Monday, October 10, 2005

"Our Revenues we Prize and our Tax Rates we will Maintain"

My home state of Iowa is located in the middle of what is known as "fly over country" , the portion of the USA that the coastal elites in New York City and Los Angeles fly over on their way to events, meetings, and vacations. This reality is a double edged sword of course since an influx of tourism dollars would help the American Midwest/Plains States but of course such development would alter the pastoral character of this region.

As a native Iowan I completed the state's required "History of Iowa" semester course during middle school thus I still remember the state motto of "Our Liberties we prize and our Rights we will Maintain" which I have altered to use as the title for today's posting to stress how entrenched the special interests-government bureaucracy cabal is in terms of blocking fundamental tax reform.

Today's posting was inspired by a newspaper article published in the October 9, 2005 edition of The Gazette. The article's title was, "GOP Hopefuls Trade Criticisms; Nussle, Vander Plaats talk about tax reform", which focused on the Republican Party candidates for Governor of Iowa -- US Congressman Jim Nussle,, and Bob Vander Plaats, -- since their primary election is set for June 2006. The item in this article of most interest to me was Mr. Vander Plaats statement of the need to "simplify Iowa's income tax system with a flat 5 percent rate that eliminates virtually all deductions."

Now this is very welcome news to hear a gubernatorial candidate call for a flat tax since this is very daring against the tide of prairie populism which is inherent in fly over country. I trust that given Congressman Nussle's experience in Washington DC as chairman of the House Budget Committee he will have an equally exciting tax reform proposal for Iowans to consider in June 2006.

A complicated tax system only benefits one entity -- the government itself -- since the system forces all taxpayers to expend hours of labor and dollars to avoid non-compliance penalties and potential prison time. If you do not believe government has enough of our money please, please consult with my friends at Citizens Against Government Waste,, since they have identified billions of tax dollars being wasted around the country.

Flat tax systems have been advocated for decades but finally we are seeing progress , ironically in the "workers' paradise" of the former Soviet Union, specifically in Russia and Estonia, which have adopted flat rate income taxes. These tax reform measures have actually INCREASED tax receipts to the central government since they offer what economists might call a "known cost of doing business" versus thousands of pages of tax code where two different tax preparers can arrive at two completely different tax liability calculations -- clearly the current system is not a rational model for a business owner trying to create jobs.

The leader of the flat tax revolution in Estonia was then 32 year old Prime Minister Mart Laar whom I have met at a few think tank conferences in the USA and Europe. You can see the results of his reforms via this article (April 2005):


Inflation dropped from more than 1,000 per cent to just 2.5 per cent, in line with western Europe. Unemployment fell from 30 per cent to six per cent and growth has soared to six per cent, a rate that Gordon Brown (NOTE: the United Kingdom's Finance Minister/Prime Minister in waiting) would envy. Investment poured in and the initial 26 per cent tax rate has been cut to 23 per cent. Next year, it will be cut again to 20 per cent.

Hopefully we can finally bury the "class warfare corpse" that our current tax system has become in a deep, unmarked grave away from future generations by adopting flat tax systems around the world. The next step of course is to reduce the actual flat tax rates periodically as government programs are eliminated, government services become more efficient, and as citizens exercise more personal responsibility such as directly paying for their health care costs (the topic of a future posting perhaps!).

Yours in tax slavery,



Anonymous said...

It wasn't until I was a private business owner that I realized how much tax was imposed on me. It almost feels like a corporate identity would be a better match because then they pay the taxes.

However, I don't feel that giving your freedom of speech and sucking up to corporate pukes is much of a swell life. I'd rather take less money and live by my own ideals than someone elses'.

Here's to private corps.

Yours in prosperity,

jdsqrd said...

Why is it an either/or choice? Advocates for the current tax system say, as one example, without a deduction for mortgage interest the housing industry would take a huge hit. Would it not be possible to combine a flat tax along with a much simplified income tax to try to maximize the benefits of both?

As an aside, when looking at all that government waste, be sure to ask your congresspersons to quit inserting the pork into the funding legislation so the government agencies may try to do their mission rather than comply with the whims of someone's campaign. [did I say that outloud?]