Op-ed in today's Wall Street Journal: Everyone Should Pay Income Taxes; It's Bad For Our Democracy to Exempt Half the Country, by Ari Fleischer:
If you thought Bernard Madoff's Ponzi scheme was bad, wait until you hear about the inverted pyramid scheme the federal government is working on. While Mr. Madoff preyed on people who trusted him with their money, the federal government has everyone's money, and the implications of its actions are worse.
Picture an upside-down pyramid with its narrow tip at the bottom and its base on top. The only way the pyramid can stand is by spinning fast enough or by having a wide enough tip so it won't fall down. The federal version of this spinning top is the tax code; the government collects its money almost entirely from the people at the narrow tip and then gives it to the people at the wider side. So long as the pyramid spins, the system can work. If it slows down enough, it falls.
It's also what's called redistribution of income, and it is getting out of hand.
A very small number of taxpayers — the 10% of the country that makes more than $92,400 a year — pay 72.4% of the nation's income taxes. They're the tip of the triangle that's supporting virtually everyone and everything. Their burden keeps getting heavier.
Today, Mr. Obama and many congressional Democrats want the "wealthy" to pay even more so there is more money for them to redistribute. The president says he wants the wealthy to pay their "fair share." Who can argue with that? But he never defines what that means. Is it fair for 10% to pay 70% of the income tax? Does he believe they should pay 75%, or 95%, or does fairness mean they should pay it all? It's clever politics to speak like that, but it is risky policy.
Mr. Obama is adding to this trend with his "Make Work Pay" tax cut that means almost 50% of the country will no longer pay any income taxes, up from a little over 40% today. A certain amount of income redistribution in a capitalistic society is healthy, but this goes too far. The economic and moral problem is that when 50% of the country gets benefits without paying for them and an increasingly smaller number of taxpayers foot the bill, the spinning triangle will no longer be able to support itself. Eventually, it will spin so slowly that it falls down, especially when the economy is contracting and the number of wealthy taxpayers is in sharp decline.
In addition to exempting almost 50% of the country from income taxes, today nearly every other social cause is given a loophole — or a preference — in the tax code. Want to buy a hybrid vehicle? You get a tax break. Do you own a solar water heater? You get a credit. Want to give to charity? You get a deduction. Own a house? There's another tax deduction for you. How about college savings, certain medical costs, and retirement savings? Yes, yes, and of course yes. Did you move, pay alimony, or "provide housing to a Midwestern displaced individual"? More deductions, credits and exemptions there too, if you qualify.
Everyone now has a sacred cow in the tax code. For my money, the most sacred thing of all is our country and its growth, but the sacred cows have turned into a pack of wolves. On both the spending and the tax side, the wolves are devouring our children's future. …
It's time to create an Economic Growth Code whose purpose is to fix and grow the economy, not redistribute massive amounts of wealth. A new tax code that creates growth and reforms our entitlement system is the only way to dig our way out of the hole we're in.



