Fiscal Conservatism and Social Pragmatism
I am hoping that the Democratic party is developing a new mindset around the shared concept of fiscal conservatism and social pragmatism.
Hillary Clinton’s recent remarks to an pro-life group that reducing unwanted pregancies was a shared goal of the pro-life and anti-abortion movement was an example of just the kind of pragmatism that is required, and is desired by the average voter.
On the subject of fiscal conservatism, I think it should be the centerpiece of the new democratic agenda, led by a balanced budget, a social security reform plan that makes sense, and a flat tax.
Tom Watson has a great post up today on the flat tax and social security reform that is exactly what I am talking about. He quotes a guy named Tom K in this post who says:
I am against an absurdly complex tax code that taxes honesty more than any other quality, and rewards the obsessive pursuit of tax avoidance more than any other behavior.
I’d like to see no taxation for the working poor and possibly the lower middle class, and a flatter tax structure overall — even entirely flat if possible (putting aside the fact that it will not kick in until, say, $40,000).
But far more importantly, I want to see a system that the average person has some reasonable prospect of understanding, and a system that does not lead to billions of dollar a year being spent finding and exploiting loopholes, which typically are available only to the very rich because the professional costs of taking advantage of them are prohibitive unless you’re going to save tens of millions of dollars.
In short, our current system isn’t really progressive; it taxes honest people, not rich people, disproportionately. Worse, it re-defines "honesty" downward: if you don’t take advantage of any avoidance options that you can afford to exploit, you aren’t being "honest" – just as people taking advantage of legal avoidance options aren’t "dishonest." It makes a sucker of he who is not a schemer, and could be much fairer and simpler and, I would submit, more "progressive" with a flattening of rates.
I agree with Tom K and I would love to see the Democratic party take this issue and run with it.
I previously posted a comment here in 3/9/2005 that seems to have been dumped. and this site is not archived on web.archive.org-so I am recreating as best I can from memory. Flat taxes tend to be regressive. A Wharton study suggested to maintain distributional neutrality compared to the present tax code, a flat tax could be paired with a highly progressive tax on concentrations of assets. Right now the fairtax folks are promoting a 23% consumption tax that would exempt purchases up to the poverty level. What I have proposed is that Progressives meet those folks part way and endorse fairtax on the condition that if there is any increase of wealth of the upper 1% or next 4% beyond the rate we see in median citizen asset holdings, there would be a tax on assets above $1 million or $5 million put in place. Those taxes might take the form of a real estate/business capital gains tax and a tax on securities adminstered via the SEC(for holdings in publicy traded companies). The securities tax would mean that a small percentage of all securities in a publicly traded company would be issued to the treasury-and smaller investors with pensions or bokerage accounts would be rebated those shares that would dilute their holdings back-so only the larger investors would be paying. Smaller investors not using their entire deduction could donate their deduction to a non-profit of their trust-but if a non-profit could not obtain broad support-they would be paying taxes too.The fairtax folks claim their tax is distirbutionally neutral. If that is really the case, they could get what they want. If not, we’d gradually increase asset taxes as the existing income and payroll l taxes are phased out. strarting with folks on the lower end of the income spectrum.