A Federalist approach to tax reform

“Tax Reform.”

What do I mean when I use that term?  Politicians and elites of all stripes and colors tend to muck up the definition with nebulous platitudes that poll well.  The American people then end up believing the way the politicians and media have conveniently twisted and contorted the meaning of tax reform.

Real tax reform, fundamental overhaul of the entire system, is one third economics, and two thirds political.

On taxes, the Left doesn’t really make tax reform a priority, only to talk about their “middle class tax relief,” but only if tax relief is important enough to sway elections.  Why would they prioritize reform, they already have the progressive, direct tax system that they want, thanks to the racist centralizer Woodrow Wilson?

On the Right, the Republican base hates the current tax code, so tax reform is red meat to make campaign promises.  However, GOP politicians and their consultant class figured out they only need to pay lip service to tax reform, but then settle on mere tax cuts for jobs and growth.

Don’t get me wrong, supply-side tax cuts and deregulation (if we can get it) do provide growth in that moment in economic history when it’s implemented.  Nevertheless, the overall trajectory of taxation is still in the direction of the government stealing more of our property.  What has the supply-side, temporary growth really achieved?

The American people and the media have essentially defined tax reform as simply tweaks and cuts to the tax code to provide either relief or growth, depending on which side of the political spectrum you’re on.  It’s the government’s money to begin with, and the people are just cogs in the economic machine to redistribute wealth.

The Washington Post is reporting the Trump White House has a plan to push “massive tax cuts,” and that it’s apparently “gaining new momentum,” whatever that means.  But nobody, I mean none, talk about reforming the tax system to a new tax code.  All the talk is centered around who’s relief or cuts is better for the economic growth and jobs for the country broadly, and for the middle class specifically.  Oh, and apparently every economic plan has to take 10 years to go into effect, then they get to squabble over whether to make it permanent or let it expire.

I’m always equally intrigued and dismayed by news of White House plans and Republican attempts at tax reform.  Intrigued because we’re in desperate need for a tax overhaul, but I’m dismayed because I know what they usually mean by “tax reform.”

Real tax reform, fundamental overhaul of the entire system, is one third economics, and two thirds political.  Yes, there is an economic component to taxes; we are dealing with finances and money after all.  But the primary function of taxation concerns the political nature of funding government.  Therefore, the primary questions tax reform must address: what is the size and scope of the government that needs funding, and what type of government are we needing to fund?

In our Constitutional Republic, we used to have a federal government of independent states.  Is progressive direct taxation appropriate for our form of government?  Or do we need a federalist tax system that “eliminates all direct federal taxes and replaces them with a uniform, flat federal tax on the gross government revenue of each state.”

It’s called the “Neutral Tax.”

It’s a reform that recognizes that we are constitutionally structured as a federal union of United States, not a national government with glorified counties and municipalities.  It takes into account that each state is different and “eliminates the federal government’s micromanagement of tax policy.”  The Neutral Tax restores the sovereignty of each state in domestic and economic affairs.

We can debate the economics of what the rate of the Neutral Tax ought to be in due time, but for now, what is the politically and constitutionally more appropriate tax system for our political system of government?