by Lance Thompson

For decades, Democrats instinctively have responded to every GOP call for tax relief as “tax cuts for the wealthy.”  This charge has been tremendously successful in keeping our progressive tax system in place.  Under this system, the more you earn, the greater percentage of those earnings are taken by the government.  Thus, in 2006, the top 10% of taxpayers paid 70% of the nation’s tax bill, while the bottom half of taxpayers paid 3%.  And forty percent of Americans with incomes too low to trigger taxation paid nothing at all. 

This progressive tax system does not collect more from higher earners simply because they make more.  They pay more because the rate at which they are taxed increases with their earnings.  The tax cuts of presidents Reagan and Bush, though successful in stimulating the economy and increasing tax revenue (yes, lower taxes increase revenue) only reduced the top tax rates, but did not alter the basic system which penalizes success.

Some have called for a flat tax–a system in which all citizens pay the same percentage of earnings to the government.  Wealthy people would still pay more because they make more, but the percentage would be the same for all.  This inherently fair system is predictably condemned by liberals as “tax cuts for the wealthy.” 

Instead of retreating from this class warfare nonsense, conservatives should instead embrace the liberal accusation of “tax cuts for the wealthy.”  They should embrace it, support it, encourage it and enact it.  Tax cuts for the wealthy is a recipe for economic success.

A fundamental principle of economics is that governments tax what they want less of and subsidize what they want more of.  Undeniable human nature ensures that this principle applies universally. 

The government has a legitimate interest in its citizens being successful.  Americans making more money, starting and building businesses, creating jobs, investing and making profits all contribute to the economic vitality of our country.  Jobs are created, money is spent, industries prosper, and tax revenues rise.  Yet our current system taxes wealth and success and subsidizes poverty and failure.

Why not reward positive economic behavior rather than punish it?  Why not replace the progressive tax system with a regressive one?  Imagine a system in which tax rates were reduced as earnings increased, the opposite of what we have now.  At whatever income level taxation begins, that would be the maximum rate.  As income grows, the tax rate would gradually decrease, but never reach zero.

What would be the result of this revolutionary idea?  The vast entrepreneurial spirit and resourcefulness of Americans would be tapped as it never has before.  Work harder, make more money, build your business, expand your investments and profits, and the government will reward you with a lower tax rate!  The greatest minds in the country would be turned  to developing higher levels of financial achievement.  And revenues would grow proportionally.

Another benefit of a regressive tax schedule would be to reverse the natural inclination of the wealthy to shelter or divert their income.  Imagine the world if you could achieve a lower tax rate by making more money.  Taxpayers would be bending every effort to report every penny of income.  During an audit, the IRS representative would require proof that the taxpayer actually generated as much income as he was claiming.  People would happily report and document every instance of money earned, no matter how small. 

Deductions would be eschewed, as they would reduce one’s qualifying income.  Hundreds of pages of loopholes and exceptions in the tax code could be excised, as detrimental to one’s qualification for a lower tax rate.  Again, this would cause revenues to skyrocket.

A one-time tax amnesty at the inception of this program would allow people to declare all previously undeclared income, and the lines at H&R Block would be out the door and down the street with people trying to qualify for a lower tax bracket.  The IRS would have to put on extra staff just to keep up with revenue flooding to federal coffers.

The regressive tax system would stimulate our economy by endorsing and rewarding those who contribute most to the nation’s financial health.  As the system currently stands, some of our brightest and most productive individuals spend great portions of their time and money figuring out ways to avoid the higher tax brackets.  Imagine if all that effort was spent trying to reach the higher tax brackets–the economic output of the nation would increase exponentially.

An added wrinkle would be that only money made in the United States would count toward one’s income.  There would be a mad rush back to American soil as offshore businesses, banks and investments flocked home.  Again, the boost to our economy would be monumental.

Liberal readers will be outraged that such a system could be contemplated.  They will complain that such a tax system unfairly places higher burdens upon the poor.  But do not the poor place higher burdens on society as a whole, with social, educational and medical programs designed to serve their needs?  None of those programs has resulted in fewer poor people.  Quite the contrary, by subsidizing poverty as we have since the advent of LBJ’s Great Society, we have only seen poverty grow, year after year.

Clearly, the answer is to offer an economic incentive to escape poverty.  The regressive tax system does that.  Make more, pay less.  What greater inducement to get an education, work hard, be responsible, and pursue success can there be?

So next time a liberal dismisses tax relief as “tax cuts for the wealthy,” welcome the characterization and embrace the concept.  It’s the kindest cut of all.