In a previous article we discussed making the federal government more honest, smaller, and more fiscally responsible. That was the first part of what we thought would be a two-part article.  We were wrong on that.  This is the second article, and there will be more.  Reversing the Progressive downhill slide our country has taken in the last century will require more than two articles.

The second link in the chain we’ll need to tow the country out of the ditch the Progressives have driven us into is tax reform.  Tax reform is useless if it is not accompanied by legislation that requires the budget to be truly balanced.  We’ve had administrations that claimed to have had a balanced budget or to have decreased the deficit, but those claims were accounting tricks, not real.  Bill Clinton claims to have had the last “really balanced budget”.  He didn’t; what he had was an economic boom that created more revenue than the government spent.  His budget was not based on income, it was based on spending, and the fact that income was greater than spending was hailed as a great accomplishment.  If the USA’s GDP magically increased by 400%, the Obama administration would have a balanced budget too, at least according to Clinton’s (and most politicians’) definition.

What we need is a truly balanced budget for our proposed smaller government; expenses cannot exceed revenue.  The outcome of this is a smaller government, lower taxes, and reduction of the deficit.  Over time, with responsible fiscal policy, the federal deficit can be reduced to zero.

So how do we reform taxes to get this done?

Tax reform is a great idea until you try to figure out how to do it.  Government with access to money is like gas in a vacuum – it will expand to fill available space.  Give an official the ability to provide an advantage to a constituent in return for campaign contributions or votes and there’s no contest; the constituent will get the favor and the rest of the voters will get the bill.

So the first thing to do is to take away legislators’ ability to affect the tax code.  There are two plans out that claim to do this:

One, the Fair Tax, is a national sales tax.  Proponents claim a 30% sales tax rate ($23 on a $77 purchase) would cover all government expenses.  There are studies supporting and against this option.  All who support the Fair Tax agree that the 16^th Amendment to the Constitution (authorizing the income tax) would have to be repealed to protect citizens from being double taxed by the government.  Many against this option claim that it would put additional burden on the middle class, while proponents claim that a consumption tax would capture revenue for the government that is not realized now.  The bills before Congress now contain a pre-bate to exempt families from the sales tax up to the poverty level.  This pre-bate is designed to protect the poor.

The Flat Tax establishes a single tax rate for all taxpayers.  People and corporations pay the same rate.  Proponents of the Flat Tax claim it would end government giving tax advantages to individuals or special interest groups as any change to the tax would affect everyone.

There are many consequences of each option, and much study needs to be done before either is adopted.  First, we need an honest, fiscally responsible government.

We need an additional piece of the puzzle to make the government smaller and more fiscally responsible.  Some services and agencies will have to be removed.  We’ll talk about which government agencies and services need to go away in a future article, but we need to understand that if government gets smaller and taxes are lowered some services cannot be provided over time.

This will not be easy or popular, and it certainly won’t be fun.  It must be done.

We the People are up to the task.