Government spending at both the state and federal levels rises every year, which puts pressure on politicians to find and justify more tax dollars. Mandatory federal spending on entitlement programs alone will soon exceed 60 percent of budget outlays, and Medicaid spending threatens the budgets of nearly every state. If our elected officials continue to chase spending with more taxes instead of decreasing both spending and tax rates, this epidemic will eventually strangle families, communities and the economy.
The spend-and-tax epidemic is like a hound dog chasing a rabbit. A hound dog cannot out-run a rabbit, but once the rabbit is cornered it’s a goner. Legislators at the state and federal levels must decrease government spending, or continuously increasing taxes will eat our proverbial lunch.
Most state governments and the federal government have shown an insatiable appetite for spending. Spending on big projects and favored groups helps ensure reelection. The fact that 20 percent of taxpayers pay 80 percent of federal tax revenues means that a majority of the public is not directly impacted by rising tax rates.
The cure for the spend-and-tax epidemic is to enact Tax Expenditure Limitation Legislation (TELL) or Taxpayer Bills of Rights (TABOR) at the state levels. At the federal level, Congress must revive the Fiscal Responsibility Act, a key provision in the 1995 Contract with America that would have required Congress to formulate balanced budgets. Not surprisingly, this 1995 provision failed to pass in the U.S. Senate. Until the public tells legislators how much they are legally allowed to spend, legislators will continue spending like there is no tomorrow. There might be a tomorrow for many of us, but the epidemic could destroy the tomorrow for our grandchildren.
There have been some successes in the fight against out-of-control spending and taxation. Twenty-six states have either tax or spending limitations. California Governor Schwarzenegger is aggressively fighting the epidemic this year with a ballot initiative to impose new limits on state spending. Ohioans will vote in 2006 on a proposal that requires voter approval of any tax increase and limits spending to the rates of inflation and population growth. This type of responsible leadership must sweep across the nation and into Washington, D.C.
We must also fundamentally change how we raise revenues to fund the activities of government. Currently we are taxed on our earned income. The amount of taxes we pay is dictated by an overly complex tax code, which is manipulated by the government to favor prospective voters and campaign donors. A national consumption tax – also know as the FairTax – would allow citizens to determine the amount of tax they pay based on what they spend, instead of what they earn. The advantages of a consumption tax are compelling and irrefutable.
The FairTax would unleash the full economic potential of the U.S. economy, un-tax the poor and make domestically produced goods and services more competitive in the global market place. The FairTax would be simpler and fairer for everybody and eliminate the wasted and costly trillion-dollar burden of compliance costs on workers and businesses.
When we place limits on how much state and federal governments can spend, and allow people to determine how much they pay in taxes based on their spending decisions, the spend-and-tax epidemic will begin to subside. Yes, there are other big issues we must fix such as the dysfunctional Social Security structure, and we must continue to place top priority on national security. But a well-defended nation with an anemic and dysfunctional economy will collapse from within, and become vulnerable to the whims of our enemies and foreign economic competition.
It is time for the rabbit to chase the hound dog, where by law revenue continuously exceeds spending. The combination of state and federal spending limitation laws and the FairTax would do just that. But it cannot happen without believing that we can make it happen, just as our Founding Fathers believed we could be a free and independent nation. Fundamentally changing our tax system and limiting government spending will require engaged and persistent citizens in every state and community.
Until the public puts a legal collar on government spending, we will continue to have runaway taxation. It’s an epidemic we must stop. Then, and only then, can we ensure a healthy economy for our grandchildren.