The Russians Are Bullish on the Flat Tax
NewsMax.com
April 19, 2002
Diane AldenThe top 1 percent of U.S. taxpayers pay about one-third of all income taxes. The top 5 percent pay more than half. The top 10 percent pay nearly two-thirds. The top 25 percent pay more than $4 of every $5.
President Bush worked hard for a $1.6 trillion in tax relief over the next 10 years. Congress approved only a $1.35 trillion reduction. But while the Bush plan lowers marginal rates and eventually ease the marriage penalty none of that changes the complicated mess that IS the US tax system.
In 1990s millions of Americans went off the tax rolls because of an expansion of the tax credit for the working poor. According to the Joint Committee on Taxation more than a third of eligible taxpayers pay no income taxes. This does not include Social Security and Medicare taxes which now take about 9 percent of the income of Americans. Yet the democrats have to be worried, more will receive benefits than they have paid into the system.
However, as columnist Deroy Murdock discovered, "American taxpayers are struggling to complete their tax returns. They will pay accountants and attorneys some $140 billion this year to generate paperwork to accompany their checks to the IRS. The 46,900-page U.S. Tax Code governs the whole process, with enough loopholes to lasso a light breeze."
Taxicrats and Other Fools The Democratic Party of the United States is content with taxes at a high level. It has always been to their benefit to seem they were the party of the "little guy" or the working poor or the oppressed. But in fact that their efforts merely create more government and an increasingly overtaxed, regulatory nightmare, an oppressive society. America has not become "better" since they began the taxaholic binge spend and tax, nor is society more fair or better because of taxing the rich to give to the poor. It is unfortunate, but to our taxicrat friends, anything above a certain preordained limit, always means that the system is somehow unfair to the poor and oppressed.
Since the 1800s the democrats, they now call themselves "progressives" have been espousing class warfare. Soaking the rich has been their mantra. As a result, the United States has had to endure the 16th Amendment to the Constitution -- better known as the federal income tax. Then another democrat established withholding taxes. During World War II, FDR supported the "temporary" system of withholding. In regards to government there is NEVER a temporary measure and taxes, like death, never go away.
Our current tax system makes it less likely that the middle class will have the wherewithal to create small business. So they will depend on the stock market for wealth creation instead, thus, giving them little control over the success or failure of their best interests.
At the time of the institution of the federal tax system in 1913, only 1 percent of a "rich" persons income was taxed. During the succeeding years, specifically during World War II and after, the "rich" ended up paying up to a 90 percent tax rate. Two presidents cut the tax rates thereby creating economic boom times. They were John F. Kennedy and Ronald Reagan. Unfortunately, the democrats and its leftist progressives did not learn form Kennedy about how to create economic growth and prosperity for rich and poor alike. Rather it became about "fairness" as defined by warmed over Marxism in modern American clothing.
To the democrats and our RINO republicans high tax rates for those they deem as rich, are just fine. Actually, the graduated income tax is the Holy Grail of the left and money pot for the ever expanding central state. After all, they have decided that making to much money is "unfair" to the poor even though the poor get very little benefit from the collected taxes. Income from taxes mostly end up in the pockets of corporate welfare clients, government agencies, special interests through grants and loans, or for social welfare programs that don't work or education that does not educate. The money goes into the black hole of government and bureaucracy rather than the hands of the "oppressed."
The idea behind a graduated income tax, i.e. equality, has never been brought about by overtaxing the rich and it never will.
Worst of all, the taxicrats had to make it so complicated it would put the Byzantine Empire to shame. Could a more complicated, confusing mess have been created on purpose? Not since the days of the Roman Empire has such a convoluted corrupt rotting carcass been hailed as a "just" tax system.
Yet even as the United States taxes its way towards oblivion; our erstwhile former enemy, the Russians, are building a free market system one bit at a time. What should make the democrats and progressive nervous is that they are succeeding.
Deep in the Heart of Russian Taxes
Our one time enemy, the former Soviet Union, has instituted a simple tax system. It is also taking lands and property out of state control and privatizing millions of acres for sale to the Russian people. Meanwhile, President Vladimir Putin and the powers that be promote the creation of small to medium business, while forming a climate of growth and independence for their ranchers, farmers, loggers, and miners in Russia's outback. In the process the Russians are evolving into a modern nation built on notions which were formerly popular in the United States. Notions which have been abandoned during the growth of the control and command central state in the 20th century. Russia, not the US, is becoming an example of a free market, low tax, modern state.
After the fall of the Soviet Union in the late 80s, the stripped pants brigade in the US State Department decided to give the Russians some very bad advice. When the "progressive" Clinton administration came along it sent its pointy headed friends from Harvard's HIID to Russia. Because of that decision all hell broke loose for the Russian people and for a free market economic form trying to be born. The advisors included Harvard wonks Jeffrey Sachs, Jonathan Hays, and Larry Summers and a couple of compliant Russians, promoting something called "shock therapies." As a result the savings of the Russian people disappeared literally over night, an oligarchy was set in place, Harvard scammed $54 million dollars in consulting fees off the US taxpayer, and an experiment in freedom for the Russians nearly failed.
Thanks to the Clinton administration, particularly "the smartest man" in politics, AKA Al Gore, billions of American tax-dollars were funneled to Boris Yeltsin with the stipulation that the Russians would adopt policies that were favored by the Clinton administration. The tax system which they were being forced to implement in exchange for American dollars was the liberal version of 'fair' taxes, in other words, the graduated income tax. Harvard wonks, the State Department's policy gurus, Clinton and Al Gore asked the Russians to charge almost no taxes to low income workers while requiring upwards of 80 percent on high income earners.
Luckily, their advice was such a dismal failure that it set in motion the eventual rise of Vladimir Putin. Putin ditched the kind of advisors Clinton and Gore had sent over and decided to listen to one of America's best ethical capitalists, one Steve Forbes.
Economist Joseph Lollie relates, "In January 2000, the new Russian president, Vladimir Putin, inherited a bankrupt government and a nation that was in collapse. One of the first things President Putin did was to request that Steve Forbes come to Moscow and advise him on how to salvage his government. Mr. Forbes asked Dr. Alvin Rabushka to accompany him on the trip. The result of that visit was President Putin pushing through a total overhaul of the Russian tax code. Putin and the Politburo implemented a 13 percent across the board flat tax beginning January 1, 2001.
Where the United States did not and still do not listen to men like Steve Forbes, fortunately the Russians did. Instituting a 13 percent flat tax which has been profoundly successful in eliminating tax evasion and old style Russian corruption. Plus, tax revenues are reaching record levels without all the crushing burden of 45,000 pages of tax regulations.
In remarks at the Russian Ministry of Finance on April 16, 2001, Putin reported that income tax revenues for the first quarter of 2001 ran 62 percent above the entire previous year's revenue collection and far ahead of earlier projections, due to the new 13 percent flat tax. President Putin has repeatedly pointed to the 13 percent flat tax as one of the key policy achievements of his new administration.
Deroy Murdock relates a conversation he had with a senior member of the Russian Duma regarding the flat tax: "This initiative "is establishing the custom of paying taxes in Russia," senior Duma member Dr. Konstantin Remchukov told me over lunch last fall. "It's greatly simplified everything." He says that three years ago, tax revenue equaled 9 to 10 percent of Russian GDP. By last November, that number had grown to 16 percent. This follows the supply-side Laffer Curve: Lower marginal tax rates produce higher revenues as both new and previously concealed economic activities enter the tax base. No wonder Russia's GDP grew 5 percent in 2001.
Former Reagan economic advisor, National Review contributor and co-host of CNBC's "America Now" Larry Kudlow tells us: "By taxing work, production, and investment less, Russia can now boast of a 40% year-to-date stock-market gain. Compared to Germany's 10% drop, or Japan's 13% loss, or the U.S.'s 11% setback, Russia -- all of a sudden -- is looking pretty good.
Furthermore, Kudlow relates, "By no longer overtaxing those very same means of production that Marx and Lenin constantly ranted about, stronger Russian economic growth is now throwing off budget surpluses as far as the eye can see. Foreign debt is being paid down and IMF prosperity-killers have been given their walking papers. The perpetually sinking Russian ruble has stabilized and the inflation rate is descending."
The Russians found it easier to pay the 13 percent tax rate than the 25 percent bribes to corrupt tax collectors under the Clinton/Gore/Harvard graduated income tax. It was easier to fill out a postcard and send in the check than hassle with bribery and possible criminal actions by the Russian government for cheating or not filing. As a result, money is rolling into Russian coffers because they took a chance on the common sense of Steve Forbes.
Thanks to Forbes and a few modern day ethical capitalists, it is very possible that the Russia is in the ascendance economically while we will be in decline within 20 years or less. The Russians had the good sense to listen to someone who actually had the best interests of the country and the Russian people at heart - Steve Forbes. They were also lucky to have a leader willing to take a chance on a modern version of ethical free market capitalism.
Meanwhile, Tom Daschle and the democrats believe higher taxes means a better system, a fairer system. God forbid that Americans should learn that a flat tax works. It might drive the final stake into the poor failing heart of the democratic party, along with the abused and failing tax system the US has had in place since 1913.
What the US has to watch out for is capitalism heading for greener pastures overseas. The Dems and their constituents don't care, they feel good because the "rich" in the United States are being punished via the graduated income tax. Like all good central the democrats do not want anyone to have "too much." They will equalize us in our poverty and make sure that very few men and women will ever have the capital available for investment.
An Old Marxist Dog Learning New Tricks
I suspect that Vladimir Putin has always been more pragmatist than Marxist. It is amazing that someone who was born into the oppressive socialist system could get beyond his past and try something that no amount of cajoling or explaining can convince the democrats and progressives of the United States to do. I seriously doubt that democrats will ever get beyond punishing the rich through high taxes because too many reputations and belief systems would have to come tumbling down. Lucky for Russia an old Soviet war horse had the guts to try something new.
Not long ago, Putin, said small businesses with up to 20 staff and annual turnover not higher than 10 million rubles (about $320,000) will have the option of paying a 20 percent tax on profits or 8 percent tax on revenues as of the start of 2003.
Small businesses will no longer have to pay a number of taxes --value-added tax, sales tax, property tax, income tax and social tax.
"I believe that all these proposals may undoubtedly be described as revolutionary, no less important than the introduction of the 13 percent flat income-tax rate for individuals," Putin said in televised remarks on the sidelines of a meeting with leading Russian scientists.
The Russian experience has led three Polish political parties to introduce a flat tax in 2002. Last year the Chinese were looking into the flat tax as well.
I just wonder what it will take to force the United States, specifically the democrats, to give up on failed visions and old clichés about what is fair. Some who call themselves "progressives" will never admit that redistribution of monies through taxation only helps growing government.
A punitive tax is inherently an unfair tax. Ironically, it is taking a reformed communist/socialist society, Russia, to show the rest of the world how a tax system should work. It is too bad the United States could not have provided the example.
Check out my website at www.aldenchronicles.com. To get in touch with me, please contact me at alden@newsmax.com.