The Corner

Lost in the Debate over Romney’s Tax Return

There is very little to add to the piece by NR’s editors this morning called “Romney and Our Broken Tax Code.” We probably wouldn’t be having these pointless conversations about how much Mitt Romney’s effective rate is and how much tax money he failed to claim if the system wasn’t so complicated and full of loopholes.

Yes, this tax code is in serious need of reform. Many American lawmakers understand that low marginal rates are crucial to promoting economic growth and yet the federal tax system remains extremely progressive. It also double taxes income that has been saved and then invested, like Romney’s. Our tax code also assesses personal (and corporate) income on a worldwide basis — a rare feature among OECD countries that should the U.S. Finally, the tax code is so packed with exemptions, exceptions, tax credits and other loopholes that the amount of taxes Americans pay today has little to do with how much money they make and more to do with how many kids they have, whether they rent or own a house, which state they live in, and whether they make their money in the form of wages or capital gains.

We must also remember that taxes are not meant for the government to milk as much income from taxpayers as possible to pay its gigantic bills. The level of taxes that a government aspires to collect should have some connection to the necessary goods and services it has to provide to individuals. And by necessary, I don’t mean all the spending promised to every possible interest group out there. We shouldn’t be having a conversation about taxes, and whether someone pays enough or too much, without also considering what services should be provided by the government. As we stand now, the government is overreaching and overspending and it’s no surprise that it doesn’t have enough revenue to pay for it all.

One thing is sure, the answer is not more revenue. Even if Washington could collect more revenue, it wouldn’t provide anything resembling a balanced budget, because the government would go ahead and spend the money on more promises.

Sure, the tax code must be reformed. But maybe more importantly, spending must but cut and the size of government must be seriously reduced so that we can aspire to have a tax collection system that is connected to what government spends. Not the other way around.


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