Guy Sorman, in “Why Not a Negative Income Tax (NIT)” (Investors Business Daily, Jan 24 – http://www.investors.com/NewsAndAnalysis/Article/560521/201101211925/Why-Not-A-Negative-Income-Tax-With-Cash-Subsidies-To-The-Poor-.htm) — provides strong arguments for a progressive NIT. In essence a NIT is very close to a major aspect of the Fair Tax now in Congress (www.fairtax.org) – where low income would receive ‘prebates’ monthly up to approx twice the poverty level. Mr. Sorman describes a NIT that would be progressive and limit work disincentives. Fair Tax supporters ( I am one ) please heed Mr Sorman’s formula.
Mr. Sorman argues that NIT can replace all low income welfare programs . I can not agree any more given my personal experience as a 1978-83 auditor of USDA’s Child Nutrition Programs (CNP). No way did CNP come close to providing $1 of benefits per $1 of taxpayer $. Fraud, abuse, waste, and too many layers of bureaucracy rendered CNP as a total failure. As a strong advocate of government programs for social justice, CNP was my first post college job. I left in 1983 as a free market capitalist for a long rewarding Wall Street IT career.
I doubt government social programs are any better administered now. In fact government programs are a significant drain on economic growth, our GDP potential.
Today it is imperative that we grow the economy so we can generate more Treasury revenues. We have no choice. If you can read a balance sheet this is obvious. In three years our federal government debt has increased from $9 trillion to $14 trillion or almost 100% of our GDP. This is near Greece levels. We are at a risk of an economic Armageddon as those financing our debt are wondering if financing it further will yield any positive returns. So we need to increase revenues and cut spending. How should we proceed?
A major revenue generator will be Congressional passage of the Fair Tax. That will eliminate all federal personal and corporate income and payroll taxes and replace that with a revenue neutral tax of 23% (for now) for all ‘new’ products and services. It will be progressive, providing ‘prebates’ to lower income. It will eliminate the IRS and special interests that compound our tax laws. That alone will boost our GDP from 1.5% to 3% offsetting cost of complying with complex tax codes. That extra GDP will generate more revenue thus reduce our debt. That 23% Fair Tax then could be reduced and further encourage entrepreneurs to invest. Yes – a business and investor friendly environment results in greater economic growth. Visit www.fairtax.org for more details, then write to Congress. The Fair Tax Bill is there but needs a push for a vote.
We also need to cut government bureaucracy fast – like right now – so we do not need to increase our debt ceiling.
Challenge me please. Can anyone argue why allowing low income to simply keep more of their own money or have a progressive NIT that will still provide a work incentive is not the best policy for the low income class? Can anyone cite a government that actually did not drain out GDP and revenue potential? Please respond.
Morris Township, New Jersey
January 22, 2011