Posted on Thu, Aug. 19, 2004
EDITORIAL

Does DeMint Deserve Savaging?
Candidate has tax reform half wrong, half right


Maybe U.S. Rep. Jim DeMint deserves the scorn that his Democratic opponent for the U.S. Senate has heaped upon him for suggesting that a national sales tax become the No. 1 federal revenue source. Just as S.C. Superintendent Inez Tenenbaum says, replacing the personal income tax with a national sales tax is a bad idea - and not only because it would push the federal tax burden down the personal-income slope.

But DeMint, R-Greenville, is right in asserting that middle-class Americans would clamor for fewer government programs if the programs' true cost was more vivid to them. A national sales tax would certainly accomplish that.

The current tax code invites Americans to believe that someone else should pay for popular government programs that primarily benefit the middle class: Medicare, Social Security, higher education loans and grants, veterans benefits, nursing-home subsidies, farm subsidies, mortgage subsidies and highway construction, to name just a few.

At the same time, Americans vote in politicians who promise to cut taxes. Politicians who dare to tell them the truth - that the government is broke and they share responsibility for that - get "rewarded" with a one-way ticket to retirement. Is it any wonder that Congress resorts to deficit spending to keep us all happy, while paying for the war on terrorism and the military adventures in Iraq and Afghanistan?

That said, DeMint's national sales-tax proposal, one of several tax-reform ideas he has talked up for years, is the wrong way to force middle-class responsibility. To bring the budget into balance, the tax rate would have to be pegged at 20 cents per dollar, maybe higher. Americans from the middle to the bottom of the personal-income slope would spend proportionally more of their incomes on taxable items than the wealthy few - a violation of the ability-to-pay principle that drives all fair-taxation systems.

Moreover, a national sales tax would punish consumption. At a time when so many households are overextended and personal savings are dangerously low, a tax code that discourages personal spending might not seem such a bad idea.

But millions of American jobs are tied to consumption. Here on the Grand Strand alone, thousands of jobs depend on the consumption of hotel stays, airline tickets, amusement tickets, retail sales, car rentals and restaurant meals. Statewide, thousands more jobs are tied to the manufacturing of consumer goods - such as the BMWs produced in DeMint's House district. It isn't an exaggeration to say that a national sales tax could trigger a recession from which it would take decades to emerge.

DeMint would be wiser to focus on simplifying the income tax - an idea much discussed in Congress during the late 1980s and early 1990s. By eliminating deductions and tax breaks and reducing the disparity between the highest and lowest tax rates, Congress could preserve fair taxation - and make the connection between program costs and taxes paid clearer to middle-class Americans.

Tenenbaum, meanwhile, should explain how, exactly, she would pay for the middle-class tax cuts and education-spending increases she advocates without increasing the federal deficit.

If she truly wants this year's Senate campaign to be about the role of the federal government in the lives in Americans, she needs to be honest about program costs, too.





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