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Looking to Change the Way We Pay Taxes

Senator Ben Cardin wants a system that’s fair and easy to understand

Everybody hates taxes, yet we want more and more services from government.
    Trying to balance those two forces, U.S. Senator Ben Cardin wants to change our entire tax system, which he regards as out of whack, not to mention unfair.
    The system he’s espousing essentially taxes us when we spend money rather than siphoning it from our paychecks, earnings, dividends and capital gains. Cardin is a Democrat, but many Republicans agree with him. So does Bill Gates.
    To find out what Cardin is thinking, Bay Weekly sat in on the senator’s meeting last month with the Greater Prince George’s Business Roundtable. Behind Cardin, a banner read Marylanders Deserve Progressive Tax Reform.
    We recorded his presentation; for clarity, his excerpted words are presented in Q&A format.

Bay Weekly    Nobody likes taxes.
Sen. Cardin    Most people realize the tax code is badly broken. I try to understand the tax code, but I can’t fill out my taxes. People don’t think they’re being treated fairly with their neighbors. For business, it’s not very predictable. And it’s not competitive, so you see more and more companies locating in other countries.

Bay Weekly    So you’re trying to change the way we pay taxes?
Sen. Cardin    I co-chair the Senate Finance Committee’s subcommittee on business tax issues. We’re trying to make a better code. It’s a nonpartisan issue. I think there’s a general understanding that we need to do something radical. The basic principles are agreed on by both Democrats and Republicans.
 
Bay Weekly    What are those basics?
Sen. Cardin    First, we want the tax code to be fair. It’s got to treat middle-income families fairly. They’re already burdened. We call it progressivity. We want to make sure taxes are progressive so those struggling today are not saddled with additional burdens.
    We want to make sure it treats neighbors the same. Two people in similar circumstances ought to have similar outcomes. It causes a great deal of resentment when you think your neighbor is getting something you’re not getting. Our system is very dependent on your honesty and voluntary compliance. If you feel you are not being treated the same as your neighbor, you kind of push the envelope more than you perhaps should.
    We want it to be predictable. When you make a decision, you want to know the tax consequences.
    We want certainty and we want it to be easy to comply with.
    And we want our tax code to be job-creation friendly to make America globally competitive.

Bay Weekly   Your solution?
Sen. Cardin   We’re the only industrialized nation in the world that does not have a national consumption tax; we’re one of only a handful of nations in the world that doesn’t. This puts us at a tremendous competitive disadvantage. Businesses are locating in Europe and Asia to get lower taxes. Billions are held offshore and are not being repatriated.
    It makes no sense why we have marginal [rising with income] rates so high. Our top marginal rate at 39 percent is much higher than in other countries, and we are not competitive.
    The bottom line is that we would have the lowest marginal tax rates in the industrialized world. And middle-income families would pay no more and often less than they do today.

Bay Weekly   Explain.
Sen. Cardin   My proposal is a 10 percent consumption tax on all goods and services. The only major category of exception is governmental services, as you’d be paying taxes on taxes, which makes no sense. Other than that, all goods and services are subject to the consumption tax. You pay it once. There’s a credit to make sure you don’t pay it twice.
    It would be simplified. There would be basically four deductions: state and local; charitable; interest on mortgages; and benefits employers provide for health and retirement.

Bay Weekly    How is it progressive?
Sen. Cardin    Depending on income and family size, you will get rebates on your consumption to make sure it does not hit middle-income families harder than our current federal tax system does. It is a credit based on income and family size that approximately relates to a family not having to pay taxes on the first $50,000 of consumption.
    You will have a card similar to a credit card or the card used for food stamps. When you buy services, you buy and swipe. If you’re entitled to benefits, you get them immediately so you don’t have to lay out the money based on what you’re entitled to receive.

Bay Weekly   Would there still be income tax?
Sen. Cardin   The personal income tax starts at $100,000 of taxable income for families. The first rate is 15 percent. It graduates up to 28 percent, the top bracket for income above a half million.
    The corporate tax rate would be cut by more than 50 percent, down to 17 percent from the current 35 percent.

Bay Weekly   What are the benefits of the Progressive Consumption Tax Act?
Sen. Cardin   First, the competitive advantage the U.S. gets from a marginal rate on both consumption and income that is five points below the average of the industrial nations of the world.
    It also provides incentive to save, which has always been a problem for Americans. Americans like to spend. It’s a part of our culture. So even when our economy was at its strongest, when we led the world in every category of economic growth, we had in many of those months negative savings. We actually consumed more than we saved, requiring us to bring in more capital from outside than we perhaps should be doing. This proposal rewards savings.

Bay Weekly   How would you get conservatives to play along?
Sen. Cardin   One of the major concerns of conservatives is that it would increase the size of government. It is not an effort to grow government. It’s an effort to pay for government. So we have a circuit breaker built in. In the event it produces more income than we say, we have an automatic tax refund to taxpayers. It is revenue neutral so it does not add to the deficit.

Bay Weekly   Can it happen? Does progressive tax reform have a chance?
Sen. Cardin   I do not believe we will pass major tax reform in this Congress. I don’t think we’ll pass [either] income tax reform or progressive tax reform. I hope what happens is that there is so such frustration out there with the tax code that it will be part of the national debate for the presidency. In the next Congress, I’m hopeful a proposal similar to mine will be considered.

I want to thank the Bay Weekly for explaining this complicated tax proposal called the Progressive Consumption Tax. This was excellent investigative reporting - and perhaps it was not intended to be - but it was.

On Cardin's own web site, there is no mention of this so-called government "credit card" that would be required for each and every purchase a citizen makes. This, to me, is shocking. This is a huge revelation. This proposal is recommending total control and tracking of the entire population.

For those who are religious or are familiar with the Bible at all, you might recall this:
Revelation 13
16 And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:
17 And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

For those who could care less about Bible passages, and value civil liberties, here is a thought: If you already feel like the govt controls too much or has too much say in your life, just wait until Big Brother REQUIRES you to carry his credit card to buy any product or service, anytime. This is about "man's control over man".

This Progressive Consumption Tax proposal is not only potentially unworkable, it is definitely extremely dangerous. Perhaps a better name for it would be the Human-Chattel Economy Tax. The only thing Progressive about it is that it makes our already fragile civilization progressively worse.

What we need to research is replacing most current taxes, the IRS and the 16th Amendment with a competent tax system based on excise taxes and import duties. This may mean we can't build as many aircraft carriers or national parks, but we can surely keep our social safety nets, protect our civil rights and still have a strong national defense and unbeatable Navy.

Mike Robinson, Annapolis MD