Revenue Enhancements for Ron Paul Fans

Smaller government means lower taxes. Right?

In the long run, yes. But in the near term, maybe not!

If, by smaller government, you include abolishing the Federal Reserve System and going back to a gold standard, you need to balance the federal budget first. And not just a cash basis balance like Bill Clinton briefly managed, a real accrual accounting balanced budget. That requires a pretty big cash basis surplus since the Baby Boomers are starting to retire! Finally, the budget needs to be balanced on average year in and year out. We need surpluses in the good years to offset deficits in time of war and/or economic crisis.

Hard money and chronic budget deficits don’t mix. Try, and you grant a giant windfall to the government’s creditors. Given our over $19 trillion dollar national debt, the windfall is likely to bankrupt the nation and cause an economic depression.

If you are a psychopathic anarchist with a fortress full of food and ammo, economic collapse isn’t a problem. “Government crash! Whee! Now we have a shot at anarchy!” But for those who want to restore the Constitution, this is a problem. Crises and constitutions don’t mix very well either.

Massive changes in government spending and the Constitution also don’t mix. Yes, you can realistically dream of U.S. troops pulling out of the Middle East, ending the Drug War, and possibly even abolishing the Department of Education. But I doubt this is enough. Grover Norquist and his hoard of zombie congressmen have been playing a losing game of Starve the Beast for decades – and have run up an enormous national credit card bill. You need to either be patient and let inflation work its evil magic on the national debt, or find some additional federal revenue before giving a gold standard a new try.

“But the government will just spend any new revenues!”

Good point, you in the back row. To abolish the Fed, you need federal revenue enhancements that discourage government spending. Tricky, but not impossible. Here are some ideas:

1. Levy a big fat import duty on non-NAFTA oil. The Saudis and Kuwaitis owe us a few trillion dollars for protection services rendered over the past few decades. Make them pay. Or you could ramp up the tariff even higher and make North America full-on energy independent, getting rid of most of our excuses for meddling in the Middle East. Not only that, you would chronically lower the world price of oil, which would be a boon to developing countries, and a bane to the Wahabis, who are using their surplus funds to bankroll radical madrassas across the world. Less terrorism = federal money saved. (Lives saved too.)

2. Eliminate the tax break for state and local taxes. Why should you get a tax break for living in a high tax state or city? Yes, it might make some sense if high income folks lived in poor cities which need the revenue, but this break applies even to taxes paid to high dollar liberal utopias. Is the country better served when golf courses and internet service are provided by governments? Not if you like your government small!

3. Make municipal bonds taxable. Tax free municipal bonds are a tax break for the old money super rich. They move the Laffer Curve maximum significantly. That 90% tax bracket from the “good ole days” was mythical. The effective tax rate on the old mony rich was the difference between municipal bond rates and the rate of return on a conservative taxable portfolio. (The high brackets did hit those who were getting rich, like movie stars. That’s how Reagan went from New Deal Democrat to conservative icon.) Not only does this break put the old money rich on the side of bigger government, it encourages development via municipal bonds – which generally come with eminent domain abuse.

4. Have an interstate sales tax. Amazon.com got a long running tax advantage for years when they didn’t pay sales tax. Now, local stores are collapsing, and the right to buy things with cash is disappearing! Don’t get me wrong: I like Amazon, and use their services frequently. Internet catalogs are wonderful for items purchased by the few. But the ability to browse physical products is pleasant, and the thought of all my purchases being recorded on a computer gives me the willies. So I would make the interstate sales tax a bit higher than the typical state sales tax.

Here’s the cool bit: let companies which have physical stores around the country choose whether catalog/Internet orders are interstate or intrastate. If interstate, federal law and sales tax applies. If intrastate, the relevant state sales tax and laws apply. We get a nice clean delineation between interstate and intrastate commerce! We get competitive government – the upside of anarchy without the chaos.

5. Tax old copyrights. The old Mickey Mouse cartoons should be in the public domain by now, along with some other Disney classics now sold on overpriced DVDs. Congress retroactively extended copyrights in a giveaway to Hollywood and publishers. They should pay for the privilege. Without government, there would be no copyrights at all. This is clearly an example of fee for service government.

Today, movie stars and guitar heroes compete to play Liberaller than Thou, while living the lives of decadent aristocrats. If they want big government, let them pay for it.

6. Use tariffs for revenue. High taxes on domestic production has gutted our industrial base. Unless I’m missing something, low taxes on imports coupled with high taxes in domestic production constitutes a subsidy for imports. Chronic budget deficits are definitely an import subsidy. Maybe import duties should be comparable, more or less, to our stack of income and payroll taxes. (I’m still thinking on this one, but I would note that somehow this country ran its central government mostly on tariffs and we somehow went from backwater to superpower.)

7. Treat capital gains as ordinary income. Warren Buffet wants to pay more taxes. We should oblige him. Ditto for the unicorn startup founders in Silicon Valley, who have joined in the Left Coast game of Liberaller Than Thou. And as for the billionaire Republican donors, with the exception of the Koch Brothers, they all keep calling for more military spending. Let them pay for their armchair belligerence. When billionaires pay the same tax rates as those in the Tea Party demographic, we might expect them to buy some smaller government politicians.

And we might expect them to lobby for a gold standard as well. Inflation coupled with a high capital gains rate is brutal.

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