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The Language of Taxation Needs an Overhaul

Because of Congress' proposed health care "surtax," now is the perfect time.

by
Tom Blumer

Bio

July 18, 2009 - 12:30 am
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Imagine, if you can — and given the likely results if cap-and-trade legislation recently passed by the House ever makes it into law, you don’t have to imagine very hard — that after paying $500 a month for utilities, your household is slapped with an increase that will cause your monthly bills to go up to $750.

How much have your costs increased? That’s obviously not a trick question; the answer is 50%.

But that’s not the language of taxation. That needs to change.

The current government spin applied to the above situation would go something like this: “Well, since your income is $5,000 per month, and your utility bills are increasing from 10% of your income ($500 divided by $5,000) to 15% of your income ($750 divided by $5,000), your utility rate is only going up 5% (15% minus 10%).”

If your neighbor tried to console you with such language and said, “What’s the big problem here?,” you’d be tempted to deck him or even her (but being a sensible person, you’d resist) — especially because (and I’ll get to this later) such an increase would force you to cut your discretionary spending by way more than 5%. Yet we let politicians get away with taxation verbiage like this all the time. This serves to make their seemingly endless designs on the contents of our wallets appear more palatable than they should.

The last time I recall a real pushback against this mathematical chicanery was in Ohio during the early 1980s. Helped along by political clumsiness, the blowback was effective enough that it should have been considered a model for future anti-tax efforts. Instead, it has mostly fallen into the dustbin of history.

But to measure the tactic’s effectiveness, all you have to do is ask almost any news-following longtime Buckeye State resident older than 50, “Who raised Ohio’s income tax by 90%?” The overwhelming odds are that they will answer, “Oh, that was Dick Celeste.”

Now, of course, Celeste didn’t take 90% of Ohioans’ income (though, given his far-left political positions, he may at some point have been tempted). Also, nobody ever said he was the brightest tactician. In 1983, shortly after winning office, Celeste, with the help of a slim majority of Democrats in the Ohio Senate, imposed a “temporary tax rate surcharge [that was] increased to 83.3% in 1983 and to 90% in 1984 and made permanent.”

Celeste and the Democrats protested that 50% of that 90% was “only” a continuation of a “temporary” tax passed by the previous administration, and that the other 40% was “only” a rate hike of a couple of percentage points.

The complaints fell flat. Everyone in the state knew that what the Democrats had imposed was a permanent tax increase of 90%. Because it was applied across the board to all rate brackets (that was the clumsiness, partially inherited from clumsy Republicans), even those who supported it had a hard time not speaking of the truly correct 90% increase.

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