Let's be fair

July 19, 1995|By Tommy Denton

TOUGH TIMES call for tough decisions, and Congress is busily about the business of making tough decisions on reducing the federal deficit.

But wait. Let's define "tough times." The stock market is cruising along very nicely. President Clinton's deal with Japan that prevented a 100 percent tariff on luxury automobiles has kept sales of those sleek machines moving at a brisk pace. Tourism is thriving. Traffic is snarling around shopping malls from sea to shining sea. Fast-food franchises and other restaurants are packed with hungry customers.

With all this disposable income careening through the economy, times appear to be something other than "tough," except for those unpleasant occasions when unkempt, vacant-eyed vagrants drift listlessly along the streets of U.S. cities.

Of course, the Contract with America was drafted with the apparent idea that pre-emptive measures are necessary to avoid really tough times in the future. This is only prudent, because the United States has been eating its seed corn and tallying up the deficit in crimson digits, which, unless acted on soon, will be passed on to future generations to reconcile.

Proposals to cut federal spending have enjoyed resounding popular support, although more than modest differences arise in separating political pork from strategic national security. Only Social Security has been spared.

One investment banker's pre-emptive measure, though, may be a struggling young middle-class family's breach of the social compact. In the great debate about how society is to allocate its national wealth, some interesting revelations are emerging about the country's traditional understanding of promoting the general welfare.

As the drumbeat of deficit reduction thunders through the land, one rallying cry that offers increasing appeal is the proposal to "simplify" the tax code. Without question, the tax code is monstrously complex and in need of revision.

What many desperate advocates of simplicity ignore, however, is that the public policies and protections wrought during the past 90 years justified the attendant complexity as a reasonable cost to retrieve the financial destiny of the nation from the voracious greed of the robber barons. Since Teddy Roosevelt, those policies have gradually produced unparalleled economic vitality and a more equitable distribution of that prosperity for the American people.

"Simplifying" nearly a century of evolving fiscal policy with the stroke of a political machete will undoubtedly invoke the iron law of unintended consequences -- especially if some of the simpler-minded proposals become law, because they are the work of the intellectual heirs of the robber barons.

House Majority Leader Dick Armey, R-Texas, has offered his "flat tax," which imposes on hourly and salaried workers a fixed 17 percent tax with no deductions, and on those who gather their riches from stocks, bonds and other investments -- well, nothing. Zip. Nada.

Mr. Armey would exempt from taxation any family earning less than about $36,000. Because the wealthy garner most of their affluence from so-called unearned income -- expect creative corporate accountants to restructure executive remuneration packages to minimize "earned income," thus avoiding substantial taxation -- the greatest tax burden will fall unmercifully on the working middle class, whose Social Security taxes are likely to increase in the bargain.

Flat tax is to equitable tax policy as flat Earth is to navigational precision. But it is simple -- simply dangerous to democracy by further expanding the already obscene disparity of wealth in this country.

As political analyst Kevin Phillips wrote in his book "Arrogant Capital," the "rentier and investor class" has been using its increasing political clout in Washington to enhance its privileged economic leverage. Although the bottom half of the top 1 percent of the country's wealthiest families earning up to $400,000 a year basically retained their level of income during the 1980s, the investment capacity of the top one-half of 1 percent exploded. The flat tax would explode it further.

According to a study by officials of the Federal Reserve Board and the Internal Revenue Service, the top 1 percent of families in 1989 had more wealth than the bottom 90 percent of the country. Government statistics show that the gap is growing in the first half of the 1990s, just as the value of earnings for middle- and low-income workers is flat or declining.

Look, this is a capitalist economy, and capitalism should be encouraged as the economy most compatible with the principles of democracy -- but not to the detriment of that democracy. No one is suggesting bleeding the rich.

A simple tax, though, should not come at the expense of a fair tax on all income, and all taxpayers should bear an equitable -- and thus progressive -- proportion of the burden necessary to support the common good, including and especially the awesomely wealthy. Fair's fair.

Tommy Denton is a Fort Worth (Texas) Star-Telegram columnist.

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