by Robert L. Sommers
Wealthy slackers of the world, your savior is at hand! There is finally a politician who feels your trust fund pain. He's Steve Forbes, the messiah of inherited money, who received his pile from daddy, thought deeply about the problems of the rich, internalized the injustices inflicted on unearned fortunes, then brought forth the fiscal flatulence known as the "flat tax." If has his way you'll never have to pay a nickel to the IRS ever again.
Here at last is a politician who grasps your plight. Instead of pandering to those malcontented worker bees who are forever whining about making ends met, and about medical care and house payments, Forbes knows the affluent have problems too. Beluga caviar and Veuve Cliquot aren't getting any cheaper, and no other elected representative seems inclined to give you a tax break. But with Forbes as chief executive, all those self-righteous social contract types espousing the work ethic and family values will finally meet their match. Even though the top one percent of U.S. families have markedly increased their wealth during the last decade -- while the bottom 20 per cent has become a lot poorer -- that's not good enough for our Steve and his gang of flat tax evangelists. They want more, and they want it now. They won't relax until they pay no tax at all: nada, zip, none. Their patron saint is Lenora Helmsley, whose memorable maxim went: "Only the little people pay taxes." As Steve likes to tell it, he is for a simple flat one-rate-for-all 17 per cent tax on all wages and business earnings. What he fails to mention is that dividend and interest earnings won't be taxed at all. Nor will capital gains be taxed when someone sells property for a profit.
Even if Forbes drops out of the race and retreats to his mansion, he will have left an indelible mark on the tax system. Current frontrunner Pat Buchanan has responded to Forbes' flat tax proposal by suggesting a 15 per cent flat tax of his own. His plan keeps mortgage-interest and charitable deductions and exempts the first $25,000 in income for a family of four.
The wealthy, like Forbes, remember all too clearly how the confiscatory feds grabbed half of daddy's estate, leaving them with only $50 million for every $100 million in the will. They recall bitterly that daddy couldn't make them presents of more than $10,000 per year because that was the maximum annual gift tax exclusion. Now, never again will they have to suffer. With Forbes at the helm of our yacht of state, there won't be an estate tax or gift tax in sight.
One of the best parts of Steve's plan is how it skewers those working stiffs while pretending to benefit them. Rolls Royce reactionaries annoyed at gridlock caused by wage slaves commuting to their tacky subdivisions can relax; under Forbes' plan mortgage payments will increase between 20 and 25 per cent and many will lose their homes. And there'll be a whole new perspective on health care, because under Steve's plan there will be no tax deduction for companies that provide coverage as a worker benefit. That means corporations will no longer find worker benefits affordable, and workers will have to pay for their own health insurance with their own after-tax dollars.
Forbes knows that do-gooders and charities are always hounding rich folks like him for money, so he has eliminated the charitable deduction as well. Next time a charity asks for money the well-to-do can feel good about saying, "Sorry,my contribution is no longer deductible," and ignore that outstretched palm.
Here's another stab-in-the-back Ritchie Rich can enjoy: Republicans always want to transfer programs from the federal government to the states -- and now states that increase their taxes to pay for those programs are in for a surprise, because state taxes are not deductible under Steve's flat tax plan. California, New York, and the others that cater to proletarian concerns will now get their comeuppance. In addition, since interest income will be untaxed, city and state governments that rely on tax-free bonds to finance their operations will see their interest costs skyrocket and many could go the way of Orange County.
An even better part of the Forbes plan is the deception used in selling it. He tells people that preparing their tax returns will be easier -- failing to mention that that is because he has eliminated all their deductions. He says that mortgage interest rates are artificially high because of the deduction, but he forgets to reveal that personal interest rates were not affected when those deductions were abolished. Nor does he mention that removing the mortgage interest deduction will cause housing values to plummet. Since homes serve as collateral for mortgages and for home equity loans, any substantial loss in housing values will reduce the availability of those loans.
Steve is brilliant! He employs the average American's exasperation at the current tax code to sell the flax tax's alleged simplicity. Few notice that the flat tax will in reality have tremendous loopholes -- providing tax attorneys and accountants endless opportunities to restructure business and investment transactions to avoid both income and estate taxes.
Two examples: One taxpayer with income of $1.1 million in 1994 paid $300,000 in federal taxes; under the flat tax plan he would have paid a little over $17,000. Or assume Bill Gates earns $250 million in dividend income on his Microsoft stock. He will pay less tax -- zero -- on that vast income than the poor sucker working in a steel mill, earning $40,000 and supporting a family of four. Forbes appears to stand foursquare for revenge against the working poor.
In case trust fund slackers get lonely, there is good news: there will be a lot more of you under the flat tax. Assume that Bill Gates decides to give away his $100 million in tax savings under the Forbes plan. Suppose he gives 100 families $1 million a year. Gates pays no gift tax on the transfer. If each family receives an eight per cent return on the gift, they would have $80,000 a year in tax-free income, enough for most to live on comfortably in many parts of the country. The combination of no gift or estate tax with tax-free investment income means that those families and their descendants might never have to work again.
Steve saves his best deception for last: He claims that saving the rich from taxes will benefit the working class through increased investments in the economy. But will it benefit the U.S. economy? Steven fails to mention that those dollars taken from the U.S. Treasury can be invested anywhere in the world. In fact, these investments could be used to build factories in foreign countries to compete against the very people who are supporting the flat tax because of its simplicity!
Yes, Steve Forbes is quite a guy.If his flat tax passes, other rich layabouts like him -- Michael Huffington comes to mind -- will undoubtedly run for political office too, just for the hell of it. We can then have a government operated by those who believe it is better to be born rich than to work. Their new platform: "Down With Work; Up With Hedonism." After all, doesn't their revised Bill of Rights guarantee affluent tax dodgers "life, liberty and the pursuit of sappiness?"
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