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                                      Election Time Tax Talk

By Rand Paul

Chairman

Kentucky Taxpayer United

Politics  101 :   The closer you get to an election, the closer you should scrutinize all candidate’s promises.  Or Read my Lips but also watch my hands, as I may lift your wallet while simultaneously promising not to steal.

 Politicians as a class of people are notorious for easy and sometimes glib promises before elections, followed by slippery retractions and explanations  after the elections.

          This year’s gubernatorial race is no exception.  Both candidates have told us they don’t want to raise our taxes.  I believe even Governor Patton opposed raising taxes in his campaigns, but it didn’t stop him from proposing over $300 million dollars in new taxes, including a hike in the gas tax.

          This time around,  Ernie Fletcher has taken a formal pledge not to raise Kentuckians taxes.  Is that a good thing?  Well, some have argued that the pledge hamstrings legislators and takes away the freedom they need to meet ever-changing needs for government spending.

          Kentucky Taxpayers United, a sponsor of the Taxpayer Pledge, argues that politicians, a.k.a. legislators, need to be reined-in.  Legislators are hounded day in and day out by groups who want more of  taxpayers’ money.  The teachers let out school to lobby for more cash.  The cities and counties have full time lobbyists for more cash.  The tourist boards have taxpayer financed lobbyists that lobby for higher restaurant and hotel taxes.  With all the governmental officials occupying their every day applying for more tax dollars, it’s amazing that we have any restraint on taxes.

Some might argue that we have a constitution to restrain legislators.  Though the KY  Constituion prohibits expenditures without approval of the legislature,  Gov. Patton proceeded anyway.

Those of us who argue for the Taxpayer Pledge argue that constitutional restraints are now ignored, and candidates’ promises are often broken.

Opponents of the pledge argue that our tax code is outdated and needs to be modernized.  In fact, Congressman Fletcher has argued for modernization.  But what does that mean?    If Congressman Fletcher is to abide by his Taxpayer Pledge, he can only support revenue neutral legislation.  In other words, if he raises the tobacco tax by $200 million dollars, he must lower another tax by the same amount.  Can he abide by his pledge and modernize the tax code?

The Taxpayer Pledge restrains office holders from voting for any “modernization” that would raise overall taxes.  Any plan to “modernize” the tax code could shift the taxes from one group to another, say from those making $30,000 per year to those who smoke cigarettes, would be acceptable, though using the tax code to bring about social change is not the avowed purpose of our movement.  The intention of the pledge by the Kentucky Taxpayers United is not to promote shifting the burden so much as to promote reducing the burden for all.

Ultimately, one needs to ask, do we need tax modernization at all?  For the past several years, there has been a drumbeat for “modernizing” the tax code.  To some, modernization is a code word for raising taxes; to others, it is a code word for making the tax code more progressive.    It is argued that government is too restrained by an outdated tax code.

But what are the facts?  From 1985-2003, Kentucky revenues more than doubled.   Revenues rose at an average annual rate of  5.45%.  Consumer price inflation over that period averaged less that 3%.  I’m sure many Kentuckians didn’t take home a 5.45% increase in income each year over that period.

A basic question should be:  does government need to grow at a rate faster than inflation?  Should government be restrained in spending when the economy falters and revenues slow?  Should government be forced to conserve money the way you and I must in hard economic times? 

News reports will tell you the sky is falling, and revenue shortfalls are everywhere, and Grandma Moses will be turned out into the streets because our taxes aren’t “modern” enough. 

What of these revenue shortfalls?  Are real state revenues really falling?   NO!  General Fund estimates for 2002-2003 show a 3.4% increase.    When the pundits tell you that we have a revenue shortfall, they are telling you we have a shortfall in EXPECTED revenue.  So if the road fund has $500 million dollars and next year it has $600 million dollars, you may be told that we have a $100 million shortfall in the road fund.  How?  Well, they may have wanted to have a $200 million increase in the road fund, and because it only increased by $100 million we now have a shortfall of $100 million.  How’s that for new math!

If real revenues are not really declining, do we really need “modernization” of the tax code, and what would that entail?   Are we to make the tax code more progressive?  Are those dastardly rich people with combined incomes of over $70,000 per year (an example might be a man and wife who teach public school) not paying their fair share?  According to the Taxpayer Foundation,  the average taxpayer in the US (around $50,000 combined income)  works longer each day to pay taxes than they do to provide their family with food, clothing, and shelter.  You’ll be hard pressed to tell those two school teachers they aren’t paying their fair share.

Our tax code as it stands is fairly progressive.  Over 90% of the federal income tax is paid for by couples who make $50,000 or more.  Even just counting Kentucky income taxes, which have a fairly flat rate, the more money you earn, the more taxes you pay. 

Ben Chandler also promises not to raise taxes, though he won’t be hamstrung by the Taxpayer Pledge. He desires the “wiggle” room to raise taxes if necessary. 

The real question about the Taxpayer pledge is, can we trust candidates to keep their word when in office.  Candidate and Speaker of the House Jody Richards ran for governor on a platform of not raising taxes, and yet he shepherded Governor Patton’s gas tax increase through the State House.

Last year, several Republican legislators broke their taxpayer pledge to vote to allow the hotel tax to rise.  Even the Taxpayer Pledge is not a guarantee that a candidate turned legislator will keep his or her word.  I think any poll you could construct would show that the voters have a great deal of skepticism for politicians and their word.

So when you go to the polls, remember the candidates’ promises and try to sort out who you can believe, and for goodness sake,  turn them out of office if they lie to you just one more time!

Rand Paul

Chairman

Kentucky Taxpayer United (paulr@ggclinic.com)

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