Tax reform can force fiscal responsibility
EDITOR'S NOTE: This is one of a series of columns written by candidates in contested races in the Nov. 6 general election.
Our national debt now exceeds $16 trillion, which means our lawmakers are literally spending our children and grandchildren's money even before they have earned it. But why do they do it?
The failure of the Simpson Bowles Commission demonstrates why.
Arguably the best bipartisan effort to balance the budget in a generation was the Simpson Bowles Commission that had a de facto mandate from Congress for recommending guiding policy but in the end was derailed by special interests with none more powerful than the banking industry.
The best example of this corrupting influence was the commission's decision to retain the mortgage interest deduction for houses valued up to $500,000 in spite of the commission's overarching effort to eliminate regressive loopholes, exemptions, exclusions and other "tax expenditures."
If the housing bubble taught us anything it's that the federal government's interference in the marketplace actually distorts housing prices and even helped lay the foundation for its collapse leading up to the financial crisis.
What began in 2008 and continues to drive recessionary pressures today was an economic house of cards driven by predatory mortgage lenders, corrupt credit rating agencies and Wall Street banks that packaged mortgage-backed securities, sold them to investors, then bet against them with credit default swaps.
It resulted in the bailout of too-big-to-fail Wall Street banks that today are a greater systemic risk to our nation's economy, taxpayers left holding the bag for the additional bailout of Fannie Mae and Freddie Mac, home values that still have not recovered to pre-crisis valuations and a greater national debt than ever before.
Let's face it. Bank-driven tax deductions for mortgage interest benefit the banks more than the people by encouraging homebuyers to purchase more home than they can afford, as do subsidies through government-sponsored Fannie Mae and Freddie Mac and the Federal Reserve's easy monetary policy. Together these programs artificially increase market prices which in turn distort housing stock values.
The net result is the increased likelihood that people will default on their mortgages because they paid too much for their property in the first place as the real value was artificially enhanced through special interest-driven tax policy.
Simpson Bowles retained a terribly regressive deduction that penalizes those who cannot afford $500,000 homes and would have been better off just eliminating the interest deduction altogether while dropping the tax rate for everyone whether they own a home or rent.
We need to go beyond Simpson Bowles and break free from the banking industry and countless other special interests' hold on personal income tax policy and eliminate not only the mortgage interest deduction but virtually all giveaways once and for all.
If we did we could lower everyone's tax rates even further, ensuring that low-to-middle income earners would pay no more in taxes than they are today while making certain that high income earners would finally pay their fair share.
Any tax lawyer or accountant worth their salt will confide that the many deductions, exemptions and loopholes in our tax code benefits one group more than any -- the wealthy.
By design, the entire tax code is an unbelievably complex labyrinth of decades-old special interest hooks into Congress that has resulted in not only a terribly inefficient tax system but also one that requires an army of tax lawyers, accountants and preparers just to fill in the forms.
Oddly, while Simpson Bowles failed on the personal income tax side of the tax code they made great headway on the corporate side, especially with the recommendations that target closing the countless loopholes codified annually by the narrow special interests on K Street in Washington.
That should be our model for wholesale tax reform in the United States -- close all of the loopholes, deductions, exemptions and giveaways and simply tax everyone on a progressive scale and at sufficient enough levels that require our lawmakers to no longer spend our children and grandchildren's money before they have earned it.
It's that simple and it's the right thing to do, for if we don't act our generation of Americans will most assuredly default on our collective promise to future generations for a better tomorrow.
Howard Swint, a resident of Charleston, is the Democratic candidate for U.S. House of Representatives from the Second Congressional District of West Virginia.