Forbes on Flat Tax and Balanced Budget amendment:
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Skousen: I carefully read your book, The Flat Tax Revolution. Regarding privatized social security, a flat tax and a balanced budget amendment, why does it take so long for government to solve these types of problems?
Forbes: In the public square, the way you make things happen is by having a vested interest, organizing to push your interest, and then politicians respond to those interests. So petitioners have a bigger voice than the general public. The way you try to change something with the public is to put an idea out, advocate it, and start organizing around it, and eventually you will triumph if people feel it has legitimacy.
I just think that you have to marinate your ideas. For example, on the flat tax, one of the things we're doing is in New Hampshire. Every candidate that comes into that state is going to get questioned, Democrat and Republican alike: "What are you going to do about this horrific tax code? If you've been in Congress, why haven't you done anything about it? Why wouldn't you go with a flat tax? Why wouldn't you go with lower rates?" You put pressure on that way. I hope that in the 2008 Presidential primaries, at least one candidate will be entrepreneurial enough to stand out and take an unusual stand on an issue where there seems to be some real public resentment, where the public is ready to explode.
Skousen: Would that candidate be you in 2008?
Forbes: Not me in '08. I'm an agitator now, but it could be a Democrat or Republican, or a couple of both. A Democrat could easily pick up on the flat tax idea and run with it. They may not endorse my version of a flat tax, but they might support a low rate like 15% that would apply to the big capital gains, dividends, death duties, income, etc. It would be a vast improvement over what we have now. It certainly could appeal to a piece of their constituency because of the high exemptions. If the Republicans don't get serious about this, a Democrat is going to run with it.
The other thing is, in the real world, events can push policy. Everyone now knows we face more tax competition. Everyone now knows more of the world is getting its economic act together. In the Cold War, you had a big portion of the world under a horrific ideology that was anti-growth. You had mild variations of socialism, which is anti-growth... Now, the world is catching up. You know about China and India, Central and Eastern Europe - they are determined to replicate what Ireland did...
Skousen: A 12.5% corporate rate?
Forbes: Ireland went from the weakest economy in Europe to the most vibrant, and now enjoys a higher per-capita income than Great Britain. It is phenomenal. As we look around the world, and we look here at our own horrific tax code, I think people are going to say, "we don't have to take this any more." And we won't. Ben Franklin may be right that taxes are inevitable, but how we're taxing is not inevitable. In other words, we as a free people should determine the tax structure...It's our money the government uses, so how much they take, how they take it, should be determined by us, not by Washington.
Skousen: You spoke of events. One of the big events here is a ballooning deficit, and a possible tax increase. It seems to me, any kind of tax reform, such as a flat tax, is off the table now. They're not discussing it. That's a scary thought.
Forbes: It is, and that shows why leadership, management, politics and the public square are just as vital as it is in the private sector. Good management can succeed, given the diversity. Bad management can destroy even a splendid company. You see it happen all the time. Conservatives have not done an adequate job at promulgating the idea that reducing tax rates leads to a stronger economy.
High tax rates retard economic growth. So why would we retard the economy when we're asking more from the economy with these extraordinary events? It's like telling a patient, you have pneumonia and you just broke your leg, but we're not going to give you antibiotics until your leg gets cured. No. You continue with the cure, which is lower tax rates. The government had record growth of revenue last year, up 15% on the federal level. The problem is Washington spends it all. It's not a revenue problem; it is a spending problem.
Skousen: Ben Franklin, by the way, once said, "No revenue is sufficient without economy."
Forbes: Exactly. There are always unmet needs. One of the things that Washington does all the time is come up with an excuse for why they need to spend more. If times are tough, we need to stimulate the economy. If times are good, we have the money and unmet needs. They always have an excuse.
--- interview with Dr. Mark Skousen, www.InvestmentU.com |
