[Congressional Record Volume 144, Number 49 (Tuesday, April 28, 1998)]
[House]
[Page H2341]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             TAX FAIRNESS?

  The SPEAKER pro tempore (Ms. Pryce of Ohio). Under the Speaker's 
announced policy of January 21, 1997, the gentleman from Florida (Mr. 
Stearns) is recognized during morning hour debates for 5 minutes.
  Mr. STEARNS. Madam Speaker, I come to the House this afternoon to 
talk about the U.S. tax system. We have all just paid our taxes, so I 
think it is appropriate to ask the question: Is the U.S. tax system 
fair?
  Of course not. In fact, it is kind of a preposterous question to ask 
anyway. We all kind of accept the fact that the Tax Code has become a 
perverse mess. It is a lot of things, but fair is not one of them. But 
like so many questions, this one becomes more complicated the more we 
know about it.
  For example, what if we eliminated all the problems with the Tax 
Code, the loopholes, the needless complexities, the special exemptions 
and the historical anomalies? What we would be left with in the United 
States Tax Code is its essence. It would be nothing more than a tax on 
Americans' incomes at a progressive rate.
  So we have to ask ourselves a question: Is a progressive tax on 
income fair? Well, consider the word ``progressive,'' what it means. It 
has got sort of a positive connotation today. It is a good thing; its 
basic definition is ``of or pertaining to progress.'' But before 
jumping to any conclusions, consider the definition in the dictionary 
which is number 4, ``increasing in extent or severity.''
  The American income tax code has been progressive from the start. In 
1913 when the tax was first imposed, the bottom tax rate was 1 percent, 
rising all the way to 7 percent on income over $500,000. Today the top 
rate is 39.6 percent as imposed upon all income above $250,000. 
Obviously, this sort of progressive tax is problematic in its own 
right, but there is more.
  The reason this discussion is important is because we are starting 
the debate on tax reform. In the late 19th century when the income tax 
was first debated, the economists used the marginal utility argument as 
the justification for the progressive tax. Until then, the typical 
approach was to make everyone pay the same amount so that the more a 
citizen made, the more they paid. However, the marginal utility 
theorists argued that the last dollar people made became less important 
to them as their incomes went up, so to tax citizens ``equally'' one 
would have to tax wealthy persons at higher rates.
  The idea seems pretty commonsensical at first, whether a citizen is 
Bill Gates or not. Whether Bill Gates earns $1,000 more than above his 
salary in a year, it does not change his life much. To his cleaning 
lady, the last $1,000 makes a huge difference in what she can afford. 
It might make the difference between a good year and a bad year. Thus, 
marginal utility works.
  Not exactly, Madam Speaker. Unfortunately, not all Americans are Bill 
Gates nor are all Americans like the cleaning lady. For example, 
contrast a family with an income of $100,000 to a family with an income 
of $125,000. Does one family really value its last $1,000 more or less 
than the other? Moreover, is there any way to measure the difference in 
``utility'' rationally and precisely enough to base policy decisions 
affecting millions of Americans upon this?
  In fact, this is the first easy question to answer. There is 
absolutely nothing in the vast edifice of economics that could help us 
make such a finite decision on progressive tax rates. That is the basic 
flaw of progressive income tax. There is no objective way to decide 
what different tax rates should be, and that is why many people support 
a flat tax.
  But ignorance should not be an argument for policy decisions. 
Unfortunately, the government can get away with it. Americans do not 
really believe in an income redistribution like the Europeans do, but 
Americans do not want their taxes raised either. Ultimately, it is a 
quandary best articulated by George Bernard Shaw who said, ``A 
government who robs Peter to pay Paul can always depend upon the 
support of Paul.''
  The problem for the United States is that almost everyone is a Peter 
and even the Pauls are starting to get angry at the system.
  So once again I ask: Is it fair? Is the U.S. tax system fair? 
Absolutely not. But it is not just a matter of convoluted and messy tax 
codes. It is a question of basic fairness. Is one taxpayer's last 
dollar bill really worth more or less than another taxpayer's?
  Madam Speaker, I call upon the Speaker to put this issue before the 
House soon so that we can debate ways to simplify our tax system, 
albeit a flat tax, sales tax, or simply a simplified Tax Code that 
everyone can understand.

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