The Welfare State, Tax Farming, and the Flat Tax

My friend the barista at my favorite coffee house asked me the other day to write "about how we can convince all Americans to take full responsibility for their lives and so far as possible meet their own needs." This is something I think about a lot. My two favorite presidents—Jefferson and Theodore Roosevelt—both believed that sturdy self-reliance was the true meaning of America. I'm not sure they would have quoted 2 Thessalonians 3:10--"The one who is unwilling to work shall not eat"—but they both believed that American should be an empowerment rather than an entitlement society, that nobody owes us anything, and that there is no excuse for laziness.

I'm not with Mitt Romney that 47% of the American people "will never take responsibility" for their lives, that they are a cheerfully permanent dependency class that votes Democratic so that they can continue to live off the hard work of the beleaguered 53% who carry American into the future. In Romney's cruel formulation (admittedly, an off hand toss of red meat to the base), just under half the country is locked into a co-dependent relationship with the Democratic Party: the bums (by his math, 169 million Americans) need the Democrats to keep their food stamps and welfare checks coming, and the Dems need the bums to stay in power. I find this argument so cynical, heartless, and fundamentally offensive that I hate even to put it into words.

Still, we all know that some percentage of the American people (in other words, millions of people) are gaming the system when they are able bodied enough to take care of, or help take care of, themselves. Roosevelt would want to thump them into good sense. My view is that that percentage (the "sponges") is in fact relatively small, and that it is pretty heartless to blame people who would work if they could for not being able to find work in a lackluster and sputtering service economy just emerging from the worst economic recession since the Great Depression.

Nobody can look at the welfare statistics and not be saddened. Currently, 23,116,928 American households receive food stamps. That's a total of 46,700,000 people on food stamps (13%). Almost 13 million people are on welfare (4.1%). Over one million children receive their first formal education in the federal Head Start program. In 2012 alone, the federal school nutrition programs delivered more than five billion lunches to more than 31 million students nationwide. The federal WIC program (Women, Infants, and Children) provides primary or supplemental basic health care programs to millions of Americans. Currently there are 75 million Americans receiving Medicaid. And on and on. That IS a lot of dependency. And someone has to pay for them.

I'm in favor of all of these programs—proof that we really are a great and compassionate society rather than a ruthless one. And—from the Mitt Romney 47% worldview--it is certainly true that these social programs have all been Democratic Party initiatives, most of which were denounced at their inception by the Republic right as socialist, nannystate, mollycoddling, welfare queen, intrusions into the free flow of a capitalist economy that should just be permitted to do its magic. It is also true, as Romney says, that welfare recipients vote overwhelming Democrat. Still, is there anyone who thinks it is healthy that the United States of America has this much need, this much dependency, this much welfare? We talk about means tests (I'm all for them), but we should probably also find some way to conduct "true needs tests." Let the true bums work or starve.

When I was growing up, most Americans regarded welfare and food stamps as last resort stopgaps to be regarded with some sense of shame. My kin (and probably yours) used to swear that nothing in the world could induce them to accept food stamps or welfare, and they were even a little disparaging of unemployment insurance and workman's comp. That attitude has changed dramatically in the last thirty years. I'm certainly not for stigmatizing poverty, but nor do we want to nurture or perpetuate a culture of entitlement.

In my opinion, it's not the poor that are dragging the country to ruin, though I agree that the existence of a semi-permanent welfare class would violate the fundamental ideal of American life: that in a bountiful land of freedom and opportunity, each individual, each family, takes care of itself by way of hard work, thrift, sacrifice, and resourcefulness. That may sound quaint in 2013, but without that spirit North Dakota could never have been settled. My grandparents represented everything that is right with America. They worked hard every day of their lives. They never had much. But their lives were amazingly abundant. They knew grinding poverty for long periods of time, and yet they never would have dreamed of accepting assistance from beyond the boundaries of their farm. Hurray for them. But we must not assume everyone has such tools and gumption.

Of course we should find ways to reform the "welfare state," but before we do that I suggest that we eliminate corporate welfare (countless billions), upper class welfare (a range of tax dodges, deductions, evasions, amortizations that amount to nothing more than the fleecing of the American dream), and middle class welfare. I have prosperous friends in Kansas who "farm the farm program" in ways that are perhaps legal but in my opinion unethical, wealthy and middle class friends in North Dakota who "farm the Medicaid program" by letting you and me pay for their parents' and grandparents' care in high-end nursing homes. I say, abolish all tax deductions of any sort and see who squawks loudest. It won't be the poor and minorities.

If I were in charge of the universe (which, thank goodness…) I'd scrap the current Byzantine federal tax system, and institute a simple flat tax of 10% of income, no deductions. I'd exempt anyone earning less than $25,000 per year. Well, not quite. I'd insist that everyone who files a tax return in the Exempt Category be required to write a check to the IRS for $500 per year. That would be the Minimum Federal Tax and no working adult would be allowed to escape it. I do believe we all need to have "skin in the game," as they say, to pay something to the national government for the many services it provides us. I think at least once a year every working American should have to write an actual check to the IRS so that we remind ourselves—positively, not indirectly—of two things: that government costs money, and that it is no fun writing that check, however large or small.

Under this system, the person earning $54,000 per year would pay a flat tax of $5,400. The person earning $13.7 million would pay a flat tax of $1.37 million. No deductions for mortgages, children, second homes, medical expenses, farm equipment, charitable giving, etc. I'm not wedded to 10%, because I don't know that it would meet our treasury's needs, but it has the Jeffersonian advantage of being a decimal system that anybody can easily compute. It took me several years to teach my daughter how to compute a 15% tip at restaurants, but 10% she could do from the age of eight.

Here's the basic hypocrisy, I think. When we decry the "entitlement society," we usually think of the "have nots." We'd be better off looking in the mirror.