White House Chronicle

News Analysis With a Sense of Humor

You Can Keep Cutting Taxes, If You Want to Pay the Price

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By Llewellyn King

Those Republican presidential candidates who had been governors, vied with each other in their latest debate to claim who had cut taxes the most.

When I hear tax-cutting expounded as an unassailable conservative virtue, my mind goes back to a lunch in Houston in the 1970s, when two of conservatism’s rising stars and I were speakers at a meeting of the American Petroleum Institute.

The stars were Trent Lott, then a member of the House from Mississippi, and George Will, the hottest columnist burning up the op-ed pages across the country.

The three of us were urged to lunch together while the organizers got organized. I had recently launched The Energy Daily, a publication in Washington, D.C.

The conversation turned to taxes. We all agreed that we while we hated paying taxes, the United States was an under-taxed country. Let me repeat: Trent Lott, George Will and I agreed that the United States was under-taxed country.

So, I ask, how did we get to where we are today, when Republican presidential hopefuls are firmly committed to tax-cutting; when every state or local Republican governing body would rather see chaos reign — as has happened with our cities — than whisper that we should raise money to fix the problem?

The standard-bearer for taxophobia is neither an elected official nor a presidential hopeful. He is Grover Norquist, founder and president of Americans for Tax Reform, a political organization as powerful as the National Rifle Association, and as distorting of the national agenda.

Norquist has introduced a rigidity that makes discussion of tax policy almost impossible on the right. Tax has become not a matter of need and policy, but a litmus test of conservative purity.

The genesis of taxes as an evil goes back to a group of young conservatives — which included Norquist — with a consuming conviction that government is too big, and that the only way to cut it down to size (what size?) was, in their phrase, to “starve the beast.”

The problem is that Americans keep asking more of their government, and consequently it grows. We want more diseases to be researched by the National Institutes of Health, and more energy solutions to be developed by the Department of Energy. We want the food chain to be secured and nuclear waste disposed of. We want better roads, bridges, airports and air traffic control. When something untoward happens, like bee colony collapse or the disappearance of a strain of bananas, we want the Department of Agriculture to find a fix.

All those without a mention of providing social services, extending entitlements, and beefing up the military — all favored by the public.

The trouble gets worse when tax-cutting becomes an ethic, because even good taxes are an anathema to politicians, who are wont to start their political lives by signing Norquist’s “no new taxes” pledge.

Take the mess the highway trust fund is in. It is funded in fits and starts by a conflicted Congress, trapped between what it knows to be need and the desire to limit spending. Infrastructure needs to be funded in multi-year programs. Before the recent budget deal, it was funded for just three months. Can anyone build a bridge in three months?

The danger of blind tax hatred can be seen with the gas tax. It is generally agreed that using less gasoline would be a net good: fewer oil imports, fewer greenhouse gases, and more livable cities. Today’s price is low, even by historical standards.

An opportunity that may never come again exists to fix much of the nation’s crumbling infrastructure by increasing the federal gas tax from its present 18.4 cents per gallon, where it has languished since 1993. There is enormous elasticity in the amount of gas an individual or a family uses. You can buy a smaller car or a hybrid, or travel less. The price of gas is not like the price of shelter.

Many of the ills that contribute to the sense that the nation has lost its way would go away with better roads and general infrastructure improvement. You do not feel good waiting to cross a bridge or idling for hours on Interstate 95.

Sitting in a traffic jam for two hours in the morning and two hours at night may not qualify as a tax, but it is taxing. — For InsideSources.com


Politicians and Small Business—just Lip Service

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It’s right up there with Mom and apple pie in the political lexicon: small business.

Everyone knows that small business creates jobs and it creates them quickly. Ergo, politicians are constantly proclaiming their adoration for small businesses. However, their idea of how to foster new businesses seldom extends beyond tax cuts.

Politicians believe small business carries a heavy burden of tax. By implication, the only impediment to the success of small business is tax. In reality, tax is a minor ache in the small business body. To pay taxes, small businesses must show profit. Most are in profit intermittently. So a bill proposed by newly elected U.S. Rep. Betsy Markey (D-Colo.), which extends the period over which income can be averaged from two to five years, should bring some relief.

In the decades since the end of World War II, the owners of small businesses—from restaurants to light manufacturing—have been pushed to the wall by government action at the local, state and federal levels; all of which have favored the growth not of small business but of big business. At the state level, the big lobby and the small are voiceless. At the federal level, big businesses are on the congressional doorstep with campaign contributions, while small business is an abstraction.

In particular, the kindly treatment of chain retailers in local planning has pummeled and even destroyed small businesses. The arrival of a Home Depot in my semi-rural neighborhood meant summary execution of about 25 hardware stores.

Lower prices and some convenience sucked the customers out of the locally owned hardware stores. But it was a dubious bargain. After the initial enthusiasm, indifferent service and total ignorance of the stock reminded those customers that they had traded away expertise and service for a few cents of initial savings.

The big box stores–some of which are now going out of business–not only crush their small retail competitors, but they also crush their American suppliers by demanding prices that compete with those of cheap-labor competitors in other countries.

Got a great idea for a new type of oven mitt? OK, you will have to try and get your product on the shelves of the big retail stores. There are not enough other outlets. Gird your loins because you are about to go into a bruising negotiation with these retailers. To them, you are no more than a sharecropper. They want low prices and you, the small business manufacturer, are going to deliver them or perish–or, maybe, deliver and perish anyway.

How about the predicament of the travel agencies? Like bookstores, there was something genteel and very appealing about operating a travel agency. It was a lot of work for a small income, but travel agencies provided an independent living for tens of thousands of individual operators, and sometimes families. With deregulation the airlines took against the agents, refusing to pay commissions. This parsimony has not saved the airlines, but it has greatly undermined the travel agents and the service they provided.

It is not just the entrepreneurial class that has suffered from chains. We all have. Just look at their natural habitat: the shopping center. From Miami to Seattle, shopping centers are offensive in their sterility and their replicated chain-store banality. Is this the American Dream? Architecturally challenged, bland, homogenized, remotely owned shopping centers. They are not American Main Street replacements.

A thrill goes through me when I find a strip mall showing its age. There I know I will find small businesses with a fist full of employees booking cruises, repairing televisions and vacuums, and selling things from crystal to to yarn. In old industrial parks, small companies make everything from custom chimney pots to industrial fasteners.

This is where American dreamers have found self-employment and have the sense of possibility and the certain knowledge that they are small enough to fail. It is also where the jobs are, my political friends. Small business is driven as much by romance as profit. It offers the individual a chance. It also hires quickly.