Burns: If you want to rebuild U.S., start with tax code
He's lanky, white-haired, calm. Listen to him for a few minutes and you sense great patience, stunning analytical abilities, and a sustained passion, untainted by malice. His name is Leo Linbeck Jr. His company has built some of America's most striking buildings.
But I've come to talk about a different kind of construction, our tax system, which is broadly acknowledged to be one of the most wretched things ever built. I've come to Houston because Linbeck is a prime mover behind the idea of a national sales tax, one that would replace the entire 73,608-page tax code.
While our tax code has been called "an abomination," it is now clear that both political parties intend to do no more than tinker with the abomination, in different ways, to rebuild America to their vision. Neither party sees that our tax code is central to our current economic mess. Linbeck thinks differently. He says that to rebuild America, we need a brand-new tax system.
Get what they want
When I asked how the idea came about, I was surprised by his answer. Nearly two decades ago, he was having lunch with two friends. One, the late Jack Trotter, suggested that the biggest single problem in America was its tax system. Businessmen all, they agreed and decided to do the research and development for a tax system that would work.
"We started with research," Linbeck said. "What do people dislike most? What would they like or not like? What would they like to have?"
Then they asked another question: "If people got what they wanted, would it be efficacious?" Would it work?
That's where a lunch conversation ended and the heavy lifting began. Finding little academic work on differing tax systems, they selected 25 top economists and asked if they were interested. All 25 were. They narrowed the group to eight, including Martin Feldstein at the National Bureau of Economic Research, James Poterba at MIT, Laurence Kotlikoff at Boston University and Dale Jorgenson at Harvard.
The result was a bold idea: Replace the current mess with a national sales tax. Tax consumption and only consumption. Eliminate the income tax, the employment tax and the corporate income tax. Just tax consumption.
"It's very progressive, but on a discretionary basis," Linbeck said. "If you buy a Bentley and I buy a Ford, you'll have to pay about 20 times the taxes I pay. People that spend more money will pay more taxes."
Then they spent millions to test "the market" for the tax. Result? Not only would it work, but the name FairTax came out of one of the consumer panels as well. "All I want is a fair tax," one of the panelists said.
If the people liked the idea and understand it, I asked Linbeck, why isn't it the law? And that's where I learned, once again, that the problem lies in Washington.
Usual way didn't work
They tried to get the FairTax idea, as a piece of legislation, through the House Ways and Means Committee the usual Washington way.
After six months they gave that up, Linbeck said, and decided to follow a grass-roots path.
"I'm convinced that what we have for government is a contemporary form of feudalism," he told me.
"We have an elected elite, their staff, lobbyists, the academics. Perhaps 100,000 people. It's a relatively small number of people, well-educated, well-intentioned, not bad people. But they believe they ought to decide. They gravitate toward complexity, not simplicity. … ," Linbeck said. "If you accept a simple idea - that complexity creates opportunities for manipulation - then you can immediately see that the largest single tool is our tax system."
Alas, the idea may make too much sense to go far in Washington.
This article is posted here.