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STEVE FORBES: The 1996 election will be one of the most important in American history. It will define the direction that America takes in the post-Cold War world, and as we enter a new era that will alter the way we live and the way we work, and not only have importance to us at home, but it is also going to have global importance as well. The reason is that being the only superpower today, the rest of the world is looking to America for a sense of direction of where to go in this new era.
They’re looking to us for an example. They’re floundering right now. And you go around the world and you sense that they’re looking to the United States for how to move forward, and thus far, we haven’t provided them with much of an example. The fact of the matter is that if America regains her self-confidence, moves forward dynamically, energetically, with a sense of innovation, imagination, excitement, the rest of the world, much of the rest of the world will quickly follow suit.
If America does well, the rest of the world can do well. If America is in trouble, the fact is the rest of the world is in trouble. If we falter, the world falters, and this is the significance of 1996. We can move forward in a very traditional, vibrant American way, and then the rest of the world will quickly follow our example. If we move forward positively, if we get rid of these barriers that stand in the way of our moving ahead, we’re going to quickly astound the world and ourselves with our achievements and our opportunities. That’s the promise of 1996.
We must begin by changing the culture of Washington. Right now, it is not good enough. It’s simply not good enough to send more good people to Washington, because if you don’t change the culture, eventually the culture envelops them and eventually they become, many of them, the very people they came to fight and to replace. And to change the culture of Washington, you have to get to the source of power in Washington, which is simply the major source of power is the tax code.
The power to tax is the power to destroy. It is the major source of power in Washington, because they do trade favors for loopholes. That’s the way the system works. That’s why in the last twenty – twenty-five years, the tax code has become so incomprehensible that even the tax collector can’t understand it anymore, and it’s done for political reasons. Just remember, it is not your typical American who writes that tax code. It is the lobbyists, the lawyers, the rich, and the powerful, and that’s why it’s the monstrosity that it is today.
If we want Americans to have faith again in their institutions, want to have–to get rid of this corrosive effect on American life, we have to get rid of that tax code. No one outside of Washington, no one outside of Washington could have consciously devised something more incomprehensible, more un-understandable, more corrupting, more anti-growth, more anti-family, more anti-anything you might like today, than the tax code that we have today.
As I’ve said before, our Declaration of Independence was 1300 words, the Bible 773,000 words, the tax code 7 million words and rising. That puts it in perspective. (applause) And there’s only–(applause)–there’s only one thing to do with this monstrosity. You can’t reform it. You can’t trim it. The only thing to do with this monstrosity is to scrap it, kill it, drive a stake through its heart, bury it, and hope it never rises again to terrorize the American people.
It’s the only thing to be done with it. And when we do that, when we do that, America will start to move forward again. All of my opponents, or many of my opponents, and the Washington political institutions and political class are all trying to get you to believe that by simplifying the tax code, removing certain deductions, you are going to come out on the short end. Just remember with the flat tax, with you as individuals, and with you as families, the flat tax is a tax cut. You will gain more than you lose.
Let me just quickly explain it. Each individual gets a $13,000 deduction, $13,000 for each individual, tax-exempt income, each child $5,000, so if you’re a single person, your first $13,000 of income is tax-free from federal income tax; if you’re a couple, it’s 13 times 2, $26,000; if you have two kids, it’s $36,000, 26 plus 10, $36,000 for a family of four of tax exemptions, $36,000 of income tax-free.
That family today now pays Uncle Sam about $3,000 in federal income tax; under the flat tax, they would pay zero, zip. Remember, too, your personal savings are no longer taxed. So it makes it easier, a little easier, to put together a nest egg, which is hard to do these days, for a house, for a college education, for retirement. Your personal savings are tax-free. If you’re on pensions, tax-free. Social Security, tax-free. Capital gains, tax-free. Inheritances, tax-free. You can pass that business on and not have to worry about the IRS, in effect, confiscating it from you.
This is the essence of the flat tax. This is what the Washington political class does not want you to know or learn. They want you to think it’s going to somehow hurt you. It’s going to help you. The only ones who lose is the Washington political culture and those who feast off of it. They also say it’s going to be bad for homeowners, if you want to buy a house or own a house. Again, it’s the Washington logic again.
Just let’s walk through it because I know there may be some people here from Washington, so I’ll try be slow and deliberate. (laughter and applause)
Okay. Step No. 1, you keep more of what you earn, which means you have more money in your pocket, that shouldn’t be bad for buying a house. Two, because your personal savings are not taxed it makes it a little easier to put the nest egg together to make the down payment. That should be good. No. 3, this is a shocker you never read about, is that even critics of the flat tax acknowledge that the flat tax will mean lower interest rates.
Now, in the real world, lower interest rates means lower mortgage rates, which means lower monthly payments to finance your house. So you have more money in your pocket, you have a better chance to put the nest egg together, the cost of financing your house becomes cheaper. Don’t you think in the real world that helps housing, rather than hurts it? In the real world, it does.
Now, just imagine waking up tomorrow morning; flat tax, $36,000 of exemptions for a family of four, 17 percent rate above $36,000 for that family, no tax on personal savings, and a 4 1/2 percent mortgage.
Don’t you think life in these United States would be better? Don’t you think the quality of life would be better? Don’t you think families would have a chance to get off the treadmill, instead of being on the treadmill and feeling that the treadmill is winning? Don’t you think that would remove one of the principal burdens on families? Of course, it would. We can do it in 1996, if we get the mandate.