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Maurine Proctor
Wednesday, January 09 2013

Sen. Mike Lee: The Fiscal Cliff and the Fiscal Avalanche

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Lee Mike4The fiscal cliff was a shorthand term used to describe a series of changes that were set to take place on midnight on December 31, 2012 including a roll back of the “Bush tax cuts”, an end to the temporary payroll tax cuts (resulting in a 2% tax increase for workers,) and deep automatic cuts for over 1,000 government programs. In theory, a fiscal cliff bill was designed to stop the government from going over the cliff. Utah Sen. Mike Lee was one of only 8 senators who voted against the fiscal cliff bill. Meridian asked him why.

Meridian: On New Year’s Eve, the so-called fiscal cliff bill came before the Senate and you were one of only 8 Senators who voted against it. Why?

This bill represented a failure on several levels. It was a failure in what it did. It was a failure from a procedural standpoint and it was a failure from what it failed to do.

What it did was to preserve the overwhelming majority of a dysfunctional tax system. We have a tax system that has put us $16 trillion dollars in debt, has given us trillion dollar annual deficits and is really choking our economy. We have preserved the overwhelming majority of it. One could say we preserved about 98 or 99% of it. For those who had a significant change in their income tax structure, it just got worse. For everybody else, it got left intact. Preserving a dysfunctional system is bad.

On the procedural front, we were left with 6 minutes to read this bill. This is 153-page bill. They released the bill text as 1:36 a.m. on New Year’s Eve. We were called to vote at 1:42. It is physically impossible to read a 153-page bill in 6 minutes. It’s not just that it’s physically impossible, you know with a high degree of certainty when you get a bill of that importance and that length with that much intensity surrounding it, that it is laden with special interest favors, and it was. I didn’t know what they were at the time, but I knew they were in there—and that’s one of the reasons I voted no.

Finally, what it failed to do—it failed to achieve any kind of meaningful reform of our tax system. We’ve got an antiquated, outdated, volatile tax system that produces an inconsistent revenue stream. In some years like 2011, it produced about 14.5% of our GDP. It averages between 18 and 18.5% of GDP and some years you get peaks. About twelve years ago we had a peak that was over 20%, but it averages about 18%. The problem is the peaks and valleys cause us to expand government. In the peak years we end up spending everything and that resets spending at the high level, but we don’t ratchet back down the spending when we hit a valley. It’s not a good thing. What we needed was comprehensive reform and we didn’t get that. Instead we got something worse.

Meridian: When the nation is in a desperate situation, though, isn’t it time to compromise? Aren’t there times you have to bend to solve a problem?

Of course you do. Compromise is a term that gets thrown around a lot these days. It’s interesting. My office fields a lot of phone calls that deal with the word compromise. A large number of them say, “Don’t ever compromise. Don’t do that.” Another part will say “Compromise. Compromise anytime you get the chance. Compromise with a fox in a box on a train in the rain.” The calls that take either of those two perspectives perhaps miss the point, which is that compromise isn’t an end. Compromise is an inevitability in any legislative process that involves more than one person. If you are a dictator, a despot in whom all power is concentrated, then you don’t have to compromise. If you’ve got a legislative system that involves more than person, you have to compromise.

You can’t justify what happened here with this legislation by invoking the need to compromise. That’s not what happened here. Nor can you suggest that this legislation had been debated for months. It was debated in the Senate not at all. It wasn’t even debated for six minutes because no one ever read it. An essential element of true compromise is open debate that includes the opportunity to amend. We didn’t have the opportunity to amend this in any respect. We didn’t have the opportunity to present even a single amendment to this.

So to call this compromise would utterly miss the problem. This was not a compromise. This was something that was rammed through the process of the Senate in a most inartful manner.

Meridian: What do you think should happen to the tax system to make it more consistent and reliable.?

Sen. Lee: First, the tax system needs to be simpler. Our tax code, together with all its implementing regulations, occupies tens of thousands of pages of text. No one has ever read the whole thing in its entirety. No one ever will. If they did they would probably die, just like the man who ran the first marathon and died immediately after.

I sit on the Joint Economic Committee, and a few months ago we had one of the nation’s leading experts on the U.S. tax system. He has a PhD in the U.S. tax code. We asked him a question. “Do you prepare your own taxes?” The answer was as telling as it was shocking. He said, “No, I don’t, because there is no possible chance that I could be certain that I have gotten it right.” So, even somebody who has dedicated his entire professional career to the U.S. tax code doesn’t understand it, even with respect to his own tax situation.”

James Madison had a great quote in Federalist #62. He said, “It will be of little avail to the people that their laws are made by men of their own choice, if the laws be so voluminous that they cannot be read or so incoherent they cannot be understood; If they be repealed or revised before they are promulgated or undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?”

His words seem to reflect a concern that is very well highlighted by today’s tax code. Our laws ostensibly are written by individuals of our own choosing, but they are so voluminous that they can’t be read and so incoherent that they cannot be understood. We need a tax code that is simpler and fairer and more easily understood.

Meridian Magazine: What specifically in addition to the complexity bothers you about the debate at hand?

Sen Lee: The mere fact that is as complex as it is leads to other problems. Those who secure certain benefits under the tax code, do so, not because they are providing any good or service to humanity that warrants it, but because they are powerful, because they can afford to have an army of lobbyists working Congress and making sure their special interest is protected under the tax code.


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