As Taxpayers for Common Sense staff make their way back to DC, steeled for a new year of making government work, below you will find the best TCS Wastebasket title as chosen by you our supporters.

We wish you and your family a Happy New Year.  And as we move into 2010 I encourage you to help us start on a strong foot by making a donation today.

—

Reprinted from an earlier Wastebasket:

Sur-Tax-A-Lot
December 4, 2009

A group of powerful lawmakers recently proposed a surtax to pay for costs associated with the war in Afghanistan. While we have regularly argued that the war costs should be budgeted, tacking a special income surtax on top of the tax code for certain dedicated purposes – in this case, the troop increase – is the wrong way to go about raising revenue.

The country is facing an enormous $1.5 trillion budget deficit, so the idea of enacting a special surtax to pay for the war may be attractive to some. But in reality we should either look to raise revenue across the board or cut other expenditures. War represents the ultimate sacrifice and commitment of a nation. If we are to go to war, we need to be prepared to both budget and pay for it. But the surtax is problematic for other reasons as well.

One major problem of enacting a surtax is that it complicates an already complex tax code. And the proposed war surtax is ridiculously complex. It is a sliding scale that starts at a base level of 1% of taxes owed and then is multiplied by a factor – annually determined by the president to yield enough revenue to pay for the war – and added on top of the filer’s tax bill. For those at the upper end of the income scale, the factor is doubled. That is unless you have served in the Iraq or Afghanistan combat zone since 2001, or you have lost a family member to the wars, in which case you are exempt.

Another problem is that temporary fixes in the code have a nasty habit of overstaying their welcome. For instance, there is some precedent for creating a special tax to pay for war. Remember that telephone tax that was abolished in 2006? Well the tax was enacted to pay for a war – the Spanish American War ! For a four month conflict, it left quite a legacy: the Rough Riders, the slogan “Remember the Maine,” and a tax to pay for it that stuck around for 108 years. Creating a sunset or end date for a surtax doesn’t give us much confidence either – the U.S. Code is rife with programs that were extended past intended sunset dates.

Surtaxes are not a one hit wonder. In fact the war tax is not the only surtax Congress has been considering. The House health care reform bill has a 5.4% tax on individuals making more than $500,000 a year or double that for couples. But the problems outlined above remain.

In reality, surtaxes represent quick hit solutions to highlight an issue or avoid tough revenue challenges. It’s pretty clear that the war surtax was more about scoring political points than it was about raising revenue. That’s probably why Speaker Pelosi swatted it down this week . But that doesn’t get around the fact that the enormous deficits our country faces are the result of fundamental revenue and spending problems. Quick hits, sound bites, and band aid solutions are not going to address the issues. But real tax simplification, tax reform and targeted spending cuts could go a long way to bringing the nation's books closer to balance.