Ron Paul Warns Tax Reform is Useless Without Spending Reform

Tyler Durden's picture

Submitted by Ron Paul via The Ron Paul Institute,

Recently, Republican leaders in Congress unveiled a "tax reform" plan that they claimed would provide the American people with a simpler, fairer, and more efficient tax system. While this plan does lower some tax rates and contains some other changes that may make next April a little less painful for Americans, there is little in it to excite supporters of liberty.

Taxes may even increase under this plan for some Americans, as it eliminates some of those tax deductions labeled “loopholes.” When I served in Congress I opposed bills that “closed loopholes” because closing loopholes is just a fancy way of saying raising taxes. Anything that leaves more money in the hands of the people is beneficial to both liberty and economic efficiency. As economist Thomas DiLorenzo put it, "...private individuals always spend their own money more efficiently than government bureaucrats do,” therefore sound economics, as well as a concern for liberty, requires opposition to any proposal to "let government bureaucrats spend more of the people's hard-earned money.”

Tax reformers also stray from sound economics when they endorse a tax system that is designed to direct consumption and savings. I share the concern that the current tax system distorts people’s behavior by discouraging savings. However, the solution is not for the government to create a tax code that punishes consumption in order to encourage savings. A truly efficient market is one where individuals are completely free to determine how to allocate their incomes between consumption and savings. No politician or bureaucrat can know the proper allocation of savings and investment that meets the needs of every individual, and government policies designed to cause individuals to devote more of their income to savings than they otherwise would distorts the market just as much as policies that encourage excess consumption.

The Republican tax plan adopts what is called “dynamic scoring.” Dynamic scoring is designed to recognize that tax cuts, by incentivizing work and investment, can increase revenue to the government. This is the argument of the famous Laffer curve. It has always seemed odd to me that a supposed free-market economist would argue for tax cuts on the grounds that it would enrich the state's coffers. After all, the more money the state has the greater its ability to violate our liberties. Does this mean that those concerned with liberty should vote against tax cuts? Of course not; the solution is to make sure tax cuts are big enough that they cost the government revenue.

Sadly, politicians in Washington refuse to consider any tax plan that would decrease government revenue. This is because the prevalent attitude in DC favors protecting the welfare-warfare state over protecting our liberties. As the obsession with the Laffer curve shows, even many alleged supporters of the free market only pretend to support liberty as a means to enhance the well-being of the welfare-warfare state.

Many politicians in Washington also forget that deficit spending is itself a tax. When the government runs deficits it uses money that could be more efficiently used by the private sector. Deficit spending also leads the Federal Reserve to monetize debt, thus burdening people with the inflation tax.

Instead of worrying over the latest plan to enable the government to more efficiently take our money, people who want to advance liberty must focus on breaking the intellectual and political consensus in support of the welfare-warfare state. Only then can we radically reduce all taxes, including the most insidious and regressive of taxes -- the inflation tax.

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drendebe10's picture

The best way to kill a cancer tumor is to completely cut off its blood supply.

BurningFuld's picture

Either that or kill the host.

lordylord's picture

Ron Paul making perfect sense once again.  How could any rational man disagree with him?

Keyser's picture

I agree with him, although I believe the US is well past the point of avoiding implosion through either tax or spending reform... 


ejmoosa's picture

...And that is why I abandoned the Fair Tax years ago.

It does nothing to slay the beast that is the Federal Government.

It just changes the food source.

Dick Buttkiss's picture

None do.  Unfortunately, few exist.

The Most Interesting Frog in the World's picture

Here in lies the problem.  I am shocked daily by the desire for a communist state.  Why do we live in a communist society.  The majority have voted it in...

Greenskeeper_Carl's picture

Any tax reform is also pointless if you don't end the fed. That inflation tax ain't going anywhere as long as we have a central bank creating money and giving it to the banks

yrad's picture

Amen, Dr. Paul. 40 years of teaching the same message to ignorant people yet he keeps teaching. Hats off.

Seek_Truth's picture

Ron Paul is an honest man. It has been decades in America since we have seen such. Yet few voted for him. That is all we need to indict the voters / voting system / this nation.

This was our (next to) final warning.

The (truly) final warning comes within one year from now.

End of Empire beckons...


mc225's picture

the word 'reform' translates as, 'plebes get shafted'.

silverserfer's picture

RP needs to begin any serious discussion regarding monetary policy with "after the FED is abolished we can_____" 

Its all utter bullshit to talk about fiscall responsibility as long as we are using fedbux. There is no point in trying to play an honest game when the dealer is hell bent on cheating and changing the rules as you play.

wee-weed up's picture



Unfortunately, until there is a RESET in gov't and all the banksters are hanging from lamp posts...

There will be NO spending reforms. The Feds and Congresscritters are too addicted.

RaceToTheBottom's picture

When you are competing with people who give stuff away, austerity is a hard sell.

AdvancingTime's picture

I think this article by Ron Paul is spot on. Our tax system is a nightmare and spending is out of control. In early 2013 an oped titled "Brace For an Avalanche of Unfunded Debt" by Mort Zuckerman, the editor of U.S. News & World Report and the publisher of the New York Daily News warned that America is facing a crises. Zuckerman made some strong points, the bulk of what he wrote is contained in the article below.

edotabin's picture

Always spend 15-20% less than what is collected until debts are paid off. Then 5-10-15 years down the road put the surplus in a "lock box" and give to Al Gore.

g'kar's picture

"Ron Paul Warns Tax Reform is Useless Without Spending Reform"


Tax reform is useless with the IRS and Congress in charge. Dump the whole system to pre-1913. No Federal Reserve Act and no 16th amendment as well as letting the state legislatures elect their senators.

buyingsterling's picture

There will be no GOP tax plan. If it results in working people paying less taxes Obama will nuke a city before he signs it. He wants you working 16 hours a day, then before you go to bed, he wants to fuck your son and watch some of his goons beat and rape your wife while he sits on a giant vibrator, which he wipes off with an American flag hanky. Good guy, and fun at a party.

OC Sure's picture




Don't the terms of tyranny serve to numb the citizens' mind as a means to succumb their body?

Tyranny defines the terms, the premise is accepted, and you're putty in their hands.

What would raise a rabble in arms more than if the terms were turned upside down and identified as they are?


Is it taxes or robbery?

Is it inflation or theft?



10mm's picture

This guy needs either to play with grand kids or plant tomatoes.

Cabreado's picture

Brilliant comment.

Do you represent the future, or are you one who has already messed it up?

Bemused Observer's picture

Well, if things continue as they are, Paul will get his wish. Fewer people working means fewer payroll taxes collected, so they will have to rein in the spending, unless they want to tax their rich friends to make up the difference.

I could care less either way, because 1) They're full of shit anyway. And 2) I have no intention of contributing my tax dollars to this dysfunctional government anymore no matter WHAT they do.

Cabreado's picture

Thank you again, Ron Paul.

The Response to your writings continues to be a bellwether of just how far down we are, and exposes the fundamentals of Why, and How we got here.

Mr. Ed's picture

"...people who want to advance liberty must focus on breaking the intellectual and political consensus in support of the welfare-warfare state. Only then can we radically reduce all taxes..."

Dr. Paul:  the welfare state only exists because people allow it to exist

The idea of taxing income - or grabbing some of "what you got" - is a tax on a person's belief in their own liberty and self-worth.  The IRS, like a Mafia thug takes your money just because you "got some", and it is a short step, logically, for the welfare state to turn around and give what "you got" to anybody who claims they haven't "got enough" - no accounting needed (unless you're the one getting your pocket picked by filing a tax return!).  And the idea that it's okay to take stuff that isn't yours also supports the warfare state.

The idea of grabbing someone's money because they happen to be there - as opposed to taking it on a fee for (government) service basis (as would be done under the FairTax), permeates the entire stinking mess that is our current tax system.  It's odor seeps into the minds of everyone who is compelled to live, plan and act under the code.  And that preserves the welfare mindset.

If you want to change the way people think about themselves, about the welfare state and about life, then let them start breathing air on a daily basis that is not contaminated by the IRS, because the IRS embodies the very ideas the underly the welfare and the warfare state.   And, let them chose how much they want to save by controlling there own consumption (and level of taxation).  It's not complicated.

The FairTax creates a space where person can regain the notion that their own life belongs to themselves.

The welfare-warfare state will only end when the majority of people change their thinking about what is important and what is  right.  Being forced to live with an intrusive, burdensome and mentally poisonous IRS makes that change very difficult for most people.

Note:  When the FairTax legislation becomes law, your former buddies in the House are gonna lose a whole lot of power over their "subjects" and campaign donors!  That may have an almost immediate spill-over effect on their ability to get welfare legislation passed or extended.

And finally, while I strongly disagree with your stated position on the FairTax,  I generally agree with most, if not all, of your other major political positions and would have gone far out of my way to vote for you if by some miracle you had been nominated!!!

Dexter Morgan's picture

A nation retail sales tax of 23%?  I think that's outrageous.  Fuck the government.  Many serfs paid less than that rate, plus you want me to pay state tax, 8.2% sales tax, etc, ect?  Fuck the FairTax!  Legalize freedom and reinstall the system that worked.

Mr. Ed's picture

You need to go here and actually read about the FairTax (aka HR25)... of course if you work for the IRS or some other part of the Tax-Industrial Complex you probably know that the FairTax will bring your way of life to an end.  If that is the case, you've read it and you know that the total tax people pay will go DOWN not up.

The only way to argue against the FairTax is to tell lies about it.

The Most Interesting Frog in the World's picture

The only way taxes are going to go down is if spending goes down.  The current tax structure started in 1913 and the form was one page long.  If you think that your proposed "fair tax" will be more simple and will not be subject to the same government influences, lobbying and special interests you are delusional.  The answer is to shrink government, but for reasons already argued, we face the same long uphill battle.

Mr. Ed's picture

"The only way taxes are going to go down is if spending goes down..."

First off, with the FairTax, upwards of $250 billion in compliance costs leave the system freeing up funds and secondly the underground economy is suddenly being taxed, including all kinds of criminal activity.

Now, you will no doubt say that those damn crony bastards in congress will just find some way to squander that extra money instead of reducing the tax rate.  Well, they will probably try, but suceeding may be another matter: with the public mind freed of the oppressive weight of the IRS police state and re-focused on what services are being provided to support the economy with each taxable purchase of new goods, consumers will become more curious about what they are getting in return.  I would expect that pressure to rein in imprudent and non-sensical programs and laws will build and that this will put a brake on spending - not accelerate it.

Arguments of this kind also have a simple flaw: if you think the FairTax will have no effect on spending or will cause it to increase, then what makes you think you can reduce spending?  I haven't heard any practical ideas, and I mean ANY, that will impact the spendthrift character of our political class.  It is only the people of this country who can change things.

Right now, most people cannot see the real cost of government for all the trivial tail-chasing nonsense, the intimadation and the sheer waste of time involved in trying to navigate and co-exist with a crazy-making agency and its tax code.  It consumes the mind, it makes YOU crazy.  So, if you're like most people, you put these feelings out of your mind the same way you put thoughts of what you should do to some criminally outrageous IRS employees... and out-of-mind is out of sight!

The FairTax allows that to change.  I expect to see two things:  1) an increase in the number of small businesses that are started as a certain number of potential entrepreneurs will now see regulation fall below their tolerance threshold, and  2) a very, very bumpy road ahead for the political class as many people find they suddenly have the time to turn politically active.


" If you think that your proposed "fair tax" will be more simple..."

The people who wrote the FairTax legislation are well aware of this issue.  But the FairTax requires some attention and an effort to understand.  Washington likes to get its hands on proposals and twist them for their own purposes, assuming of course, that they've even read the damn thing they're voting on. (!!!)  They can only do this however because most people have no idea what's going on.

The FairTax is shaping up to be something quite different.  Frequent FairTax educational events are being held around the nation at the county and city level to explain in detail how this thing works.  I don't think Washington will get away with its usual mucking around behavior where the FairTax is concerned.


The FairTax legislation HR25 (S122) is currently before the House Ways and Means Committee.  You can learn more about it here.



Dexter Morgan's picture

Fuck a 23% national sales tax and fuck you for calling me a liar.

teslaberry's picture


the most insidiuous lie about taxes is that the rich pay the taxes. and i'm not even talking about inflation. 


sales tax. payroll tax. TOLLS . SPEEDING TICKETS. FINES. gas tax. electricity regulation 'taxes'. alchohol tax. taxes on you cellular phone. and of course property tax. you pay property tax for owning a MOBILE FUCKING HOME. if the government could tax your cardboard homeless box, they would. they cannot so they actually just pay cops to destroy homeless encampents and then make sure someone gets paid a shit ton of money to keep homeless folks 'housed'.

what's more insidious is that while you might defend property tax as a state tax---which provides citizens a fair accounting. the federal goverment uses its power to exempt 'non-profits' from institutional taxation. this property tax exemption strips states of their ability to tax the wealthiest property owns, --the large institutions. and thus, it forces the states to incrase their taxes on their own citizens to raise sufficient tax. that tax might be a higher property tax, sales tax, or other state tax to make up lost revenue.

the entire thing is structured in such a way that the entire pricinging and taxation system is held in a contorted position in 50 different ways. all of them meant to extract as much tax out of the peasant middle class and upper class who pretend they are 'rich' for the benefit of institutional interests , specificlaly the govenrment itself.




and then of course, if you factor in INDIRECT taxation---which means everything you pay for is MORE EXPENSIVE becauset the businesses you buy those things from are taxed. 




the idea that the rich are the one's paying taxes only goes to show one thing---the not rich inability to pay income tax is proof that unemployment is SUPER FUCKING HIGH. 


it doesn't proove the poor don't pay most of hte taxes. it doesn't prove the middle class is priced out of everything. and of course, the ultra .01 % don't worry about overtaxation when their wealth is built upon the status quo ratcheting their power through debasement and govenment price racketeering. 

the top .99% under the .01% is in a different situation than the .01%. and yes, just because they are overtaxed to pay for a system out of control, doens't mean the poor and middle class aren't paying the vast bulk of the taxes. 

the income tax...please. as if income tax comprised the majority of taxes anyways!



Mr. Ed's picture

"... you pay property tax for owning a MOBILE FUCKING HOME. ..."
"...the entire pricinging and taxation system is held in a contorted position in 50 different ways. all of them meant to extract as much tax..."
"...everything you pay for is MORE EXPENSIVE becauset the businesses you buy those things from are taxed. ..."

These are good examples of how government taxes things (including your livelyhood) simply because they are there,
The income tax infects people with this kind of thinking.  The effects are very ingrown after 100 years and very far-reaching. 

Pass the FairTax and get everyone used to the idea that you can't tax things simply because they exist.

Dexter Morgan's picture

The income tax is horrible but a 23% national sales tax is a joke.  

Mr. Ed's picture

You can find detailed information about how the FairTax works here.

TK69's picture

The "fair tax', Like the flat tax, like the progressive tax, does nothing to acutally reign in government.  In fact, it does the oppsoite.  

And if you think there is no compliance with the "fair tax" you are being delusional.  It would be far worst as consumers (despite the contrarian claims) would eventually have to prove that they paid "tax" on all of their purcahses.

Mr. Ed's picture

What you are saying doesn't make sense to me.  Could you be a little more specific?

TK69's picture

Federal and state taxes should be levied and collected against local governments directly, based upon population size and needed revenue, without filings, leins, penalties, or contact with the public.  

And governments at all levels should operate on tax revenue only and not the proceeds fines, permits, penalties, and confescated property,etc. And there should be an "limit" upon one could "contribute" to local government.

ymom11's picture

Spending reform is impossible without FED reform because there is more debt than principal requiring perpetual spending.

Seeing Red's picture

Disagree with RP about closing loopholes being bad.  Many loopholes are created by legislation for special interests and increase the complexity of the tax code; how is this a good thing?  I'm even against the long-term capital gains loophole in the AMT ... it defeats the entire supposed purpose of the AMT.  Get rid of it and lower the AMT rate to 20-22% so the middle class is less screwed.