Forbes speaks with students on campus about simpler tax code, competition in health care

Forbes speaks with students on campus about simpler tax code, competition in health care

Steve Forbes, chairman and editor-in-chief of Forbes Media, joked with an estimated 150 Marquette students while visiting campus Monday evening.

“If you’re on a bad date, talk about monetary policy,” Forbes said. “You’ll have the rest of the night to yourself.”

Forbes, who campaigned for the 1996 and 2000 Republican Presidential nominations, was invited to campus by College Republicans and the Young Americans Foundation. He presented his ideas on how to improve the economic condition of the United States brought about by the 2007 financial crisis.

“His unique and respected career in both the business world and politics and extensive work in tax reform gives Forbes an expertise in the area and his talk here would be tremendously beneficial to the Marquette community,” said Matthew Walker, co-chairman of College Republicans, in an email.

Forbes summed up three policy decisions that he said were holding the economy in stagflation: taxes, healthcare and monetary policy.

“Taxes raise revenue; however, they are also a price and burden placed on working,” Forbes said. “When you lower the price, you’ll get more of those good, productive things. Raising taxes is counter productive.”

Instead of a progressive tax system, under which the U.S. now operates, where higher earners pay a higher tax rate, Forbes instead proposed a flat tax system where all households and business’ pay the same rate. Under the flat system, a family of four making more than $46,000 would pay a rate of 17 percent and tax credits would be available. Businesses would also pay 17 percent. Theoretically, this would allow for more investment and economic growth.

“The current tax code has about 9 million words,” Forbes said. “It is beyond redemption. I’d replace it with a simple code.”

A simple flat tax would close loopholes and decrease the cost of collection, eventually raising revenue, Forbes said. He gave the example of Russia, who implemented a flat tax and saw an increase in revenue after three years.

Forbes referenced the National Commission on Fiscal Responsibility and Reform — better known as Simpson-Bowles — that reported a growing consensus on the need for tax reform. He believes the idea is there for comprehensive, simple tax reform and said a new code will take on a positive dynamic.

Paul Nolette, a professor of political science, thinks the tax code needs reform, but that this reform will come in minor ways rather than an entirely new system.

“The only way to reduce tax rates and yet raise revenue is to reduce or eliminate the many tax deductions and exemptions in the current tax code a proposal that has been part of some flat tax proposals as well,” Nolette said. “The problem with this is that each one of the deductions and exemptions has a political constituency that will be quite willing to fight against eliminating it.”

Forbes also addressed this, stating that each tax shelter must be eliminated in order for a new system to be put in place. Further, Nolette said he believes the political feasibility of a flat tax is low, and tax reform will eventually be a compromise.

“I think the political feasibility of a flat tax is very low,” Nolette said. “For one, the idea has little support from Democrats, mainly because of concerns that the flat tax would shift the tax burden from higher-income Americans to lower- and middle-class Americans. Second, there is a concern that a flat tax would reduce federal tax revenue. If this was not accompanied by major spending cuts — something that has proven politically very difficult — than this would make the federal budget situation more problematic.”

The College Democrats articulated similar concerns that a flat tax would not be politically feasible.

“Flat taxes are regressive,” a statement from College Democrats read. “They cause excessive harm to the poorest Americans, while providing tax cuts for the wealthy. Progressive taxation creates opportunities for middle class Americans and ensures that everyone pays according to their ability.”

While he is well-known for supporting a flat tax system, Forbes said he believes monetary policy is most responsible for the health and growth of an economy. Forbes said the US Federal Reserve exerted too much control during the 2007 financial crisis, which he argued distorted the value of the U.S. dollar and hampered recovery.

“If the central bank doesn’t create enough money or creates too much, the economy sputters,” Forbes said. “Periodic binges of quantitative easing undermine the US dollar. This results in cheap money, less productive investment and pressure on real wages.”

Forbes continued to explain that these controls suppress interest rates creating uncertain lines of credit in businesses. This makes loaning to small and new businesses, who lead in job creation, harder.

“Monetary policy doesn’t get any attention and it is hurting your future,” Forbes said.

He also dedicated parts of his speech to discuss health care policy, stating that the current system is filled with a demand, but has become a crisis because the current system is focused on insurers rather than patients first.

“Why do we have a health care crisis?” Forbes asked. “It is because we don’t have a real, free market in health care.”

Forbes is in favor of a system he likened to the food production system, where farmers are free to grow food and sell to private processors who then sell it to consumers. Forbes made a parallel between food and health care, which he said were both basic human needs. He argued if the demand is there, free markets will fill it.

Forbes explained he does not believe the government needs to lead the healthcare system. Rather he said he believes it should create a health safety net, similar to the food stamps program and allow the health market to become driven by patient demand.

Forbes remained optimistic about the economic future of the United States throughout his talk and encouraged those in attendance to search for ways to solve problems and innovate.

“Free markets are free people doing amazing things,” Forbes said.