The Plight of the Homeless
by Thomas Fleming

Life in the Unreal City.

VIEWS

Finding Eden
by Hugh Barbour, O.Praem.
The paradise of fools and its King.

At Home in the Cosmos
by John Francis Nieto
Dante versus the modern imagination.

NEWS

Taxation for Economic Survival
by David A. Hartman
The Business Transfer Tax.

FICTION

The Wand of Youth
by Anthony Bukoski
A story.

REVIEWS

Mexico Comes of Age
by Allan Wall

Julia Preston and Samuel Dillon: Opening Mexico: The Making of a Democracy

plus

Samuel Francis on Alex Owen’s The Place of Enchantment: British Occultism and the Culture
 of the Modern

Patrick Walsh on Philip Larkin: 
Collected Poems, edited by Anthony Thwaite

CORRESPONDENCE

Letter From Canada: The Forgotten White Ethnics
by Mark Wegierski

Letter From Poland: A Pilgrimage to Jasna Góra
by Greg Kaza

VITAL SIGNS

FOREIGN AFFAIRS: Out on a Limb: America's Pledge to Defend Taiwan
by Ted Galen Carpenter

PROPERTY: Robbing Peter, Paying Wal-Mart
by Steven Greenhut

TELEVISION: It’s a Wonderful Racket
by Kevin Michael Grace

COLUMNS

SINS OF OMISSION
by Roger D. McGrath

THE ROCKFORD FILES
by Scott P. Richert

THE AMERICAN INTEREST
by Srdja Trifkovic

IN THE DARK
The Motorcycle Diaries,
Sky Captain and the World of Tomorrow
by George McCartney

THE HUNDREDTH MERIDIAN
by Chilton Williamson, Jr.

THE MORALITY OF EVERYDAY LIFE
by Thomas Fleming

DEPARTMENTS

POLEMICS & EXCHANGES
AMERICAN PROSCENIUM
CULTURAL REVOLUTIONS

POETRY
Poland, New Year’s Day, 1982
A Warning to Dissidents and
Vengeance Is Mine, Says the Lord, 1943 by Leo Yankevich   

ON THE COVER

Cover by Saint Luke; inside illustrations by Melanie Anderson.

The result, as many economists acknowledge, is crippling: a double taxation of savings for investment and excessive marginal rates. But there is an even greater disadvantage to U.S. manufacturing: a one-sided application of free-trade policies. The object of the various free-trade agreements crafted by our government was supposedly the mutual elimination of tariffs. Tariffs were, in fact, eliminated, but all of America’s trading partners replaced them with comparably high border-adjusted value-added taxes (VAT), which give selective advantage to their industries. The result is crippling: a double taxation of savings for investment and excessive marginal rates, redoubled by the additional burden of foreign value-added taxes.

America is virtually alone in the developed world in not providing the advantage of such border-adjusted taxation to her manufacturers. At an average level of 17.7 percent for member countries of the Organisation for Economic Co-operation and Development (OECD), these taxes are not only levied on goods imported from the United States but abated on goods exported to the United States, constructing barriers to U.S. competitiveness in manufacturing that are insurmountable, especially since, in today’s open world economy, capital, technology and management are free to move anywhere that offers the best opportunities.

The United States has adopted a self-destructive trade policy, in part, because of our entirely laudable commitment to free enterprise and our rejection of mercantilism and colonialism. At least since World War II, American business and political leaders have viewed free trade as the basis for international peace and prosperity. In theory, the “invisible hand” of free markets—if capital, technology, and labor were free to seek their own competitive advantage—would disperse the means and fruits of free enterprise worldwide. To accomplish this economic miracle, protectionism in the form of quotas, red tape, and, most particularly, high tariffs would be progressively reduced and ultimately abandoned.

As the dominant economic and military power, the United States led the movement to dismantle trade barriers, both by setting the example and by supporting a New World Order of international trade regulation (GATT and WTO), economic cooperation (OECD), and customs unions (such as the European Union and NAFTA). According to the OECD, its members have reduced their average tariff rates from 40 percent at the end of World War II to 4 percent today. The United States’ average import duty on goods is currently 1.7 percent.

The decline of tariffs masked a trend, which started in Europe, toward border-adjusted taxation in the form of value-added taxes. These taxes were levied principally on manufactured goods. The alleged purpose was to “level the playing field” by offsetting the expense of government welfare through taxation of spending on consumption. The VAT’s were determined to be “indirect taxation,” which the WTO permits to be rebated on exports and levied on imports. Led by France, who first adopted the VAT in 1968, European Common Market countries added the VAT over the next five years, although Germany and Italy were slower to reach the current VAT rates than were France, Belgium, and the Netherlands. The Asian countries have since joined the VAT parade. Today, the European Union 15 has an average standard VAT of 19 percent, and the average OECD standard VAT is 17.7 percent. During the 1990’s, Mexico and Canada increased composite rates to 15 percent from 10 percent and 7 percent, respectively, and China adopted a 17 percent VAT in 1994.

The OECD’s summary of its members’ tax trends (“Revenue Statistics 1965-2002”) reveals the truth:

A fast growing revenue source has been general consumption taxes, especially the value added tax (VAT) which is now found in twenty-nine of the thirty OECD countries. In fact, the substantially increased importance of the value added tax has everywhere served to counteract the diminishing share of specific consumption taxes such as excises and custom duties.

The only one of the 30 OECD countries without border adjustments in her federal tax code is, of course, the United States.

As foreign governments have increased the VAT, they have also reduced effective corporate income taxes. In the United States, by contrast, the taxation of resident corporations’ foreign income is causing the flight of corporations’ headquarters to countries that exempt taxation of overseas income.

The time has come to replace the current corporate income tax with a border-adjusted and territorial tax code that really does level the economic playing field. Any effective alternative should also meet the requirements of supply-side tax reform. In other words, such a tax code should be neutral in taxing savings versus taxing consumption; it should reduce marginal rates and assess the tax burden equitably.

There are four principal candidates for supply-side tax reform. Only two of them, unfortunately, meet the criteria of consumption taxation and border adjustability. The most popular plan with conservatives is probably the Hall-Rabuska flat tax, which is a single-rate tax on wages and an equal-rate tax on origin-based corporate cash flow that exempts returns to capital at the personal level. As a “direct tax,” however, the flat tax could not be made border-adjusted according to WTO standards and, therefore, could offer no comparable border-adjusted tax relief for U.S. manufacturers. Although it is promoted as a simple tax, political reality would subject the flat tax to a continuing redefinition of income—and, potentially, to a progressive rate schedule. Since such a plan would inevitably be stigmatized as tax relief for the rich at the expense of the majority of wage-earning taxpayers, its prospects are very dim.

Another less popular plan is the Consumed Income Tax (CIT), which taxes all income once and only at the personal level, after investment savings have been exempted. This, too, qualifies as a “direct tax,” making it ineligible for border adjustment. Although the CIT has the advantage of taxing all income the same and of encouraging investment, it is also susceptible to political tinkering that could reintroduce progressive taxation and higher marginal rates.

Closer to the mark is the Fair Tax, which is a flat-rate retail-sales tax (RST) that replaces all federal taxation, including social-insurance taxes, and gives rebates on the tax on the equivalent of poverty-level income. It is an indirect consumption tax, and, as such, qualifies by WTO standards for border adjustment.

The preferable alternative is the Business Transfer Tax (BTT), a subtraction method value-added tax based on the difference between revenues and purchased goods and services for all enterprises and employers. The BTT would exempt fixed investment and exports, but it would apply to imports, and it would credit an employer for social-insurance taxes paid. Both the RST and the BTT would offer rebates that could be used to remit taxes on “necessities."

The RST and the BTT are both consumption taxes, but there are significant differences because of the different tax bases that underlie the plans. Theoretically, the RST has as its base all personal consumption expenditures; experience with state retail sales taxes, however, shows that it is very difficult politically to impose taxes directly on “necessities.” A large portion of consumption—housing, healthcare, food, legal fees, and even hair care—are exempt from state retail taxes, and the same humanitarian zeal might afflict the RST. Even without exempting necessities, the RST would have a smaller potential base. It would require a higher rate than the BTT, which would provide an incentive for tax evasion. Were an RST to replace all federal taxation (as the Fair Tax proposes), then it would either have a smaller base than the proposed BTT, or it would have to introduce a companion measure that would tax payroll and the consumption expenditures of government and not-for-profits.

This leaves the Business Transfer Tax as the most viable proposal on the table. What are its advantages? Apart from the fact that it can be made border adjustable, the BTT would establish a tax base that includes all commerce and employers, eventually reaching even employment and purchases in the government sector and employment in the ballooning not-for-profit sector. Although aimed at consumption, the BTT, by collecting from employers rather than from consumers, would offer little justification for allowing exemption, but it would also provide equitable rebates to offset spending on necessities. Such rebates would serve as replacement for exemptions, deductions, and credits, and, if the BTT were adopted as a single flat tax, all taxation of income could be eliminated.

How should a Business Transfer Tax be implemented on a revenue-neutral basis, replacing current taxation in order of priority? First, the corporate income tax would be replaced by a 5.5-percent BTT. Next, the BTT would be raised to 10 percent, enabling the personal income tax to be flattened to a 14-percent single rate. Finally, the entire tax code (apart from personal FICA taxes) would be replaced by a 20-percent BTT. If the socialists insisted on maintaining a “progressive” code, a somewhat lower BTT rate could be adopted, supplemented by a modest upper-income tax. This is not recommended, but this is not a perfect world.

Following this plan would mean an equitable, neutral, transparent, and politically feasible supply-side and border-adjusted reform of the federal tax code. It would dramatically reduce our perennial trade deficits on manufactured goods and provide optimal growth for all sectors of the U.S. economy. It would level the playing field for U.S. corporations in general, and manufacturing in particular, and for U.S. blue-collar workers, whose earnings have been increasingly depressed over the past three decades. It would mean a return to a more equitable sharing in the growth and prosperity of the U.S. economy—not only for those in manufacturing but for all sectors of the U.S. economy.

Our representatives in Congress should consider the U.S. taxpayers’ definition of “fair taxation.” A Readers’ Digest poll addressed the question “What is the highest rate of taxes Americans should pay regardless of income level?” A statistically sound sample of Americans answered: 25 percent. The BTT meets this criterion.

Some politicians and experts continue to deny that there is a manufacturing crisis and to oppose a U.S. value-added based tax. This obfuscation of the real reasons for declining blue-collar incomes serves the interests only of the few who currently profit abroad at the expense of all other Americans’ prospects for the future.

David A. Hartman, a retired banker, is chairman of the board of directors of The Rockford Institute.

This article first appeared in the December 2004 issue of Chronicles: A Magazine of American Culture.

Liberals preach perspective, Epicureans advise indifference to friends and nation, and Buddhists long for Nirvana.  Today, it is principally Christians who insist on a sense of place.  Our universe is filled with special places: This earth, to which God deigned to send His Son; the land of Judea, where He was born; Galilee, which He regarded as home; the cities of the Greeks that gave us our civilization; and Rome, still the urbs aeterna, the seat of an empire of which our world, so full of itself and little else, is the merest afterthought.

When most of us think of place, however, it is not Rome or Bethlehem we have in mind but the place we came from.  But how many of us live in the town, much less the home, in which we grew up?  In American towns like Rockford or Charleston, to name only two of the places in which I have lived, the bright and ambitious are expected to move off to Chicago or Atlanta, or, better still, New York or Los Angeles.  Small towns, even small cities, are for the losers, and Garrison Keillor may continue to bleat, in adenoidal tones, his saccharine tales of Lake Wobegone, but it is from the safe distance of St. Paul, New York, and Scandinavia.

John Crowe Ransom attributed much of America’s cultural and spiritual malaise to the refusal to settle down, and it is true that many of the great American heroes have been drifters: Christopher Columbus, Capt. John Smith, Daniel Boone, Johnny Appleseed, to say nothing of Charles Lindbergh and Alan Shepherd, who are known principally for their dramatic exits from America.  Americans, as we learned in school so long ago, were hardy adventurers who packed a Bible, a spare shirt, and two chickens and headed off, in search of adventure, to the New World.

This theme, however, has been overplayed.  Outside of fairy tales and Arthurian romances, few men are foolish enough to go on quests.  Most of our ancestors were near the end of their ropes—in a few cases, this was literally true—and they were looking for cheap land and the opportunity to make a fresh start.  Once they arrived, they quickly put down roots.  Although some hardy Celts pushed off to the Appalachian frontier, most settlers who had good land held on to it.  We like to think of America as a youthful country, but, by the time of the Revolution, Englishmen had been living in Virginia for nearly 170 years, and many leaders of the rebellion—Washington and Jefferson, the Adamses, the Rutledges and Laurenses—were deeply rooted in the soil of Virginia, Massachusetts, and Carolina.

The exceptions, perhaps, prove the rule: The displaced Yankee rake Ben Franklin and that tax-collector without a country Tom Paine.  Both of them were afflicted with the Enlightenment fantasies of objective rationalism that have done so much to undermine the sense of place and loyalty our ancestors brought with them from Old Europe.  Men of the late 18th century, following the philosophers, were learning to liberate themselves from prejudice and superstition, as they called tradition and religion, and to see the universe not as the Creation of a God Who made the world and saw that it was good but as a vast mechanical system in which the place of man was very small, and the place of the individual man infinitesimal.

Enthusiasts for the French Revolution were no longer interested in improving a single nation.  Democracy in one nation was reactionary.  The true radicals, like Paine and his friend Anacharsis Clootz, had to be citizens of the world.  Clootz, proclaiming the “nullity of nations,” headed the foreign delegation to the French National Assembly.  As an Hébertiste, he suffered the penalty his party would have inflicted on much of France.  His buddy Paine narrowly escaped the same fate and died in America, one of his many homelands.  His demise in Greenwich Village seems to have cursed the place to this day and made it the natural home of bad painters and worse writers.  Paine was buried in unconsecrated ground on his own farm, but his archnemesis William Cobbett, in a fit of uncharacteristic and inappropriate generosity, had the corpse dug up and brought to England for burial in a patriotic monument he intended to construct.  Since Britain refused to rescind the order of outlawry passed upon a disloyal subject, the bones of the wandering tax man had to pass into the hands of a receiver.  Sic semper omnibus rerum novarum molitoribus!

Even Tom Paine grew tired of his life as perpetual revolutionary and represented himself as a respectable American man of property.  There are even stories that he repented of his atheism on his deathbed.  What did he have to lose?  Young men are thrilled to discover that their parents and ancestors are wrong on all the essentials, but, as the blood cools and they no longer think themselves immortal, they begin to hear the sad old music, reminding them how briefly they walk upon the earth, how faint are the footprints they leave.  “Why ask after my ancestry?” is Glaucus’ famous reply to Diomedes in the Iliad.  “Like leaves blowing in the winter wind are the generations of men.”

Glaucus, wise beyond his young years, is not taking time in the midst of a battle to inform his Greek enemy of the obvious fact that generations are born and pass away.  Our situation is more humiliating than that.  This entire generation passes away, scattered by the winds of time, until, in three generations, no one is left to remember what we looked like or what our voices sounded like.  In another generation, we cease even to be a family anecdote.  Our place in the scheme of things, if looked at from a sufficiently enlightened perspective, is nowhere.

Glaucus, however, was not enlightened.  Although Homer’s Achaeans had a gloomy view of the afterlife, they did celebrate the deeds of their ancestors and worshipped the gods of their native places.  Despite the melancholy tone of Glaucus’ question, he does remember six generations back to the grandfather of his namesake, who was his own great-grandfather.  Like the Romans and many Christians today, Greeks paid tribute to their dead ancestors in religious ceremonies that served to consecrate the house.  Until the philosophers taught educated Greeks to think in universal terms, the citizen of a polis was rooted in the sacred soil of Attica or Boeotia and, if he was attentive, knew the names of the gods and daimones of every hill and spring.

Early Romans were, if anything, more reverent, and it would be the work of a lifetime to memorize the names of every little god who presided over the first plowing, the second plowing, the sowing, weeding, harvesting, storing—to say nothing of the malicious spirits who inflicted the plants with mold or rust or weevils.  A medieval European peasant had almost as many neighborhood saints and martyrs as a Greek or Roman peasant, and these mysterious and friendly powers, commemorated in rustic shrines and local festivals and in carved stone and stained glass within the church, made the landscape bristle with energy and meaning.  Now the festivals are put on for the tourists who visit the church in busloads, and, where the glass has not been broken, its stories are forgotten.

Every civilized society goes through a phase of “enlightenment,” and some, if they are lucky, survive it.  The sophists of the fifth century B.C. taught their students that man is the measure of all things, that values are conventional and not rooted in nature, that we know nothing of the gods, that might makes right.  Socrates, although a genuinely irritating man in many respects, saw the problem being created by atheism and moral relativism, but neither he nor his best student Plato understood the danger inherent in their own tendency to treat political and social life in abstract and universal terms.  Plato’s Republic might just as well have been called Utopia.  Aristotle, fortunately, has provided the permanent corrective to the Socratic moral heresies, but it was not the students of Aristotle who dominated the later Greek approach to politics but the Epicureans, who taught men to feign interest but cultivate indifference to their local community, and the Stoics, who preached the doctrine of world citizenship.  Although both schools were to have pernicious effects during the Enlightenment, the Romans converted Stoicism into a pragmatic, albeit austere, creed of duty.  The emperor Marcus—who divided himself into, on the one hand, universal man and, on the other, a particular Roman born into a certain family—is a long way from the Phoenician confidence man who founded the school.

Good character and good intentions can partially convert a philosophical sow’s ear into a silk purse.  Look how Jefferson sidestepped his own nonsensical theory of natural rights when it was a question of defending Virginia.  The Enlightenment that infected Jefferson, like the sophistic movement in fifth-century Greece, entailed a rejection of the particular and local in favor of the universal, of the sacred and mysterious in favor of the secular and rational.  Demystification, like so many other bright ideas, sounds better in the morning than it does in the dead of night.  If my poor human life cannot be given meaning by tradition and ritual, then I shall carve out my own destiny, like Robespierre or Napoleon or Mussolini, and, if nations will not obey me, there is the heroic road taken by the fictional Raskolnikov or the all-too-real serial killers who have cut such a swathe through our post-Christian world.

Most Americans, hell-bent on success, do not dream of conquering nations or murdering our neighbors.  Our vast ambitions are defined by bigger cars, bigger houses, bigger blondes.  In John Huston’s Key Largo, when Rocco the gangster (Edward G. Robinson) is asked what he wants, he does not know how to answer until Humphrey Bogart tells him, “I know what you want.  You want more.”  More is the creed of a lost people.  “He who dies with the most toys wins,” reads a sign I used to see in expensive tackle shops.  Like children piling up stuffed animals on the bed, we think our toys can shield us from the great emptiness we really believe in, and, even if we go to church, it is neither a great cathedral built to the greater glory of God nor a humble chapel where the faithful pray.  No, our churches must have big-screen TV’s and youth choirs waving their arms as they bellow loud commercial music that might be used to advertise the bogus beer we drink.  Some of us demand song-and-dance numbers more appropriate to the midway of a county fair, and we expect to be told our Christian duty by wavy-haired, tooth-capped preacherboys who could fill in for one of the Chippendales—anything to distract us from the thought that we are going to die alone, and no matter how pretty the plot we have chosen in the “memorial garden,” our corpse is one plant that is not going to come up again in the spring.  In thinking that pagan thought, we have already made our existence Hell, but we have not even the pagan comfort of thinking that our flimsy afterlife will be consoled, once or twice a year, by ritual prayer and feeding administered by descendants who are both pious and a little bit afraid.

I am saying nothing that has not been said before by the Agrarians, and by Pound and Eliot.

Unreal City,
Under the brown fog of a winter dawn,
A crowd flowed over London Bridge, so many,
I had not thought death had undone so many.
Sighs, short and infrequent, were exhaled,
And each man fixed his eyes before his feet.

Dante’s vision of Hell has become Eliot’s London.  Eliot was going mad as he wrote The Waste Land.  He found some sanity in joining the Church of England and in becoming a kind of English patriot, as the local references in the Four Quartets suggest.

For many of us who have spent our lives moving and traveling, it is too late to put down deep roots in the soil of California—or of Illinois, on whose people and identity Edgar Lee Masters long ago pronounced the eulogy.  We can do our best, however, to love the places in which we find ourselves or to move to places we can learn to love, knowing that all such particular and partial loves are preparation for the full love we shall only know when we finally make our way home to where we belong.

This article first appeared in the December 2004 issue of Chronicles: A Magazine of American Culture.