Alan Keyes
January 28, 2002

ALAN KEYES, MSNBC HOST: Hi. I am Alan Keyes. Welcome to MAKING SENSE.

Well, it was an exciting week last week on this show, and I think we have a lively one coming up. All the buzz around town here in Washington, of course, is the president's State of the Union address tomorrow, in which he is going to address a great many things I am sure, including probably stimulus packages and other such things. On account of that speech, you won't be seeing me tomorrow night, because I'll be like you, watching the president's speech no doubt. But the day after that, on Wednesday, we have Dr. Laura Schlessinger joining us. I hope you will join us for that program.

This evening, we are going to look at one of the subjects that in a way will figure in the president's speech tomorrow night, and that is taxes. But of course, we will be talking about something that perhaps won't slip into the speech, at least not just yet. Because the question before us tonight is one that I put a lot of the time, but that you are not liable to hear in the midst of the discussions of whether the rate should be up, and whether the rate should be down, and what we should do to give people this amount of money that they earned and that amount of money. Because I have problem with that whole discussion.

The underlying question in my mind whenever I am listening to that, it even happened during the course of the debates in the presidential race, and I am always sitting there thinking, but it's their money. That's our money you are talking about, as if it belonged to you and the government, but it really doesn't. And when you think about that, it raises a fundamental question about the income tax itself.

And a question that in light of its history and other things, we should ask ourselves from time to time to take a look behind this discussion. Remember that it's all our money, and that the income tax itself was a choice that was made at a certain time in our history about how we were going to support and fund the federal government. Has it worked? Is it a good idea? We are living with it now, as we have almost — death and taxes they always say, as if they were inevitable. Well, taxes are inevitable, if we are going to have a viable government. But a given form of taxation, that is not inevitable. That's a choice we get to make, a choice that was made in the past.

And so, the issue that I will be laying on the table this evening is the income tax. Should we abolish it? Do we have, in fact, to live with it? And what are the consequences?

As usual, we are going to start by taking a look at the basic facts. Look at a little history and background at some of the things that we can learn about what the income tax is doing to us today. And for the “JUST THE FACTS” segment, joining us now live from New York, William Baldwin, the editor of “Forbes” magazine. Thanks, William, for agreeing to come on the show this evening and share some thoughts and facts with us.

The first thing I would like to do is just to remind folks, unlike death and taxes in general, the income tax has not always been with us. When did we get it in the first place?

WILLIAM BALDWIN, EDITOR, “FORBES” MAGAZINE: Well, not counting aborted version that was in the Civil War era, we have had it since 1913. You go back to that 1913 1040, it will bring tears to your eyes. The instructions were one-page long, and the top rate was 6 percent.

KEYES: And who was it supposed to hit? I mean, I remember at the time during the debates and so forth and so on, I mean the people who paid this tax were supposed to be only the richest folks, right?

BALDWIN: Well, the 6 percent rate applied only to the Robber Barrons. I'm not exaggerating too much. It was for incomes of $500,00 and up, and that was a huge amount of money back then. It was like tens of millions of dollars now. The rate only kicked in, a 1 percent rate kicked in for people making more than $3,000. People below $3,000 paid not a dime, but $3,000 was a lot of money back then.

KEYES: Yes, it was.

BALDWIN: It was about twice what Henry Ford was paying workers to assemble Model Ts. So very few people paid any tax, and most people paid only a percentage point or two.

KEYES: Now, that has certainly changed. Are we supposed to believe now that all of us have become Robber Barrons? What happened?

BALDWIN: Well, it's hitting an awful lot of people, but even now, it's interesting. The progressivity hasn't changed that much. Look, for example, at the statistics that the IRS puts out on who pays what. The top 1 percent of taxpayers, people with taxable incomes over about $300,000, those people pay an astounding one-third of the total personal income tax burden in this country. And the top 25 percent of taxpayers, that's people with taxable income over $53,000, those people are paying five of every six tax dollars even now. It's not that different from what happened in 1913.

KEYES: So what are the bulk of people looking at in the way of their tax burden these days?

BALDWIN: Well, I think a lot of people making less than $53,000. Certainly, most of the people making less than $30,000 are paying probably more, a lot more in payroll taxes — I am talking about Medicare and social security — than they do in income taxes.

KEYES: I think a lot of people do see that problem and that reality, when they are looking at the amount of money that's withheld from their paycheck. What exactly led to the broadening of that base in terms of participation in the income tax? At what point in our history did that occur?

BALDWIN: Well, remember the first tax came along coincidentally just before we went into World War I. That wasn't as an expensive as a war as World War II. When that came along, they had to get real serious about collecting taxes from the great masses of Americans, and that's when you saw withholding taxes.

KEYES: Now, that's the era when withholding...

(CROSSTALK)

BALDWIN: ... money in April.

KEYES: That's when withholding came in, and we sort of got the system that kind of takes it out before we get a chance to look at it, right?

BALDWIN: That's correct.

KEYES: I think that's one of the aspects of the system that I find to be particularly, well, shall we say interesting for the moment, and we'll be taking a look at it a little later in the show.

Now, we have had a debate in the course of the last several years with folks looking at that system and trying to see whether or not we can come up with alternatives for reform or abolition. What kind of alternatives have been laid on the table in the last several years?

BALDWIN: Well, some people are talking about a national sales tax. Now, the problem is it would have to raise an awful lot of money. The U.S. government slurps up $2 trillion a year, and half of that comes from the personal income tax. That would mean a very fierce national sales tax, and you have a little technical problem, when you get up to the kind of rates we are talking about, 20 percent or more.

KEYES: Well, there has also been...

(CROSSTALK)

BALDWIN: ... is enforcement.

KEYES: There has been a proposal...

BALDWIN: How are you going to keep people from smuggling?

KEYES: There has been a proposal laid on the table, in fact, by somebody you are familiar with in the course of the last campaign for a flat income tax. Now, how would that work?

BALDWIN: Well, I think the person you are referring to has the last name, Forbes. Now, he was talking about a flat tax that would be very progressive, because it would exempt $36,000 of income for a family of four. And above that amount would be a flat 17 percent. Nowadays, we're in a recession. I think the rate might have to be a little bit more than 17 percent, but those are the numbers that he was throwing out.

KEYES: Now, tell me something. What are the prospects right now? Because I quite honestly look at the present scene. We were having a lively discussion, in fact, about these kinds of alternatives. Congressmen were going around the country debating the retail sales tax vs. the flat tax, particularly in the Republican ranks. It seems as if, since the election season though and especially with other things that have happened in the world, obviously terrorism and so forth, some of this seems to have fallen on the back burner. What are the prospects for real fundamental reform and discussion of these fundamental issues right now?

BALDWIN: Approximately nil, and here is the problem. The income tax raises huge monies, and it is addictive. It's very hard to get rid of it. The second thing is that the complicated tax code we have, and I mean bizarrely, weirdly complicated, 15,000 pages of tax code and regulations, is addictive to politicians. They hand out goodies with it. They reward people. They engage in massive kinds of social engineering. The tax code tries to tell you what kind of a car to drive, who to hire. It even tries to tell you what to do with chicken manure, I'm not kidding.

KEYES: Well, you know, I think that that is one of the major issues underlying the tax issue that isn't much talked about, because we talk about the money and the tax rate and who gets what and how much people are getting. But I think underlying in all of the issues you just touched on is an issue of power. Who is controlling what in this situation? And I think obviously, as you said, politicians get addicted and bureaucrats and others can get addicted to the control that this system puts in their hands.

Thank you very much for being with us tonight, William. We really appreciate the thoughts that you have shared with us.

Next, we are going to be sharing some thoughts, of course, with PEOPLE JUST LIKE YOU, in the segment where we bring regular folks together to talk about issue like this that are in front of us and close to home in terms of our own burdens and responsibilities. Of course, we'll also get to your phone calls and e-mails later on in the show. And at the end of the show, on a personal note, remember that law school shooting in Virginia? I am going to tell you something rather shocking about that story that you may not have seen or read about.

But first, does this make sense? The society that puts out the New International Version of the Bible has decided to come forward now with a very controversial gender neutral. It's going to be a politically correct version of the Bible. Now, let's see. God created the world, and then he created human beings, male and female, he created them. But apparently, throughout the Bible, his word was confused about the difference. And he's not the only one. Think of the choir people, who are going to be sitting there trying to decide whether what they are singing is a him, a her or an it. Hmm. Does that make sense?

(COMMERCIAL BREAK)

KEYES: Welcome back to MAKING SENSE.

We have come to that portion of the show called PEOPLE JUST LIKE YOU. Joining us now is Pradeep Ramamurthy, a student at Georgetown University, Audrey Sheppard, a health consultant, and David Merlino, who is a headhunter in Atlanta. I always have a hard time saying that, David, but that means you go out and look for people for search firms and everything, right?

DAVID MERLINO, HEADHUNTER: Well, I actually search people for — yes, for firms they go out and give me an assignment, and I try to find the appropriate talent for those companies.

KEYES: Great. While y'all were listening to the segment we went through, (UNINTELLIGIBLE) thumbnail sketch of the income tax, where it has come from, where it is. And as I look at it, the last point that was made by William Baldwin strikes me as a good starting point for the discussion, because we often talk about the income tax as if it's all about money. Now, here's the question I have for you, and maybe we'll start with Pradeep. Is the income tax all about money? Or is it, in fact, all about power? Because at the end of our little segment, well, why would politicians not want to change this system? Because it gives them control over distribution, what's happening to companies. I mean, a point of fact it is a source of enormous political power and patronage to have a system like this, isn't it?

PRADEEP RAMAMURTHY, GEORGETOWN UNIVERSITY STUDENT: I agree, but I think that it's about power in a different sense. It's about responsibility and who people are responsible to and where they get their money from and how that responsibility transfers and how they spend that money. And I would argue that people have two different responsibilities. They have one responsibility to themselves obviously, and another responsibility to society. And that's where the income tax comes in is in fulfilling their responsibility to society.

KEYES: Well, I think maybe that's where taxes come in. I would agree with you on that, but without any doubt. But in terms of both what Pradeep has pointed out and the power equation, when we look at the income tax, is that the only way to go about this? What do you think, Audrey?

AUDREY SHEPPARD, HEALTH CONSULTANT: I definitely think it is. Maybe I am just wedded to the way things are, but you know, we've got a war at home. We've got a war abroad. We have all kinds of domestic responsibilities. We have a system that works, and I think if it ain't broke, let's go with it. Well, I'm for it.

KEYES: But we'll talk in a minute about whether it is, in fact, a system that works. But the question that I'm putting on the table for first consideration is whether or not it involves more than money. And I think one of the things we are agreeing on here is that it does. It involves a question of who is controlling what? Who is controlling this money? And the question of that control, which Bill Baldwin brought up, is one of the things I guess that has always preoccupied me. Is this the only way to go about it, David?

MERLINO: No. And unfortunately, most Americans are mistaken of what is going on here. OK? Daschle and Gephardt come on, and they bend the truth to make it unrecognizable. And here's the bottom line; 25 percent of the people are paying 82 percent of the taxes. So a government that robs from Peter to pay Paul always has Paul to depend on. But when 25 percent of the folks are paying 82 percent of the burden, it is very simple to see what liberals are doing. They come out and say I want to help people. They want to make you dependent on them. So how will they ever be kicked out off office when only 25 percent of the folks are paying the taxes?

SHEPPARD: I am not sure whether your statistic is exactly right. I will assume that it is. But those are the folks that have the money. You go where the money is. So I don't see what that's so (UNINTELLIGIBLE) to you.

KEYES: Now, wait a minute. Are we then like that famous bank robber...

SHEPPARD: Yes, that's correct, yes.

KEYES: ... who when asked why he robbed the banks it's because that's where money is?

SHEPPARD: I think so.

(CROSSTALK)

KEYES: Now, wait, wait, now hold on a second, because that would imply, wouldn't it, that the income tax is a kind of theft. Do you think it's a kind of theft?

SHEPPARD: No, no.

MERLINO: No, absolutely not.

KEYES: In what sense is it not theft?

RAMAMURTHY: Because I think that the people that make money off of, you know, the society has some responsibility to that society and contribute back to it. And income tax — and I agree with you that income tax is not necessarily the only way to go after taxation, but it would be ridiculous to say that people's incomes don't, in some way, come from the society they live in. And even if they are taxed in other ways...

KEYES: Oh, so I see. Your income, the income comes from the society. It doesn't, for instance, come from your hard work. It doesn't come from your talents. It doesn't come from your ability.

RAMAMURTHY: Oh, it definitely does. (UNINTELLIGIBLE). It definitely does. But that hard work would potential not be feasible and potentially not be facilitated if that society didn't exist.

KEYES: Yes, but this is...

(CROSSTALK)

KEYES: Wait, wait, I want to go into this a little further, David. Because is what you are saying, Pradeep, that we would not have an ability to take care of ourselves and make a living, except in the context of government and society? So that in a way you are saying that before the people can happen, the government must happen. Is that what...

RAMAMURTHY: No, I disagree. I think that society has to exist in order for people to make as much income as we — as much wealth creation as we see today. Now, it would be great if society itself could find some way of funding itself. It would be great if society was an agent in and of itself, but it's not, and that's why we have a government to act on behalf of society.

KEYES: David?

MERLINO: Pradeep, and again, we need some kind of taxation. OK?

RAMAMURTHY: Absolutely.

MERLINO: And the fact that people cannot see what the liberals and Democrats are doing is amazing to me. And here's another fact that's amazing to me. The founding fathers started this country, gave their lives for you to breathe this freedom. OK? And with that very freedom, you would just assume desecrate their graves to say we need a 38 percent federal income tax, social security, Medicare, state income tax, state sales tax. Think about what Washington would think about that. But they started out with zero federal income tax.

SHEPPARD: See...

RAMAMURTHY: The other issue...

KEYES: Audrey, what were you going to say?

SHEPPARD: Well, see but I would like to ask you, you know, this is all well and good. It's a very good theoretical discussion. But you know, there are some facts of life in terms of this country. How would you, you know, approve drugs that the FDA does? How would you have an army?

KEYES: Can I answer that question?

SHEPPARD: How would you do all of these things?

KEYES: Audrey, can I answer that question?

SHEPPARD: Please.

KEYES: Because the premise seems to be that without the income tax, there would be no money to fund to the government. Is that what you're saying? Let me ask you a historical question.

RAMAMURTHY: It...

(CROSSTALK)

KEYES: Let me ask you a historical question. When this country was first founded, we went through 100 and some odd years, and what economists say is the most difficult period of the country's development, when you reach the takeoff point for industrial development, and you are building the infrastructure from scratch, you are developing...

SHEPPARD: (UNINTELLIGIBLE) started.

KEYES: ... a self-sufficient agriculture, this is the hardest thing to do in a society's life. And during that whole period, when this country was being put together, when it took off infrastructuring, when it laid the basis for the economy, the greatest economic world power when it passed the most difficult tests of its existence. We had no federal income tax. How was the government funded? How was the government funded with the land extension system? How was the government funded, when we opened up the West? How was the government funded, when we were moving forward in the frontiers and so forth and so on, facing these difficult tasks? Do you know?

SHEPPARD: Do tell. Do tell. No, I don't.

KEYES: See, because the one thing that I find real interesting, and there are two assumptions that have now been laid on the table. One is the assumption that in some sense, governments or I'll use the general word, but you mean society armed with enforcement power presumably. The government is prior to the work that people do. And the second is that without the income tax, we couldn't have funded the government.

Now, historically we did fund it for a long time and in very difficult circumstances without the income tax. But it's the other one that...

(CROSSTALK)

RAMAMURTHY: If I can...

KEYES: But one second though. Because you raised it, Pradeep, in terms of in a sense almost of which comes first, the chicken or the egg. But one of the things that worries me about this tax system — a fellow once called up on a radio program I was on doing savings and loans stuff. And I had been talking about how the taxpayer was being asked to foot the bill for this debacle and so forth, and he called up and he said to me, he didn't understand why the government had — why the taxpayer had to foot the bill for all of this. Why didn't the government do it?

What was wrong with that statement? David, what was wrong with that statement?

MERLINO: The government is the taxpayers.

KEYES: What, say again?

MERLINO: The government is the taxpayer.

KEYES: So wait one second. So the money does come then from the people and not from the government?

MERLINO: Absolutely.

KEYES: And it comes from the people doing what?

MERLINO: Doing work.

KEYES: Doing what kind of work? Government work?

MERLINO: No, all kinds of work — employing people.

KEYES: But wait a minute. Because you have business presumably, and people put together those businesses. And is that initiated by the government in our society?

RAMAMURTHY: No, but there are goods that the government provides.

KEYES: Like what?

RAMAMURTHY: Like security, like property protection.

KEYES: Apart from — at what point in our history, because you said that you can't have all of this and so forth and so on. But when the country was founded, when the Revolutionary War fought, when the frontiers were opened, when people moved out into the West and so forth and so on, who was providing all of the services?

RAMAMURTHY: You know, I'd like to take actually, and I think I'll answer it then I do this, is take a little step back. And I think one of the justifications for taxation of income — a progressive income tax is because one of the other founding principles, and you were talking about founding principles in this country, is equality of opportunity. And I am not convinced that you could provide that equality of opportunity if you did not, in some way, balance the awesome power that people in power with money have. I mean, if...

MERLINO: Where in life, liberty and pursuit of happiness does that mean everybody gets a fair chance? That means...

RAMAMURTHY: That's what this country was founded on.

MERLINO: No, no. It means you have a right to earn...

RAMAMURTHY: Equal opportunity not...

MERLINO: ... your fair chance.

RAMAMAURTHY: Equal...

MERLINO: You have earned your fair chance.

RAMAMURTHY: Equal opportunity and not equality of results as the country was founded on. And the...

SHEPPARD: See...

MERLINO: Equal opportunity is communism. This is as far away from communism as you can get.

RAMAMURTHY: No, equal opportunity is not communism. Equality of results is communism. There is a huge, huge, huge difference.

KEYES: But what I don't quite understand is how does a tax system that puts the greatest of burden of taxation on what is now becoming a relative handful of the population? How is that tax system, even in its concept, about any kind of equality? It looks like the people who go out and who put the greatest effort forward and who get results on account of their willingness to work hard and put things together, we're going to punish them...

RAMAMURTHY: Absolutely not.

KEYES: ... with prohibited taxes.

RAMAMURTHY: Absolutely not. Because part of the reason I would argue that many of these people are wealthy is because they come, one, from wealthy families. They come from circumstances that already have opened up opportunities for them that unless you provide those opportunities to other people, you won't see this kind of (UNINTELLIGIBLE).

MERLINO: Can I make one point, Alan, please? It's very important. This is very simple, because I am not as smart as Alan. OK? And he is trying to prove to you guys with facts how this country came about. But I can prove that I am right with one simple statement. I am telling you the Democrats want people dependent on them so they always get votes.

RAMAMURTHY: Why is there a Republican government?

MERLINO: But watch this. Watch this. I will put the gauntlet down. I will challenge Gephardt, Daschle, McAuliffe, any of those Democrats to come and talk to me on any TV show, any TV show about the tax code, and they won't, because I will expose them.

KEYES: Audrey, you had a thought?

SHEPPARD: Well, I am getting a little confused here. I don't know if your problem is with all centralized money going into a big pot that is raised in some way, or if your problem is the income tax.

KEYES: Well, my problem is the income tax. But I think...

SHEPPARD: So specifically taxing income...

KEYES: Since you asked.

SHEPPARD: ... not another way.

KEYES: Since you asked. My problem is the income tax.

SHEPPARD: This is leaving me confused.

KEYES: And it's really very simple. Unlike Pradeep, I don't think the government built this country. As a matter of fact, I know that it is an historic fact of America.

SHEPPARD: I think he said that.

(CROSSTALK)

KEYES: Let me finish. Let me finish. But...

(CROSSTALK)

KEYES: Pradeep, the people built the government, right?

SHEPPARD: Yes.

KEYES: And every cent that the government got in order to do its work did not come because government did X, government did Y, government did Z. It came because people acted before the government was even established...

SHEPPARD: Fine. Nobody is...

(CROSSTALK)

KEYES: ... had created farms and businesses and homesteads and towns and corporations. The states antedated the federal government. The localities and towns predated the state governments. All by way of saying that the people had the power in their hands, they delegated some of it to the federal government in order for it to get certain tasks done, and they were the starting point.

The thing I worry about with the income tax is that if you give the government control over the national income, then instead of the government coming from the people dependent on them, the government now controls how much of their work, how much of their effort, they actually are going to have a say in. And as I also point out to people, if you give the power to a government to tax you, to basically say you set the tax rate. You can take as much money out of my pocket as you decide, which is what we have done to the government. OK? How much of your money do they, in principle, control?



RAMAMURHTY: Well, I'd rather honestly and I think...

KEYES: No, no, answer the question though. How much of your money in principle, if I say to somebody, I am handing to you the power at your discretion to set the tax rate, that you will reach into my pocket and take the money out. In principle, how much of my money do they control?

MERLINO: 100 percent.

KEYES: How much?

MERLINO: 100 percent.

KEYES: 100 percent, and...

(CROSSTALK)

RAMANURTHY: Would you rather the government whose, you know, in a democracy the representative of all people control the money or, you know, control the way it is spent and you know, benefit everybody? Or would you rather have it concentrated in the hands of about, you know, a half a dozen or several dozen families in this country?

(CROSSTALK)

KEYES: Do you know what I would rather? I would rather — it's very simple.

(CROSSTALK)

RAMANURTHY: ... controlled by Bill Gates and everyone is sitting there eating, you know, cereal?

(CROSSTALK)

KEYES: Pradeep, you asked the question. I would rather, Pradeep, that the decisions be made by the people who earn the money, and that the government not have a say, not get control of one cent of it, until they have decided how to spend it. And guess what system does that? A national retail sales tax, where you don't have to pay the tax until after you have decided what to do with the money. It's that simple. The principle I am looking at — the government needs to be funded, but why does the government need to be funded at the expense of our control, our power over our own resources, our ability to control our own earnings? That's the question that I would put on the table.

We have reached that point, I'll be sad to say, when we are coming to the end of the segment. Thank you so much.

I must say about this segment, I only have a couple of seconds, I know. But I have loved every night of it, precisely because we gather together people, regular folks, and what do we find? We find that whether we agree or disagree, we are making sense of the positions we put forward. And that's what I think this segment and this show is all about.

Next, we're going to get to the bottom line. And that's going to be in this case a more traditional debate between Rita Cutner (ph) and myself, we're going to talk about the pros and cons of the income tax, and my own position that it should be abolished. Later, we'll take a look at what's on your mind.

But first, does this make sense? The New Jersey Education Department has apparently adopted a curriculum standard that doesn't require the mention of George Washington, Thomas Jefferson, Ben Franklin, the founders. As a matter of fact, it looks like history has become for them a no-founder zone. How are we to remember the ideas that go into our freedom, if we don't remember the people who thought through those ideas? Does this make sense?

(COMMERCIAL BREAK)

KEYES: This is MAKING SENSE. Now, we get to the bottom-line.

We've had a discussion amongst our regular folks, a lively discussion, I think, a diversity of view points expressed, about the income tax and about its necessity, about its purpose and usefulness.

Now I'm going to have a continuing discussion. It'll probably be a little bit more of a debate than the last one was, because we have such different points of view.

But joining me now is, in some ways, an old debate partner of mine. We've been at this before. Robert Kuttner, the founder of “The American Prospect,” a liberal policy magazine.

And it was a thought I had as I was watching the news just then and the Enron business being on everybodys mind — isn't part of the source of the temptation in our politics to all kinds of corruption and incestuous relationships with corporations — doesn't it arise in fact from the power that is put in the hands of politicians because of the income tax system?

ROBERT KUTTNER, “THE AMERICAN PROSPECT”: That's a great question.

Let's look at what the Enron scandal was about. The Enron company figured out a new way to fleece the public. It set up a whole bunch of off-the-books enterprises, and then it paid off politicians to waive the rules so that the investors couldn't figure out what Enron was doing, and so that its own accountants couldn't figure out what it was doing, and it dealt some of the accountants in on the deal. The income tax had nothing to do with this whatsoever. If there were no federal income tax, if there were no federal taxes whatsoever, the Enron scam still would have been exactly the same kind of scam.

KEYES: But would we have the sort of structure that we have in this country, in which the whole political system seems to be established in order to protect the interest of the private sector from the enormous concentration of power, to either help or interfere with their affairs, that we have put in the hand politicians who have become the gatekeepers of pretty everything that goes on in economics in our society?

KUTTNER: Well, you know, you said some very interesting things about America in the 19th century in the last segment, and there was a lot of corruption in the 19th century. There were some really bad guys after the Civil War, probably the worst period in our history for corrupt American politicians.

You know, there was no income tax. So we can have a debate in which you can fault the income tax for a whole bunch of things, but corruption has been around almost since Adam and Eve. The income tax is only 80 years old.

KEYES: Now, see, this is what raised the question, though. If you know that government is an instrument prone to corruption — I think our founders understood this. It's something I deeply believe. What people usually do in the face of that reality is they avoid big concentrations of power in the hands of a few people.

You don't tell folks — whether it's in the Congress or in the bureaucracy — that they are going to be the gatekeepers of the entire national income, decide who rises and who falls based on very complex tax laws and structures which you then must buy your way around, in terms of the influence that you can get with these politicians and bureaucrats. Does it make sense to concentrate power in this way in the face of the reality of the corruption?

KUTTNER: Well, you know, the founders invented a very interesting system here of checks and balances so that no branch of government would have too much power, so that temporary majorities could not work their will and run roughshod over the rights of minorities, and it's worked pretty well.

Now, whether to have an income tax and how big a government to have is a separate question from the question of how to secure the rights of the people.

So you invited me on to debate the income tax, Alan. Let's debate the income tax.

KEYES: But Robert, before we go into the — I don't invite people on just to do what everybody else does. And in fact, what you've just said is the heart of the matter, as far as I'm concerned.

KUTTNER: Right.

KEYES: Can the people control the government when the government controls the income of the people?

Back in our founding period they were fond of quoting one of the famous British writers, I think it was Blackstone, who had written that the power over someones resources is the power over their will. Now obviously, in a system like ours, the will of the people is supposed to decide who represents us in Congress and so forth...

KUTTNER: Sure.

KEYES: But if we have handed off to the politicians power over the resources of the people, haven't we in fact given them power over the people's wills?

KUTTNER: Yeah, but Alan, this is a democracy. It's a representative democracy. Every four years we elect a president. Every two years we elect the House and part of the Senate. And if you look back over the past 75 years, taxes have gone up, taxes have gone down. When people think taxes are too high, they elect Ronald Reagan. When people want more public services, they elect Linden Johnson.

It's a reasonably effective democracy. Let's debate the income tax, shall we?

KEYES: We are debating the income tax. Because what we are in effect debating, I think, is at the heart of the income tax system. You've talked about the ups and downs of the income tax in response to this or that. Isn't that because in point of fact this system has allowed for the politicians, vis a vis the people, to become manipulative? To stand before them, as folks did when I was running, and say “we'll give you this” and “we'll give you a little more of that” and “we'll take more from this other guy over here,” setting one class against another, one group against another, offering all kinds of people the false promise that they're going to get something, when it's really they're own money, all in order to secure their own position of power.

KUTTNER: No, I don't buy that at all. In fact, you take two of the most expensive programs that the government provides, Social Security and Medicare. They're immensely popular, because old folks know that if it weren't for Medicare, they couldn't afford to buy health insurance. And old folks know that if it weren't for Social Security, half of them would be destitute in old age.

Now we can debate over whether Social Security should be partly privatized, and that's an interesting debate. But the politician who says “let's abolish Social Security,” he's dead meat, politically, because the politicians are ultimately responsible to the people. That's what a democracy is all about.

I'm happy to debate the income tax anytime you want to.

KEYES: The wonderful thing is, that I don't sit here as a politician who is saying, “well, let's neglect old folks and let's make sure people don't get health-care,” and so on. As a matter of fact, I think that the key issue with respect to the income tax is in America today, should the dollar that an individual earns, should that dollar, should the first decision about how to use it be in the hands of the individual who earned it, or in the government's hands?

And right now, the answer to that question in principle is that the government gets to decide, in principle, whether the first use of your dollar is going to be yours or going to belong to somebody else. Shouldn't the people who earned the money have the right to the first say as to what's done with it?

KUTTNER: Well, the people who earn the money do have say over most of their private income, and their elected officials — and let's not forget, their officials are democratically elected — have chose to levy taxes to provide for certain public services. If those services were not popular, the people would vote the scoundrels out.

And you had a very conservative guy on at the beginning of this show, the editor of “Forbes” magazine, who said that if you had a national sales tax, it would have to be 20 percent. That's why very few politicians are in favor of a national sales tax. An income tax is a more effective, a more popular form of tax, because it taxes people based on ability to pay. And as he pointed out, five out of six Americans don't pay much income tax. It's a progressive tax. It taxes the wealthy.

KEYES: As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government...

KUTTNER: Democratically.

KEYES: The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system.

In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won't, at the voting booth and in other phony issues, be subject to that manipulation.

KUTTNER: Alan — look, remember the slogan of this republic that we fought a revolution over? It was “no taxation without representation.” It wasn't “no taxation.” And the founding fathers believed that if you had representation, it was OK for the people's representatives to levy taxes. So we didn't say no taxation ever. We said let's have a democratically elected congress and then we can decide what kind of taxes to levy on ourselves.

KEYES: We're going to have to go, but the fascinating thing is, that the very founders, who thought, as you described, were the founders who wrote the constitution in such a way that the federal government could not levy the kind of income tax that we have today.

KUTTNER: Well, then we amended the constitution.

KEYES: That, I think, is a fascinating comment on what the founders thought was the foundation of liberty.

Robert, thank you very much for joining the debate.

KUTTNER: Oh, thank you Alan.

KEYES: Really appreciate it.

Later, on a personal note, I'm going to be telling you a little bit about that shooting at a law school in Virginia last week, and I'll have something to say about it that I don't think you're reading about in the newspapers.

But first, I want to hear what's on your mind — your phone calls and e-mails are next.

You're watching MSNBC, the best news on cable.

(COMMERCIAL BREAK)

KEYES: So tonight we took our first look at the income tax, and taxes in general. You can bet it's not going to be the last time we talk about this subject. How often does it recur in American life and society? We'll be back to it, I'm sure, in the weeks ahead.

But it seemed like tonight the show went awfully quickly.

Let's see what you all have on your mind tonight. Let's go to Mike in Wyoming. Welcome to MAKING SENSE.

MIKE: Yes, Alan, I love your show.

KEYES: Oh, thank you.

MIKE: My question is, how quickly would you be able to switch from an income tax, as it is, to a flat tax or to a retail sales tax, and how realistic is that?

KEYES: Well, you'd probably have to phase it in, but you have to remember that the mechanism for collecting the tax around the country is already in place, because most of the states in this country already fund their work using a sales tax. And that would mean that all the federal government would have to do is kind of piggyback on to that mechanism, have the proceeds collected in the hands of the federal government instead of the state's, divide them up at the end of the day.

And with the modern technology of course, that would be an even easier process than it might have been in the past. So I think there would be a transition period, but in terms of the retail sales tax, I don't think it would be a very difficult one.

Let's go to Patrick in Texas. Patrick, welcome to MAKING SENSE.

PATRICK: Hi, Mr. Keyes. I was wondering, is the income tax constitutionally legal?

KEYES: You know, there are questions raised about it. In particular, there are questions raised about the ratification of the 16th amendment. Some people dismiss them out of hand. I have had occasion on several occasions to take a look at some of the things that folks have written about the researches that have been done into this. And as we were just reminded, in fact, by Robert Kuttner, the period we're talking about, at the end of the 19th, beginning of the 20th century, a very corrupt period in American politics, so I'm not sure it should come as that much of a shock that a process taking place in that context might have had some features to it that were not altogether Kosher.

So I think it's a question worth looking at, though in terms of the impact of that question on our current debate, I think we'd be better to focus on the question of whether or not this tax, in principle, makes sense for a free people. And when we conclude that it does not, take the needful step. Thank you.

Jane, in Virginia, welcome to MAKING SENSE.

JANE: Yes — hi, Dr. Keyes.

KEYES: Hi.

JANE: I agree with you. I believe income tax is a form of slavery, and my question is this: since we're a consumer driven economy, then why can't we pay our taxes through a federal sales tax? People who make more money, seems like they buy more expensive things. They'd pay more money, and so forth.

KEYES: I think that's right. It's one of the things that folks focus on to think through the question of progressivity, because they say the income tax is the only way to get that.

I think the natural progressivity of consumption would be the best way. Folks with more money are going to buy more expensive goods. As a result, they're going to pay more in taxes.

That's especially true if you set up a system that takes a basic market basket of necessities that people need to survive, exempts it from the tax, so that poor people and people who want to be frugal and lower their tax burden would be able, by their own choice and frugality, to lower their tax burden, instead of waiting for some politician in Washington to do them a favor.

Terry (ph) in North Carolina, welcome to MAKING SENSE.

TERRY: Yes, Dr. Keyes, I'd simply like to comment that I believe you to be an immensely articulating, ground-breaking pioneer in what I classify as intellectual television, and I wanted to thank you for challenging Americans to open their minds.

KEYES: God bless you. Thank you, Terry. Really appreciate the thought. And I hope we will keep up the challenge. It certainly is our commitment.

We're going to go to some e-mails now. And these will have to do not just with today's show, but with some of the things obviously that we have talked about in the course of last week.

First up, T. Sandberg from Orlando writes to us on capital punishment: “I am a fellow conservative and I find most of the time I agree with your views on most topics, but you conveniently forget about the Ten Commandments when it suits you. I'm speaking of your viewpoint on capital punishment. Sir, there was no fine print of the bottom of the most important ten things said in the Bible. God said in no uncertain terms “Thou shalt not kill.” It was not added that society had the right and humans didn't. It was simply stated. You somehow have spun this the other way. If you can find the time, I'd love to hear your response.”

Well, my response, actually, in a biblical sense, is very simple. Because the commandment properly translated is “Thou shalt not do unlawful murder.” That is to say, killing wrongfully.

It's quite obvious in the Old Testament that God does not ban human beings from all forms of killing. In fact, sometimes he directs the Israelites to do genocidal killing in terms of their coming into the Holy Land.

It is also true that in the New Testament, St. Paul wrote that the magistrate does not have the sword for nothing, reminding us in point of fact that this is a fact about human society. Even Christ himself said that it was a power that comes from the Father.

So all of these things need to be looked at when you're talking about Scripture, not just an isolated — and sometimes I think misunderstood — aspect of it.

Let's go to Nubeo who writes to us: “I saw your first show. If you really want to make sense, don't use words like “amalgamate.”

Amalgamate makes sense to me.

There's been some talk on the set and amongst the various folk connected with the program that I ought to be fined when I use words for which one has to have recourse to the dictionary. I'm thinking about this. It might be a fair test. I don't know. But that e-mail certainly puts me in mind of it, and we may have to institute it for me to keep my tongue under control.

They just slip out, these words, I can't help it. They find the appropriate slot and out they come. But I'll try to be more controlled. Thanks for your calls and e-mails.

Next, a personal note.

We'll be right back.

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KEYES: Coming up Wednesday, we'll be MAKING SENSE with Dr. Laura. That's a show you don't want to miss.

Now, on a personal note; you remember the law school shooting last week in Grundy, Virginia. Well, John Lott, Jr. of the American Enterprise Institute wrote a fascinating column in “The New York Post” today in which he pointed out that in only four of about 280 stories that he found on Lexus Nexus about that shooting did they mention the fact that — remember, there was a shooting and a professor was killed, the dean was killed, and then a bunch of students is reported to have subdued the shooter?

You know what they failed to tell you? They failed to tell you that two of the students who initially were able to subdue that gunman were themselves armed. They ran, got their weapons out of their vehicles, came back, pointed them in the direction of the gunman, were able to disarm him and then other students joined them in subduing him.

Now think about that. Why is it that they use things like this as the poster stories of gun control, and yet when you examine the fact of an episode like this, it turns out that guns were used by law-abiding citizens to avoid greater death and mayhem.

And in fact, there are a lot of reasons to believe that when responsible citizens are encouraged in the appropriate, responsible and educated use of firearms in self-defense, they are able to avert disasters. Not a bullet was fired by them in doing this, and that happens hundreds of thousands of times every year, but you don't read it in the press.

That's more than biased, that's the kind of thing that could distort our judgement and lead us into a very bad mistake about our own defense.

That's my sense of it. Thanks for being with me.

Lester Holt is up next. We'll see you on Wednesday.