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RUSH: Here’s Tim in Fort Worth. Welcome to the EIB Network. Great to have you here.

CALLER: Hey, coach, you’re rocking the box across Texas.

RUSH: Thank you very much, sir.

CALLER: With all this talk about the upcoming tax increases and new taxes, I wanted to get your thoughts on something from the opposite direction, and that is the ending of the direct taxation of the people by the federal government in its entirety and moving to a system where we tax the states, let them raise the money however they want.

RUSH: Well, you know, I’m interested in all of these theories, the flat tax, the FairTax, there’s any number of taxes. The problem I have with all of these theories is that they’ll never happen.

CALLER: I don’t deny that, Rush. It would take an amendment and I know Congress would not go for that. But just from a computational standpoint, the federal budget’s, what, two and a half to $3 trillion in good times. You divide that by 50 states that would be an additional 50 to $60 billion per state every year.

RUSH: Yeah.

CALLER: And if the states got hold of that money —

RUSH: Wait, wait, wait. Additional to what?

CALLER: Additional to what they raise for themselves.

RUSH: Oh.

CALLER: It would be on top of that, and if they got hold of that kind of money Arnold’s in debt $20 billion this year, how much of that would come off the top before he sent it to the federal government?

RUSH: Exactly, how much would the feds get? Because the federal budget may be three trillion but there’s a deficit of 1.4 so in effect we’ve got an almost five trillion-dollar budget.

CALLER: I think the states would hold the federal government in line on spending for that.

RUSH: Impossible, ’cause they can print money, and the states can’t.

CALLER: But the people that represent the states that would be giving up that money and spending them into deficit — now, I agree, it would be tough, and it probably would never happen, but just from a logistical standpoint, it would neuter the federal government. Anyone that can reach into your wallet whenever they want to take what they want has the power, that is the power that they federal government has, that and putting us in jail.

RUSH: The problem, the reason why this is never going to happen — and look, I’m not trying to throw cold water on this, I’m really not.

CALLER: I understand.

RUSH: I happen to live in reality. The name of my city is Literalville. And it makes a lot of people uncomfortable. You would not believe — in fact, this is an interesting thing — you would not believe the communication challenges I have with certain people because I’m a literalist. I believe what people say. When they say it, I think they mean it. The biggest challenge I have is to learn when somebody doesn’t really mean what they’re saying ’cause I don’t say something I don’t mean. I live in Literalville. So if somebody tells me they want something or they want something to happen and if it’s in my power to make it happen, I start working on it thinking they meant it. And then I come to find, ‘No I was just talkin’.’ So I live in Literalville. What I know is that taxation, as far as liberal Democrats are concerned, is not about money. It’s about power. All this talk about the fat tax, the FairTax, the VAT tax, all this is wonderful. Members of Congress — and I would even venture to say in both parties — are not going to surrender the power they have in social architecture alone in writing the tax code. The power — this is why Charlie Rangel’s in trouble. He’s chairman of ways and means. That’s the most powerful committee in this country. They write the tax law. Every tax bill is originated there, no matter what a president wants, no matter what some Senator wants, it starts at the Ways and Means Committee. That’s where the lobbying starts, that’s where all the arm twisting starts.

How do you think we have the home mortgage deduction? We have it because way back when it was determined that the American dream equaled home ownership. And everybody knows that the vast majority of the American people will never be able to write a check for a house. You have to finance it. Well, that creates a lot of businesses. Home building business, the mortgage business itself, lending and so forth, all of the ancillary businesses that arise from that, the various contractors engaged in building a house. A lot of people depend on houses being built. So as an incentive, guess what we’ll let you do? We will let you deduct the interest. That alone has caused more people to buy houses that had no business buying them than anything else, until subprime came along. That’s power, folks. What kind of political contribution do you think you can get from the home builders of America? What kind of contribution do you think you can get from Angelo Mozilla, whatever his name was as Countrywide?

If you can deduct what you’re borrowing, why do you think the people went nuts, the ’86 tax reform that eliminated credit card debt deduction, remember when people went nuts over that? And I recall on this program, in Sacramento when I was there, when I got here people were still upset about it. And I said, ‘Why do you want to spend yourself in debt? Why do you want to incur debt on your credit card?’ ”Cause I want the deduction.’ You may get a deduction but it’s costing you more money. ‘I don’t care. I can deduct the interest.’ People had begun to live their lives that way, they’d go out and use their criticized cards ’cause they thought they were screwing the government by deducting interest. And then it was taken away. The rules changed. It was as big a controversy as ATM fees going up 50 cents. So my point is that here I am in Literalville, the power of social architecture alone to build whatever kind of society you want via the tax cord, you want to reward certain people, give them in that business or for that activity a tax break. A deduction, a credit, or what have you. They’re never going to get rid of that power. Republicans included.

It’s not about raising money. It is for us conservatives. We’re interested in tax policy that raises money because we don’t like being in debt. We’re interested in power, too, but power for you, the people, not power for bureaucrats and politicians and officeholders and all the like. You can use the tax code to make people smoke less. You can use the tax code to make ’em smoke more. You can use the tax code to make ’em buy beer or buy less beer, more booze or less booze. You can screw the tax code around to make ’em make more charitable contributions. You think they’re going to get rid of this power? Ain’t no way, fool. As our Official Obama Criticizer would say, ain’t no way, yo. You’d be digging on that. It’s real simple. People get mad at me when I just want at slough off: ‘What about the FairTax?’ Fine, I love it, intellectually fabulous. The only way to get rid of it is tear everything apart and start over.

Power. It’s about the power. Social architecture. And not just that. Think of all the campaign contributions you can get with tax breaks for certain business activity or what have you? Look at how big the tax code is. What do you think the reason for the size is? It ain’t about raising money. Yo, it’s about staying in office. It’s about paying back friends for campaign contributions. See, here I am — I’ll bet you half of my problems with liberals in the media is I live in Literalville. I say what I mean. That’s politically incorrect. Most people don’t say what they mean.

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