There are those who pull the wagon and those who ride in the wagon. This column is for those of us who are still pulling the wagon even after all of these years. Frankly, those riding in the wagon don’t really give a fig about our laments as long as someone other than them pulls the wagon. (For those of you forced to endure a teachers union led education in the Portland Public Schools, that first sentence is what we call an allegory and in this instance refers to the difference between those who fund the government and those whom the government funds. Okay, an allegory is. . . oh, forget it – buy a dictionary and look it up.)
Last week the “pullers” paid the balance of their income taxes for 2020 at both the federal and state levels. And the “riders” were grateful – well, not all of them, many of them were outraged that we didn’t pay more. Of course those of you who live in California, Oregon, New York, Michigan and other left leaning states paid considerably more than those who live in states like Florida, Texas, Wyoming and South Dakota and others that do not have state income taxes. But high state income taxes are not the basis of the problem – they just exacerbate the problem.
I’m not a fan of taxes even on a good day but my rational self recognizes that governments need revenue to fund basic functions of government on behalf of the people it is supposed to serve: public safety, the common defense, efficient transportation, free elections and public health. However, we have gone far beyond those initial goals of funding the government. Now taxes are used to transfer wealth, subsidize favorite businesses (green energy), punish other businesses, terminate pregnancies, fund studies that favor the controlling parties goals, silence others whose views oppose those in power, and indoctrinate children in much the same way as the dreaded madrassas of radical Islam. And of late, to impose virtual marshal law on citizens without legislative or judicial oversight in the name of the China virus pandemic.
But this isn’t even about how the government spends and wastes tax revenue. What this is about is the tax system itself. It is brutal. The current tax code encompasses some over 2,600 pages and is supplemented by over 60,000 additional pages of regulations, tax rulings and references to annotations to tax cases in the court system. The basic rules of Christian and Jewish life are contained on two tablets and only Ten Commandments. Even the New and Old Testaments that serve as the commentary on those Ten Commandments encompass less than 1,300 pages. The tax code is so complex that you almost regularly need a tax professional or certified public accountant to prepare your tax returns annually. And that is not just for businesses, it also applies to ordinary taxpayers who must wade through the limitations, thresholds and loopholes to determine whether or not they apply. And it is made so because the tax code is no longer for raising revenue – it is for societal control as noted above. Absent that, the tax code could be simplified to the point that all but the most complex multi-state and international businesses could prepare and file their tax returns in less than an hour.
Here are some suggestions.
1. Taxes should be designed to produce the revenues necessary to fund the legitimate functions of government – that’s it. Nothing more, nothing less. Taxes should not be used to encourage or discourage investment in particular lines of business. Taxes should not be designed to redistribute income or wealth. And taxes should not be designed to encourage or discourage a particular form for doing business.
2. Everyone should be required to pay taxes. The whole concept of a representative democracy is that the law, having been adopted through the representatives of the people, should apply equally to all. If you start carving out exceptions for the application of the law – even the tax laws – we are no longer a nation of laws but rather a people subject to the whims and caprice of the powerful. There is a point at which welfare payments equal or exceed some incomes. It is pointless to extract taxes that would move someone from positive income to welfare dependency. Therefore any income below a fixed percentage (above one hundred percent) of welfare qualifications should not be taxed. After that there can be a limited number of tax brackets remembering, however, that taxes should not be used to punish success.
3. There should be a mechanism for directing some portion of your taxes to fulfilling legitimate governmental functions. Arizona fulfills that purpose with a tax credit for payments made to foundations whose sole function is the advancement of K-12 education whether public or private. A similar method can be applied to foundations whose sole function is to distribute food, clothing, and medication to the poor. Certification by the state that at least eighty-five percent of the revenue received by such foundations is distributed to the intended recipients would keep the scam artists out of what should be a charitable function. There could be an added benefit in that taxpayers would have some say in the distribution of their tax dollars.
4. The calculation and payment of taxes should be simple and efficient. Today, the Internal Revenue Service employs slightly over 82,000 people. There are at least that number in the private sector who attempt to provide guidance, preparation and defense for taxpayers. Not one of them provides any benefit. In fact, they represent a sword (IRS) and a shield (tax consultants) both paid for by the same taxpayers. The tax system should be so simple and transparent that anyone who can perform a job can complete and file a tax return. The elimination of tax deductions – all tax deductions – would further simplify the tax system and ensure that Congress does not engage in picking winners and losers in the competitive markets.
I’m not holding my breath that Congress will ever adopt such proposals because they would eliminate half of the lobbyist and the lobbyists donations to the members of Congress. The current makeup of Congress feeds on the dysfunction it creates for its citizenry and nowhere is that more apparent than in America’s income tax regimen. To echo Forrest Gump’s admonition about “stupid” let me suggest that “corruption is as corruption does.”