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Friday, April 23, 2010

Common Sense Tax Reform (or at least a start…)

I read an interesting article the other day from The Hill (Capital Hill Publishing) that outlined a proposal from Senator Judd Gregg (R-NH) and Senator Ron Wyden (D-OR). There are several articles out there on the proposal, including this one from the DailyCaller.com.

There are positives and negatives to the proposal, but at its core it has one attribute that I really like: it begins the process of simplifying the U.S. Tax Code. Note the word “begins”, as I’d hope this would only be the beginning of such an exercise. As I’ve noted before, the current tax code is an overly complicated mess of social engineering…constructed by both political parties…that is build on a foundation of good intentions gone awry.

Now those on the political left have a tendency to be wary of any reform, as they believe any thing that lowers taxes inevitably makes the system less progressive. I believe that’s a false assumption, as the current system’s encouragement of consumption (via tax-subsidized debt) and punishment of saving (via taxing it) is actually extremely regressive for the working classes. Furthermore, perpetuating a system that is so complicated that most folks don’t actually understand it is as far from a progressive ideal.

Think about it: the wealthy can pay to have accountants take care of their finances, but what about the working class? Honestly, do you think that the lady who sits in the Jackson Hewitt cube at the mall is a tax expert? How many of the working poor can complete an IRS 1040 Long Form (which is what would be required for a working family to take advantage of all possible tax breaks)?

Look, I work in an industry that is predicated on the current tax code, so I genuinely could be harmed by any large-scale tax code overhaul. Even given that I support this kind of effort, as the good outweighs the bad. I’d much rather see my industry move towards a model where people saving more so because they need to and less so because complicated tax rules encourage them to do the right thing.

America needs a flatter, simpler tax system. I personally think we should be taxing consumption, not savings or income, but that’s a bit too “way out” for most folks, so I’ll settle for supporting the Wyden-Gregg proposal...for now.

2 comments:

Tom Borthwick said...

How exactly is this a good proposal? Lower the corporate tax rate? That's just a typical Republican meme. And the Heritage Foundation exists solely to pay its Fellows large sums of money to back up outrageous Republican claims with what looks like evidence.

Two million jobs? Give me a break. More bonuses for CEOs. More windfall for shareholders. We've watched it happen over and over.

Stephen Albert said...

More to come on this Tom, but the dirty little secret here is that regardless of the actual corporate tax rate, there are so many loopholes that many corporations don't pay ANY tax, regardless of the actual income. Zero. Zip. Nada. Any proposal that lowers the actual rate but also closes loopholes (which I understand this does...) is a good one from a business perspective.

As for the Heritage Foundation, well I am reminded of that scene in the Exorcist where Max Von Sydow tells Jason Miller that even Satan tells the truth every once in a while (all be it to confuse us all).