Fairness

When people talk about the injustice of our tax system they’re generally thinking about corporations that pay no tax, or wealthy individuals whose tax rate is lower than that of a middle class taxpayer.  They call for higher rates; but higher rates are not going to fix the problems they have in mind.

Tax deductions, and the complexity that they’ve introduced into our tax system, are a significant cause of injustice.  Complexity is an invitation to tax lawyers to devise creative ways to cut a client’s tax bill, and of course it’s the wealthy who can afford to pay the large legal bills that result.

Total federal tax deductions, as calculated by the OMB and the Joint Committee on Taxation, are worth more than a trillion dollars a year to a government that only received $3.5 trillion in taxes in 2019.  IRS Commissioner Chuck Rettig says that another trillion could be harvested if we got all taxpayers to simply pay what they owe, under the current crazy rules.

Wealthy people who do pay what they owe and don’t maneuver for tax deductions are leaving New York and California, where their total tax brackets can exceed 50%, and moving to Florida, Texas, and other low-tax states.  The wealthiest can move all the way to New Zealand (a 33% top tax rate) or the Cayman Islands (a zero, that is 0%, income tax).

The same is true for corporations.  Before the 2017 tax reform we were losing corporations to Ireland (where the corporate tax rate is 12.5%) and Switzerland (as low as 11.9%, depending on canton).  134 countries, including Ireland (and maybe/probably Switzerland) just agreed to a 15% rate.  15% is still quite a bit lower than the U.S. rate, but most of our corporations will stay here if they think they’re being treated fairly.

As you study proposals for tax reform ask yourself whether they will actually cause the tax rates of billionaires such as Jeff Bezos and Mike Bloomberg to rise significantly.  Congressmen protect the beloved tax breaks of their campaign donors.  And they play to the voters;   why, you might ask, are American gasoline taxes still a tiny fraction of those charged by other developed countries?

Returning to our main point:  Charging higher tax rates to compliant taxpayers, while letting the schemers get off tax free, isn’t just stupid;  it’s mean.  Taxes can’t be fair unless they are simple.  John McCain liked to say that the tax code is the foundation for the corruption of American politics.

 

Pork Is Back!

 The Congressional Research Service, April 8, 2021:

“The House Committee on Appropriations and Committee on Transportation and Infrastructure have separately announced that individual Members may request funding for specific transportation projects. This ends an effective ban on earmarks that has been in force in the House since 2011.”

Forbes, May 6:  “This week, the U.S. House posted online 3,309 earmarks.”

Financial Crisis Ahead

It happened in New Zealand in 1984, in Sweden in 1994, and in Canada in 1995.  Each of these nations suffered a painful financial crisis, slashed the size of its overgrown welfare state, and returned to health. That’s where we’re headed in the next decade.  We’re running trillion-dollar deficits, and Medicare runs out of … [read more]

Jefferson Says

“The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” (Thomas Jefferson, 1816) Our federal deficit is larger than a trillion dollars a year, so each year the debt our children will carry grows by more … [read more]

Competing For Tax Revenue

Wealthy Brits are buying homes on the island of Guernsey, says The Economist,  so they can easily move there if Jeremy Corbyn is elected.  Corbyn wants to apply the 45% tax rate to those making just $105,000, and establish a new 50% rate.  And create a wealth tax, and raise … [read more]

Bipartisanship Blooms!

The President, the Speaker of the House, and the Senate Minority leader shared a celebration of goodwill and harmony recently, in agreeing to spend TWO TRILLION DOLLARS on infrastructure. Yes! Let’s pick a gigantic round number first, and then come up with a list of ways to get the biggest political impact!  So far … [read more]

Swindling Children

Yale, a bastion of privilege with an endowment that exceeds $25 billion, has proudly announced that tuition for the coming school year will cost $55,500. If you want room and board you’ll have to cough up a total of $72,100. The price of education has soared to ridiculous levels because … [read more]

Another Year, Another Trillion

The federal debt has crossed $22 trillion. That’s $67,278 per American, including babies—and a rapidly-growing population of elderly citizens who receive checks from the government but no longer pay FICA. Their lifelong contributions to Social Security and Medicare were spent during their working years, and all that’s left … [read more]

A Balanced Budget Amendment to the Constitution

If we were to  pass a balanced-budget amendment to the Constitution (“BBA”), the federal debt would still go up each year.  Congress has a bagful of tricks that it uses to skirt any form of discipline, from “off-budget” spending to the cleverness of the  “Unified Budget” (which effectively seized the … [read more]

Interest

Average student loan debt in New Hampshire is more than $33,000, and the national total is now $1.5 trillion.   But it’s those same young college graduates who will bear the burden of our national debt, now $21 trillion, up from just $2.5 trillion in 1988.  The debt doubled to $5 … [read more]

Your Future

A few weeks ago the debt passed 21 TRILLION DOLLARS, but I was out to lunch with the rest of America.  Pollsters say that hardly anybody cares about the debt any more.  Deficits stimulate the economy, right?  Doesn’t that mean jobs? Ummm, that sort of “stimulus” is a dubious way to try … [read more]