Mar 4, 2011
My taxes are done and I am mad. Before the Tea Party jumps to add me to their mailing list, I want to be clear. I am not happy because I am getting more money back than I had withheld for federal income tax! Thanks to the Making Work Pay Tax Credit, our share of the stimulus package, and the Child Tax Credit, Uncle Sam is paying me to be a citizen. That makes me mad.
I do not believe that a person should be able to earn an income from work or investments in the United States without paying at least some federal income tax. It’s is not right that 40% of the population does not pay federal income tax. Everyone benefits, rich and poor, from at least some of what our federal income taxes provide. We all need national security, education and roads. If we earn a dollar, we should pay some part of it to the government. I suggest 10% as a minimum tax. Call it a fee for services rendered.
That’s not the only problem with our perennially messed up tax code. We all know that. Nobody likes its current complexity — except maybe accountants and tax lawyers. It’s too difficult. It’s muddled with too many exemptions for special interest groups and vote-buying tax credits. It is undoubtedly purposely unclear.
What I want is a Clear Tax. For me, this is a progressive tax with three levels of fixed personal income tax. A Clear Tax means very few deductions and all revenue is income. Any deductions would be based on documents provided by a third party, such as mortgage interest, purchase price of a US manufactured car, or an IRA contribution — nothing difficult to compute and nothing that would allow one to hide income.
A Clear Tax would not have social deductions. The IRS should not be involved in social welfare. I believe in social welfare, but it should be provided by a government office specific to the task, not through the tax code. This means eliminating Child Credit, Earned Income Credit, credits for medical expenses, etc. The tax code should consider only exemptions aimed at specific areas of economic growth.
To be sure that exemptions and credits are limited to those that would actually stimulate growth, a new agency should be created based on the Supreme Court — call it the Supreme Board of Economists. This group of nine economists appointed for life by the President and confirmed by the House of Representatives would have to approve deductions and credits unanimously.
Each tax level would apply to a level of household income, such as 20% for households with incomes 50% above the poverty level, 25% for households with income in excess of two times the poverty level, and 30% for households making four times the poverty level or more. The poverty level would be established annually by the SBE.
The best argument for a progressive scale is the widely-held belief that those who earn more benefit more from the infrastructure and social programs of the country. I subscribe to this as well as to the belief that to those who are given more, more is expected.
Those households earning less than or up to 50% over the poverty level would be required to pay a minimum tax. Above, I suggest 10%, but I am open to discussion on this point. However, all income earners should pay income tax even though they may need social assistance to keep their household afloat. It is as much a social responsibility to support one’s government as it is a government’s responsibility to assist the economically disadvantaged.
I also believe that while we have a national debt, the government should collect an extra 5% debt tax during presidential election years. The proceeds from this quadrennial tax must be applied to the national debt. If there is no national debt, the tax would not be collected. The economic and accountability benefits of such a tax are obvious.
Tax morality is simple. Taxes need to be fair, to be equitable and to provide for the common good. Much like forms of government, no one particular form of taxes is absolutely better than another. The concern must be to raise sufficient money for the community chest without dampening interest in industrious behavior. Sounds simple — so, why aren’t taxes?