So How Come the Tax Code is so “Unfair”?
[Originally posted on January 11, 2011.]
It’s that time of year. Now, as the airwaves are filled with the same silly stories that the same silly people trot out every silly year, it’s timely, and I present it for your consideration, slightly altered and emended:
NOTE: Spent all day Tuesday [January 11, 2011] at an update on changes to Federal and Oregon tax law for 2011.
This is going to be very short — because I know how much you just love reading hours and hours of tax code and court decisions — but there are two concepts that I’ve not mentioned before, which I leave the reader to ruminate on.
1. “Fairness” in taxation.
“Simple” does not automatically equal “fair.”
It is a trope of American political rhetoric that because the tax code is complex (67,000 pages last time I checked), it MUST be unfair.
Which is ridiculous.
Here, let me “reform” the US criminal Code (which has quite a few pages itself): Five years imprisonment for all misdemeanors; death penalty for all felonies. No exceptions.
There: that’s “simplified.”
Is it fair?
You’ve got to realize that the complexity of the tax code comes directly from an ongoing attempt to BE fair: to make sure that a commercial fisherman and a backwoods logger are taxed fairly, as compared to a Wall Street broker or a Main Street banker (are any left?) or a waiter or a professional football player. Obviously the issues involve in each profession are very different, and trying to be fair IS NOT an easy matter.
And unfairnesses will ALWAYS crop up, which will then be corrected, adding more pages to the tax code. But the PUSH is usually towards fairness.
(Unless, as is currently the case, the top tax brackets were written BY the rich FOR the rich, in which case, YOU get to pick up their tab. That OUGHT to make you mad at the right parties.)
And, moving through Congress, you can understand the strange twists that sometimes takes.
The famous example comes from 1988, when Congress passed a law changing the way that very wealthy children (i.e. child actors) reported their income. This law applied to precisely FIVE children in the United States, but in every library, every post office and IRS kiosk in the USA there were copies of the new schedule that had to be generated for those five kids. Odd things happen. But …
Just remember this: when Steve Forbes is pushing a “simple” tax (“flat tax”) it isn’t because HE wants to pay more of YOUR fair share of taxes.
2. The tax code is needlessly complex.
This is the fun one.
Last summer I took my Enrolled Agent education, and over and over again, there were the inevitable exceptions and conditions attached to each area of tax code. And it DID seem needlessly complex until I had one of those “A Way of Thinking” moments (from the classic Theodore Sturgeon short story).
In the story, the main character had a peculiar way of thinking that would often turn the binoculars around backwards. On ship, the crew spends eight hours trying to remove a giant gear that runs a winch. Nobody can crack the bolts holding it on. The lead character wakes up, comes on watch, looks at the problem, undoes the bolts holding the axle in place, takes a sledge-hammer and shoots the axle across the deck like a torpedo.
If you can’t take the gear off the axle, take the axle off the gear.
And I realized that EVERY exception was closing a loophole that someone had found as a way of getting around paying their fair taxes.
Now, when you consider that the tax code is 67,000 pages long, you have to admit that it is less a testimonial to the frivolous regulatory fever of bureaucrats than a testiment to the endless capacity of human beings to CHEAT.
Virtually every exception and subrule represents a monument to the nearly infinite creativity of the chiseler, the cheat, the selfish skunk who thinks that everybody ELSE ought to pay for HIS ability to access weather satellites, drive well-maintained roads, trade in weights and measures that are guaranteed by regulation, to purchase safe food, drink safe water, find his way to his destination via Global Positioning Satellites, etc. etc. etc.
Or access the internet.
When you take the axle off the gear, the “fairness” of the tax code seems an entirely different matter than first apprehended.
Something to think about.
Because as long as this trope exists that taxes are “unfair” and “needlessly complex,” it’s people like Steve Forbes — and not average taxpayers like you and me — who will benefit. Our system of progressive taxation has produced the greatest prosperity and fairest distribution of the tax burden in history, to this point, and created this amazing society that we all benefit from: flood control, reservoirs of clean water and power generation to weather satellites, interstate highways, cleaner air and food and water, and control of epidemics — all preventions of scourges that we take for granted, even though they have bedeviled humanity from day zero.
Just remember, the stores at night shine big and bright, deep in the heart of taxes.
A writer, published author, novelist, literary critic and political observer for a quarter of a quarter-century more than a quarter-century, Hart Williams has lived in the American West for his entire life. Having grown up in Wyoming, Kansas and New Mexico, a survivor of Texas and a veteran of Hollywood, Mr. Williams currently lives in Oregon, along with an astonishing amount of pollen. He has a lively blog His Vorpal Sword. This is cross-posted from his blog.