Taxing Illusions
Feb 26th, 2009 | 6 responses
President Obama’s proposed federal budget features a dramatic change in the tax code of this country. In the Bush years the aim was to ease the tax burden of the richest Americans, those making more than $250,000, leaving the rest of us with a greater burden when it comes to keeping the federal government fiscally afloat. Under Obama’s proposals upper income people would be taxed more with higher marginal rates and fewer deductions, meaning they would carry a bigger share of the overall tax burden.
What a charming illusion this is. The illusion that this is actually the way proposed tax law changes would work—even if a Congress that still feeds happily on the mother’s milk of rich folk largess were to pass the proposal as presented.
Here’s the way it would really work. A bevy of beady-eyed accountants would wade through the voluminous tax changes from the new law as written and find innumerable loopholes that could be employed to avoid the new law’s intent. The IRS would then move to close these loopholes, a process that will take years, the number of years lengthened, of course, by even beadier-eyed (but better dressed) attorneys who will use every legal dodge in their legal dodge bag of tricks in order to save their rich clients’ untaxed wealth so as to mightily increase their own. And by the time Mr. Obama’s progressive tax notions finally do transcend the efforts of these accounting and lawyering professionals and begin operating as intended, our present president will likely be replaced by a Republican who truly believes the only real way to generate economic growth is to provide more incentives for the rich to keep more of what they already have.
A more progressive tax code that actually operates in a more progressive manner? Don’t bet your temporary payroll tax reduction this will happen any time soon!
6 Responses to “Taxing Illusions”
My solution.
1. 5 percent national sales tax.
2. 10 percent flat tax paid by everyone except those with incomes below 15,000 dollars.
3. 10 percent Federal income tax on those earning 250,000.01 up to 5 million dollars.
4. 15 percent Federal income tax on those earning 5,000,000.01 up to 25 million per year.
5. 20 percent Federal income tax on those earning 25 million plus.
No deductions. No write offs. No charge offs. No depreciation. All would be flat taxes across the board. IRS could save a trillion dollars a year in salaries and auditors.
Of course we know this could not work. Why? Because the 5 million tax attorneys who earn their living finding loop holes say it wont work.
Progressive tax codes work within a certain range but when pushed too far, the people in the higher brackets will shelter their wealth and income. You can complain about that as 'greed' all you want, but it's a fact of nature as certain as gravity.
Greenschemes is right that a simpler tax code would help a lot. Instead of worrying about the rich paying their fair share by trying to jack up the highest rate brackets, just stop allowing loopholes (which generally favor the very wealthy much more than they do the working upper class.)
The Fair Tax would be my preference because we'd be better off taxing all on the consumption side instead of income, but I don't think it'll ever happen (too many people resisting it, just as GS points out.)
GS,
Has anybody ever looked to see if your proposal is revenue neutral? Or is it just a massive tax cut for the wealthy under the guise of “simplification”?
GS,
To complicated…
A simple flat tax on wealth.
(Assets – Liabilities) * tax rate (somewhere between 5 & 10%), no corporate taxes, no inheritance taxes, no 401Ks & company.
Im sure the wealthy would love your 5 percent tax on Assets. Thats the ticket so each year they can divest themselves of assets by sending their money off shore. Which then would put them into a 5 percent tax bracket……I hear a million amens on that plan.
Elrod
In my world nothing is free. Citizens who are lower income would be asked to pay a 10 percent tax on top of a 5 percent sales tax. In return they get free health care. Because under my plan their would be enough money to balance the current budget with in excess of 450-600 billion per year left over. This money could easily be divested into a national health care plan which would free up a tremendous amount of burden on corporations and citizens who would then expand their businesses because they are no longer bearing the burden of health care for their employees.
It would be a tax increase whose sole benefit would expand the economy by bringing about a very large expansion of disposable income.