November 6, 2017

Proposed Income Tax Changes (note: this is NOT reform)

Behind closed doors the Republicans are crafting changes to our current totally messed up and complex income tax laws. You can be sure that the lobbyists are helping to write the proposed legislation and all credible analyses point to a huge increase in the federal deficits and lots of benefits for the top 10% of tax payers and businesses (and their owners).
Having recently read T.R. Reid's book:A Fine Mess: A Global Quest for a Simpler, Fairer, and More Efficient Tax System, I'm convinced the only way to "reform" our income tax system is to start from scratch. Reid searched the world and concluded that the fairest tax system is BBLR: broad-based  with low rates. Low rates are achieved by eliminating most of the current deductions and loopholes.
"The U.S. tax code is a total write-off. Crammed with loopholes and special interest provisions, it works for no one except tax lawyers, accountants, and huge corporations. Not for the first time, we have reached a breaking point. That happened in 1922, and again in 1954, and again in 1986. In other words, every thirty-two years. Which means that the next complete overhaul is due in 2018. But what should be in this new tax code? Can we make the U.S. tax system simpler, fairer, and more efficient? Yes, yes, and yes. Can we cut tax rates and still bring in more revenue? Yes."
"Other rich countries, from Estonia to New Zealand to the UK—advanced, high-tech, free-market democracies—have all devised tax regimes that are equitable, effective, and easy on the taxpayer.  But the United States has languished. So byzantine are the current statutes that, by our government’s own estimates, Americans spend six billion hours and $10 billion every year preparing and filing their taxes. In the Netherlands that task takes a mere fifteen minutes! Successful American companies like Apple, Caterpillar, and Google effectively pay no tax at all in some instances because of loopholes that allow them to move profits offshore. Indeed, the dysfunctional tax system has become a major cause of economic inequality. " 

I have no hope that a BBLR system will be instituted by the current administration. But the book is well worth reading to understand why current efforts to "reform" the income tax system are futile.

"T. R. Reid majored in Classics at Princeton University and subsequently worked as a Naval officer during the Vietnam War, a lawyer, a teacher, and assorted other jobs. At The Washington Post, he covered Congress and four presidential campaigns. He served as the paper's bureau chief in Tokyo and London. Reid has reported from 4 dozen countries on five continents."

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