My ‘tax reform’ pet peeve

by The City Wire staff ([email protected]) 115 views 

Any “tax reform” passed by Congress and signed by our President this year, next year, or in any future year will never change this one fact: by design, the sole purpose of levying any tax is to take money from the taxpayer and transfer it to somebody else.

The simple question that is difficult to answer is are you receiving a benefit equal to or above the amount you paid the government in taxes? When you pay your taxes, are you a winner or a loser?

Conversation about the need for tax reform has increased as a result of President Obama’s State of the Union Address a couple of weeks ago. What I hear when I listen to these conversations or read opinion pieces or quotes by political leaders and pundits is a lot of inaccurate statements about our tax laws. I have to ask myself when I hear the people making these inaccurate statements, are they deceptive, uneducated, or just mistaken.

Consider the State of the Union Address last month. President Obama used the word “loophole” multiple times. Each time the use of the word was inaccurate if you understand the definition of the word loophole.

Investopedia defines a loophole as a technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. It allows a person or business to legally circumvent the law in a way lawmakers never intended. The word generally carries a negative connotation. When used in the State of the Union Address, the word loophole was used to describe a part of the Internal Revenue Code President Obama doesn’t personally like, but the tax law is working as prior Congresses and Administrations intended.

As the President continued to talk, he continued to be inaccurate in his descriptions of the tax law making process. The President said, “As Americans, we don’t mind paying our fair share of taxes as long as everybody else does, too. But for far too long, lobbyists have rigged the tax code with loopholes that let some corporations pay nothing while others pay full freight. They’ve riddled it with giveaways that the super-rich don’t need, while denying a break to middle-class families who do.”

I would challenge anybody to accurately describe what a taxpayer’s “fair share of taxes” equals. A hardworking self-employed single person making his fifty thousandth dollar will pay an incremental federal tax rate of 40% when adding his self-employment tax to his income tax. Ask that person if he or she thinks that rate of tax is fair. The intent of the language was to bash corporations and the super-rich for complying with tax law. The tax laws as currently written may not be politically acceptable anymore, but they work as intended as enacted by prior Congresses and Presidents.

President Obama would not be president today if it wasn’t for lobbyists and rich folk. I personally don’t like our electoral system as it works today, allowing money to flow to politicians to influence legislation, but claiming that it is lobbyists that rig the Internal Revenue Code with loopholes is very disingenuous. It requires Congress and a President to get any “loophole” into the Internal Revenue Code. Somebody needs to send the President a replica of Harry Truman’s desk sign that stated “The buck stops here.”

President Obama’s opposition has just as much a problem with using accurate language. In Republican Senator Joni Ernst’s response to President Obama’s State of the Union Address she made the statement. “Let’s simplify America’s outdated and loophole-ridden tax code. Republicans think tax filing should be easier for you, not just the well-connected. So let’s iron out loopholes to lower rates and create jobs, not pay for more government spending.”

I would have loved to ask her to itemize these loopholes to which she referred. I think it is a safe bet that any loopholes she might have listed would not really be an accurate use of the word loophole either. Her intent too was to stir emotions, not to assist in voters making a good decision.

And as you listen to the Republicans profess their indignation about the current Internal Revenue Code, keep in mind that it is the Internal Revenue Code of 1986, the product of a Republican controlled government. The Tax Reform Act of 1986 reduced the number of income tax brackets, but the resulting Internal Revenue Code was anything but simple. The complexity they complain about is a Republican design.

The point is that politicians are not interested in voters becoming educated in the current state of the Internal Revenue Code and the true economic effect of their tax reform positions. Their descriptions will not be accurate. Therefore, if you want to be knowledgeable about tax reform as proposed by our elected government leaders, read the proposed legislation without political commentary that most likely will be inaccurate.

Tax reform will be a big issue for the 2016 elections. You will hear politicians use the word “tax reform,” “fair,” and “simple” in the same sentence over and over again for the next few years. Just keep in mind fairness is a subjective description of an emotion, not an objective standard that can be measured. A politician’s idea of fair might not mean what fair means to you. And with “lobbyists rigging the tax code” as Congressional candidates reap the benefits, simplicity is a dream.

I’m not an anarchist. I don’t belong to the Tea Party. I believe government is necessary and must be funded through some form of taxation. I just want to be able to be well enough informed to make a reasonable choice when elections arrive. Political misuse of language intended to mislead sure makes an informed choice difficult.