Letter to the Editor: We Need Federal Tax Code Reform

By Igor Sill | Published on 12.05.2011

Fundamentally, I believe that America’s tax code is an outdated archaic mess, having grown to become an unwieldy and ineffective bureaucratic institution.

The code is needlessly complex because of deductions, credits, exceptions, date enablers and loopholes. As a result, the tax code contributes to our government’s huge size as a result of this burden of administering its complexity and its subsequent revisions and enforcement (tax courts, attorneys, judgments, liens, garnishments, etc.).

Resolving the tax code issue would actually have a very positive effect on our deficit by lowering the Treasury’s operating overhead significantly, eliminating the massive special interest credits/expense and increasing the revenue inflow.

President Ronald Reagan recognized the need and validity of this approach back in 1981 when he proposed the Economic Recovery Tax Act (ERTA), the Reagan tax cuts, a 25 percent across-the-board decrease in personal marginal tax rates. Even with the then-massive Cold War military expense buildup and the subsequent dilution of the act as it cleared, the Reagan tax cuts showed that reducing excessive tax rates stimulates economic growth, reduces tax evasion and tax avoidance schemes, and can actually increase tax revenues from the rich.

We absolutely need tax reform that is fair, simplified, flat, low and easy to understand and administer. Incorporating elements of Herman Cain’s more aggressive 9-9-9 plan as well as the proposed flat tax plan is pivotal to reforming a tax system that simply no longer works.

As to the misguided notion that 99 percent of Americans support 1 percent of the rich in tax payments, the truth can be found by Googling “Who pays federal income tax?” Click here for a link to the actual stats from the National Taxpayers Union: The top 1 percent of the wealthiest income earners pay 38 percent of U.S. tax revenues, the top 5 percent pay 59 percent, the top 10 percent pay 70 percent, the top 25 percent pay 86 percent, the top 50 percent pay 97.3 percent and the bottom 50 percent pay 2.7 percent of all federal tax revenues.

The largest share of the tax burden is shouldered by the top 5 percent of the wealthiest 1 percent of Americans who are paying well more than half of the federal income tax revenues, while the poor pay virtually nothing in federal income taxes. If you take a further investigative look it becomes clear that once federal spending is taken into consideration, those “1 percent of wealthiest Americans” are paying far vastly more into government and consuming virtually nothing, while the bottom 50 percent receive the largest amounts of that spending and paying virtually no federal tax. Those are the facts.

We need to collect a flat tax from all U.S. citizens above the poverty line, eliminating income taxes for those below the poverty line, drastically reduce entitlements and entitlement programs, lower the corporate tax rate so that the United States can regain its competitiveness in the global markets, while reducing our unemployment. We currently outspend on foreign military activities more than the actual net income of all U.S. corporations combined. Let’s continue to invest heavily in our country’s security, our educational system, shoring up our borders, deporting illegal aliens involved in criminal activities, drastically cutting entitlements, while withdrawing our military occupation of other countries.

We can then begin enjoying a more prosperous era of economic growth by a leading world power, whoever our next president may be.

Igor Sill
Santa Barbara

Comments

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» SnoozReader on 12.06.11 @ 12:10 AM

The problem is in the details, for instance, corporations:

“Washington-based Citizens for Tax Justice along with the Institute on Taxation and Economic Policy produced a report this month that sampled 280 of the Fortune 500 companies in the United States and found that they paid an average U.S. corporate tax of 18.5 percent.

Of those 280 companies, 78 paid no federal taxes in at least one of the past three years.
One of the authors of that report, Rebecca Wilkins, senior counsel for federal tax policy at the Center for Tax Justice, argues that the Tax Foundation studies are misleading because they include both deferred and foreign taxes in their calculations.

Not to complicate things further, but Bruce Bartlett, a former Treasury official under the first President George Bush and now a New York Times blogger, argues that the broadest measure of a country’s corporate tax burden is to calculate corporate taxes as a share of gross domestic product. In that case, the United States is among the lowest in the OECD, he said, which begs the question; how can a country have such a high tax rate, but such a low tax burden? The answer: loopholes and deductions.”
according to http://www.politifact.com/ohio/statements/2011/nov/28/rob-portman/sen-rob-portman-says-us-has-second-highest-corpora/

I think any tax system congress will create will favor certain individuals, corporations, and federal reserve bankers/friends who have bought out enough of the congress and the executive branches (thereby the judiciary as well). We need to vote the bums out, but the game takes lots of cash to overcome a few fear, uncertainy, and doubt claims by the bad guys.

A federal sales tax on top of current state sales tax is going to just add more taxes on the innocent while the clever will be bartering their way around it. Simplification is good, but we are living in a complex world.

Good points about the useless and endless wars we have gotten into. I thought exporting all of our jobs was going to be the cost of diplomacy that would keep us out of war.

End game in 50 years: the mass of humanity will be expendable when Mr. A. I. Robot takes 99% of the jobs, so to survive a bit longer, you need to get into the 1% to afford a brain implant. Tears for the children of today.

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» AN50 on 12.08.11 @ 05:15 PM

Snoozr, you have to be careful in your assumptions. I agree that much of our tax code is biased and full of exceptions and loopholes for those who can afford to lobby our corrupt federal government. GE, whose CEO is on the president’s council for economic development, paid no tax last year, meanwhile shipping thousands of US jobs off to China. However, for those companies not engaging in corruption or the immoral practice of chumming congress through the lobby industry, those loophole eliminations will cost us all. We often make the assumption that businesses pocket what they don’t pay in taxes and that is a very dangerous assumption. Most businesses, due to our regulatory, labor and trade laws, would simply go out of business without those loopholes. In fact many loopholes and breaks given to businesses were done so to help them stay competitive with cheap foreign adversaries being subsidized by their own governments to beat us out.

So you are right in that the devil is in the details. Something most people don’t care to dive into while screaming foul over the tax burden. Another way to think of it is be careful what you ask for, you might just get it.

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