When I hear about the hapless celebrity who is fleeced by his unsavory accountant for millions, I marvel at how stupid some people can be — until, of course, tax day rolls around and I realize my accountant, were he a less virtuous man, could do the same.
Yes, our tax system is fairly complex. And complexity is what makes it work. If Jane Taxpayer figures out she spends more than three months of her year working for Joe Biden, well, she might be annoyed.
Fact is she should feel blessed. As our vice president once posited, paying taxes is patriotic. So it’s worrisome that fewer and fewer Americans are asked to participate in the ethical work of paying off General Motors’ $4.3 billion second-half losses or subsidizing wind farms in Montana.
According to the Tax Foundation, this year the top 10 percent of earners are on the hook for about 73 percent of all the income taxes collected by Washington.
On the flip side, nearly 50 percent of households — because they don’t make enough or they have various deductions — don’t pay any income tax whatsoever. (Your payroll taxes “fund” your own stake in Social Security and Medicare.)
If there’s a smoother way to spread the wealth, I’d love to hear about it. But if government is a force of righteousness — a wondrous $3 trillion gift that saves lives and imbues America with hope — why is it that so many of its citizens aren’t fully invested in the magic?
To be fair, as burdensome as income taxes seem to everyone, most of us are disconnected from the genuine and growing cost of government. Tax payments have been declining for the majority of Americans (good for the economy and your freedom), while government spending is increasing.
Now, I hate people who are richer than I am as much as the next guy. But how long can we keep relying on the wealthy?
The total income taxes paid by the top 1 percent of earners as a share of gross domestic product has doubled since the early 1980s. At the same time, the bottom 95 percent of earners pay a significantly smaller share. I’m not an economist (sorcerers!), but this strikes me as an unsustainable policy.
It’s true that President Barack Obama has come up with more than $3 trillion in new taxes during his short tenure, but that’s not enough. Paul Volcker, the president’s informal adviser and a former Federal Reserve chairman, recently broached the idea of “value-added tax,” a consumption tax embedded into everything you buy, and a new carbon or energy tax. (Interesting concepts if they were fixed to future plans to cut taxes on income, labor and investment. They are not.)
It’s doubtful that raising taxes is the answer. As a study conducted by the Tax Policy Center found, even if Washington raised taxes by 40 percent, it would “reduce — not eliminate, just reduce — the deficit to 3 percent of our GDP, the 2015 goal the Obama administration set in its 2011 budget.”
Someone could mention how helpful a massive across-the-board spending cut coupled with entitlement reform would be for the long-term fiscal stability of the nation, but then again, that person would be engaging in idealistic flights of imagination.
So taxes it is. If I were running a minority party, I would make tax reform a major plank of my campaign.
Cut capital gains and corporate taxes. Simplify and flatten income taxes. Finally — and this is sure to go over well in suburban and lower-income households across the nation — spread the income tax burden more equitably so that all of us can enjoy “investing” in Washington.
After all, if your taxes were tied to their spending in any substantive or immediate way, politicians would be … well, they’d be in trouble.