Paying taxes is not a favorite activity of most citizens. But we realize that some taxes are necessary to provide for the essential functions of government.
So shouldn’t the ideal be to keep taxes as low as we reasonably can while meeting essential needs – and to make all taxes as nearly fair as possible for everyone?
One big problem with taxation is that many politicians try to give the impression that they are doing some large number of taxpayers a “favor” by putting a distasteful heavier burden on fewer “somebody elses.” Is that fair?
Wouldn’t most of us feel better about paying taxes if we were sure everyone was being treated equally?
Wouldn’t it be good if, for example, taxes were levied with a basic exemption for everyone, and then if equal tax rates were applied beyond that?
Well, you know the old “class warfare” cry of “soak the rich.” (They may have money, but they have relatively few votes) And there are appeals to “favor” the lower or middle class. (They are numerous and have more votes)
But when there are many special categories of tax impositions and tax exemptions, many people get “soaked,” and “fairness” does not prevail – often leading to bad results.
A recent news story from Washington described the U.S. Senate’s $858 billion “compromise” tax bill. The report said the bill was “packed” with a lot of “special-interest bonanza” tax breaks and “earmarks” providing various favors.
Why should that be? Why should there be favors for some – and penalties for others?
That’s a good and often unanswered question, but special benefits are nonetheless provided for numerous “categories.”
For example, in the current Senate bill, there is an “alternative minimum tax” provision. It provides a so-called “patch” for middle-income taxpayers, so that the alternative minimum tax will apply to “only” 4 million people – instead of the 28 million who will be hit by the tax without the patch. Why wouldn’t it be fairer to have lower tax rates on everybody instead of favoring some millions of people and taxing other millions excessively?
And why should Hollywood get a special tax break involving the cost of film and TV production? It’s explained that is to “keep film production from going overseas.” But how many other businesses might be in similar competitive positions, but get no tax breaks?
Why should Puerto Rico and the Virgin Islands get rum tax breaks? It’s explained, of course, that they need help to be competitive.
Why should NASCAR speedways be favored by being allowed to write off their investments faster than other businesses may write off theirs?
And so it goes in our long and extremely complex tax laws – but that doesn’t make it right.
The tax code ought, rather, to be “simple” and “clear” and really “fair” for all, without undue favors or punishments for anyone.
That probably would stimulate businesses, increase employment and enlarge production – and even bring in more tax collections from lower taxes applied to a thriving and growing base.
But it appears that Congress does not yet understand that.