Sunday, April 16, 2006

Closing the Umbrellas

In an unprecedented move, I finished my taxes a few weeks early this year. But with tax day arriving on Monday, here’s a quick post about taxes.

Concerns over the “super-rich” paying little or no taxes are, for the most part, borne out of class envy and a pathological focus on equality as an objective that trumps all others in society, arguments that I want no part of. However, I agree that it is outrageous that the wealthy can avoid paying taxes through accounting gymnastics, while the rest of us don’t have the ability to shelter ourselves the same way. But let’s ask ourselves how they are able to do this. The answer is that they are exploiting the multitude of loopholes, exemptions, tax credits, and deductions that exist in the current tax code. Most of these have been put in place to please some voting constituency or another, and the left-liberals are certainly not immune to pushing for tax exemptions for various activities in the name of helping, supposedly, the lower/middle class (particularly those with families). But as the tax code becomes more complex, it becomes more difficult for (especially) the poor to negotiate the system and take advantage of these exemptions, while the upper-middle and upper classes can have a professional accomplish this for them. What is supposed to be a way to ease the burden of the working poor (in theory) ends up helping the wealthy and the relatively wealthy (i.e. people who vote). How many times do we see that happening? (It’s often, by the way).

I think there are plenty of reasons to detest the various tax exemptions in the current code on principle, but here’s a reason to fight them for practical purposes: it’s allowing the very wealthy to get away with paying very little in taxes. Get rid of all the exemptions, create a moderately progressive tax scheme (yes, I’d prefer a flat tax, but let’s be realistic), and have people do their taxes on the back of a postcard. No shelters, no complex series of rules and incentives, and no more free rides for anyone who can afford to have someone game the system for them.


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