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3 Priorities to Guide Tax Reform

How we can fix our hopelessly outdated tax code.

Close up of a yellow pencil erasing the word, 'Taxes.' Mcarrel/DreamstimeCongress is finally tackling the tax code, which is good news because reform is badly needed. Our outdated code is complicated by thousands of credits, deductions and exemptions to individual and corporate interests—and it imposes high rates that inhibit economic growth. However, as we've seen with the failed efforts to repeal and replace Obamacare, getting a consensus among Republican members is easier said than done. It should boil down to three priorities.

First, though overhauling the whole tax code would be great, if the goal is economic growth, reforming the corporate side is the most pressing priority. Everyone knows that the corporate tax system is a punishingly inefficient and large driver of corporate avoidance. Ideally, a reform plan could cut the rate dramatically and move the United States from the highest to one of the lowest rates among industrialized nations. The president has talked about 15 percent, which would make U.S. companies significantly more competitive abroad and at home while dramatically reducing the need for tax avoidance and inversions.

It should also replace "depreciation" with "full expensing." This sounds like a bunch of tedious jargon, but all you need to know is that companies generally aren't allowed to immediately deduct (expense) their investment costs when calculating taxable income and that this creates a bias against business investment. Some exceptions exist and create their own problematic biases because they're targeted toward particular industries or activities supported by politicians. Different rules make for a more complex tax code, encourage lobbying and lead to special privileges for the well-connected. Full expensing would flatten all this out.

These reforms would boost the economy, American competitiveness and job creation the most. A corporate tax reduction would boost standards of living through higher wages, too. That's because the majority of the corporate tax is shouldered by workers, in the form of lower wages.

The second priority? Congress needs a budget. Without that, there's no reconciliation—the process by which Republicans can bypass the need for 60 votes in the Senate. Without that, there's no reform. However, the rules of reconciliation require that tax reform be deficit-neutral outside the 10-year budget window. A lot of the current tension about tax reform is caused by a disagreement about how to meet the deficit-neutral constraint.

A third priority requires that tax reform be paid for. The best way to do that, however, is to restrain spending. We're $20 trillion in debt and heading once again to a $1 trillion deficit, even before the tax cuts. Extending and strictly enforcing the previously bipartisan and quite modest Budget Control Act caps of 2011 until 2025 would pay for tax reform without resorting to new sources of revenue such as the misguided value-added tax, a carbon tax or a border adjustment tax.

Getting rid of genuine loopholes that benefit individuals and corporate interests would also help pay for tax reform. The exclusion for employer-provided fringe benefits, the state and local tax deduction, and the deduction for U.S. production activities are ripe for repealing and could allow for trillions of dollars in tax cuts.

Congress could approve a tax cut that expires after 10 years, of course, but temporary tax cuts are less conducive to growth because entrepreneurs and investors realize that there's no permanent change in incentives to create jobs, income and wealth.

All of this leads to a problem. If Congress and President Donald Trump aren't willing to impose spending discipline and if they're unwilling to tackle a sufficient number of major loopholes, that presumably means there won't be fiscal room to get a large rate cut and expensing.

Politically, it could be easier to push for just a rate cut at the price of expensing, because it's imperative that the corporate rate be dramatically reduced and—let's face it—most people don't even know what expensing is. The bad news is that leaving expensing behind would be a missed opportunity. We know that politics isn't always conducive to good economics, and the good news is that you can't go wrong with cutting the corporate tax rate—but Congress can and should do more than the bare minimum.

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  • Robespierre Josef Stalin||

    These reforms would boost the economy, American competitiveness and job creation the most. A corporate tax reduction would boost standards of living through higher wages, too.

    Cite missing. Corporate profits have been going up, but wages have remained largely stagnant. Why wouldn't a company simply respond to the chance to pocket gains from lowered taxes by increasing their dividend or giving the CEO a bigger bonus?

  • loveconstitution1789||

    Wages have been going thanks to Democrats and their $15 minimum wage increases? Haven't you heard?

    Typical of a lefty to be against businesses having any more money to spend how it wishes. One thing government does is take corporate outrageous profits and spend it on the people to make their lives better. I mean, companies don't pass on all expenses to customers in the form of higher prices.

    Since I was responding to a lefty, I must add... /S

  • mortiscrum||

    You didn't respond to Robes' point, though. The article is citing increased wages as a reason to lower the corporate tax rate. Robes correctly points out that corporate profits are doing very well right now, and wages have remained flat. This brings a lot of doubt on to the idea that lowering corporate taxes will boost wages.

    An entirely separate reason to lower corporate taxes is because government is illegitimate or whatever. That's not the same topic though.

  • loveconstitution1789||

    Hey Robes sockpuppet, wages are going up thanks to the minimum wage fallacy.

    Corporate profits going up does not necessarily mean wages go up immediately as companies might need to spend capital on non-wage investments.

    As the article correctly points out that wages will not typically go up with high corporate taxes because there is less money.

  • wearingit||

    You seriously are one of the worst commenters here. Nowhere in your incessant rambling did you make a cogent point or refute either person's arguments. Shut up and stop polluting the message boards.

  • Leo Kovalensky||

    I agree in part with Robes, and disagree with the assertion that lower taxes necessarily yield higher wages. Wages are set by supply and demand of labor. Corporate taxes have no direct impact on either the supply or demand side of the equation.

    A better argument is the first point of the quote, that lower taxes lead to economic growth. Companies take the savings and reinvest, which creates more jobs. You could argue that the increase in demand has some positive pressure on wages, I guess, which is what the author is likely doing.

    Also the assertion that CEO pay is somehow this horrible thing is ridiculous. It's not like CEOs have a giant Scrooge McDuck bin of gold that they go home and swim in every day. They reinvest their money into the market and spur economic growth.

  • JFree||

    the assertion that CEO pay is somehow this horrible thing is ridiculous.

    No it is absolutely ridiculous. Stock options grew like kudzu because they a)got special tax treatment compared to other forms of equity-based pay and b)judicial decisions have created a serious corporate governance agent/principal problem.

    The effect is that CEO's now earn most of their money from a lottery ticket whose value depends more on stock price volatility and asset-price inflation than any real increase in shareholder value. And CEO's (agents of the board) now basically control the board (agents of shareholders) while the principals (actual at-risk shareholders) have little/no control over the pay of those who supposedly work as their agents.

  • knockatize||

    "Dividends" aren't going to Mr. Burns sitting on a pile of gold, y'know.

    Anybody who's got a 401(k)/403(b) gets a piece of that, and so do state pension funds - who really could use the money, because if those pension funds aren't thriving it's the average taxpayer who gets stuck with the bill for the retirements of those public employees so beloved of progressives.

  • Episteme||

    Dividends also go to any of us who purchase stocks that pay dividends. I'm currently unemployed and have always had low-paying jobs, but I've been judiciously investing for twenty years and been building up my portfolio into one that partly reinvests itself and partly pays out in dividends. I paid for graduate school part-time with a mix of accrued dividends and old bonds (instead of taking out any loans). Our problem in modern society in more one of providing easy access to what is already legally equal-term investment (the lines between labor and capital classes having long ago blurred, differing only in scale in the same way that a low-end wage work worker and a high-end salaryman differ). I always joke when talk of capital gains taxation comes into play because I'm a poor man on paper who technically follows tax rules far closer those used by the wealthy in our society, given how much of my sparse earning in recent years have been invest-based!

  • mpercy||

    The CBO produced a report "THE INCIDENCE OF THE CORPORATE INCOME TAX" in which it states

    "A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but that money must come from somewhere: from reduced returns to investors in the company, lower wages to its workers, or higher prices that consumers pay for the products the company produces.

    That report goes on to say:

    "The short-term burden of the corporate tax probably falls on stockholders or investors in general, but may fall on some more than on others, because not all investments are taxed at the same rate.The long-term burden of corporate or dividend taxation is unlikely to rest fully on corporate equity, because it will remain there only if marginal investment is not affected by those taxes.

    "...In the very long term, the burden is likely to be shifted in part to labor, if the corporate tax dampens capital accumulation.

    It's possible that one reason profits are not funneling down to labor is because of vagaries of the tax code that make it "better" for the company to something else with the profits instead of pay their workers more. For example, for every $1 they increase worker's pay, they will have to actually expend $1.0765 (covering their requirements for FICA payments). Also, employers are spending an ever-increasing amount on employee health-care costs, which have perverse tax incentives for them to provide as fringe benefit instead of hard wages.

  • You're Kidding||

    And, do not forget that, increasing compensation is locking in a cost. You can't take them back later. This can lead to financial difficulties. Maybe even offshoring of jobs or importation of cheaper labor.

    Other expenses can usually be increased or decreased proportional the ebb and flow of business. This makes a business sustainable as long as there is a market for their product or service.

    None of this applies to government of course. We just live to increase capacity no matter the demand. It's the ultimate in bureaucracy.

  • tommhan||

    Exactly, it is a pipe dream to think that money will fall to the little people.

  • loveconstitution1789||

    The second priority? Congress needs a budget. Without that, there's no reconciliation—the process by which Republicans can bypass the need for 60 votes in the Senate. Without that, there's no reform.
    Actually, all the Senate needs to do is end the 60 vote majority vote requirement and repeal ObamaCare along with reform taxes. If the Republicans lose control of the Senate, then a 75 vote requirement for all legislation is added and a 100 Senate vote is required to change all Senate rules.

  • mortiscrum||

    How laughably undemocratic. Have you really paused to consider the damage to the country that kind of power grab could cause?

  • loveconstitution1789||

    Its still a majority of 51 votes that are needed, so that is laughably democratic.

    Damage to fix all the lefty policies that have the hurt the USA and then make it harder for future lefties to hurt the USA? Yeah, that is super scary- to Democrats.

  • mortiscrum||

    Everything a democracy can possibly do doesn't become democratic by default. A majority voting themselves more power and locking in their ideas is undemocratic.

  • Loss of Reason||

    "we must pass it so we know what's in the bill"

    I guess that wasn't a power grab right?

  • Calidissident||

    I'm sure you were also one of the same people who, back when the Democrats controlled the Senate and were considering abolishing the filibuster, would have lambasted that as a tyrannical move.

  • tommhan||

    I don't know about him but I have always hated the filibuster. Just vote on the damn stuff and move on. Nobody could run a business like the Federal government is run without going bankrupt quickly.

  • Palin's Buttplug||

    The effective corporate tax rate was 17% last time I checked so there won't be much of a reduction.

    Lower it to 15% and get rid of ALL deductions - in particular loss carryovers. Simple and low it is.

  • geo1113||

    If you got rid of all deductions, it would then be a revenue tax.

  • Palin's Buttplug||

    No it wouldn't.

  • geo1113||

    You obviously don't know taxes. My business is taxes.

  • Palin's Buttplug||

    A company with $3 billion in revenue and $3.1 billion in expenses would pay no taxes. That $3 billion revenue would not be taxed.

  • mpercy||

    That's because you're DEDUCTING EXPENSES!

  • loveconstitution1789||

    Lower it to 10% or 5%.

    I know lowering tax rates scares the shit out of you lefties.

  • Palin's Buttplug||

    BIg GOP deficits scare the hell out of us liberals.

    Deficits go up when the GOP is in power. see 2004-2009 and the Reagan years.

  • Leo Kovalensky||

    Deficits go up when the government is in power. see all of our lifetimes.

    There... Fixed it.

  • mpercy||

    You didn't bat an eye for $1T deficits under Obama, though did you?

    FY 2016 - $585B
    FY 2015 - $438B
    FY 2014 - $485B
    FY 2013 - $679B
    FY 2012 - $1.087T
    FY 2011 - $1.300T
    FY 2010 - $1.547T ($1.294 trillion plus $253 billion from the Obama Stimulus Act that was attached to the FY 2009 budget).
    FY 2009 - $1.16T ($1.413 trillion minus $253 billion from Obama's Stimulus Act)
    FY 2008 - $459B
    FY 2007 - $161B
    FY 2006 - $248B
    FY 2005 - $318B
    FY 2004 - $413B
    FY 2003 - $378B
    FY 2002 - $158B

    What happened in 2007? Democrats won control of Congress.
    What happened in 2012? Republicans won back Congress.

  • L.G. Balzac||

    I planned to spend a million dollars this year but then I didn't. What's my budget deficit?
    garbage in - garbage out.
    -
    If the federal govt debt is owed primarily to an unconstitutional org like the federal reserve, why not just give 'em the middle finger instead?

  • You're Kidding||

    Good point.

    I work in government now. A CFO as a matter of fact. But, I had 20 years in income tax and private sector corporate finance before that.

    In government, when we through numbers around, we often refer to them as "budget". And, that's exactly what they are. The budget. The plan. We seldom deal with what actual expenditures are. There just this blind spot that, whatever we budgeted is what we will spend. And, miraculously we do.

    In the private sector, budgets were just plans; metrics against which we measured our actual performance. And, period to period comparisons were based on ACTUAL results. Not what the plan or budget originally was. This was normally quite different than the original budget and, variance analysis that could explain the deviation was expected. Results were used to modify future plans and their corresponding budgets.

    Imagine that. We actually sought improvement rather than statism.

  • Loss of Reason||

    The Obama deficits were a-ok though right?

  • tommhan||

    over 9 trillion in debt under Obama, nuff said.

  • Calidissident||

    This says an effective rate of 29%.

    https://www.cbo.gov/publication/52419

    Also, while I agree with a simple, flat code, why no loss carryovers? If a business has a $5 million loss in year 1, and a $10 million profit in year 2, why should they the same amount as a company that makes $5 million each year, and thus makes $5 million more over the 2 year period?

  • You're Kidding||

    Well to start with, it makes no difference in overall economic terms.

    Corporations do not pay taxes. Their customers do. And shareholders who's dividends are issue post tax.

    But hey, by dropping this simple understanding we can endlessly debate the "fairness" of any deductions, rate structures, etc. and waste our breath.

  • Horatio||

    No carryovers? So, Heads = Government Wins, Tails = Businesses Lose? I mean, just because I'm having a bad week doesn't mean the guy mugging me should have one too, amiright??

  • Curt2004||

    How would anyone possibly run a business if they couldn't deduct their expenses?

  • some guy||

    Honest question: How would everyone here feel about getting rid of income taxes and only funding the federal government through some combination of fees, excises and property taxes?

  • Leo Kovalensky||

    Honestly speaking, none of this is practical until we get our spending under control. Pass a balanced budget amendment, and then lets talk about the best ways to fund what's left of the government.

  • Tony||

    A balanced budget amendment would destroy the country. Stop listening to quacks.

  • Horatio||

    I agree. Doesn't California have such an amendment? The central problem is people want a pony for free and our pol's are willing to pretend to give us free ponies.

  • L.G. Balzac||

    Free ponies shouldn't affect the budget. They have $0 cost, right?

  • Leo Kovalensky||

    Runaway debt is destroying the country, this we know. It doesn't take a genius to understand that increasing the $20T national debt by $1T per year is not sustainable. Given that entitlements are fueling the debt and nobody will ever touch them

    I agree government debt can be a good, necessary thing. We funded WW2 with debt, but then immediately repaid it. The current runaway debt started under Reagan and nobody has made significant improvements in it since.

    I would argue that it would be prudent to put in a some provision to allow for deficit during national crises or wars, but ultimately that will lead our tax and spend governments to just declare more crises and wars to fund their pet projects.

    Allowing the government to control itself is fruitless, this we know, and the people's only defense is to amend the constitution.

  • Tony||

    Why not just stop supporting a dogmatic campaign that disallows ever, ever raising taxes? That is how government pays for stuff. If debt such a big problem, maybe the biggest according to some of you, then refusing to raise taxes makes the whole thing seem very cynical. But we're nowhere near WWII levels of debt/GDP, and it's not actually a crisis, especially since it's cheap right now.

  • DaveSs||

    The US government has regardless of what top rates are, rarely been able to capture more than about 20% of GDP in taxes for longer than a year or two. The post WW2 average is 18.9% IIRC.

    Spending on the other hand has averaged about 19.9% over the same time period.

    So the real question is, why not stop supporting a dogmatic campaign that considers holding spending flat, let alone reducing it to match realistic expected revenues to be tantamount to mass murder?


    Post script: The fact that debt is at present cheap (artificially I might add) does not then by definition mean that taking on new debt is not a problem.

    Current Debt/GDP is right around 105% which is getting pretty darn close to what it was during WW2 (120% peak I believe). The problem with your line of thinking here is this this. We don't have a major freaking war sucking up 30% of GDP going on right now. If we did in fact have a major war that necessitated massive debt spending you'd be right the ratio wouldn't be much of a problem because in just a few years we win and the massive debt spending would stop, or we'd be defeated and then who the hell cares anyways.

    The debt we are taking on today is an expression of mainstream politicians cowardice. Rather than being honest about what can be afforded with the taxes taken in, they borrow and kick the can down the road.

  • Loss of Reason||

    Because than pork couldn't be given to people right Tony?

    Since you in your mom's basement (or under a bridge) we can't ask you, but ask her if balance her budget matters or does debt destroy her?

    I know in your mind government debt is great because it's not your money. Who cares about the future as long as you can get your Cheetos and red bulls now right?

  • Qsl||

    Problem being is when you go down the path of land value taxes and whatnot, you are taxing wealth which gets a certain group of people riled up (and perhaps rightfully so), nevermind the fact is as close to a voluntary tax as you are likely to get (let alone all the economic arguments in favor).

    Some interview at the Hoover Institution made the case that taxation should be separated into what are legitimate targets to tax and then what those tax rates should be. If that is the case, I don't think a good argument has been made for the corporate tax (or income taxes), so haranguing over the rate is just political football. If it is invalid, it should be abolished completely.

    That isn't to say something like a land value tax is valid, but there is a long list of arguments in favor (Rothbardians aside). Taking that no system of funding the government is going to be ideal, you are left with picking and choosing what compromises you are willing to make and the problems they will introduce. That should be the starting point in any debate over taxation.

  • You're Kidding||

    I prefer participatory budgeting with a requirement of a balanced, federal budget.

    Every year, people donate however much they feel is appropriate to the federal treasury. And, they designate, at least in broad terms, what federal agencies and/or programs their donation can be used for.

    After the revenue is all accounted for, Congress budgets the following year's expenditures equal to the funds provided.

    Talk about being able to vote with our dollars!

  • Rebel Scum||

    How we can fix our hopelessly outdated tax code.

    Nuke it from orbit.

  • Leo Kovalensky||

    Step 1: Simplify the tax code in a revenue neutral manner. Put everyone on an even playing field. This should get significant bipartisan support.

    Step 2: Fund all tax cuts with a flat cut across all non-entitlement spending including defense. This shows that the Republicans are serious about cutting taxes, and cutting the deficit. I think this could happen, honestly. If the Democrats don't get behind it, they will suffer mightily at the polls, and the problem likely will solve itself.

    Step 3: Reform entitlements. Without reforming entitlements, all of this talk is political masturbation.

    Step 4: Pass a balanced budget amendment so that we never get into this situation again.

  • Curt||

    For the most part, I agree. But, I can't decide if Step 2 or Step 3 is least likely. Probably Step 3.

    The concept that Republicans would ever consider cuts to defense (even if was accompanied by massive cuts elsewhere) is pure fantasy. Because, in simplest terms, the Republicans are *not* serious about cutting taxes and cutting the deficit. It's just a good slogan... nothing more. Democrats also have no interest in this, but they don't even pretend.

    But Step 3? Not a snowball's chance in hell. Despite some occasion mild murmurs, there is nothing with a more firm bipartisan commitment than the ideal that the only reforms of entitlement that shall ever occur are occasional increases.

  • Leo Kovalensky||

    The biggest hurdle to reforming entitlements is that you have an entire generation of people who vote in large numbers whose livelihood is totally dependent on the benevolent government. I agree it won't happen, but it has to happen.

  • Curt||

    And their numbers are continuously refreshed. It's not a case where the proponents of an awful idea will eventually all die off. The supporters of medicare and SS aren't the people who are 55+ in 2017. They're the people who are 55+ from now until forever.

    If they didn't constantly repopulate their numbers, in another 20-30 years, we'd be able to grandfather a few and drive a stake through its heart. The 30- and 40-somethings who currently support massive reforms (reductions) to those programs will vocally support massive reforms (increases) in another 20 years. The switch will occur right around the time they realize that their retirement savings are gonna last for about 3 years.

  • You're Kidding||

    I know a fair number of people my age - 55+ - that would reduce or even give up, their entitlements if we could guarantee that they wont' soon come back in another form and there was a balanced budget requirement. They would be willing to make their self interest subservient to the greater good. We've learned our lesson about believing in government benevolence and omnipotence.

    How many of you less than 55 year olds would be willing to continue paying into the entitlements if we agreed to a cut off age and continued funding until the last of that cohort was gone?

    The only way we're going to be able to get rid of the entitlements, particularly SS and Medicare, is to phase them out. Simply eliminating them is politically unrealistic and would be a shock to our national system that we probably could not survive.

  • p3orion||

    I don't think a even a balanced budget amendment is needed, simply a check on growth. Limit each department's annual budget increase to what it is now, adjusted for inflation and population increase. In only a few years time, the growth in GDP and the accompanying increase in tax revenues should zero out deficit, and bring increasing surpluses from then on.

  • You're Kidding||

    Californians tried this at the state level with Prop 13. It was only a check on the growth rate in property taxes.

    But, it did not restrict growth of the beast. So we've run massive deficits. And, they continue to grow (public employee pension tsunami).

    And, Prop 13 is regularly attacked and vilified from many angles as the source of all of our governmental "problems". Just yesterday there was an opinion piece about getting rid of the "loopholes" in Prop 13. You know, the fact that businesses that owned real property were beneficiaries and shouldn't have been. Because if we just tax all those businesses more, it will solve all of our governmental funding issues. Few dare to say that we need to address state expenditures.

  • Tony||

    Our tax system is not in such bad shape that we need Republicans to "reform" it, nor could it ever be.

  • Leo Kovalensky||

    What do we need? Democrats to increase it?

  • Tony||

    You're the one who is advocating paying major expenses. I think we can both agree that it would be nice if Republicans stopped enacting trillions of dollars of tax cuts and trillion-dollar wars based on lies.

  • You're Kidding||

    Tony:

    Wasting money on wars?

    Wow, you've found common ground. You'll go libertarian yet!

  • Loss of Reason||

    Yeap all the Republicans..borrowed from above - deficits per year

    FY 2016 - $585B
    FY 2015 - $438B
    FY 2014 - $485B
    FY 2013 - $679B
    FY 2012 - $1.087T
    FY 2011 - $1.300T
    FY 2010 - $1.547T ($1.294 trillion plus $253 billion from the Obama Stimulus Act that was attached to the FY 2009 budget).
    FY 2009 - $1.16T ($1.413 trillion minus $253 billion from Obama's Stimulus Act)
    FY 2008 - $459B
    FY 2007 - $161B
    FY 2006 - $248B
    FY 2005 - $318B
    FY 2004 - $413B
    FY 2003 - $378B
    FY 2002 - $158B

    Point to when Republicans controlled Congress and did tax cuts.
    Now point to when Democrats took over Congress *cough 2007*

  • See.More||

    Corporations do not pay taxes. They pass their tax burdens on to their customers (in the form of higher prices), their employees (in the form of lower pay), and/or their investors (in the form of lower dividends).

  • Curt||

    You say that as if those are different things? As if, somehow, corporations would pay taxes through some other method than those things.

    Hmm, let's see here. Individuals do not pay taxes. They pass their tax burdens on to their employers (in the form of higher wage demands), their service-providers (in the form of lower tips), and/or their families (in the form of fewer vacations and smaller data plans).

  • Horatio||

    Only individuals pay taxes, since only individuals earn money. A corporation is simply a collection of individuals. Shareholders have the same pool of money taxed twice (or thrice, depending) before it ever gets to be spent on tips and vacations.

  • Curt||

    Agreed, but disagreed. Mostly semantics. A corporation *is* a collection of individuals. Those individuals aren't separately/individually paying the corporate tax bill. The corporation (those individuals collectively) is paying the tax bill. And, yes, about the multiple taxation.

  • See.More||

    You say that as if those are different things? As if, somehow, corporations would pay taxes through some other method than those things.

    Taxing corporate income is dumb as it is ultimately passed on to the consumer etc.. Thus, rational tax reform should go beyond reducing corporate tax rates and eliminate them altogether.

    Hmm, let's see here. Individuals do not pay taxes. They pass their tax burdens on to their employers (in the form of higher wage demands), their service-providers (in the form of lower tips), and/or their families (in the form of fewer vacations and smaller data plans).

    Not quite the same, but close (unless the individuals in question are net tax consumers...) And, indeed, for very similar reasons, taxing individual income is dumb. It in essence says, "You do not own yourself. The State owns you and anything it does not take it is generously allowing you to keep."

    Oh, and, taxation is theft.

  • Curt||

    I read your initial post in the voice of someone bitching that corporations are evil because they pass that tax burden on to others. Impression revised.

    Taxing corporate income is dumb... sure. Basically the problem is that the government set up a system where they consider themselves entitled to take a chunk out of every possible financial transaction that occurs. Anytime money changes hands, Uncle Sam believes he's entitled to take a chunk.

  • Curt||

    Ultimately, there's a long way we can go to reduce the cost of compliance of paying taxes (armies of accountants). But despite that, no matter what reform there is to the tax system, the government is still going to take at least as much money so they can hand out free shit to people.

    When people talk about tax reform, I believe they're always talking with the mindset that ultimately it will result in some kind of reduction to what's paid. While that would be awesome, I don't believe there's any chance of that. I think that realistically, the best we can hope for is reduced compliance costs.

  • You're Kidding||

    The "shit" that government hands out ain't free. It's just that someone else paid.

    That is an important distinction. And the sooner the proletariat wakes up to this rational thought, the closer we are to bringing the government tiger back to it's pussycat role in our lives.

  • Uncle Jay||

    "Oh, and, taxation is theft."
    No, taxation is extortion.

  • Let freedom ring||

    Face it-Veronique and Reason and the libertarian conservative establishment simply do not understand the US INDIVIDUAL income tax. That goes for Grover, Lew, Matt, Nick, Brian, CATO, MISES, Heritage, Sheldon, Randy etc. etc. Even Judge Napolitano doesn't understand the income tax.
    The reason is they have ignored TAX HONESTY for decades. They have refused to understand the history and nature of the tax. They either do not want to learn or are afraid to learn. If the major libertarian think tanks and pundits would simply talk to people like Pete Hendrickson, a regular guy, a grassroots libertarian who speaks to local libertarian parties, but is ignored by the establishment, we could really, really move the ball forward on this issue.
    The US INDIVIDUAL INCOME TAX is a tax on public offices only, based on the 19th century British income tax. Put differently, it is a tax on the exploitation of a federal privilege for profit. Anyone who is engaged in an occupation of common right that is not paid from the federal treasury is entitled to a full refund of federal and state withheld taxes, including payroll taxes, and thousands of people have obtained this refund without going to court, using the IRS own procedures, since 2003. Why wont someone look into this? see www.losthorizons.com

  • mpercy||

    Have fun in tax prison.

  • Episteme||

    With any luck, Wesley Snipes left some of his cool anti-vampire stuff in his cell when he checked out!

  • Lester224||

    Congress seems unlikely to plug tax loopholes that benefit their big contributors and lobbyists.

  • You're Kidding||

    I abhor the use of the word "loophole". And, I am a former tax professional.

    What one calls a "loophole" is another's legal entitlement to a tax deduction.

    We should start the conversation of honestly by recognizing this. We are interested in taxing gross and not net income. From there we can build. Maybe even get into VAT or something similar and less onerous than our federal and, most state, income tax fallacies.

  • Uncle Jay||

    RE: 3 Priorities to Guide Tax Reform
    How we can fix our hopelessly outdated tax code.

    Here's some ideas.
    Lower the corporate tax from 37% down to five percent or lower.
    But I doubt that would happen because the ruling elitist turds in power like to restrict competition, especially if it interferes with the cash flow of their cronies.
    Eliminate the income tax and replace it with a sales tax of one percent for anything you purchase except for food, medicine and clothing that is over $20.
    That won't happen because our beloved socialist slavers oppressing us like with archaic and complicated tax codes.
    Plus, I doubt the gutless GOP has the will or nerve to implement serious tax reform.

  • You're Kidding||

    Not immediate elimination but a phasing of one to the other.

    Throwing the whole system out to be replaced by another is a recipe for disaster. Maybe even revolt.


    "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." - Thomas Jefferson

  • n00bdragon||

    There is no priority 1, 2, or 3. The duty of the tax code is not to create economic growth, it's to pay for what the government spends. The -only- priority is paying for what is spent. Making sure tax cuts are "paid for" is bullshit when there is already a 400B deficit. Taxes need to go up for everyone and spending needs to fall off a cliff. Entitlements have to be reformed and then once everything is squared up financially then maybe congress critters can go back to day dreaming about how to command the economy to be stronger.

  • swampwiz||

    Yes, let's see Congress try to cut the employer insurance tax, homeowners, and state & local tax deductions. The Republicans are setting themselves up for another bill that they ill fail at. That said, reform of corporate income could still happen, but it's going to require getting rid of deductions there and then some rise in the tax rates that the wealthy pay (the ridiculous hedge-fund low income tax rate should be a no-brainer).

  • Charles Barr||

    Tax cuts do not need to be "paid for", taxes need to be cut PERIOD. The only way we can accomplish this while dealing with a $20 trillion national debt is to gradually replace debt-based money with debt-free money. The inflationary impact of unbacked dollars is no different than the inflationary impact of the same amount of debt-backed dollars, and such a policy will call a halt to the increase in the national debt and its crushing $430 billion in annual interest payments. See www.fixourmoney.com .

  • Hank Phillips||

    Did anyone see "repeal the individual income tax" in Veronique's article? In a supposedly libertarian mag dedicated to individual rights, the staff are off publishing recommendations in the looter press for KEEPING the tax that points IRS guns at our heads, and recommending repeal of the corporate income tax. After WWI the federal government consumed 4% of the national economy and President Coolidge pointed to Laffer Curve results a half-century before the Laffer Curve had a name! Surely we can do better than this!

  • ejpoleii||

    Change personal income tax to a single rate applicable to all income from whatever source. Eliminate all deductions except a single deduction for all for all individuals. No joint returns. Individual returns only.

    Reduce corporate income tax to a minimal amount but allow paid dividends to be deducted. Similarly simplify all other taxes to eliminate favoritism.

    Balance the budget.

  • tommhan||

    If congress does what they usually do they will help families more with higher credits and deductions and the hell with those of us that are single filers and just pay more taxes than families even though most of them have 2 paychecks. I would rather have a flat tax or better yet a national sales tax so everyone pays.

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