Another Impractical Guide To Small Government

   Worse yet, the code is a labyrinth of penalties and rewards that benefit only those with the legal and accounting resources to exploit them.   US Representative Rob Portman claims that, "The income tax code and its associated regulations contain almost 5.6 million words -- seven times as many words as the Bible. Taxpayers now spend about 5.4 billion hours a year trying to comply with 2,500 pages of tax laws".."   And if this isn't daunting enough, consider that up to 5,000 IRS rulings a year can further complicate the application of law in your tax return.

   The tax code is so complex partly because it tries to do way too much.   In addition to generating much of the revenue needed to fund the federal government, it is used today to maintain control over Americans -- to reward decisions we like and penalize decisions we don't like.   The tax code is also used for the distribution of charity, with tax credits for everything from child care to green energy spending.

   A tax code that exerts control is especially insidious.   By contrast, stand-alone laws that regulate behavior can be fairly straightforward.   It's against federal law, for example, to kidnap a child, and you can't rig your product's prices by conspiring with competitors.   But the tax code is unique in its ability not only to provide penalties, but also rewards.   Through the tax code, the federal government will reward you for having a lot of kids, buying an environmentally friendly car, financing your house with a loan, and making your money through passive investments rather than working.   In the process of mucking around in otherwise free markets for kids, cars, housing, and investments, public policy can create bubbles in demand.   That's another story.

   Tax complexity is a real villain, because the code only rewards those who can sort through this dizzying maze.   The IRS estimates that it is unable to collect $300 billion a year in taxes due and payable, simply because of the complexity of the code itself.   Don't wonder for a minute how things got so complicated -- poor people aren't to blame.   Wherever an incentive or penalty is found in the code, you can track the winners and losers.   Winners are usually easy to identify, whether a particular industry, a particular class of investor, or some narrow special interest group.   Losers are far more numerous, however, and can usually be identified only with the help of a mirror.

*

   In summary, the system of taxation in America is a self-defeating and inequitable mess.   We're taxing the wrong stuff, offering rewards and penalties to control our citizens, and making things so complex that only the lawyers and accountants -- and their employers -- come out ahead.   The whole system is a stacked deck favoring the rich at the expense of the vast majority.

    Don't give up yet.   In the next installment we'll figure out how to bring about solutions to our issues, continuing to use taxation as an example.   Stay tuned.

Next Page  1  |  2  |  3  |  4

(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).