1,040th Tax Letter

It's long past time for tax reform. Why isn't the Incumbent Party listening?

Dear Taxpayer:

In the past, I have addressed my annual tax-issue “Open Letter” column to members of Congress, presidential candidates, and the commissioner of the Internal Revenue Service (IRS). They never respond. I think it’s time for us to discuss this matter among ourselves.

Tax absurdities abound. Each round of “tax reform” has added to the complexity of the tax law to the point where more than 65,000 pages of regulations and instructions now need to be consulted to comply with the intricacies of the federal tax regime.

The alternative minimum tax (AMT) is the poster-child for the hypocrisy of the political class’s use of our tax code. It had its genesis as an effort to tax high-income individuals who had taken advantage of “loopholes” to pay no tax. In fact, the majority of this year’s alternative minimum taxpayers will have incomes between $100,000 and $500,000, and about one-third will make less than $100,000. To eliminate the AMT going forward would deprive the political class of $1 trillion over the next 10 years, so you can bet that the AMT is here to stay.

Democratic Congressman Jim Cooper from Tennes-see, writing in the Wall Street Journal last year, pointed out that the Incumbent Party had no lasting solution to the alternative minimum tax, only budgetary gimmicks. One of the gimmicks with the current IRS tax scheme is that 40 percent of this country’s households pay no income tax at all. It’s worse than that. According to the “2008 Tax Relief Kit” offered by the

U.S. Department of Treasury’s Office of Tax Analysis, 1 percent of our taxpayers earn 21 percent of our nation’s income, but pay 39 percent of our nation’s taxes. It thereby becomes easier and easier to raise taxes on higher and higher incomes because fewer and fewer people pay any income tax at all, while at the same time, enjoying a vast majority of the transfer payments, such as Social Security and other tax-supported programs.

Because all people benefit from the services provided by income taxes, and often in inverse proportion to the amount they pay, all citizens should have some skin in the game and pay minimum amounts of income tax. We impose no obligations for the privilege of citizenship—no draft, no public service—so the very least we should expect is that all individuals with reportable income pay 10 percent of it to the IRS. Tithing for the country should be an honor. When people have to pay for something, they pay more attention and accountability is the result.

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