Saturday, August 27, 2016

Seventeen Solutions – taxes

I usually have a book in my car. I take it with me when I know I'll have time to read – doctor waiting rooms, dentist chairs (while waiting for x-rays to be developed), physical therapy appointments (for the 15 minutes of ice after a workout), movie theaters, restaurants when I'm by myself, concert halls (for before the concert), Ruth Ellis Center (when taking a break), that kind of thing. I tend not to have a fiction book in the car. It needs to be something I can read in short bursts with perhaps several days before I open it again.

The book in my car I recently finished is The Seventeen Solutions, Bold Ideas for Our American Future by Ralph Nader.

Yes, that Ralph Nader. He made his name in 1965 with the book Unsafe at Any Speed about the poor safety record of American cars. He is credited with the passage of several important consumer protection laws, such as the Clean Water Act and the Whistleblower Protection Act. He ran for president six times and is accused of being a spoiler in the 2000 election, siphoning off enough votes in Florida so that George Bush and Al Gore ended up essentially tied.

And this year Nader annoyed some people (like me) with is criticism of Clinton and his (mild) praise of Trump. At 82 is his brain affected by old age?

The book, published in 2012, sat on my shelf for a couple years. My delay was because I thought proposing all these wonderful ideas isn't much good if you don't provide a way of getting the ideas past the GOP held Congress. We're in this mess because the GOP lackeys are beholden to big corporations and they're not going to give up power by nicely asking. So what is the plan in getting these ideas implemented? My skepticism continued while reading the book, especially when I saw how the corporate takeover of America has affected more and more areas of our lives. Corporations have overrun that too?

Even so, I thought the various ideas are what this country needs. Because I think the ideas are so great and explained so well, I'll review them here. I certainly won't get through all of them in one blog post. This, then, is the first in a series.

1. Tax Reform
The Institute on Taxation and Economic Policy (ITEP) has published a brief overview of five principles of sound tax policy.

* Equity evaluates whether the tax system is fair. It comes in two varieties.

Vertical Equity means the poor pay as little or as much as the rich do in relation to their income. This is the classification of taxes into progressive or regressive. Regressive taxes, such as sales taxes and flat income tax rates, take a bigger (higher percentage) chunk out of the lower incomes than the wealthy incomes.

An often cited reason for progressive taxes is poor people feel the pinch when rates are raised, rich people don't. There are two more reasons. First, the rich have economic power. They can hold down the wages of the poor – check the rising ratio between the average worker and the CEO. Second, the rich have political power and can rig the laws to favor themselves. This can be done through corporate subsidies, free tech transfers, non-compete gov't contracts, undervalued mineral and timber licenses, and other tactics.

Horizontal Equity means different forms of income are taxed at the same rate. Currently, income from labor can be taxed as high as 33% while capital gains income is at 15%.

* Adequacy means the gov't has a stable and sufficient source of revenue to fund the public services we need. Our current method meets this goal in principle (though many state legislatures intentionally underfund what their citizens need in services).

* Simplicity allows for enforcement of the tax code. The current system means corporate tax attorneys can run circles around overburdened IRS auditors. Which means the IRS finds it easier to go after the petty violations of the middle class and working poor. A "tax industry" of lawyers, accountants, and consultants thrives on the complexity of our tax system.

* Exportability means preventing people from avoiding taxes by crossing state lines. When you travel to another state, you pay that state's sales tax. Business taxes are based on the amount of business in each state.

* Efficiency means a business is making decisions based on business reasons, not on tax avoidance reasons. For example, a Reagan tax break on commercial real estate prompted an oversupply of office buildings. These unused office towers meant more productive investments didn't happen – and were paid for by taxpayers.

Our current system fails on equity, simplicity, efficiency, and likely adequacy. Nader documents this well. Though we grumble about taxes there is an amazing little serious and thoughtful public discussion of tax policy. What we get instead is outrage and platitudes from pandering politicians. The proposed budgets by Speaker Paul Ryan and Donald Trump perpetuate all these current failures.

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