The Awfulness Of The Income Tax

Bill Murchison
|
Posted: Apr 17, 2007 12:01 AM
The Awfulness Of The Income Tax

So here we are as usual this time of year, fuming and fretting and rummaging for choice epithets about income tax and the urgent, the unquestionable, the unimpeachable need for tax reform. We always talk this way in April. And it never comes to anything but talk.

True, true, and praise the Lord, sometimes sensible administrations improve the working of the system. Notably, tax rates get cut, as in the Reagan years, and then again, a decade and a half later, under George W. Bush.

These ministrations help. If you skinned yourself up in a bicycle pileup, wouldn't you want first aid? The problem with the tax system is that first aid, however generously administered, is a lower priority than cure of the root sickness.

Plans for overhaul of the tax system arise and fall and arise again and hang in space before tumbling back down because, basically, as a nation, we'd rather be sick than cured of all the eccentricities, unfair disincentives, unfair punishments, confusions, contusions and what not that the progressive income tax system inflicts.

A flat tax -- no deductions, just add up your income and calculate your tax level -- would get the job done wondrously. The great Dick Armey, the last intellectually coherent politician to lead the Capitol Hill Republicans, campaigned for the flat tax with might and main. The ex-communist nations of Eastern Europe have embraced the flat tax with impressive success thus far. This hugely American idea, based on fairness, draws yawns or indignation in America, reminding us that good ideas don't succeed by being good; they succeed on account of leadership, opportunity or sometimes accident.

Another plausible idea for reform is a national retail-sales tax: a less good idea than the flat tax, but constructive on account of its simplicity and understandability. Understandability is the last feature anyone would claim for the income tax system as we know it in America.

Why, then, do we stick with such a system? Human occasions are clouded over with varying motives, but one such motive sticks out here: We're not looking for a system that makes sense; we're looking for one that sticks it to the rich so that the government -- supposedly -- can redistribute the proceeds.

On which score the present system doesn't seem to satisfy us completely. If you think so, listen to the Democrats talk about "tax cuts for the wealthy." Anything that can be represented, politically speaking, as favorable to fat cats -- no matter how badly it works, no matter how much it distorts intelligent decision-making in things economic -- we evidently don't want. That the Bush tax cuts have brought into the Treasury more money than the dollar amount of the cuts doesn't count. Nor does it matter that no one really understands the tax code. It's a matter of perception. The main idea isn't to gather money, it's to feed the political rhetoric machine. The richest nation in the world loves to pummel the rich.

At least our politicians do. I'm less sure about those they purportedly represent. Fifteen-thousand-square-foot McMansions and stock options can incite the best of us at the worst of times. We think, who really needs all that dough? The politicians who manage the tax code from the left end of the political spectrum go a step beyond thinking about such matters. They see the code as a way of ramping up resentments against their philosophical opponents. Far from agreeing to flatten tax rates, they campaign for taxes that 1) nurture their ability to redistribute the goodies and 2) get the idea out that to favor tax cuts is to favor unfairness and elitism.

We won't get reform out of these characters anytime soon. No flat tax; nothing that actually simplifies the taxpayer's life. Forget it. We just might, though, in the meantime, if we work hard and keep our eyes on the political ball, successfully defend the lower rates of the Bush years and even cut them some deeper. Things being as they are, I'll take it.