There's lots to like in the tax changes being considered by Congress as part of the five-year balanced budget plan: a long-overdue family tax cut, reductions in capital gains and death taxes, and tax incentives for families to save, rather than borrow, to finance their kids' education. There's also lots to dislike: tax incentives for families to borrow, rather than save, to finance their kids' education (yes, the legislation plays it both ways); a variety of nit-picky tax increases on business (all of which, of course, ultimately will be passed along to consumers); and a smorgasbord of special exemptions and exceptions for a variety of special interests.
There's a lot there, and that's the trouble: Congress is taking an incredibly complicated tax code and making it even more complicated. Indeed, the biggest winners in all this will probably be the lawyers and accountants for whom every tax change means money in the pocket.
Let me be clear: I strongly favor many of the changes Congress is making. They are the right thing to do.
The $500-per-child tax credit, for example, will relieve at least some of the heavy tax burden facing American families that, on average, now hand over 25 cents out of every dollar in direct federal taxes to Washington, compared to just two or three cents following WW II.
The capital-gains tax cut will stimulate economic expansion and job growth.
And changes in the estate and inheritance taxes -- the death taxes -- will save thousands of family farms and businesses from liquidation.
Besides, I think it's grossly unfair for sticky-fingered Washington to feel it has any moral claim to the money a family accumulates over time, whether through hard work, shrewd investing, or a combination of the two. If mom and dad want to bequeath their nestegg to Uncle Sam, that's their prerogative; if mom and dad want to leave their shekels to the kids, that also should be their prerogative, without the heavy-breathing taxman filling his pockets as well. (Unfortunately, the tax bill doesn't eliminate death taxes. It merely increases the amount a family is permitted to pass along before Washington takes its bite.)
What bothers me most about the tax bill is the fact that it does nothing to simplify the tax code; in fact, it does the reverse.
So let me make a modest proposal: that Washington leave the doggone tax code alone -- declare a moratorium on tax bills -- until it is ready to do what really needs to be done. That is: Chuck the entire 17,000-plus-page tax code into Washington's biggest trashcan and replace it with a simple, flat tax that everyone can understand without the help of an accountant, lawyer or interpreter.
Everybody has heard the stories, no doubt, about all the unsuspecting taxpayers each year who call the IRS for help only to be given the wrong answer by the IRS answer schmoes.
Let's get real: If IRS bureaucrats can't understand the tax code, how can they expect you and me to understand it? (Heck, I even have an MBA from the Wharton School of business and finance and have to hire someone each year to figure out how much I owe -- and why.)
So let's stop playing games. No more mucking with the tax code until Congress is ready to approve a flat tax that treats all taxpayers equally. Sure, some of these Band-Aids and half-measures are helpful.
But what we really need is a top-to-bottom overhaul of the tax code.
July 24, 1997
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