Friday, June 29, 2007

This is What's Wrong with the Tax Code

A couple of days ago CNN published a story about a speech given by Warren Buffet at a recent campaign event for presidential hopeful, Senator Hilary Clinton. Here is a quote from the CNN article:

"Buffett said he makes $46 million a year in income and is only taxed at a 17.7 percent rate on his federal income taxes. By contrast, those who work for him, and make considerably less, pay on average about 32.9 percent in taxes - with the highest rate being 39.7 percent."

What kind of tax system allows such ridiculous outcomes to exist? Although I disagree with their arguments, I understand why some people support a flat tax rate. However, is there any rational person that can justify a system under which the rich pay a LOWER tax rate than the poor?

Buffet did not stop there. He actually offered a reward of $1 million to anyone who could demonstrate that any one of the nation's wealthiest individuals pays a higher tax rate than that person's secretary...

As far as I am concerned, this is proof positive that the entire tax code must be scrapped and rebuilt from the ground up. This is not something that you can address with a quick fix. Our tax system is full of loop holes, and is fundamentally flawed. Unfortunately, the reason that our tax code is broken is that Congress has sold itself to special interests of all flavors. It is now lobbyists that control policy, not our so-called elected officials.

Is there no hope for tax justice for the middle class? Sadly, I don't think there is. It appears that paying a lower tax rate is yet another reason to try to become rich...

4 comments:

plonkee said...

Having had the misfortune to have to once file a 1040NR EZ, I can tell you that the problem with your tax system is that its too complicated and all the forms and notes are badly written. This means that tax loopholes can only be taken advantage of by the rich.

The Gentleman said...

I thank you for the post, but do you have any more information about what a new tax code would look like? How do we avoid loop holes when the people in charge of the tax code itself are looking at their own self interests? Also, I work for a lobbying firm and it isn't so much us who control policy, but our wealthy clients who expect us to lobby on their behalf. Unfortunately it is a business like any other and when work comes we take it, good or bad. Thanks again for the post.

Shadox said...

Gentleman - well, a good place to start would be to have all income, regardless of source, be taxed at the same level (e.g. Capital gains, dividends and income all taxed at the individual's marginal rate). Forget about things like carried interest. Then forget about all sorts of unfair deductions, e.g. Mortgage interest deduction, deduction for health care spending and so on. Next, get rid of all corporate loopholes - from agricultural subsidies to oil exploration subsidies.

What can I tell you. It seems like pretty simple stuff if people are willing to do the right thing. Unfortunately, that is rarely, if ever, the case.

BTW I am not blaming you as individual lobbyist. Youre making a living and providing for your family. If that was my job I would do e same. That's not to say that your industry is one I like. I think a fair analogy would be the tobacco industry - individuals providing for their family and doing the right thing, while the industry as a whole should be scrapped. Just my personal opinion.

The Gentleman said...

If what you say were possible, that would make the tax code more fair in my opinion and the country would be better off from it. I wonder when anything like tax code reform will take place. and no worries, I completely get it about the lobbying industry. Thanks for the post again.