Taxation and Capitalism

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It's a principle of common law that ignorace of the law is no defense before the bar of justice. But that doesn't make sense anymore. The Treasury Department and the Internal Revenue Service both promulgate and enforce the tax law of our country. Excuse me, those laws are passed by Congress, as we all know, but mainly they happen because the Treasury Department submits the proposed set of rules, and the Congress modifies and approves them, and then the IRS enforces them. In many cases, the interpretation of the code passed is left to people who work for Treasury, and as we all know, the interpretation can be as important as the laws themselves. We have special tax courts to make further rulings - but what we end up with is the US Tax Code, and I would submit to Congress and the public that nobody, not even an experienced member of the bar, can possibly understand it all.

We even have the absurd situation that when a citizen brings his tax records and return forms into an IRS office for assistance from the people who enforce the law, and those IRS employees make a mistake, then the citizen who comes to his government for help is responsible for the mistakes that the government makes.

The purpose of taxes is to provide revenue for the country's government so that the government can serve the people. But along the way we've created an entire industry that takes billions of dollars from the public. Why? To explain a tax code that gets more complex every year, a code that the enforcement people themselves do not understand with a sufficient degree of confidence to undertake responsibility for getting it right. You already know, or you should, the amount of money government spends enforcing that tax code, and that's not especially productive, either. Government's supposed to be working for the people, not confusing them.

I want the tax code completely rewritten into something a normal person can understand. I want that tax code to make sense. I want a code with no special breaks. I want the same rules to apply equally to everybody. While being developed, I want no corporate or any other form of lobbyist into the Treasury Department offices to discuss the matter, and I beseech Congress to follow suit. When they start talking to every Tom, Dick, and Harry who has a little suggestion to take care of a special group with special needs, we end up with the mess we have now.

We're all Americans. We're supposed to work together, and in the long run, tweaking the tax laws of our country for every lobbyist with an office and a clientele ultimately takes more money from everybody. The laws of our country are not supposed to be a jobs program for accountants and lawyers in the private sector. The laws which Congress pass and which the IRS enforce are supposed to serve the needs of the citizens, not the needs of the government.

I can hear you now. "A really fair plan is progressive. Doesn't this place a higher burden on working Americans?"

I understand what you're thinking. But what is meant by "working" Americans? I work. I built my career from the ground up and and, believe me, that's work. My friend makes something like four hundred thousand dollars per year - much more than the President, I might add. Does that mean she doesn't work? I think she does. She's a surgeon. I have a brother who's a physician, and I know the hours he works. True, those two people make more than the average American does, but the marketplace has long since decided that the work they do is more valuable than what some other people do. If you're going blind, a union auto worker can't help you; neither can a lawyer. A physician can. That doesn't mean a physician doesn't work. It means that the work requires higher qualifications and much longer training, and that as a result that work is more highly compensated. What about a baseball player? That's another category of skilled work, and most nobody objects to the salary paid Randy Johnson, for example. Why? Because he's superb at what he does, one of the - what? - four or five best in the entire world, and he is lavishly compensated for it. Again, that's the marketplace at work.

In a broader sense, I object to the artificial and mainly false dichotomy that some people in the political arena place between blue-collar and white-collar workers. There is no way to earn an honest living in this country except by providing a product or a service to the public and, generally speaking, the harder and smarter you work, the more money you make. It's just that some people have greater abilities than others. If there is an idle-rich class in America, I think the only place you find them is in the movies. Who here, if you had the choice, would not trade places with Randy Johnson or Jack Nicklaus? Don't all of us dream about being that good at something? I do, but I can't throw a fastball that hard.

What about a really talented software engineer? I can't do that, either. What about an inventor? What about an executive who transforms a company from a loser to a profit-maker? Remember what Samuel Gompers said? The worst failure of a captain of industry is to fail to show a profit. Why? Becuase a profitable company is one that does it's job well, and only those companies can compensate their workers properly, and at the same time return money to their shareholders - and those are the people who invest their money in the company which generates jobs for the workers.

The thing government bureaucrats forget is why they're there and what they're trying to do. The government doesn't provide productive jobs. That's not what it's supposed to do. General Motors and Beoing and Microsoft are the ones who employ workers to turn out products the people need. The job of Government is to protect the people, to enforce the law, and to make sure people play by the rules, like the umpires on a ball field. It's not supposed to be government's job, I think, to punish people for playing the game well.

The IRS collects taxes so that the government can perform it's functions. But we've gotten away from that. We should collect those taxes in such a way as to do minimum harm to the economy as a whole. Taxes are by their very nature a negative influence, and we can't get away from that, but what we can do is at least structure the tax system in such a way that it does minimum harm, and maybe even encourages people to use their money in such a way as to encourage the overall system to work.

Again, I know what you're thinking. "You're going to want to cut capital gains taxes, but that benefits only a few."

That simply is not true. Reducing the rate of taxes on capital gains means the following: it encourages people to invest their money. But not exactly. let me explain.

Let's say I make a thousand dollars. I pay taxes on that money, then I pay my mortgage, pay for food, pay for the car, and what I have left I invest in XYZ Computer Company. XYZ takes my money and hires somebody. That person works at his job like I work at mine, and from what work he does - he's making a product which the public likes and buys, right? - the company generates a profit, which the company then shares with me. That money is taxed as regular income. Then I sell the stock and buy into another company, so that it can hire somebody else. The money realized from selling the stock issue is capital gains. People don't put their money under the mattress anymore, and we don't want them to. We want them to invest in America, in their fellow citizens.

Now, I've already paid taxes on the money which I invested, right? Okay, then I help give some fellow citizen a job. That job makes something for the public. And for helping give a worker a job, and for helping that worker make something for the public, I get a modest return. That's good for the worker I helped to hire, and good for the public. Then I move on to do the same thing somewhere else. Why punish me for that? Doesn't it make more sense to encourage people to do that? And, remember, we've already taxed that investment money once anyway - in actual practice, more than once.

That isn't good for the country. It's bad enough that we take so much, but the manner in which we take it is totally counterproductive. Why is government there? It's supposed to be helping things along, not hurting. And the net result, remember, is a tax system so complicated that we need to collect billions just to administer it - and that money is totally wasted. Toss in all the accountants and tax lawyers who make their living off something the public can't understand...

America isn't about envy. America isn't about class rivalry. We don't have a class syatem in America. Nobody tells an Amercian citizen what they can do. Birth doesn't count for much. Look at Congress. Sons of farmers, sons of teachers, sons of lawyers, sons of truck drivers, sons of immigrants. If America was a class-defined society, then how the heck did those people get there?

Let's try to make it easier for people to do what so many have done in spite of the system. If we have to skew the system, then let's do it in such a way that it encourages our fellow citizens to help one another. If America has a structural economic problem, it's that it doesn't generate as many opportunities as it should and can do. The system isn't perfect. Fine, let's try to fix it some.

You're thinking again: "But the system must demand that everyone pay their fair share."

What does "fair" mean? In the dictionary, it means that everyone has to do about the same. Ten percent of a million dollars is still ten times more than ten percent of a hundred thousand dollars, and twenty times more than ten percent of fifty thousand. But "fairness" in the tax code has come to mean that we take as much money as we can form successful people and dole it back - and oh, by the way, those rich people hire lawyers and lobbyists who talk to people in the political arena and get a million special exemptions written into the system so that they don't get totally fleeced - and they don't, we all know that - and what do we end up with? We end up with a jobs program for bureaucrats and accountants and lawyers and lobbyists, and somewhere along the way the taxpaying citizens are just plain forgotten. Government doesn't care that they can't make sense of the system that's supposed to serve them. It's not supposed to be that way.

I'll tell you what I think "fair" means. I think it means that we all bear the same burden in the same proportion. I think it means that the system not only allows but encourages us to participate in the economy. I think it means that the government promulgates simple and comprehensible laws so that people know where they stand. I think "fair" means that it's a level playing field, and everybody gets the same breaks, and that we don't punish Randy Johnson for winning games. We admire him. We try to emulate him. The government tries to make more like him, and it keeps out of their way.

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