Wednesday, November 02, 2005

Tax Reform Rules OK


It seems like every administration tries to improve our arcane and wealth-sapping federal income tax collection system, a $2 trillion nightmare. Of course our system, like most government action, is a benefit to some (tax accountants and tax attorneys, and other experts at beating and changing the system) and of harm to everyone else. The Bush II administration proposal was released yesterday.

I was happy to see the recommendation for the removal of two of my pet-peeve societal benefit distorting loopholes, the mortgage deduction and the deduction for employer paid health plans. To repeat the obvious, the first sucks as it is a wealth transfer from non-homeowners as a class (poorer) to homeowners as a class (richer) and the latter sucks as the deduction drives-up health insurance costs for the self- and unemployed and entrepreneurial classes for the benefit of bloated corporations (a generalization but more or less true).

Workers of the World Relax would like to see the federal government paid for by, 1) a voluntary tax funded by a national lottery, or 2) more realistically, a consumption tax, with a cost-of-living reimbursement, eg the more you consume above a certain level the more you pay in tax. The whole idea of taxes is to tax the behaviour you are trying to discourage. Taxing income and savings the way we do now creates disincentives for investment, and therefore slows wage and standard-of-living increases over time. Or, 3) even Presidential Candidate Forbes' promotion of a flat tax was better than what we have now in that it would remove the ghastly compliance costs and rent-seeking of the existing system.

I overheard a conversation on the Metro by some kids who are passionate about these things (these things being politics and the belief that politicians and our bourgeoisie political system have solutions to problems that we dont have ourselves. This is then unfortunately coupled with unrealistic expectations, then disappointment when government doesnt solve all the problems and then anger. This then feeds our hate-creating, blame-pointing, two party system - Repubs and Dems, which then permeates through to other levels of society creating an "us vs. them" social fabric) that Bush II is 'the worst president ever'.

Maybe the President can change this perception and leave a positive legacy instead of just a 'nation-building' body count by actually doing an income tax reform now that social security reform on the spending side has died a slow death. Naaahh.