Fixing the Tax Code Is a Piece of Cake
But a really fine cake that pleases a large dinner-party takes a while to bake and has a whole lot of ingredients.
Step #1 Throw out the old cake
The old cake, the current Tax Code as been around since the 16th Amendment to the Constitution, ratified in 1913. The recipe was for a different cake, a different dinner-party and an entirely different country.
1913 found America still largely agrarian, just beginning to get comfortable with its industrial revolution and about to be sucked in to the First World War. Yet to come (and in short order) was the burst of economic enthusiasm as war ended, followed by the 1929 stock-market crash, the Great Depression, President Roosevelt’s New Deal and World War Two.
Considering the times and turmoil, the old cake served amazingly well, but turning the recipe over to Congress confirmed the advice against too many cooks. Special interests added sugar, industry lobbyists wanted more salt and as we tended to gravitate toward war as an industrial product the dough failed to rise sufficiently—both metaphorically and in fact.
Tear the damned thing up. Repeating history, the fifties, sixties and seventies were boom. Bust lay in the beam of the headlights from the eighties until today.
Step #2 Come to grips with our technological age
America doesn’t earn money as it did in agricultural or industrial times, so it make little sense to fuck around with an outdated model. We need to bake a new cake. Agriculture, in its broadest definition (food and food industries) contributes about 5.2% of gross national product (GDP). What industry we have left (and it’s larger than you think) kicks in about 19%. The big, solid base of this new cake we’re designing is technology. Big Tech, which hardly existed thirty years ago, is the huge, buttery, delicious bottom layer amounting to the 77% we call the service sector. Those are the folks that play crappy music while you’re on hold, constantly reminding you how important you are and then proving they don’t give-a-shit by not hiring enough help. They are god, they know they are god and they act like god. George Carlin has a great piece on just that subject. We have yet to figure out how to tax them, but we’re mumbling about it in Congress and the current G7 meeting. The players are all new, spanky little baby-monsters in a play-pen they just built. Currently, they pay no taxes to speak of. So they are perfectly happy to remain silent.
Step #3 Put reality to work
Okay, this is a generality and generalities are how we go to be a conspiracy-theory nation, so read it with caution. Agriculture and industry, for the most part, are paying their taxes. Workers on payroll are all paying their taxes and it makes them increasingly itchy in places they can’t scratch to read about Tech avoidance.
You see the interesting thing about avoidance, when you attach the word to tax, is that it’s legal. Jeff Bezos and Warren Buffett are not breaking the law. In fact, when you corner either of them, they admit to being perfectly willing to pay their share—but their share doesn’t exist in the tax codes.
I find—and you may find as well—that fact to be amazing, considering that the tax code amounts to 26 volumes, covering 70,000 pages. And that’s why it can’t be fixed. Not only were there too many cooks, but it contradicts itself on major issues, which is why 1.2 million tax accountants and specialists are employed throughout the country.
Step #4 You can’t unmake a bad recipe
This is particularly true with Congress and its penchant for earmarks, special exemptions for their constituents, anything for a friend and the money lobbyists pay them for their approval. So rule them out. A Special Committee can’t produce this document.
Why not bring long-dead Alfred Nobel into the argument? He invented dynamite and then turned his money and attention to rewarding excellence. Perfect. Yeah, Nobel honored Milton Friedman in 1976 but every organization goes wrong once in a while--although bankrupting most of South America was no small thing.
But Joe and Paul are different. Let Joe Stigler and Paul Krugman put together a staff of their choice, with an unlimited budget, a quiet place to think in Montana (maybe roam around a bit on horseback), an unlisted phone number and a year to put together a new code. A hundred pages should do it in plain English, once they’ve thrown out all the oddities like the homeowner’s mortgage interest exemption.
If they need more, make them beg for each page.
Nothing should be beyond examination: perhaps a revenue tax on flash trades and for sure a way to tax increased wealth from invested capital on an annual basis, as well as a careful look at all avoidance schemes such as family trusts. A day or two in the saddle can be very inspirational--connection to the earth and all that.
Step #5 Deliver it to Congress for a roll-call up or down vote
Once all the special-interest screams have died down, I suspect we will have a scheme that places a national minimum wage into the hands of those who fall below a certain line, without shaming them onto their knees. It might further remove the burden of making tax-collectors out of businesses. Because we hope to be working toward eliminating the imbalances and avoidances in the current structure, my personal hope is that everyone gets to make a smaller contribution to a far larger cake. Isn’t that what good baking is all about? Then, last but not yeast, increase the funding of IRS operations by an enormous percentage so they can properly respond to their challenges. After all, they were they guys who sent Chicago’s Al Capone to prison. For them, that was the frosting on the cake.
Image Credit: ludowici.com