There is no equality before the taxman

Thursday, November 30th, 2017

This is no libertarian tax reform, but there are provisions that Veronique de Rugy of Reason really likes:

Before breaking down these proposals, it is worth remembering that our current system is horribly complicated, making compliance costs exorbitant. It is incredibly unfair, extending privileges to some at the expense of others. There is no equality before the taxman.

Genuine tax reform would expand and simplify the tax base by getting rid of the thousands of loopholes to special interest groups. It would lower the top marginal rates and end the double taxation on saving and investment. It should restore some horizontal equity (two people making the same income paying the same taxes). It would also make as many provisions permanent — and predictable — as possible.

Good tax reform would require the federal government to make adjustments in spending, the way states and the District of Columbia operate, so the amount of tax collected more or less covers spending for a given year.

The House version goes after a large number of tax exemptions, breaks, credits and deductions that make our code so complicated and unfair. It takes some significantly steps to reduce the mortgage interest deductions. It also gets rid of most — with the exception of a $10,000 deduction — of the state and local tax deductions (SALT). Pretty impressive moves considering ending tax deductions is usually where tax reform goes to die.

The House plan doubles the standard deduction, meaning dramatically fewer taxpayers will itemize their taxes.

The Senate plan also doubles the standard deduction. (an estimated 90 percent of filers making under $200K would now claim the standard deduction). It gets rid of SALT entirely, but is more timid on the mortgage interest deductions. Moreover, it preserves many of the tax breaks with which the House dispenses. And rather than making the tax changes permanent, it includes a sunset date of 2025 reverting the standard deduction, the estate tax, the child tax credit, SALT, the pass-through deduction, and individual tax rates to 2017 levels.

President Trump’s intention to give a real tax break to the middle class is counter-productive considering the middle class barely shoulders any of the income tax as it is. The top 10 percent of income earners — households making $133K, not $1 million as most assume — currently pay more than 70 percent of all income tax revenue. The middle quintile pays, on average, 2.6 percent of the federal income tax.

And yet, in both the House and Senate plans the middle class receives the largest tax relief by reducing their marginal tax rates, increasing the child tax credit and doubling the standard deduction. The result is fewer taxpayers would be paying income tax at all, problematic from a small government perspective. It also means a more progressive income tax code than it already is.


Both plans cut the corporate income tax rate from its current 35 percent level to 20 percent. The Senate version implements the cut in 2019, the House version in 2018. Both have the good sense to make the change permanent. This is the most pro-growth/wage change. This is a measure worth passing to make the country tax environment more competitive.


  1. Grasspunk says:

    I don’t agree with the definition of middle class as middle quartiles. It is simple but misses any difference in character between classes and is a complete break with history. It was not the case that half the population were middle class. How many merchants and professionals traditionally? 10%?

    Maybe it is best defined by the payment of taxes. If you don’t pay much tax, I’m not sure you can be middle class.

  2. Patty O. says:

    You’re middle class if you do your own laundry. If you do someone else’s laundry, you’re probably poor. If “the help” does your laundry, then you’re rich.

  3. Sam J. says:

    “…end the double taxation on saving and investment…”

    I don’t agree with ending this. Corporations, it has been ruled, are people. As long as this is the case and they can give any quantity of money they wish to politicians then they should be taxed like people and be treated like people in criminal cases. People don’t have limited liability so Corporations shouldn’t have it either if they are people. Corporations have a huge advantage over the average citizen which they shouldn’t. In the past Corporations were ruled to be a great evil, which they are, because no one is ultimately responsible for what they do. Corporations are not over taxed. They pay less than people. If corporations want taxes to be lower for them then they need to explicitly give up their rights as people and become just a limited liability corporation like the original law intended. There is no double taxation because Corporations are people. Why should someone pay less taxes, indexed to inflation, if they put their money in a corporation than someone who uses their money to build something? Why is their money better than someone who say opens a bank account?

    The whole capital gains laws are just a huge rip off. All gains should be taxed at the same rate adjusted for inflation. Let’s say a guy uses his tractor to make some money. Why is the use of capital any different? Another example. A guy uses his programming skills to program a computer program and the profits are taxed at a normal rate. Another guy uses his capital to pay one person to write the same program and he gets a better capital gains tax rate. There is no double taxation because people using capital to make money are just using the tools they have to make money. Same as a shovel, a tractor or labor. That any of these are any different is just a huge lie that can readily be seen as bull.

    I was talking to a guy once about this and he was spouting the standard Fox news line about how important it is to treat capital better than other types of assets or labor. What most people don’t understand is those who have access to capital creation, banks, can create capital for almost nothing putting everyone else at a huge disadvantage. I don’t want bankers to own everything, as they do now. I would change the laws to vastly, greatly, tremendously favor people who actually made something instead of using just capital to buy every one else out.

    We already have laws that overwhelmingly favor capital over people. Hence the financialization of all aspects of our lives. The financial creation class can destroy an honest run business because they don’t have to make profits like a normal business. Look at Amazon. Have they EVER made a profit??? The only reason Amazon, Facebook and Google exist is they are in with the financial Oligarchs and can get capital at next to nothing.

    I have no problems with people making fortunes if they make something. People like Bill Gates, although I hate him for social reasons(he said that out of all the massive money he has in foundations that he was not going to give any money to White people, FUCK HIM), I don’t begrudge him the money he’s made. Same with Steve Jobs and others like this. There’s a lot of people that hate, absolutely hate Elon Musk because he gets government subsidies. Yet we don’t hear a peep about the bankers who get to create money from nothing and buy up all the industry in the country and move it to China. At least Elon is making something and the tax breaks that he gets are because the US government, and I personally, believe that solar power, electric cars and a national space program are important for the USA and it’s worth paying for. I seriously doubt you could get the same level of support of bank ownership of industry and yet we subsidize them to the tune of tens of trillions of dollars.

  4. Sam J. says:

    Patty O’s description of the middle class is very good!

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