Thursday, September 28, 2017
Everybody wants to pay less taxes. Most of us want a fairer distribution of the tax burden, and a simpler tax code. But overhauling tax law has always been treacherous territory, often vital to the wellbeing of the republic but always prone to political skullduggery even when in the hands of competent administrators. Under current conditions, with know-nothings in control of Congress and the White House, and power in the hands of the party most likely to kowtow to the wealthy, the vast majority of us have good reason to worry. Watch your wallet! Watch the wallets of the wealthy! And watch the government’s wallet!
Demand that your representatives explain their proposals in terms of “effective” tax rates. The effective tax rate is the percentage that people actually pay, the bottom line. Partisans will deliberately try to confuse you by talking about “tax rates,” by which they mean “nominal” tax rates. These are something different altogether. Nominal tax rates are the percentages that identify tax brackets and appear in tax tables. They are mere theories, goals, or hopes; they are not real. Thousands of pages of tax code, defining what is income, how income is classified, and who gets what kinds of exclusions and deductions, stand between nominal tax rates and effective tax rates. In particular, don’t be fooled by talk of the 39.6% tax rate for people in the highest income bracket, or the 35% corporate tax rate. These are both nominal rates, in fact paid by very few.
Don’t let them fool you with the tried-and-true tactic of slithering back and forth between percentages and dollar amounts.To say, for example, that the wealthiest Americans pay so many millions or billions in taxes is meaningless except as a percentage of their income. Conversely, talking about changes in various categories of budgets and deficits in terms of percentages is often quite misleading. If they’re talking about the fairness of the distribution of taxes, or comparing one group or entity to another group or entity, they need to express that in percentages. If they’re talking about budgets and deficits, they need to explain things in terms of total dollars. Anything else is just a blizzard of numbers designed to confuse.
Be very careful about the use of the term “loophole.” The difference between a “loophole” and a “deduction” is merely one of perspective. Closing a “loophole” means somebody, somewhere is paying more taxes. You have a right to ask who and how much, and having that information might change your evaluation as to whether closing the “loophole” is a good idea or a bad idea.
Demand a plain statement of the effective (not nominal) tax rate of the wealthiest American people and businesses. Ask what they’re actually going to pay as a percentage of their income. Under the current system America’s wealthiest pay a shockingly low percentage of their income in taxes, and aren’t going to want that to change. Why do you think Mitt Romney and Donald Trump refused to release some of their tax returns? Insist that your representatives explain this to you.
Don’t believe anyone who says that lowering taxes raises revenue. Only idiots or liars can look you in the eye and tell you that.
Demand an up-front explanation of where the federal budget is going to be cut in order to remain balanced. This is vital because the proponents of the current tax reform project aren’t even bothering to pretend the new plan will be revenue-neutral. If they keep taxes low for businesses and the wealthiest people, which seems inevitable, and they lower taxes for the middle class, which they’ve promised, then the total dollars taken in by the federal government will be dramatically reduced. This means that government spending must be reduced by the same quantity. Honest legislators and executives would set the budget first, then structure the tax system to generate the necessary revenues, distributing the bills evenly. Dishonest legislators and executives push tax reduction first, and worry later about what government programs will be cut. Tax reform, then, becomes a process of creating a fearsome weapon that can be used to ram through the Republican agenda for the impoverishment of the federal government. Do you think you might someday need Medicaid or Social Security? Ask your legislators how those programs will fare under their proposed new tax system!
Pay attention to the analyses of real experts who are less partisan than the President or Congress. Watch the evaluations made by the Congressional Budget Office. Check the summaries made by credible organizations outside of government.
Taxes are going to be reformed. The proponents of the current round of tax reform are going to try to lie to us all. Don’t let them get away with it!