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Scratch any
certified public accountant and you will find a philosopher. OK, you have to
cut pretty deep and it will be a dull, boring philosopher, but a philosopher all
the same.
And it has to
be about taxes. Tax knowledge has a half-life of about two years and I haven’t
been a tax practitioner for a long time. But while rules and regulations come
and go, the driving philosophy remains the same: Taxes exist to raise money for
government and to influence people’s behavior. Those seeking deeper meaning are
doomed to disappointment.
Take fairness.
There has been much in the news about Congress sending President Clinton a bill
to reduce the “marriage tax,” the difference between rates for married and
single taxpayers. If there is a fairness argument for taxing married and single
folks differently I haven’t heard it, regardless of who benefits. Fixing it
would make common sense if that were the goal.
The president
says he will veto the bill, claiming the change would unfairly benefit the
wealthy. Yet an analysis I saw shows a two-earner married couple making $30,000
a year would benefit by $836 (nearly 3 percent of their income) compared to
marrieds earning $150,000 saving $1,500, or 1% of their income. If the former
benefited at the same rate as the later they would get only $300.
Frankly, it’s
tough to make a fairness argument for taxing the financially successful at
higher rates in the first place – yes, I’m a flat-taxer. Though it is
conventional wisdom that statistics are death in a newspaper column, that notion
allows anyone who throws around unsupportable statements to do so without fear.
So if your life insurance is paid up, here goes:
According to preliminary Internal Revenue Service data for 1997, the top 1
percent of U.S. taxpayers accounted for 17 percentage of income earned by
individuals but paid 33 percent of federal individual income taxes. The percent
of total tax they pay has risen steadily over the years and is nearly twice what
they shouldered in 1981.
Meanwhile the bottom 50 percent of the nation’s taxpayers earned 13.8 percent of
individual income in 1997 but paid only 4.3 percent of federal individual income
taxes collected.
The real reason high earners are taxed disproportionately has less to do with
equity than with the Willie Sutton theorem. Sutton, you may recall, is reported
to have said the reason he robbed banks was because “That’s where the money
is.” A little jealousy on the part of the electorate makes it easy.
For the record, the top 1 percent of wage earners earn $250,000 a year or more.
I live some ways away from that neighborhood.
Don’t look for logic in tax law either. Besides the fairness argument,
President Clinton says we can’t afford to spend the budget surplus on tax cuts.
He then said he might sign the bill if it included Medicare coverage for
prescriptions. So tax cuts are apparently too costly unless we add another
entitlement.
I
take issue with the idea that cutting taxes is “spending” anyway. A government
budget surplus, by definition, is an overcharge to taxpayers. To desist from
tax gouging has nothing to do with spending.
What of using the surplus to pay down the national debt? On the surface, I like
it; I just don’t believe they’ll do it. Since the surplus arose there have been
numerous ideas on how to spend it, but I know of no proposed legislation to
reduce the debt. The president did, however, take time off from blasting
marriage penalty reduction to commit hundreds of millions of dollars to school
lunches for children in developing nations.
Perhaps, as has been suggested, Republicans are merely making an election issue
of tax relief; I say let ‘em. Even if the GOP wins both the presidency and
Congress I’m not convinced they won’t find ways to spend the money once the
election monkey is off their backs. Let’s reduce the load now while the
pressure is on.
© 1997 – 2002 Brent Morrison
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