In tax season, we all hate it except those who get a refund. If you are a middle class boy or girl and you have a salary, you will have no choice but to pay the prescribed amount based on your earnings. When we look at the tax code, we can’t help but notice that it contains 73,954 pages and none of them are there for the benefit of the middle-class person. In 1913 there were 400 pages. In 1945 it jumped to 8,200 pages, in 1974 to 19,500 pages and continued to increase until it reached the number it contains today. If history is any indicator, it will continue to grow, but why? I think the answer can be summed up this way, the law has gotten super complicated for a couple of different reasons. The first reason is to allow many different tax shelters so that the rich can get away with paying less than a percentage of their profits than we, the middle class. Another reason may be the fact that most of the people in Congress are lawyers, and complex tax laws provide a lot of legal work for that profession.
When President Obama took office, the tax code was 67,506 pages long. In its first two years, when Democrats controlled both houses, the tax code grew to 71,684. The code was growing at a rate of 3% per year. Growth slowed to 1% when the government was comprised of a Democratic president and a Republican house with Democrats with a slight edge in the Senate. It seems to be a good thing for the tax code when there is a division in government that prevents each side from helping its favorites with it. One tax expert said that most of us don’t realize how much our tax rate really is because of the different taxes we pay. On income tax alone, some of us are required to pay federal income tax, state income tax, city income tax, and Social Security tax. In some cases, we are also required to pay sales tax, property tax, inheritance tax, and taxes on money that we could earn on a certain amount. While all of these taxes may not apply to everyone, the tax expert estimates that the average person pays about half of their income in taxes when you add it all up.
So here we are diligently paying all of our taxes on middle-class income wages, while hearing about companies and fat cats paying a very low fee or even nothing at all. I heard about a company that not only didn’t pay taxes for the year, but somehow got the money back. One tax shelter that is available to everyone is investing in real estate. There are many different deductions you can claim and hopefully if you made a good investment your property will increase in value. Many large corporations have relocated their headquarters to foreign countries to avoid paying some or all of their taxes in the United States. The government is so concerned about this that new laws are being drafted to make it difficult for companies to do so. Some companies that are based in foreign countries, because they moved from the US, are Seagate Technology, the data storage company, Pricewaterhouse Coopers Consulting, and Tyco Electronics, now TE Connectivity. I don’t know how much Pricewaterhouse is worth, but I do know that the other two companies are worth billions, so the United States is losing a lot in taxes.
Senator Dick Durbin had something to say about this the other day, but I doubt his words have much effect. Monsanto is considering buying a competitor in Switzerland. The senator said, “I strongly urge you and the board of directors to maintain the Monsanto Company headquarters and tax domicile in the United States.” One thing I have to wonder is how can most other western countries have much better tax laws for companies. Somehow it reminds me of how we have failed with our Medicare. It cost us twice as much as Europeans for healthcare and is not as well qualified as many of the European countries. Why is the United States demanding so much tax money from its citizens and businesses? I am tired of hearing that it is the fault of Medicare and social programs when European countries have them and work there. Regardless, there is no question that we have allowed our tax laws to get completely out of hand. We can’t just keep adding new laws every year to appease those with big lobbies. What many people don’t realize is the fact that laws are written many times by lobbyists and basically “passed” by the senators or representatives who introduce them.
Nobody wants to face the truth, the tax code is killing us. A senator once said that if we had a single tax in which everyone in the country and each company paid 15% of their wages or profits, we would have a lot of money and the deficit would disappear. This would also depend on our elected officials finding no new ways to increase the amount of spending. One of the problems is that we spend too much money and don’t take into account where a part is going. The expense is protected in black accounts. Those are accounts where there is no supervision and that are supposed to be used for secret projects. There is also another problem, a law was signed a few years ago that allowed certain spy agencies to raid the budgets of other agencies without permission. Then there are the projects that are useless to most of us and designed to help only a few or even one, like Bridge to Nowhere, a famous bridge project. The bridge to nowhere was really the Gravina Access Project. It would have cost $ 223 million at the time and would have led to a very sparsely populated island in Alaska. The island only had a population of 50 people. Makes one wonder how this could have been considered in the first place.
Tax reform has been pending for a long time. Lawyers would go crazy at the idea of a flat tax, because there would no longer be a need for tax lawyers. This could be one of the reasons it would never happen. Another reason is that if you are a rich guy who pays little or nothing, or a corporation that does the same, a flat tax would be a tax increase for you and those people would never want that and would start pushing hard against you. Something has to be done or we could be looking at a tax code with over 100,000 pages in the next 20 years and who knows how big it could get in the next 50 years or so. If we can’t go to a flat tax, will we ever have the ability to simplify the tax code with so many interests at stake?