Are our Tax Laws Overly Complex?; Executive Power*

Are our Tax Laws Overly Complex?


They also distort economic activity, misallocating resources and reducing productivity.

They were drafted by politicians bought pressured by lobbyists wealthy contributors cronies special interests.

They don’t adequately address our unsustainable deficits.

The Internal Revenue Code impacts every American, whether an individual or entity, and every foreigner having any connection to the U.S. It permeates every facet of American life, every corner of the economy, and every international relationship. The Code contains more than 4 million words, a count that doesn’t include the many-volume Treasury Regulations drafted in an attempt to interpret them. Let’s not forget the consequent state and local tax laws and regulations as well. A arguably more important work, the Bible, has only 800,000 words. Everyone can access the Bible. That isn’t true of the Internal Revenue Code, a current cornerstone of American democracy in a nation viewed as the exemplar of capitalism. The Code is indecipherable to all but a relatively few tax professionals who, truth be told, add little or nothing to our nation’s productivity – as a former tax law professor, I can attest to that. Our elected officials are not motivated to simplify it or make it understandable or equitable. Quite the contrary. Doing so is not a vote-getter. Significantly, the Code is so riddled with special benefits and subsidies that any change would upset one constituency or another, a vote loser. Since 1986, the approach of Congress has been to play to the lobbyists populists special interests. How else is one to serve the people get re-elected? That remains the trend in 2019. The Democrats are falling over themselves to tax the Fat Cats. The Republicans, smelling the blood of Democrat billionaires in the water, seem to be adopting a similar-enough populist line. One can only hope for a Churchillian Moment, for a visionary to step forward and capture the public’s imagination. What might such a leader do with our antiquated Tax Code?

Columbia University law professor Michael Graetz introduced his ÔÇÿCompetitive Tax Plan’ more than a decade ago. Broadly, the plan shifts the tax system, which is based on income, to one based on consumption. The plan is revenue neutral and would not change the overall income distribution. The Competitive Tax Plan contains five components.

  • A value-added tax (also called a goods and services tax) with a broad base and a single rate of 12.9 percent. Businesses with less than $1 million in gross receipts would be exempt. There would be 18 to 24 months between enactment and implementation, which Graetz expects would accelerate purchases of durable goods and provide a short-term boost to the economy. The tax would be modeled after modern value-added taxes in New Zealand, Australia, Canada, Singapore, and South Africa. States would be given incentives to harmonize their tax policies with the federal tax.
  • An individual income tax in which the first $100,000 of income for married couples would be exempt from taxation ($50,000 for singles and $75,000 for heads of household). Above this threshold, tax rates would be 14, 27, and 31 percent. The alternative minimum tax and surtax on investment income would be repealed. With these reforms, less than one-fifth of the households now paying income tax would be required to file returns.
  • A corporate income tax with a reduced rate of 15 percent. All credits except the foreign tax credit would be eliminated, and the corporate alternative minimum tax would be repealed. The plan may also subject large businesses (even if they are not corporations) to the corporate income tax while simplifying the taxation of small businesses.
  • The current payroll tax, but with credits of 15.3 percent of wages for workers with earnings up to $10,000 and a credit of $1,530 for workers earning between $10,000 and $40,000. The credit phases out for incomes above $40,000.
  • Refundable child credits would be established and distributed through debit cards. Each child would qualify for $1,500 per year, with a phaseout provision for higher-income earners. Low- and moderate-income earners, on the other hand, would receive an additional rebate of up to $3,500 for one child and $5,200 for two or more children.

The Competitive Tax Plan would make the U.S. a low income-tax country. It would mean that taxes on savings and investments will be lower and most American would pay no tax on their savings. The vast majority of Americans would never have to deal with the IRS. Unlike other consumption tax proposals (e.g., the Flat Tax; David Bradford’s X-Tax; George W. Bush’s Panel’s Growth and Investment Tax), the Competitive Tax Plan would fit well with existing international tax and trade agreements.” [The Tax Policy Center’s Briefing Book]

Such a radical plan would upset the order. But then, leadership needs to be made of stern stuff.

Executive Power

Does the President have the power to declare a national emergency that reallocates monies expressly denied by Congress? While that decision apparently will be left to the courts, the more relevant questions are what the extent of Presidential power should be and who should be the arbiter of that determination. Should a President unilaterally be able to take non-wartime actions where no immediate action is required – that is, where there is not an “emergency,” defined as “a serious, unexpected, and often dangerous situation requiring immediate action”? Congress has been largely absent in delineating the extent of conflicting Presidential and Congressional powers, ducking that question in 1952 when Harry Truman attempted to seize privately-owned steel mills. It left that Constitutional question to the courts, and the Supreme Court ultimately ruled that the President’s action was unconstitutional. The next attempt to expand non-wartime Presidential power was Richard Nixon’s declaration of a national emergency during a wildcat postal strike in 1970. Congress declined (again) to address Nixon’s use of the National Guard to deliver the mail, tacitly acquiescing in his determination of a national emergency. It subsequently recognized a need to draw clearer lines when it enacted the National Emergencies Act in 1976. Yet those lines weren’t clear enough to prevent Jimmy Carter from issuing emergency sanctions against Iran, George W. Bush from doing so against Zimbabwe, Barack Obama against Syria, and approximately 30 other instances of expanding Executive authority. By taking no action, Congress recused itself from the Constitution. This was compounded when each of the foregoing “emergency” sanctions was renewed year after year making those emergencies permanent, where they remain today. Our Constitution contemplates a balance of power among the Executive, the Legislative and the Judiciary. The problem is not in the Constitution itself and no one is calling for a Constitutional Amendment to address excessive Executive Power. The problem lies with Congress in not delineating where the President’s power ends and Legislative approval is required. As in enacting the National Emergencies Act, Congress needs to draw the lines that future Presidents cannot cross. This question should not be left to the courts to decide on a case-by-case basis years after the event. That’s no way to run a country, though it appears to be Congress’s way.

Finally (from a good friend)

Why Men are Seldom Depressed:

Men are just happier people. What do you expect from such simple creatures?

Your last name stays put. The garage is all yours. Wedding plans take care of themselves. Chocolate is just another snack. You can be President. You can never be pregnant. You can wear a white T-shirt to a water park. You can wear NO shirt to a water park. Car mechanics tell you the truth. The world is your urinal. You never have to drive to another gas station restroom because this one is just too icky. You don’t have to stop and think of which way to turn a nut on a bolt. Same work, more pay. Wrinkles add character. Wedding dress $3500. Tux rental-$75. People never stare at your chest when you’re talking to them. New shoes don’t cut, blister, or mangle your feet. One mood all the time. Phone conversations are over in 30 seconds flat. You know stuff about tanks.

A five-day vacation requires only one suitcase. You can open all your own jars. You get extra credit for the slightest act of thoughtfulness. If someone forgets to invite you, he or she can still be your friend. Your underwear is $6.95 for a three-pack. Three pairs of shoes are more than enough. You almost never have strap problems in public. You are unable to see wrinkles in your clothes. Everything on your face stays its original colour. The same hairstyle lasts for years, maybe decades. You only have to shave your face and neck. You can play with toys all your life.

One wallet and one pair of shoes — one colour for all seasons. You can wear shorts no matter how your legs look. You can ‘do’ your nails with a pocket knife. You have freedom of choice concerning growing a mustache. You can do Christmas shopping for 25 relatives on December 24 in 25 minutes. No wonder men are happier.

 If Sheila, Candy and Sarah go out for lunch, they will call each other Sheila, Candy and Sarah.
If Mike, Dave and John go out, they will affectionately refer to each other as Fat Boy, Bubba and Wildman .

When the bill arrives, Mike, Dave and John will each throw in $20, even though it’s only for $32.50. None of them will have anything smaller and none will actually admit they want change back..
When the girls get their bill, outcome the pocket calculators.

A man will pay $2 for a $1 item he needs.
A woman will pay $1 for a $2 item that she doesn’t need but it’s on sale.

 A man has six items in his bathroom: toothbrush and toothpaste, shaving cream, razor, a bar of soap, and a towel.
The average number of items in the typical woman’s bathroom is 337. A man would not be able to identify more than 20 of these items.

A woman has the last word in any argument.
Anything a man says after that is the beginning of a new argument.

A woman worries about the future until she gets a husband.
A man never worries about the future until he gets a wife.

A woman marries a man expecting he will change, but he doesn’t.
A man marries a woman expecting that she won’t change, but she does.

A woman will dress up to go shopping, water the plants, empty the trash, answer the phone, read a book, and get the mail.
A man will dress up for weddings and funerals.

Men wake up as good-looking as they went to bed..
Women somehow deteriorate during the night.

A woman knows all about her children. She knows about dentist appointments and romances, best friends, favourite foods, secret fears and hopes and dreams.
A man is vaguely aware of some short people living in the house.

*┬® Copyright 2019 by William Natbony. All rights reserved.

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