The Tax Man Cometh

In law, everything is about framing. Most of the time the evidence can go either way and the better lawyer is the one who frames the issue in the light that the jury finds more favorable. Being that lawyer's represent one of the largest professions who enter Congress, it's no surprise that this strategy is used on political issues. Abortion is about protecting women's reproductive rights, legalizing marijuana is about tax revenue, our grandparents were all immigrants. It is all about framing and that has been very true about the tax issue which has gotten even more attention than usual because of the impending expiration of the Bush tax cuts. (Sorry, I won't call them the Lauer tax cuts)

Democrats want to raise taxes, and yes when you are paying more in taxes it is a tax increase, in order to increase government revenue because despite what Nancy Pelosi has claimed, they have in fact increased the deficit. Republicans want to lower the tax rate because we're still mired in a recession, unless you're the Bureau of Labor Statistics, and raising taxes will hurt job growth and the economy overall. Great framing jobs but both arguments miss the point. The debate is not over whether taxes should go up or down but how we can reconfigure a maze of tax code that would have Alice in Wonderland's head spinning.

Our tax code has thousands of changes made to it each year and while most of us don't really notice while filing out a 1040EZ, small businesses notice. Small businesses are the job creator of the economy. It must be true because both sides of the aisle say it. So not only do we hit them with taxes that take away from their ability to hire more people, we make them spend even more money hiring someone so the IRS's sword of Damocles won't swing over their neck. It's not about whether to tax them more or less, but more about how to tax them in such a way where they aren't living in constant fear of an audit.

MIT released a proposal a few months ago about a personal income tax scheme, since endorsed by Tim Pawlenty, that would make two tax brackets and get rid of all deductions, excemptions, and credits. I love this idea. It would fit on the back of a postcard and everyone would have no problem filling it out. Also, it would make tax burdens so simple to discover the government would be able to minimize the unpaid tax balance. I believe in a reasonable tax and I also believe everyone paying their fair share.

I want to take this proposal a step further and start applying it to corporations. Obviously it would be a little more complicated as you have to figure in benefit packages, inventory, capital investments, and so on but our system now is so large law firms solely dedicated to tax law make a mint. By steamlining revenue collection, we would be better able to see how it was working, enforce tax collection for efficiently, and allow Americans to spend less time worrying about being audited. As has been previously posted, I too agree with taxes. It's fantastic that the police are a phone call away and I think not ending the Bush cuts in 2004 was a big mistake. But our problems are more grave now and until we frame this issue as one of reform rather than higher versus lower, we'll never see the type of meaningful tax collection that can help finance our nation and help it grow to its ultimate potential.