Round up the usual suspects
Knowing who is opposed to tax reduction and why is just as important as knowing who is for it and why. Let’s identify the current crop of anti-tax relief nay-sayers:
First in line are those who think the money you earn really belongs to the government and that the government is a better judge of how to spend your money that you are. These are the Fabian socialists or liberals. The socialist-liberals like to see high income tax rates imposed on the two percent who already carry 80 percent of the nation’s tax burden.
Next are those who oppose the elimination of the estate or death tax. They are led by the very wealthy such as Bill Gates, Sr. and Warren Buffet. Mr. Gates fears a reduction in charitable giving. But an easing of deduction rules would fix that. Mr. Buffet wants the government to deny his children 55 percent of their inheritance because he doesn’t want to do it himself. Sounds like a personal problem.
Also opposing death tax elimination are many who make their living devising complicated estate plans for getting around the death tax. Sure, the death tax can be avoided if one has the bucks to pay for the creation of various kinds of trusts and foundations.
When it comes to the death tax, the IRS wants to be paid, in cash, within nine months. Heirs are often blind-sided by a death tax bill of up to 55 percent of the estate being inherited. Because they cannot scrape up that kind of cash within nine months, many small business owners or farmers must sell the family business. Their laid-off workers then qualify for unemployment checks. Is this stupid or what?
Those with the dollars and the foresight to do so often purchase a life insurance policy large enough to cover the cost of the death tax. Yet, many people do not see the need to purchase insurance for this purpose until late in life. By then, even term life insurance premiums may be financially out of reach. Add life insurance companies to those who oppose elimination of the death tax.
Supporters of the capital gains tax like to characterize it as a tax on “unearned income.” The only thing “unearned” is what the government does when it confiscates a portion of the rise in value of an investment in which your capital was put at risk. Why should the government profit from the risk you took? Why does the government punish savings and investment when, instead, the nation needs more savings and investment?
Why not encourage long-term savings and investments by eliminating the capital gains tax on investments held, say, 24 months while retaining the capital gains tax for short-term investments? That would be a way of using a punitive tax to create a more stable economy. Day-traders and speculators oppose this idea.
A recent poll revealed overwhelming support for a reduction of marginal income tax rates. But that same poll showed almost no support for cutting taxes on corporations.
Unfortunately, many people do not understand that corporations do not actually pay taxes. They pass their taxes on to consumers in the form of the prices they charge for their goods. In that regard, corporation taxes are actually just another form of income tax because you must use your income to purchase goods and those goods already have the corporation taxes added in. Double whammy.
Of course, if we were really serious about tax reform and government efficiency we would move the tax-filing day from April 15th to the first week in November so it would, on occasion, coincide with Election Day. Another step would be to eliminate tax withholding. Right about Election Day, taxpayers would have to pony up the cash to pay their tax bills. Then, even the folks in West Palm Beach County would figure out how to punch their ballots.
William Hamilton is a nationally syndicated columnist and a featured commentator for USA Today.
(c)2001. William Hamilton.