The Feld-Blog

I've learned more about tax philosophy in the last two or three days that I really ever wanted to. Tax philosophy you say? Yes, actually. Tax philosophy. See the Progressive community has a very specific philosophy on how people should be taxed. Taxes should be (1) Fair, (2) should reward hard work, and (3) should be comprehensible. Don't worry, there are actually very few numbers and almost no technical talk in this post.

See here is the problem: Under the Bush Administration the tax code has expanded by more than 10,000 pages. Taxes are perhaps the most pervasive institution of our government. Nearly everyone pays them and without them the government would be absolutely non-functional. Why then is it that the most fundamental element of the US government also the most complicated?

But the complexity of the code isn't just annoying, it's also substantively detrimental. Here's an example. The Earned Income Tax Credit is, believe it or not, a morality-driven tax credit. It allows the government to waive or subsidize taxes for citizens who are having trouble making ends meet even before they have to pay taxes. Well that's very nice of the government, but the EITC is so complicated that 70 percent of people who file for it have to pay someone to figure out their taxes for them. As nice as the government is trying to be, they've made the code so complicated that the poor people they are trying to help have to shell out more money for someone to figure out their taxes. Oops.

Also, conservatives tax rich people's investment income at a significantly lower rate compared with low and middle income people's wages. Why? The effect this generates is that low and middle income families often pay double the percentage of their income that high income taxpayers pay. Does that make sense to you?

Finally, there are a ton of regressive taxes on the books. The payroll tax is probably the most famous. Regressive taxes are taxes that take a larger percentage of poor people's income than they do of rich people's. Essentially these are punishments for being poor. I don't think anyone would argue that this is fair.

So the Progressive community's solution - appropriately enough - is a progressive tax. Just three tax brackets - 15%, 25% and 34.6% - and progressive with equality for all forms of income. It would actually bring in $500 million of new revenue over the next 10 years.

Fairness. Simplicity. Reform. Sounds good to me.