The Federal Tax System Is Broken -- Fix It, Don't Cut Out Its Heart

http://www.latimes.com/news/opinion/la-oe-brownlee30nov30.story
COMMENTARY
The Federal Tax System Is Broken -- Fix It, Don't Cut Out Its Heart
By W. Elliot Brownlee
W. Elliot Brownlee, a professor of economic history at UC Santa Barbara, is author of "Federal Taxation in America: a Short History" (Cambridge University Press, 2004).

November 30, 2004

Various presidents have overseen major reforms of the progressive income tax, but according to news accounts the Bush administration contemplates its virtual abandonment.

One possible route it has suggested would be to shrink the tax base to just wages, salaries and pensions (thereby exempting investment income such as interest, dividends and profits) and replace progressive rates — rates that increase as income rises — with a single "flat" rate.<snip>

The enactment of a progressive federal income tax, in 1913 under President Wilson, culminated a long and often bitterly contested reform movement. The reformers believed that individuals ought to be taxed according to their ability to pay, and that individual taxes ought to be based on a person's total income — investment income as well as wages and salaries. They lamented the fact that state and local property taxes applied only to real estate, leaving such property as stocks and bonds untaxed, as remains the case today. A federal income tax, they thought, would help compensate for this.

The reformers also regarded the existing tax system, which relied heavily on tariffs and other consumption taxes at the federal level and on real estate taxes at the state and local levels, as too regressive. Such a system hits low-income families harder than the rich. The adoption of progressive taxes at the federal level — with some rates aimed at the very wealthy — was expected to help correct for the regressive elements elsewhere in the system.<snip>

The success of the 1986 reforms in making the income tax economically sounder, fiscally stronger and more equitable ought to encourage the president to stay on that path and reject scrapping the progressive income tax.

As low taxes are their only real win against Democrats. Voters think only short term (which is extremely stupid), but they're not so dumb that they don't look at their own pocketbook.

- C.D. Proud Member of the Reality Based Community