Home Table of Contents Previous Appendix

Appendix 3
Simplifying the Tax Code

Our current federal tax code contains four principal areas of complexity: 1) the sheer variety and number of taxes and fees, 2) the differing tax schedules and scales applied to various sources and amounts of revenue, income, gain, and windfall, 3) a complex labyrinth of deductions, exceptions, loopholes, and write-offs designed by the wealth-serving writers of the tax code for the purpose of evading the payment of taxes, and 4) social engineering, a maze of corporate and personal subsides and credits designed to support various causes or to adjust or rearrange in some way the social landscape.

To this complexity we add a Mt. Everest of complimentary complexity in the private sector: millions of perplexed, harried taxpayers scrambling to meet the tax deadlines, an army of tax accountants gathering information, making calculations, and filling out a sea of paper and electronic forms required by the taxpayer and by the taxing agency, and another army of lawyers and money manipulators in financial institutions and in other corporations and businesses cranking out an ever more varied and fanciful collage of financial actions, tools, and instruments designed to dance with or do end runs around the intricacies of the tax code for the purpose of minimizing or avoiding altogether the payment of taxes.

The main purpose of the complexity in our tax system is obfuscation, to prevent everybody else from seeing the slight of rich hands avoiding the payment of corporate and personal taxes while dumping the load onto other taxpayers.

The principal proposal of this work is to create a forth branch of government, the demos, consisting of the entire electorate directly deliberating and voting on twelve of our most central political-economic issues. Among other things, the power to tax would be removed from the other branches of government and placed fully into the hands of the demos. Five of the demos issues would deal with the amount that we choose to tax ourselves and the distribution of that tax burden. All taxes, levies, and fees of every kind at the federal level would be eliminated and replaced by only three simple, sliding-scale taxes which allowed no exemptions of any kind: a tax on the annual gross revenue of corporations and businesses, a personal income tax, and an inheritance tax. Thus, in one clean sweep all of the complexities of the current tax system would be tossed out.

For a given taxpayer, all corporate and business revenues from every source or stream during a tax year would simply be totaled and taxed. So also with all personal income and inheritances; each would be simply summed and taxed. All sources of revenue, income, gain, and windfall of every kind would be completely taxable. There would be no exemptions of any kind for any corporation, business, or individual.

That sounds rather scary, doesn’t it? The wealthy would do their best to frighten the middle class by reminding it that its loopholes would be lost too. But one shouldn’t fall for this scare tactic. Under our current tax system, tax loopholes for the wealthy are much better than anybody else’s. In a simple, sliding-scale tax system without exemptions, we would pay taxes on all of our revenue or income but at a much lower rate than we currently pay on a portion of our revenue or income. In the end, when all the dust settled, with a sliding-scale tax system with no exemptions, wealthy corporations and individuals would no longer have available the hiding places and the tools they currently use to evade the payment of taxes and to dump the burden onto others. The middle class and the working poor would be much better off with a no-exemption, sliding-scale tax system the tax scales of which are set by the entire electorate in the demos than they are under the current system with scales set on everyone by the self-serving elite.

Despite all of the good that would be achieved with the simplification of our tax system, the question may be asked: In our making such a radical simplification wouldn’t we be throwing the baby out with the bath? Aren’t at least a few of the complexities in our current tax system there for good reasons? Isn’t some complexity necessary for the purpose of achieving fairness and equity in taxation?

Consider the following situations:

If one lived in a house for 20 years, sold it, and moved to another location to follow a career, under our no-exemptions rule the money received from the sale of the house would be added to the taxpayer’s other income for the tax year sending the taxpayer’s tax rate into higher regions and the tax bill into the stratosphere leaving significantly less money to buy the next house. And what about all the money that the taxpayer originally paid for the house? The taxpayer has already paid taxes on that money. Shouldn’t it first be subtracted from the sale price of the house?

What about a business that moved to a new location or sold off part of its assets to become more efficient or to focus on that which it does best? What about someone who made a “killing” in the stock market, who won a lottery or won at gambling, or who was wise or lucky enough to hold a piece of property whose value wildly increased before being sold? The person may have been poor for his or her whole life until the gain or winning, and now, suddenly, all that will have changed. But at tax time the person would fork over a significant chunk of the gain. What about someone who had just completed a long-term contract and was paid a lump sum at the end of the work? What about somebody who had just received a gift or an inheritance? What about anybody who had received any significant lump sum or amount of property?

In our search for equitable simplicity shouldn’t we retain the concept of a capital gain, the cost of something being subtracted from its sales price and only the gain taxed? And surely we must also create a reasonable way to tax lump sums of revenue and income? For all of its good intentions, aren’t we forced by the need for a certain amount of complexity to back away from a no-exemptions tax system located entirely within the demos? For, if any complexity at all is introduced into the system, that complexity could not be handled by the demos and would have to be defined and handled by the plutocratic, err… ‘representative’, branches of government, wouldn’t it? Wouldn’t that undermine the power of the demos, and nullify the result of this whole enterprise?

Recall our analysis of our human condition and of our political-economic situation. We are organized into dominance hierarchies. The cultural expressions of our biological dominance are authoritarianism and plutocracy, governance by the wealthy. In our American expression of dominance, the wealthy, aristocratic founders created a constitution and a government that the wealthy use to serve themselves first and best. They created a government of divided powers but— due, among other things, to a deeply flawed electoral system that overwhelmingly favors the wealthy—divided only among the wealthy excluding all others and excluding democracy to the best of their ability. Their “republican” form of government, our supposedly “representative” democracy, is and always must be deeply flawed.

But, as the phrase the tyranny of democracy indicates, pure, unopposed democracy is also deeply flawed in that the simple majority can create oppression of another sort.

We found our solution to authoritarianism and plutocracy to lie in a redistribution of the powers of our current republican form of government. We created a hybrid consensus government consisting of a new, truly democratic branch, the demos, the powers of which were set in balance with the existing plutocratic branches, redeeming them by rendering them truly democratic and representative. Along with other powers, the demos was given the sole power to tax.

Now, the political-economic power held by America’s elite is huge. It holds all the aces. The demos would have to have sufficient power to adequately counterbalance the power of the plutocratic branches. Possessing the sole power to tax was to be a cornerstone of that power. To the extent the power to tax was diluted by being shared with the plutocratic branches, the power of the demos itself would become reduced.

Historically, every advantage has remained in the hands of the wealthy few. It is the exception that the many has had the upper hand or even a sufficient measure of power. It is extremely difficult to gather sufficient power into the hands of the many to effectively counteract and counterbalance the power of the few. Therefore, it is anathema to dilute the demos’ sole power of taxation.

But even if this were done by giving the plutocratic branches the power to introduce some complexities into taxation, wouldn’t the demos still possess significant power? The demos would bring the entire electorate into one political body and give that body the power to determine how much we are taxed and the distribution of that tax burden. The demos would have the power to set the length of the Standard Workweek, the size of the minimum wage, and the amount of the national debt. And the demos would provide the means for electing the president, senators, and representatives in a powerful, new way.

This new way of electing these officeholders would give the electorate the ability to place into office people who truly represented it. These representatives would add only that complexity into the tax code which served all of us well and none to serve only the wealthy. That’s the way it would work, wouldn’t it? And, overall, the demos would retain sufficient power to balance the plutocratic branches, wouldn’t it?

Well, that’s the big question, isn’t it! The big worry would be, of course, that while writing a new, improved tax code our new, improved representatives slipped into that code enough wealth-favoring loopholes and evasions to undermine the consensus of the demos on taxation, the size and distribution of the tax burden that it sets.

Even with our new way of electing its members, depending on those within the plutocratic branches to write honest tax code would place us dangerously close to our present situation and throw the results of our whole power redistribution enterprise into question. There would be no point in creating a demos that possessed powers insufficient to its task. So, again, once the power to tax had been removed from the plutocratic branches of government and placed into the demos, it would be anathema to place even the smallest portion of that power back into the their hands.

Here are four possible solutions to the dilemma that would keep the power to tax solely within the demos: 1) Embrace the no-exemptions rule as the lesser of evils. 2) Create a dozen or so most essential tax rules at the time that the demos is created (following the guidelines discussed later in this appendix), and then create no new ones. 3) Give the demos the power to create and maintain a simple tax code. 4) Combine both 2 and 3; create an initial simple tax code at the time the demos is created, and then give the demos the power to alter and add to that initial code.

Let us examine the strengths and weaknesses of each of these proposals.

Embracing the no-exemptions rule as the lesser of evils would keep the sole power of taxation entirely within the demos and undiminished. But we would forego the concept of capital gains, and we would have no mechanism to handle lump sums of revenue or income. Lump sums would simply be added to all other revenue or income received during the tax year driving the taxpayer’s tax rate to higher levels.

There are, however, some mitigating circumstances. First, this method possesses a rudimentary fairness in that we would all be in the same boat. For example, any person selling a house would have to have the whole selling price of the house added to his or her current tax year’s income and taxed.

Second, by our demos consensus we would be setting the aggregate amount of our tax burden and the distribution of that burden. Thus, we would likely have a smaller, more efficient government and lower tax rates that were easily borne even during a year that contained an unusual lump sum of revenue or income. A taxpayer’s average tax burden over the years would be significantly less than it is under our current tax system.

Third, the notion of double taxation causes many to grind their teeth. If one buys a home with funds which have already been taxed and later sells it for a larger sum, then it seems almost instinctually fair that one should only be taxed on the gain above the original purchase price. Our current tax code offers consideration for this and selected other particular situations. But double, triple, quadruple, etc. taxation is laced throughout the entire system. By the time that an end consumer receives a product or service, it has been taxed in many ways. All of these “invisible” taxes are, of course, added into the price of the product or service. The consumer ends up paying all of these taxes with money on which he or she has already paid taxes. A tax system with no exemptions and double taxation is not wonderful. But it would also not be something new. Even with its flaw of double taxation, a demos tax system with no exemptions would result in a significantly lower overall tax burden for taxpayers than what we bear under the multiple taxation of our current system.

A few people who are able to see deeply into the matter would understand that it is best to accept this first no-exemptions method. Its virtues outweigh its flaws. But many would be skeptical and want to examine other possibilities.

Moving on to our second method of keeping the power to tax solely within the demos, we could create a dozen or so most essential tax rules at the time that the demos is created (again, following the guidelines discussed later in this appendix) and create no new ones. We can readily see that in creating no new rules once the demos is set in motion, we would have a rigid situation that did not allow further amendment as time and wisdom might demand. However, this second method would get us beyond the even more severe limits placed upon us by the no-exemptions rule of the first method. Even just a few judiciously devised rules could take us a long way toward what many would feel to be a more equitable and comfortable tax system … if the rules really were equitable and the elite did not manage to slip any self-serving rules among them.

Consider this proposal for the more equitable taxation of lump sums than merely adding them to one’s revenue or income for the year:

The basic idea is to level lump sums over a period of years so that they may be taxed more lightly in smaller chunks. The scheme could be created both as simple tax code written at the time of the creation of the demos or as code written later by the demos.

Notice especially the nearly universal applicability by taxpayers of the proposal. Every corporate, business, and individual taxpayer in America could use this proposal to advantage. The few other rules included in a brief, simple tax code should also be universally applicable. No rules should be included that by their nature effectively apply only to a wealthy or some other select few.

Every corporate or business taxpayer in the nation that wanted one could own one and only one special deferred revenue account which could be offered by banks and other financial institutions that met qualifications for financial soundness. Every individual taxpayer who wanted one could own one deferred personal income account. And, as needed, each individual could also own one deferred inheritance account. A general name for all three types of deferred accounts might be deferred earnings accounts. All other means and financial instruments that involve the delay, reduction, or elimination of the taxation of revenue, income, or gain should be eliminated. The funds that a taxpayer added to a deferred earnings account could be invested to earn interest but only into instruments in which the principal was protected and FDIC insured.

Rather than our defining exactly what a lump sum is or what specific sources qualify, a taxpayer could deposit any desired amounts of revenue, income, or inheritance into the appropriate deferred earnings account. A taxpayer could run virtually all revenue, income, and inheritances through these accounts, year in and year out.

Each deposit into the deferred earnings account would be divided into ten portions and would follow its own ten-year schedule of maturation. Most people’s accounts would likely be quite simple, not containing many deposits. But a given account may contain hundreds or even thousands of deposits, each following its own ten-year schedule of maturation.

The holder of an account could make deposits into and withdrawals from the account at any time. When a deposit of any amount was made it would be automatically divided into ten equal portions. Beginning with the day of the deposit, the first portion would mature in exactly one year, the second portion in two years, etc.

When a portion of the deposit matured, it would be automatically transferred out of the account to some other account of the account holder’s choice. On the day of the transfer, the transferred portion would become taxable and would have to be added to the taxpayer’s revenue or income for that tax year. The second portion of the deposit would be automatically transferred and become taxable one year later. The third portion would be transferred and become taxable the third year, etc. A financial institution providing deferred earnings accounts would have to report all such transfers of funds to the tax agency, i.e., to the IRS, as taxable income. Such funds would no longer be taxable and could not be re-deposited into one’s deferred earnings account; there would be no reason to; there’s no taxation to minimize.

Interest earned by funds in one’s deferred earnings account would be periodically transferred to some other account of the account holder’s choice and become taxable income on the day of the transfer. Or it could be periodically credited to the deferred earnings account itself, each credited amount having its own ten-year schedule of maturation from the date of the credit.

An account holder could withdraw funds from the deferred earnings account at any time following these rules: The particular original deposit from which the money was being withdrawn must be specified. The money could only be withdrawn in the amounts of the original ten portions of the deposit beginning with the tenth portion and working backward toward earlier portions. The withdrawal would become taxable revenue, income, or inheritance during the tax year of the withdrawal. The institution providing the account must report the withdrawal to the tax agency.

Corporate, business, and individual taxpayers would be able to run any and all desired revenue, income, and inheritances (lump sums or otherwise) through such accounts to level out the sums for the purpose of taxation. Ultimately, all revenue and income would be taxed but at more reasonable rates than if lump sums were taxed in a single tax year. This proposal would place the taxation of lump sums or irregularly received sums on a more even keel with, say, the taxation of revenue and income that comes in more or less similar amounts daily, weekly, monthly, quarterly, or annually.

Upon the death of the account holder, the portions of the deceased’s estate inherited by others could, if desired, be taxed entirely during the current tax year, which, given low to modest tax rates, would likely be the option taken by most people receiving smaller inheritances. Or an inheritance could be liquidated, if necessary, and the funds deposited into the inheritor’s deferred earnings account. However, any portion of the inheritance which was already in a deferred earnings account of the deceased’s would be deposited into the deferred earnings account of the inheritor to continue its schedule of maturation already in progress.

Thus would be solved the problem of taxing lump sums. In addition to taxing lump sums more equitably, this proposal would also provide some other benefits. All corporations, businesses, and individuals would enjoy the same measure of tax deferment of from one to ten years on the various portions of deposited funds. With depositors motivated by the combination of lower taxes on revenue and income, deferred taxes, and the interest earned on such accounts, the rate of savings in America would rise dramatically.

After the initial ten-year period, this deferred earnings proposal would not significantly affect the amount of tax revenue that the government collects. Any deposits entering the deferral pipeline would be offset by other maturing portions of deposits ripe for taxation. The tax revenues lost due to lower tax rates on lump sums would be offset by the taxation of the interest accrued on the deferred earnings accounts. And millions of people possessing comfortable amounts of savings would need less government assistance during hard times.

This deferred earnings proposal serves as an example of a way to create simple, universally-applicable tax rules. The tax code need contain precious few of such rules to be made equitable and just.

The biggest drawback to the scheme described here is that one may want to use a lump sum now rather than have it enter one’s revenue or income stream in ten chunks over a period of ten years. A modified proposal could deal with this difficulty.

Rather than depositing lump sums and other revenue or income into deferred earnings accounts, they could be immediately utilized while their tax liabilities are entered into deferred tax accounts which would not contain funds but only tax liability records. It would be the tax liabilities which are divided into ten equal portions following a ten-year schedule of maturation in a manner similar to that described for deferred earnings accounts. Whether deferred tax accounts were maintained by taxpayers, third parties, or the tax agency, maintaining the accounts on the Internet would provide convenient access for the relevant parties.

The principal difficulty with this deferred tax scheme, and it’s a big one, is in the collection of the taxes due. As the taxes on a lump sum became due over the ten-year maturation period of the tax liability, the lump sum itself may be long gone: spent, squandered, invested and lost, etc. The taxes would have to be paid from new funds, funds the taxpayer may not have. The taxpayer’s finances may have gone belly up. The corporate, business, or individual taxpayer may no longer even exist. Perhaps for a fee third parties could bond or somehow guarantee payment of the taxes or the taxpayer could, without disturbing certain FDIC insured invested funds, use them as temporarily “locked” collateral for payment of the taxes. Given such complexities, it is probably most wise to simply let taxpayers decide how much, if any, of their earnings to run through their deferred earnings accounts and let it go at that.

A simple tax code could easily contain a few rules that define certain situations basic to all of us, e.g., the income from the sale of one’s primary residence would not be taxed if the funds were used to purchase another primary residence within a specified duration of time.

We now turn to our third possible way to keep the power to tax solely within the demos: Give the demos the power to create and maintain a simple tax code. Such a code could include tax rules such as the deferred earnings or deferred tax proposals discussed in this chapter and simple rules such as that covering the sale of one’s primary residence.

Unlike a rigid tax code written at the time that the demos is created and set in motion, code written by the demos could be amended and expanded. Perhaps as or even more important, none of our nation’s tax code would be written by wealth-serving, self-serving elites behind closed doors but by all of us, the entire electorate within the demos.

At first glance, this seems impossible. How could a body consisting of the entire electorate write something as long, complex, and esoteric as tax code?

Before moving on to an explanation as to how it could be done, let’s reflect a bit on the previous sentence. Tax code need not and should not be long, complex, and esoteric. It never should have been so, even in our current tax code. In fact, if we had representatives who were honest brokers that fairly represented all of the people including when writing tax code, then we would have no need in the first place to create a demos, reorganize the powers of our government, and remove the power to tax from the plutocratic branches. A prime virtue of the demos’ writing of our tax code would be that the code would, of necessity, always remain simple, concise, and honest.

That the demos may write tax code, a mechanism would have to be created to facilitate the process. The first element of that mechanism would be the addition to the twelve demos issues of a thirteenth “tax rules” issue. This issue would provide the means to propose, deliberate, and vote on rules of taxation and nothing else.

Recall that beneath each demos issue’s initial page a formal hierarchy of pages exists which serves to facilitate the process of pro and con discussion of the issue. The structure, function, and process of these pages and their discussion was described in various chapters, particularly in the chapters entitled Consensus Democracy and The Demos Electoral System—An Honest Way to Elect the President, Senators, and Representatives.

Recall that the deliberation of issues involved pro-and-con discussion and that any demos member could introduce, argue, and counter-argue proposals. Further, a combined method of voting and a “round robin” mechanism was discussed that fairly presented the various opinions to the demos electorate. The only thing to be added here is that for the tax rules issue the deliberations would center on proposed tax rules and modifications.

Not being numeric in nature and not lending itself to mathematical calculations, the tax rules issue could not be a consensus-style issue as would be the nine economic demos issues but would have to be handled in a majority-rule style. Just as the founders required at least a half-dozen times in the Constitution, not a simple majority vote but a super-majority of two-thirds of the demos members would be required to pass a tax rule (or tax law, if that is the better term).

This super-majority requirement would significantly increase the probability that any tax rule approved by the demos would serve the majority of taxpayers rather than some privileged few. The demos members should be ever on guard against and reject tax rules which are written in such a way as to appear to be usable by most taxpayers but which in actual practice, when meeting the qualifying criteria, serve only the few. This would be very dangerous turf, a potential back door for the insinuation of plutocracy into the demos. The non-wealthy members of the electorate would have to be ever vigilant about and really understand the full repercussions of any tax laws proposed within and approved by the demos.

Since the demos membership would be constituted of all able, of-age citizens, the tax rules that it created would not require further approval by the executive or legislative branches. Its rules, however, would have to pass constitutional muster should relevant cases involving the rules come before the Supreme Court.

Any number of tax rule proposals could be simultaneously debated under the tax rule issue. Only one proposed tax rule at a time could exist on the issue’s initial or primary page for formal required voting by the entire demos electorate. A tax rule may only appear on the initial page in its unabridged form. No title or brief description may be used. The rule should be assigned a number for easy reference. Of course, brief pro and con arguments would also appear on the page as described elsewhere in this work.

The proposed tax rule that made it to the tax rules issue’s initial page for formal demos voting would be the one that currently held the most votes among those demos members deliberating and voting on proposed tax rules beneath the initial page, the votes that increase an argument’s visibility as discussed in the chapter entitled Consensus Democracy.

One procedural rule would always exist in the top position of a list of the proposed tax rules under discussion. The procedural rule would be that no current rules may be amended and no new rules may be added to the tax code at this time. So long as this procedural rule enjoyed more votes than any of the tax rules under deliberation for amendment or addition to the code, then it would be displayed on the tax rules initial page. Thus the tax code could be prevented from growing in length and complexity as the demos saw fit.

A proposed tax rule that made it to the tax rules issue’s initial page would remain there for a year. Recall that every member would have the civic duty to refresh his or her demos votes, affirming each vote as is or altering it, at least once a year. Requiring that a tax rule that has made it to the issue’s initial page to remain there for a year insures that every demos member will have cast a vote on it.

Meanwhile, beneath the tax rules issue’s initial page, the demos members would have a long time to deliberate other proposed rules and to bring in line, by their voting, the next rule or amendment of greatest interest.

One proposed tax rule or amendment per year, (and even it may be voted down)? What a long, slow process! It would take fifty years to create a tax code of even modest length! Yes, it would be a good system, wouldn’t it? Nothing would find its way into the new, simple tax code which was not subjected to extensive, highly-visible deliberation and which could not earn two-thirds of the demos vote. It is highly likely that only rules could pass muster which were written in clear, concise language and which could be reasonably utilized by the vast majority of taxpayers rather than by only a privileged few.

Oh, but all of the members of congress, all of the nation’s lawyers, and all of the writers of advertising, product disclaimers, and corporate and consumer contracts would be participating in the creation and deliberation of tax rule proposals and amendments. Wouldn’t they be able to muck up the works with their legalese, double-speak, and word juggling? And just how long might “a tax rule” be?

Well, not every congressperson, lawyer, and ad, disclaimer, and contract writer is a bad person. Some wordsmiths would be on the side of “the people” and for the good of the nation. As fuzzy-headed as many of us admittedly are, there would be no shortage of people both within the demos and about us in our daily lives to raise the alarm about this or that sour tax rule proposal. The long process of haggling over a proposed tax rule would go a long way toward rendering it clear, concise, and honest. Further, any tax rule that appeared shiny during approved but in actual practice lost its luster could always be brought back onto the table for amendment or deletion.

We now turn to our fourth method for keeping the power to tax solely within the demos: Combine methods 2 and 3. Create an initial simple tax code at the time the demos is created and then give the demos the power to amend and add to that initial code. There is something muddy or impure about this method. If it could be said that the demos would produce clear, honest tax code which represented the true will of the people, would this proposal not start them out on the wrong foot? For who would write the initial body of tax code before the demos became functional and able to create its own tax code? The creators of the demos, likely a people-minded lot, could create it. But would code of their design reflect the true will of the electorate? Our current ‘representatives’ in congress could write it, but they’ve already shown us their true colors. That is why we want to remove the power to tax from their wealth-serving, self-serving clutches in the first place.

If there is to be a tax code more complex than simply “no exemptions,” of the four methods presented here for our keeping the power to tax solely within the demos, the third way—the demos should write it—seems the surer way to achieve a simple, clear, honest code that represents the will of all of us. The slow, thoughtful development and evolution over the years of a small body of tax rules would be our surest road to wisdom.

Here are some principles that the demos should follow when writing tax rules:

Although written in terms that seem to apply to all corporations or individuals, our current tax code contains rules that, when all of the criteria are met, really only apply to a specific corporation, group, or person. None of our new, simplified tax code should be defined to be applicable only to the wealthy or to a particular class of people or type of businesses, corporations, or organizations. There should be no rules in the tax code which by the nature of the criteria that are applied or by the level of revenue or income to which the rules could be realistically applied cause those rules to be applicable to a minority of taxpayers. Every rule in the tax code should be directly applicable by the vast majority of corporations, businesses, or individuals.
A particular tax rule should not result in disproportionate advantage to the wealthy taxpayer. If a rule benefits by, say, 10% a taxpayer with a given level of annual revenue or income, then the rule must benefit by 10% or more all taxpayers with lesser revenue or income. To put it another way, a tax rule may have a neutral or progressive effect on the overall tax rate but not a regressive effect.
None of the simplified tax code should exclude from taxation the interest or fees paid on any kind of consumer or home loans, on capital or other investment of any kind, or on the purchase of anything whatever by a corporation, business, or person. The deduction of interest is just a form of a subsidy, some taxpayers being forced to pay other taxpayers’ bills. Investments and the borrowing of money in one’s personal or business life should be entirely a private affair having nothing to do with the tax code. To the extent that government is engaged in providing entitlements, handouts, and social engineering, it should be done in other areas of government.
There should be no such thing as depletion allowances, depreciation allowances, or any of the other hundreds or thousands of esoteric or exotic write-offs, exemptions, or evasions that now exist in the tax code.
There should be no rules or exceptions favoring or disfavoring various groups or lifestyles, e.g., married vs. single, children vs. no children, providing care for others vs. none, suffering various kinds of misfortune or losses vs. not, heterosexuality vs. homosexuality, etc. Anyone seeking assistance of any kind from the federal government should go to what I earlier called The Glass House, that part of government that transparently handles all entitlements. The tax system is not the place to handle lump-sum or any other kind of grants.
Beware of those bearing gilded gifts. Sly and crafty tax code often gives an ounce to the average taxpayer while handing a pound or a ton to the wealthy or privileged. Do not approve a tax rule that helps you only a little while it helps others a lot. If you can’t make use of a proposed tax rule in your own life, then don’t vote for it. If you can’t read and understand a proposed tax rule or understand it when it is explained by someone you personally know and trust, then don’t vote for it.

Now, of these various ways to handle the simplification of the tax code while keeping the power to tax at the federal level entirely in the hands of the electorate within the demos, I most favor and strongly recommend: 1) the handling of lump sum and other earnings using the universally available (but always optional) deferred earnings accounts described earlier; 2) beyond that, no exemptions of any kind for anyone at any time; and 3) handling all entitlements using The Glass House, not the tax system.

The End

Thank you for reading Beyond Plutocracy. Please share its web site address with others. Email feedback and discussion are welcome.
Roger Rothenberger

Home Table of Contents Previous Appendix Top of Page

Appendix 3 Simplifying the Tax Code

Appendix 3
Simplifying the Tax Code