Should the US Progressive Tax System be Reformed?
The debate over the US tax system is not new, and one prevalent question is whether the current progressive tax system should be reformed. This article explores the arguments for and against reform, focusing on revenue collection, tax fairness, and the role of government.
Current Tax Compliance Issues
Even with the hiring of an additional 85,000 IRS agents, enforcing the existing tax code remains a critical challenge. A tax system devoid of any meaningful enforcement mechanisms is, in essence, meaningless. The focus should be on improving compliance rather than proposing new tax structures.
Arguments for a Flat Tax
One proposal often suggested is a flat tax, where everyone pays a uniform percentage of their income. Proponents argue that this system would simplify the tax code and be more equitable, as it would eliminate the need for exclusions and deductions. However, eliminating state income taxes would mean no exemption from double taxation, a complex issue that needs careful consideration.
Contentious Debate on Tax Fairness
The conversation around tax reform often centers on the fair distribution of tax burdens. Some argue that the current system is already too progressive and inefficient, suggesting that the federal government should only fulfill its constitutional duties, leaving other responsibilities to the states. This argument, however, lacks clarity, as no one can definitively state what a fair tax rate would be. For example, would a 47% tax rate be acceptable, or is a 50% tax rate too high? The vagueness of these terms is a significant barrier to meaningful progress.
Realistic Revenue Projections
Those proposing tax reforms often cite the unscrupulous behavior of billionaires as a means to rectify the system. The idea is to tax the super-wealthy and use the money to address social ills and improve the federal budget. However, the reality is far less appealing. With only 756 billionaires in the US, levying an annual tax of $100 million from each would generate a yearly sum of $75.6 billion, far short of the $7.5 trillion federal budget. This approach is not only unrealistic but also impractical, as it assumes no economic changes or responses from taxpayers.
Government Spending and Efficiency
The argument that the government could better manage tax revenues than private enterprises misses the mark. Large organizations like Apple, Google, Amazon, Disney, Sony, Microsoft, UPS, and PayPal have proven more efficient and innovative in managing their resources. The idea that collectively, the US government could do more with tax revenue than these companies is questionable. In fact, history has shown that excessive government spending can lead to inefficiencies and waste.
Conclusion
The progressive tax system remains a topic of intense debate. Addressing the fundamental issues of tax collection and compliance is crucial before contemplating significant structural changes. A flat tax might simplify the system, but it comes with its own set of challenges. The tax rate argument is largely abstract without concrete examples of what a fair rate would be. Moreover, the realistic projections of additional tax revenue and the efficiency of government spending are critical considerations. Until these issues are addressed, any discussion of tax reform should be approached with a critical and realistic mindset.