Jim McTague‘s latest “D.C. Current” column in Barron’s highlights a U.S. senator’s recent work to expose problems with the federal tax code.
Is there a publisher in the house? Retiring Oklahoma Sen. Tom Coburn and his staff have produced a delicious, 312-page tome on the considerable shortcomings of our federal tax system titled Tax Decoder. The report easily could make the best-seller list with some minor editing. You can download Tax Decoder until the end of the year at coburn.senate.gov. I highly recommend it because it is a wonderful way to inform any outrage you may feel against our unfair tax system, which Republican Coburn says distorts investment decisions and consequently stifles economic growth.
The senator, a physician who also happens to have a degree in accounting, illustrates how wealthy political patrons benefit from hundreds of special provisions inserted into the tax laws by compliant congressmen. Coburn notes that over 1,600 taxpayers with an adjusted gross income exceeding $1 million paid zero income taxes in 2011. “From deductions for yachts and second homes to tax credits for purchasing luxury cars and write-offs for gambling losses, the tax code is spending billions of dollars subsidizing the upscale lifestyles of the well off,” he writes. Since taxation is a zero-sum game, one taxpayer’s gain is another’s loss. The middle class, says Coburn, is the perennial loser.
Congress simplified the tax code in 1986, but what I call “the graft machine” eventually kicked in. In return for campaign funds, fat-cat political contributors pressured politicians for tax breaks. Between 2001 and 2012, Coburn points out, Congress made over 4,600 changes to the tax code—an average of more than one change every day.
Coburn notes that the Internal Revenue Service code in 2012 contained over four million words—enough to fill 9,000 pages. The original, 1913 income-tax law had 27 pages of text. Can we ever return to these the simpler times? Coburn says we can. His solution is to let the current IRS code expire and for Congress to adopt either a flat tax or a national sales tax. Any permitted deductions would apply across all industries and not just to handpicked ones. If this were to be the case, then at least eight fossil-fuel provisions in the code that reduced tax revenues by $2.7 billion in fiscal 2014 would be eliminated. So would special deductions for solar and wind energy, the magazine industry, professional sports teams, Hollywood producers, fishing-tackle-box manufacturers, hedge fund managers, and even home buyers, who would lose the mortgage-interest deduction.
