The likelihood that either party will ever drain the fetid swamp of corruption that is our tax code is zero, because it’s far too profitable for politicos to operate their auction for tax favors.
To understand the U.S. tax code and the endless charade of tax reform, we have to start with four distasteful realities:
1. Ours is not a representational democracy, it’s a political auction in which wealth casts the votes that count. Those seeking political influence over issues such as taxation place their bids in the political auction via campaign contributions and lobbying. The winner of the political auction gets favorable treatment, and everyone else ends up subsidizing the gains of the winner.
2. The wealthy pay the vast majority of federal income taxes (as opposed to payroll taxes, i.e. Social Security and Medicare), so tax cuts end up benefiting the wealthy.
High-income Americans pay most income taxes, but enough to be ‘fair’? (Pew Research Center)
In 2014, people with adjusted gross income, or AGI, above $250,000 paid just over half (51.6%) of all individual income taxes, though they accounted for only 2.7% of all returns filed.
By contrast, people with incomes of less than $50,000 accounted for 62.3% of all individual returns filed, but they paid just 5.7% of total taxes.
After all federal taxes are factored in, the U.S. tax system as a whole is progressive. The top 0.1% of families pay the equivalent of 39.2% and the bottom 20% have negative tax rates (that is, they get more money back from the government in the form of refundable tax credits than they pay in taxes).
3. The unseen burden of the tax code is the complexity tax levied on small business, the self-employed and domestic corporations with no access to global tax-avoidance schemes.
4. This complexity is necessary to hide all the special favors won in the political auction. The tax code could be a few pages long: all accounting of income and expenses must conform to accepted accounting rules, and here are the tax rates on net income/earnings.
