 |
|
 |
|
 |
|
 |
|||||||||||||||||||||
|
The convoluted tax code has another sinister characteristic — it encourages Americans to interpret the law in such a way as to twist and bend the rules so they pay less in taxes.The whole Enron debacle and related debauchery of corporate bookkeeping can be linked to an underlying desire to reduce corporate tax payments. Stanley Works, a U.S.-based industrial company, triggered a congressional uproar recently when it announced that it was moving to Bermuda to avoid paying U.S. taxes. The response from selected congressmen was: pass a law to tax them anyway. (Did any of you folks who lived in New York or Pennsylvania move to Florida or Texas to avoid paying the state income tax? You wouldn't do that, would you?) One of the more perverse changes in tax law occurred recently when Congress enacted a temporary phase out of the estate tax. Over the next few years, the exemption from the estate tax will rise until it is eliminated in 2011. But in 2012, the tax is reinstated. How bizarre is that? Imagine if your local Honda dealer announced a mega-sale that will start on July 5th — a month from now. Will anyone buy a Honda between now and then? Only those who aren't attracted to sales will buy one. Similarly, people will do all they can to legitimately avoid or postpone paying taxes — and the temporary repeal of the estate tax will encourage some very unusual acts in or near 2011 to avoid this tax. There are a few politicians who realize this enormous distortion in incentives and they are trying to rectify the situation by making the elimination of the estate tax permanent. While this is a viable solution to a pressing problem, there are many commentators who object to the repeal of the estate tax altogether. Alan Murray, political columnist for the Wall Street Journal, recently objected to the repeal of the estate tax in an article entitled: "Senate Needs Reality Check Before Refunding Estate Tax." Since the Senate listens to constituents and since the Wall Street Journal is an influential news medium, it was interesting to analyze the rationale for Murray's objections, which included:
When a country experiences an enormous increase in wealth through entrepreneurial talent and hard work that benefits all Americans, why shouldn't those "fortunate few" gain? Bill Gates is a multi-billionaire because he improved the way all of us work and live. The growth of companies such as Microsoft allows management to pay employees as much as necessary to remain competitive. And that wealth concentration is a necessary and desirable characteristic of a booming economy. Yet under the current tax law, the government will take — that is to say, tax — approximately 55% (at the Federal level) of Gates's entire fortune. At last count, that's about the gross national product of many Central American countries. But Murray continues:
From this analysis, Murray draws the conclusion that executives are overpaid. He states:
First of all, the top 10 athletes and the top 10 movie stars make a heck of a lot more than the top 10 CEOs — and even one of those movie stars said he would leave the country if George Bush won the election. I would estimate that the personal income taxes paid by these executives on their increased compensation, when considering such things as state income taxes, comes to almost 50% of that number. So instead of receiving that $155 million, let's be honest and calculate an after-tax income of about $75 million. What chills one's spine is that the government confiscated one half of these CEO's earnings. And these executives will have to hand over another 55% on what is left over if Murray has his way and the estate tax sticks around. So let's get off this kick about evil corporate executives. If anything, we should be applauding their generosity. Let's look again at the case of Bill Gates. The company he founded pays billions of dollars in taxes, he pays millions of dollars in taxes, and he still created the Bill and Melinda Gates Foundation. This foundation "is dedicated to improving people's lives by sharing advances in health and learning with the global community" and has been personally endowed by Mr. & Mrs. Gates. It is currently valued at $23 billion. If the foundation distributes just 5% of its value each year, charity will receive approximately $1.15 billion annually. And yet, there's not much media commentary about the generosity of our corporate executives. The reason is that the mainstream media just doesn't understand that the more confiscatory taxation we have, the fewer Bill and Melinda Gates Foundations we'll have, too. Alan Murray clearly doesn't make the connection.
A problem with Murray's analysis is his lack of historical perspective on the U.S. tax system. In the 19th century there was no income tax — so some form of tax was necessary to finance war. In today's world, the sum total of taxes on individuals is overwhelming, to say the least. Prior to the "current effort," the U.S. government was generating a $200 billion surplus, the largest in history — due of course to the tremendous productivity of Americans but also due to excessive taxation. Since the government has effectively eliminated virtually all the income-tax loopholes that were present in the "gilded age," the working affluent pay in excess of one-half their income to Uncle Sam to finance not only war but Great Society programs and just about any other pork-barrel idea that politicians can dream up. The inheritance or estate tax is no longer necessary to finance government spending on war — it's needed to feed the insatiable appetite of elected officials to simply spend, spend, spend. The effort to eliminate the estate tax manifests itself in the commitment that Americans made back in Boston a few hundred years ago when they pitched a few boxes of British tea into the Boston harbor to respond to excess taxation. Let's be reasonable and sensible when it comes to confiscating individual wealth. Let's give the affluent the chance to spend a good portion of their earnings on whatever they desire — because it's their money. Let's not make farmers and landowners paupers because they are assessed estate taxes on farmland that they have passed on from one generation to the next, only to be forced to sell because of this redundant tax. More, just as the abolition of the corporate income tax would reduce cheating and financial manipulation, the permanent elimination of the estate tax will remove many of the gimmicks that were created to avoid paying estate taxes.
|
|
|
|
|||||||||||||||||
<% dim printurl
printurl = Request.ServerVariables("URL")%>
he
federal government has an uncanny ability to build confusion into the
tax code. Due to thousands of pages of tax-law minutiae, individuals and
corporations can be caught up in a web of tax-oriented paperwork that
makes it virtually impossible to accurately complete the annual forms
that determine tax liability. The tax code is so complicated that it could
be used not only as a tax-collection mechanism but also as a tool of intimidation
— given the complex motives of politicians and tax collectors alike.
