Tuesday, August 03, 2004
The Jungle redux: As I read David Cay Johnston's book on the U.S. tax system, I kept thinking of Upton Sinclair's "The Jungle." I first read "The Jungle" the summer before my junior year of high school for my Advanced Placement U.S. History class. Sinclair's novel is the story of an immigrant family trying to make it in turn of the (20th) century America. The father works in a meatpacking plant and Sinclair's descriptions of the hygiene in the slaughterhouse (or more accurately, lack thereof) at times made me sick to my stomach.
While tax law does have a lot in common with the making of sausage (you really don't want to see either being made), what caused me to make a connection between Sinclair's century-old novel and Johnston's more straightforward journalistic work is what I perceived as the disconnect between the author's goal and what I saw as the likely public response. Sinclair's goal with "The Jungle" was to promote socialism as a response to the woes of the times. What resulted was the U.S. Department of Agriculture and government inspection of the nation's meatpacking industry, which continues to this day. Johnston's treatise on the failures of the American tax system comes with specific fixes, but the end result may be an effort to just scrap the entire thing and try something much simpler.
On the individual income tax, Johnston (correctly) suggests that enforcement be directed toward those with the most complicated tax returns (and thus those making the most money) and away from those collecting the Earned Income Tax Credit (who are small potatoes anyway). The Congress also needs to act quickly to rework the Alternative Minimum Tax -- something originally aimed at the richest of the rich -- that is already hitting some in the middle class.
On the corporate income tax side, there are numerous things that need to be fixed. The easiest fix, however, would take Congress half a minute to pass: The financial statements that publicly-traded companies release to shareholders should be the same ones they submit to the IRS for tax purposes.
For those interested in the subject of tax fairness, Johnston's book is well done, if you can look past his uneven attacks on the Republicans. Though he repeatedly says both parties are to blame for creating tax loopholes for the "political donor class," he at times goes out of his ways to make Republicans out to be the "worse guys." For example, when recounting the implosion of Global Crossing (a situation where DNC chairman Terry McAuliffe turned $100,000 into $18 million), Johnston repeatedly mentions Ronald Reagan. Why? Because Global Crossing CEO bought a house in the same neighborhood as Reagan's Bel Air mansion.
There are serious problems with the U.S. tax system that need fixing. The most attractive solution is likely a variation of the flat tax: A single hefty personal deduction and several tax rates for money earned above that number.
Unfortunately, none of this is likely to happen anytime soon. The Congress and the president won't take action until there is significant pressure from the electorate -- and people just aren't angry enough about this right now.