Reforming Congress is the Answer to Fair Taxation

No skin in the gameTax reformists argue that everyone needs “Skin in the Game”. But how is skin defined? In the days of kings, peasants owned no land to tax and kings paid no taxes, of course. A portion of the yield of the land peasants worked was given as tribute each year and passed up the chain of title. Coins were used in exchange between serfs and craftsmen to make taxation easier.

After the plague, serfs attempted to assert themselves by moving off the land from which they were bound to work for the highest paying lords. To stop this “chaos” the crown imposed laws that made it illegal for lords to pay above historical wages and for serfs to leave their lands. Serfs revolted and their leaders were brutally executed (broken record).

In those days, the government was not of the people, Government was of the church and of the aristocracy. Serfs were forced to pay the church and aristocracy to govern them and revolted when the governing or taxing became too harsh. America’s republic created a government of the people and by the people for the people. We determined our own taxation, which did not include a tax on our production for 140 years.

But Congress had a “better” idea. Previously America had sin taxes and war taxes, and then taxes on imports/exports, presumably helping domestic business to compete, but not until 1913 did we have a permanent income tax. Yet, as they say, kill the fish by first starting at its soft underbelly. The people did not protest the first permanent income tax because 90% made so little income that they slid under the minimum income required to be taxed.

Yet, think about it. Congress defined income as that derived from salaries and wages. These are not how America’s elite derive their wealth. They do not toil for wages?!?! How could it be that this soft under belly would stay fixed on the incomes of the elite? From this starting point, the class battle began.

In Eisner v Macomber, the Supreme Court expanded income to include that derived from capital, score one for the working class. In Helvering v Bruun, the Court decided increases in wealth alone could be taxed. Score another…Something clearly had to be done to reverse course. In Commissioner v Glensaw, the Court helped the elite in distinguishing capital income from ordinary income. Ordinary….as in ordinary people and their ordinary income….aaahhhhh.

Once taxation had begun, first applied to the wealthy, the paradigm was set. Then, all that was needed was to transfer the limited income taxation paradigm to the lower classes through the courts, shifting the tax rates toward ordinary income and away from other forms, and we have the principles we have in place today, taxation of a minor portion of wealth, heavily proportioned on the labors of the middle class.

The wealthiest of America’s middle class decry that 47% of Americans pay no income taxes. Why not rise up in arms about the fact 99% pay no deer license fees? Here is a closer figure to the population that pays no income tax. 48% of the adults in the United States do not pay any alcohol taxes for they do not drink alcohol.

There are many forms of taxation in the Country and many different levels of taxation as well. Income tax is just one of those. The very first permanent form in 1913 was structured so that 90% of Americans did not pay it. Somehow that figure, through manipulations of Congress, has now settled into the 47% level.

Yet, the proportion of taxes compared to total wealth that the underclass pay is quite high when compared to the total wealth of the elite. Those that reside in the upper ranges of the middle class get the greatest rub to their wealth, but perhaps that is the penalty they pay for being the stabilizing buffer between the wealthy and the downtrodden.

Pointing to this 47% figure as if it is the light of truth is a story that has been fed to those of us who pay the most. It is our compulsion to either puppet the story or to search for a more enlightened truth and to herald it above the others.

Government is bloated and should be put through the deadwood cutting process that most businesses go through in hard times to cull out the inefficient and ineffective. In fact, this should be an ordinary process structured into our government process. Yet, these costs though significant, are only a drop in the bucket compared to the cost of programs that have been put in place by Congress.

Of the restructuring that needs to occur, reform of Congress itself is the highest priority. As I spent the past two years connecting the dots and devising systemwide solutions for our economy, the simple fact was that all changes kept reverting back to Congress, and Congress now has in place a system that will not allow it to make needed changes.

Congress has now gerrymandered itself into extremism. It has limited the representation of the house so that it no longer represents the people as originally intended. It has structured campaign financing to favor the wealthy and in fact 90% of campaign funds come from the elite and 87% of campaigns with the highest campaign funds win their elections. Congress now over-represents the 1% and vastly under-represents the 99%.

Without restructuring Congress to fairly represent the balanced needs of the Country, no reasonable solution will be resolved to move America toward a thriving path. And without reform of Congress, an important step of tax reform will continue to be a classless battle of classes.

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Filed under American Governance, American Politics, U.S. Tax Policy

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