Thursday, December 2, 2010

Another Simple Approach

Congress has a real knack for complicating relatively simple things. The current self-generating controversy is the effect of the automatic tax increase Congress itself voted into being in the orgiastic Bush years. As you may recall, they included a "sunset" provision in order to get the tax cuts through. For Democrats, it saved face by making the tax cuts they opposed temporary; for the Republicans, it saved face by making the budget numbers seem more palatable.

Now the sun is setting, and both parties -- are there any greater collections of self-serving nitwits anywhere? -- are fumbling around trying to gore other people's oxen. It resembles nothing so much as a Monty Python sketch, except that it's not, when you get right down to it, really funny. 

I hope the sun does set on the Bush tax cuts, especially the travesty of the Estate Tax reductions. Some of us recall that our ancestors -- well, not mine, specifically, but "ours" in the national-history sense -- fought hard to get the Estate Tax put in to end the era of the Robber Barons, who accumulated wealth and passed it on intact from generation to generation. Admittedly, the tax scheme it evolved into over the course of decades of Congressional tinkering at the behest of one special interest after another was incoherent, unfair, impractical and barely effective -- it didn't so much break up great estates as ossify them in "charitable" foundations that operate, as much as anything else, for the aggrandizement and comfort of the would-be heirs -- but it was, at least, better than nothing; which is what we now have (at least until January 1).

Here, Congress, is what you do:  Democrats, especially in the Senate, where you still have a majority, let the Bush tax cuts expire. Most people won't see a really significant rise in their tax liabilities, just as they didn't really see a great decrease in liability back when the tax cuts took effect. Most people didn't make enough to benefit much from the cuts back then, and they don't make enough to be hurt much by the coming tax increase. Then, after the sunset provision has done its laudable work, undoing the mess y'all made of things eight years back, you can introduce a more targeted tax cut bill. Raise the zero-bracket amount; that will benefit everybody, rich and poor, equally. Raise the tax brackets across the board, so that most people see lower rates on their last dollar earned. Tax unearned income -- dividends and interest and capital gains -- at the same rate as earned income. (I'm shooting my own horse, there, but fair is fair.) Keep the mortgage-interest deduction if it's politically necessary -- it's not, but we can pretend -- and the child-care credit and the earned income credit. All those things are expensive sops that allow us to pat ourselves on the back and say what good people we are, taking care of poor folk and all.

Then -- and this is the kicker -- do two more things. 

First, limit the amount of compensation -- not wages or salary, mind you, but all compensation -- to any one individual that a business can deduct as a necessary business expense. Businesses can still pay exorbitant salaries to important people, either because they're actually that much in demand in the labor market or because they own the company; they just won't be able to make the rest of us finance their generosity. It may be simplest to peg the allowable deduction to median income, but it'd be better, I think, to make it a multiple of the lowest compensation amount a company pays. Thus, the more they screw their janitors and security guards with low wages (and wages paid by subcontractors count), the less they'll be able to write off as compensation to the Vice-President of Overseas Graft. There really is no reason why V-POG should make thousands of times what the night janitor makes; a hundred and fifty times as much should suffice.

Second, limit still further amounts paid in compensation to persons, subcontractors, or subsidiaries outside the United States. This, combined with current foreign-investment provisions, will prevent the flight of capital to foreign countries in the form of excessive payments. Exceptions could be made where a particular necessary service or product is only available from a foreign source, but the truth is, payments for commodities and foreign production wages aren't really a problem; nor will they be under this scheme.

1 comment:

  1. Obama should have never agreed to extend these tax-breaks for the filthy rich. Never. Never, never never.

    ReplyDelete

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