Opinions

For real tax reform, simplify the system and put the middle class first

For more than 45 years now I've done my taxes armed only with a pencil, the tax instructions and a calculator. I vehemently support comprehensive tax reform. You don't have to read the entire tax code to conclude that our current tax code is riddled with special interest giveaways and preferential treatment for certain groups.

However, unlike the current outlines being bandied about in Washington, I believe that any tax reform considered or enacted must meet three critical criteria:

• First, it must not expand the deficit beyond current unsustainable levels, and if possible reduce the national debt over time without relying on unrealistic assumptions for growth or the fallacy of "trickle-down economics."

• Secondly, any change in the tax code must maximize benefits to the middle class and not to those holding the majority of the wealth in this nation.

• And finally, we must address growing income inequality, which fueled both the leftist "Occupy" movement and the ire of the Republican base, and threatens our democracy with a growing oligarchy.

[GOP needs tax reform, or the Democrats will clean up in 2018]

Unfortunately, every current tax reform plan fails miserably in meeting these three critical criteria. So how might tax reform be accomplished?

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• Simplify the tax code. Eliminate ALL exemptions in current itemized deductions, including state/local tax deductions, mortgage interest deductions and charitable contributions. The alternative minimum tax, earned income credits and child care/dependent credits should be abolished. Incorporate the net of these special interest supporting deductions and exemptions into the standard deduction that applies to all taxpayers.

• Revise corporate tax codes to keep American business competitive globally and enable repatriation of funds for investment in America. Balance the corporate tax by providing preferential treatment for small/pass-through business, the heart of the middle class economy, while taxing the biggest corporations at an appropriate rate.

• Establish the tax brackets and rates to benefit 90 percent of Americans. Tax cuts here will maximize benefits in terms of growth as well as political support for major changes to the tax code.

• Increase the effective tax rate on the top 10 percent of earners. Tax this group on all income from salary, bonuses, stock options, investments and real estate transactions. The estate tax, easily avoided by the super-rich but punishing for family-owned business, should be abolished.

[Tax reform? Even with bipartisanship, there's a long slog ahead]

These steps, while unpopular with major campaign contributors, can meet the three critical criteria outlined above.

The current rates and limits being thrown about in Washington appear to be derived from polls rather than analysis. Everyone gets a cut to cheer about while relying on the nebulous objective of "growth" to make it all balance out.  Baloney! But our leaders, applying solid data and analysis, rather than pandering to the pollsters and perceived political benefit, can pencil it out. They can forge a solution that benefits all Americans and have a duty to do so.

It won't be easy, but I believe it is possible through focused and consistent effort by Congress. If the Republican-led Congress is unable to enact bipartisan comprehensive tax reform, or, even worse, enacts tax reform that lacks common sense, I can only hope the electorate is not naïve enough to rejoice in their small piece of a tax cut. We need confirmation that tax reform is not a cut, but common sense change that best supports the needs of the nation, not merely a benefit to the rich and powerful. Anything less will result in a serious backlash that cannot be countered by exorbitant campaign spending in future elections.

I sincerely hope that the Alaska delegation, representing one of the most diverse and egalitarian states in the union, can have a positive impact on the tax reform debate, encourage bipartisan solutions and work toward stable, sensible and fair tax reform. It is possible but only with the application of common sense, quality analysis and the leadership required to do the right thing, rather than what is merely politically expedient.

If we get this one right, it might even restore our trust in the federal  government. Ultimately, we may get a future system where the IRS does all the work armed with quality data, leaving us to concur or contest — and I can put down my pencil. Hey, we can dream, can't we?

Dan Bonney is a retired career military officer who describes himself as frequently frustrated by the stupidity in Washington, D.C. He lives in Eagle River.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com. 

Dan Bonney

Dan Bonney is a retired career Army officer from Eagle River.

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