By Orange County Register, Santa Ana, Calif.
When laws are arbitrary and indecipherable, public trust suffers. One hundred years ago, the 16th Amendment to the U.S. Constitution was ratified, creating the federal income tax. The law covered 400 pages, and the top tax rate was a petite 7 percent on earned income of more than $500,000.
As every income-tax-paying American is reminded this time of year, we have come a long way. The U.S. tax code today entails 73,608 pages, which, it is safe to assume, have never been read by the vast majority of people who must comply with the contents. A decade ago, one observer noted, the IRS tax enforcement army had grown larger than the U.S. Army in Iraq.
Income taxes, as the libertarian Cato Institute observes, are a bad idea that got worse. There is not even a consistent understanding in the tax code of what constitutes “income”; the law differentiates among bonds, dividends, savings, wages and capital gains.
The income tax distorts financial planning and business investment. It rewards tax avoidance and evasion. Something is wrong when a law is measured by how well people avoid it.
“The fewer economic decisions that are made for tax reasons, the better,” notes the nonprofit Tax Foundation’s Center for Federal Tax Policy. But U.S. income tax laws are a study in how to waste time and money and misdirect resources.
Washington is shamed by Russia, which in 2001 became the first major nation to institute a flat 13 percent tax. It spurred economic growth and boosted revenue. Russia’s neighbors Estonia, Lithuania and Latvia followed suit and saw similar results.
On this centennial of the U.S. income tax, we are reminded of the need for reforming our arbitrary, indecipherable tax code.
Orange County Register, Santa Ana, Calif.