By Linda Stamato
We’re closing in on April 17th, the extended tax deadline, so reflection is in order, particularly as we are ending our tax lives with one system and beginning with another. The challenge is not for the faint-hearted:
“The tax code, once you get to know it, embodies all the essence of human life: greed, politics, power, goodness, charity.”
That’s David Foster Wallace speaking in The Pale King. About our nation’s federal tax system, none say it better.
Congress did pass “a reform” this year and some of us may actually see some savings. But most of us won’t, not in terms of holding onto more of our hard-earned cash, that’s for sure.
The nation still taxes wages and business income at a much higher rate than, say, stock gains (for which one does nothing but engage in a passive activity: Investing).
And corporations are paying, now, at a significantly lower rate, as are individuals at the top of the income pyramid.
So, essential reform remains to be done. We could start with a simplification of the tax code, a broadening of the tax base to achieve greater equity, and a decrease in the favored treatment of income from capital as opposed to wage earnings.
Closing the tax loophole that treats a large portion of private equity and hedge fund managers’ income as “carried interest” and taxing it at regular salary rates is essential. Even Warren Buffett says so.
Tax rates for corporations, reduced significantly to align with rates elsewhere and, supposedly, to provide incentives to return dollars to America from abroad, have done little more than result in stock buy-backs and returns to stockholders.
That investment at home that was promised? Well, not so much. Few workers have seen their earnings rise, either.
For years, corporations have reduced the taxes they pay by a number of legal dodges, many of them secured by corporate lobbyists. This is a fundamental issue.
Do corporations have no sense of responsibility, no sense of obligation as corporate citizens for, let’s put it plainly, the welfare of the nation?
If corporations are people — the Supreme Court has told us they are — and people are citizens, we should expect corporations to act like citizens, shouldn’t we?
Good citizens, that is — those who pay their taxes to support the nation’s needs. And now, with more money in their pockets, they should be investing at home, in their companies, in their workers, in their communities.
As corporations continue to husband their savings and engage in efforts to dodge, the rest of us who lack influence and cannot take advantage of the bent rules and new tax rates are paying taxes to support, among other things, the operation of the government that defends the nation, guarantees the rule of law, and provides funding for education, welfare and critical social needs.
Until such time as Congress begins to do its job, we need to do all we can to shame the corporations who game the system and chastise the lawmakers who do their bidding.
And, while one cannot expect any action by executive order or by regulatory bodies in the current Administration, we can vote our individual, community and nation’s interests, to rein in those who willfully avoid the requirements of citizenship.
As for what our taxes should and shouldn’t pay for? Or, to put it bluntly: “What should government do?”
Change is needed on that front too. Next column.
Linda Stamato lives in Morristown’s Franklin Corners neighborhood, and is a faculty member at the Bloustein School of Planning and Public Policy at Rutgers.
Editor’s note: The opinions expressed above are the author’s, and do not necessarily reflect those of this publication.