I just read Amazon would be paying zero federal taxes this year. They used various tax breaks and credits to claim a $129 million rebate on $11 billion in profits.
This is understandable to me because, embarrassingly, I didn’t pay any federal taxes either. Others could pay several thousand on the same income.
Why am I not paying any federal taxes this year? My taxable income is lowered because: 1. I’m over 65. 2. I got capital gains deductions on stocks I sold. 3. I am an ordained minister – last served a parish in 1988 – so all my housing costs (up to fair rental value) are not counted. 4. Much of my Social Security income is not taxed. And, of course, I don’t pay FICA. Meanwhile, my children get none of those advantages. They are quite heavily taxed as they deal with the expense of raising children.
Over the years some have carved massive tax loopholes out for themselves while others make up for part of it. The rest? Well, with the latest round of tax cuts, we just borrow a missing trillion each year.
The solution? Make all income subject to the same rules! Keep a standard deduction for all and retain a progressive tax rate (higher incomes taxed at a higher rate) if you wish, but eliminate all income distinctions. I would still offer tax credits to help with child care, energy upgrades, etc., but that is a different subject. The key point is that all income counts the same.
However, there is one, and only one, refinement that must be made to that rule. The time value of money must be considered. If I bought a property for $5,000 in 1945 and sold it for $55,000 in 2018 I absolutely did not make $50,000. Instead, I had a $15,000 loss in today’s dollars.
We can make our tax code vastly simpler and fairer by considering all income in the same way. If, in addition, we funded the IRS so proper enforcement could be done, we could be fiscally responsible with everyone, including the very rich and folks like me, carrying their fair share of the load.