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Another Tax Reform Argument

As I have said before progressive tax schemes are seldom actually progressive. The required complexity virtually ensures that those with more resources can pay lower rates while those with less resources pay higher ones. The reason for this is that the higher tax rates imposed on top earners becomes filled with loopholes to try and influence their behavior. For example:

Foreign investment receives some perks the domestic investment does not. The reason for this is simple and makes sense. I don’t even think I need to go into it.Attracting foreign investment is essential to any economy.

Another example is when the government wishes to support certain industries, ethanol lets say. Those who invest in ethanol may get higher returns on their investment due to the lower tax rates imposed to encourage this behavior.

Again, those who can afford to go though the tax code can find ways to behave that lower their tax burden. I would argue that this type of behavior modification likely increases the “evil” income gap, rather than redistribute anything efficiently. Lets take a look at the graphic that I stole the other day:

I needed a day to do some fact checking, to the best of my knowledge this is pretty accurate.

The complexity has ensured that the more resources one has, the easier it is to lower ones tax burden.

Can one person even read that much? Lets see:

Reading 250 pages a day, It would take you 290 days to read the tax code, with enough left over for a bathroom break on day 291.


Dear me.

As far as I can see, there are additions, deletions and other changes made every year, so no person can be familiar with the whole thing. Clearly a simple tax code, such as a flat tax, negative income tax or national sales tax would be more equitable, just and fair.

Update: You can get the whole thing in just 25 loose leaf volumes if anyone wants some light reading. It’s only 3200 dollars! If you start now you can be done reading by the time you need to pay your taxes next year.

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