Tags: tax | reform | economy | trump

The Illusion of Tax Reform

The Illusion of Tax Reform
Robert Hyrons | Dreamstime

By    |   Monday, 11 September 2017 09:20 AM

Congress and the administration are going through another of their well-rehearsed performance of the Tax Reform Illusion.

The taxpayers should expect from their political leaders an endless recitation of the real or imagined failures of the income tax system — and how they will, this time, save the taxpayers from devastation.  

Playing into this vast deception of the public are all the tax experts, media reporters, think tanks, consulting firms, and vast numbers of other who, directly or indirectly, owe their livelihood to maintaining the income tax system.

Income tax has become sort of secular religion where belief in its preservation is never doubted.  Like any other sacrosanct creed caught short, flaws are humbly admitted and promises to reform piously made.

The Democrats make no bones about wanting to raise taxes on the productive to redistribute to the voting unproductive.

The Republicans made tax reform a big part of their campaign promises.

What is holding up the Congressional Republicans fulfilling their tax reform promise?

Simply this, the Senate has two self-imposed rules.

  • The first, requiring a 60- vote majority to enact tax legislation. 
  • The second, requiring tax neutrality for any cut in taxes.  

If the Senate got rid of the first, then the second would no longer be a hindrance.

If 104 years of tax history tell us anything, it’s that any tax reform legislation will cause more tax law, additional layers of complexity, and extra tax benefits for favored voting groups and campaign contributors.

The Senate Majority Leader, Mitch McConnell, is steadfast in upholding the Senate’s rules over any other consideration.

The top 10% of the taxpayers pay 90% of all the income tax.

What normally happens to these top 10% taxpayers when Congress, following its rules,  passes an income tax reform act?

PRE-TAX REFORM

  • Income                   $1000
  • Less deductions      $400
  • Amount taxable      $600

Tax rate 40%

  • Tax payable             $240

                                                                             

POST TAX REFORM

  • Income                      $1000
  • Less deductions         $200
  • Taxable                      $800

Tax rate 31%

  • Tax Payable               $248            

If Congress stays true to form, then the result of tax reform this time around will be that the top 10% of the taxpayer's  marginal rate of tax goes down, but tax payments go up to 91% of all the income taxes.

Without Mitch McConnell dispensing with the Senate’s filibuster rule, then any hope of tax reform legislation coming out of Congress will be only an illusion. 

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

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Without Mitch McConnell dispensing with the Senate’s filibuster rule, then any hope of tax reform legislation coming out of Congress will be only an illusion. 
tax, reform, economy, trump
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2017-20-11
Monday, 11 September 2017 09:20 AM
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