The Tax Burden That We All Share

For almost 20 years I had employees. You never know the pain of human resources until you supervise others and are directly responsible for their workload and overall employment.

It’s no fun.

As with every office, we had certain rules about decorum. We also had rules that were specific to me.

I’m a bit sensitive to smell, so I asked employees to lay off heavy perfume or cologne. This was harder for the men than the women. Apparently, guys take the Axe commercials seriously, thinking they have to bathe in the stuff.

In the same vein, I didn’t allow tuna fish salad in the office. One of my college roommates often ate the dish and left the dirty bowl in the sink for days. I didn’t, and don’t, need that memory resurfacing as I go through my daily routine.

In addition to the oddball items, I also requested that employees not give me the reasons they wanted to take time off. If they’d earned the time, then it’s theirs to use as they see fit. Explaining the circumstance invites judgment, which can be a problem.

One employee might want to take a day off to get her sick grandmother to the hospital for dialysis because the normal caregiver is ill. Another employee might think his cat looks sad and simply wants to spend the day cuddling with it.

I don’t need to know these things. We have common goals at the office. Let’s leave it at that.

I feel the same way about taxes.

All citizens of the country share some common goals, such as national defense, contract enforcement, and protection of our personal and property rights. Beyond that, things get messy fast.

Our current tax regime is a tangled ball of craziness. Ordinary citizens spend billions of dollars with accountants to verify compliance, while companies spend billions on tax attorneys and accountants trying to beat the system.

The problem isn’t the tax rate. That’s simple. It’s all about deductions and classifying income.

But those considerations are the same as my employees who wanted to tell me why they needed time off. They don’t apply to everyone, so some people will find them valid reasons or deductions, while others will think of them as favoritism… and they’re right.

We give tax credits for kids to promote having children. We allow people to deduct mortgage interest to promote homebuying. There are thousands of other examples where one group or activity is favored over others.

As we consider the current Tax Cuts and Jobs Act, with all of its deductions, loopholes, and motivating credits, I’ve got a simpler idea. Let’s get rid of all of it.

In 2018, our government expects to spend $4 trillion, but the majority of that is for Social Security, Medicare, and Medicaid. Looking at just discretionary spending, the government expects to spend $1.25 trillion. Unfortunately, we also expect to run a $450 billion budget deficit.

Most tax revenue comes from personal income taxes. If we fully paid for our spending this fiscal year, we’d need to raise $1.7 trillion through personal income taxes. Dividing that among the 245 million adults in the country, that’s about $7,000 apiece.

To be completely fair, in my proposal, every person would be required to write a check for that amount. After all, no one person gets more national defense, property or personal rights protection – or anything else – than another. So why should they pay more?

Of course, this won’t work. In addition to asking my retired parents to draw from Social Security to cough up the money, I’d also have to shake it out of my young adult kids, as well as people up and down the income spectrum.

But it’s worth considering because it makes us start from the most basic point possible – what we have in common.

If we moved from an absolute dollar amount to a percentage of income, things get a bit trickier (who works, who doesn’t?), but it still gives us a starting point. From my limited research, we’d all have to kick in about 20%.

Again, no deductions, no exemptions. It’s not my business if you’re raising 13 kids on a farm, or contribute $100,000 a year to a non-profit that studies the possible emotional range of trees. I don’t care if your town has a high property tax, sales tax, income tax, or bad hair tax. We as a population do not have those things in common.

I might think some of those things are great ideas, and I might not. That’s not the point. We should not ask some parts of our nation to support others for causes that are not, without a doubt, for the greater good of the country.

And that’s where the fight starts.

Does child care exist for the greater good? Fostering the next generation sounds like a great idea, but aren’t we penalizing childless couples or childless adults in general?

And what about student loan write-offs? College certainly educates the population, but only 35% get college degrees. Why are the other 65% (plus those who don’t take out loans) subsidizing those that do?

Once we started using the tax code to punish and promote activities, we started taking sides, which seems like the wrong way to approach raising revenue.

If we set the tax code as plainly as I’ve described, we’d kill the tax prep industry. We’d alleviate billions of hours wasted on tax forms, and obviate the need for much of the debates in Washington.

After saving ourselves such time, treasure, and aggravation, we could then see what happens at the regional level. Maybe states in the South and Midwest give property tax breaks for children… maybe not. Perhaps Western states promote research and development through sales tax credits. It’s possible the Northeast focuses on higher education.

Whatever each region, state, county, or city decided to do, they could approach each situation by asking the same question: What do they have in common?

I know this will never happen, but as Congress debates the Tax Cuts and Jobs Act, and I think about gathering my documents to send them to my accountant for what will be the 20th year that he’s prepared my returns, the dream sure is nice to think about.

Rodney Johnson
Follow me on Twitter @RJHSDent

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About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.