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Saturday, April 20, 2013

Kleinbard: Three Ways to Relieve Our Tax Hangovers

CNN op-ed:  3 Ways to Relieve Our Tax Hangovers, by Edward D. Kleinbard (USC):

Tax day may be over, but many Americans are still suffering from tax hangovers.

If it's any consolation, here's our country's best-kept fiscal secret: According to the Organization for Economic Co-operation and Development, Americans in 2012 enjoyed the lowest tax burdens as a share of our national economy of any developed country in the world. How can it be that we feel so much tax pain, but compared to other developed countries our tax burdens are so low? There are three reasons.

The first is the corrosive effect of "tax expenditures": government spending programs baked into the tax code. ...

The second reason for our low threshold of tax pain lies deeper: We have allowed our fiscal debates to be framed in a way that highlights only the pain of opening our wallets. We can see this backward framing of the issues, for example, in the debate over sequestration, where it is claimed that because taxes cannot rise further, spending must be cut -- without any examination of what purpose that government spending serves. By ignoring the uses to which tax revenues are put, these debates implicitly deprecate the very purpose of government. ...

The third reason for our low tolerance for tax pain is that the federal government in particular collects its showpiece tax -- the personal income tax -- in the most painful way possible, by asking each of us to assess the tax against ourselves. For most Americans, that means starting from a blank form and a shoebox full of miscellaneous pieces of financial data. Self-assessment is probably unavoidable, but the pain can be mitigated if the IRS were to send taxpayers a "prepopulated" tax return that reflects the data already furnished to the IRS. ...

Tax time will never be pleasant, but making form preparation easier, understanding better how government spending buys useful goods and services, and re-examining the tax expenditures in our tax code at least can mitigate our tax pain.

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Comments

Here's one tax expenditure that can be eliminated immediately with no loss to the public, and in all likelihood would be met with public acclamation. Amend section 162 (and other IRC sections as need be) to prohibit any deduction from gross income for any amount spent by anyone to publish the views of former Capitol Hill tax staffers. End the revolving door.

Posted by: Jake | Apr 20, 2013 2:07:56 PM