"When the tax code was created in 1913, it was about 400 pages," House Budget Committee chairman and former GOP vice-presidential candidate Paul Ryan reminded everyone Monday on his Facebook page. "Today, it's over 70,000 pages. We need to simplify the code and make it fairer to American families."
Ryan's right. The tax code has gotten out of hand. Too many people spend too much time and too much money trying to navigate its complexities.
Moreover, not enough people have skin in the game. It should never be forgotten that something on the order of 47 percent of American households pay nothing to the federal government in income tax.
The primary burden is on the affluent, the wealthy, the successful. It's what progressive taxation is all about, all the better – as President Barack Obama said while campaigning in 2008 – to spread the wealth around. But, like cancer, tax exposure is spreading. And, under Barack Obama (who pays an effective tax rate of 18 percent), things have only gotten worse.
Writing in the Washington Times, tax fighter Grover G. Norquist said, "President Obama was elected with the central promise that he would only raise taxes on those earning more than $250,000 a year. It took him all of 16 days to break that promise. His first tax was on tobacco: The average tobacco user earns $40,000 a year. Obamacare has seven taxes targeting middle- and lower-income Americans. His 2013 budget hits the poor and middle class again and again, targeting tobacco users and energy consumers."
Somewhere along the way everything got turned upside down. The government grows without any concern as to the ability of the American people to pay for it. In this, they are being transformed from citizens into clients or, as some people think of it, slaves – working for the government for much of the year before their federal, state, and local tax obligations are paid, leaving them free to work for themselves.
The federal income tax has now been with us for 100 years. Its legacy is more and more taxpayers saddled with the responsibility for higher taxes as government debt and deficits have continued to grow.
In 1913, when the income tax first came into being after the passage of the 16th Amendment, the top tax bracket was 7 percent. Now, as Norquist's Americans for Tax Reform reminds us, it's 39.6 percent. The bracket range initially ran from 1 percent to 7 percent while it now extends from 10 percent to 39.6 percent. In 1913 the top tax bracket threshold, in 2013 dollars, was $11.6 million. Now it's just $450,000. Total tax revenues, again in 2013 dollars, were $16.6 billion in 1913; now they are as high as $2.7 trillion.
The value of the family standard deduction has declined from 1913's $93,000 (in 2013 dollars) to $12,000 today, while the total number of Form 1040s filed with the Internal Revenue Service has grown over 100 years from 358,000 to 140 million.
The tax code is too complex, too cumbersome, and too anti-competitive for a 21st century industrial, global economy. Tax reform is needed now more than ever. A streamlined code that is fairer, flatter, and simpler – as reform advocates like to say – will lead to more efficiencies which, in turn, will help produce economic growth.
The current code is outdated, full of too many special interest exemptions. It also has too few people invested in what it says and what it does, which reduces the political pressure for change. As the saying goes, those who wish to rob from Peter to pay Paul will always have the support of Paul.