Patience is a virtue, right?

I've often commented that patience is a virtue with which I have not been blessed. Perhaps this will be one of those things that's supposed to teach me patience.

I refer, of course, to the ever elusive goal of tax simplification.

The cost of tax compliance and enforcement is mind boggling. I believe the cost of inaction in reform is much more significant than the potential costs of actual reform. Clearly, it's going to take more than the White House's panel on "tax simplification without significant reform" to make real progress. As many tax bloggers posted, the President's tax reform panel has delayed reporting on its findings (coverage includes posts from Joe Kristan, Professor Nellen, Robert Flach, Kay Bell, Howard Gleckman).

The Wandering Tax Pro directs us to a Business Week article titled Fight the Deficit Monster with Tax Reform. I wonder if perhaps things have to get really, really bad before they can get better. If so, are we just maybe getting to that point where it's bad enough for the public to harass Congress until reform happens?

I realize it's going to take awhile. I've got another 30+ years to retirement, and I like to think we'll make some progress in that time. I'm up for the marathon. I may not be the most patient participant in the race, but I've got the grit.

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Maybe next year...

TaxVox reports that the results of the President's Economic Recovery Advisory Board are likely to be less than stellar. Included in the post is the following observation:

From its earliest days, the group was forced to work under impossible constraints. Chief among them: Obama’s insistence that no one earning less than $250,000 should pay higher taxes. Exempting more than 95 percent of families and individuals from tax hikes of any kind essentially shut the door on any serious discussion of reform, which inevitably creates winners and, yes, losers.

This, sadly, is similar to my observations on the matter. It looks like we won't see any significant reform in the near future. No end in sight to massive AMT, endless credits, and a brand new Schedule L, too! Oh goody.

(Hat tip: Tax Update's Joe Kristan)

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How does that work?

As many tax bloggers have noted, the White House has requested ideas for the President's Economic Recovery Advisory Board to develop options for tax reform.

The blog includes this note:

The mandate to the PERAB is NOT to recommend a new tax system. They are to consider ideas on tax simplification, better enforcement of tax law, and reforming corporate taxes and to present the pros and cons of potential tax options... So be mindful of their constraints when submitting ideas.

I struggle to understand how we can get real tax simplification without recommending a new tax system. Maybe it's that my interpretation of the words "simplification" and "tax system" are not consistent with the government's. Because the way I see it, we can't get simplification without seriously revamping the system.

As often happens, I find myself comparing this situation to medicine (which just might have something to do with being married to a doctor). If we only change a code section here, or a regulation there, we're just treating symptoms and not the disease.

Just like when we keep adding new credits and deductions, we keep trying to cure our economic ailments with more and more medication. And from the stories I hear, more medication is not always the best answer! It often makes things worse.

In this stupor of mine, I cannot think of a recommendation to give the White House that would feel like anything more than treating a minor symptom of a dreadful disease. How depressing.

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Taxing the Rich

Taxprof directs us to a list of Seven Myths About Taxing the Rich published by Curtis S. Dubay of the Heritage Foundation.

The myth I often hear that bothers me most is listed as Myth 2: "The rich do not pay their fair share."

The rebuttal:

"The top 20 percent of income earners pay almost all federal taxes.

"The top 20 percent of all income earners pay a substantial majority of all federal taxes. According to the Congressional Budget Office (CBO), in 2006, the latest year of available data, the top 20 percent of income earners paid almost 70 percent of all federal taxes. This share was 4 percent higher than in 2000, before the 2001 and 2003 tax cuts.

"When only looking at income taxes, the share of the top 20 percent increases even further. In 2006, the top 20 percent paid 86.3 percent of all income taxes. This was an increase of 6 percent from 2000."

I agree it is not accurate to say "the rich don't pay their fair share." Some wealthy people are dishonest and don't pay their fair share, just as are some poor people. The stereotyping of the wealthy as greedy, heartless beings is what I find to be unfair, and tiresome. I concede there are greedy, heartless wealthy people, just as there are greedy, selfish poor people.

As recently posted by the Taxprof, Tax Lawyer, and Tax Foundation, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined.

Wealthy American citizens who obey the law pay a lot of tax.

Of course, when debating whether the wealthy pay their fair share, the true challenge is in defining what their fair share -- and anyone's - really is. I'd need to do a lot more studying of economics, tax policy, international tax rates, and a host of other topics before I could feel qualified to propose a definitive answer to the question of exactly what is a fair share.

What I would like to claim definitively is that "the rich" are not all bad people who exploit those less fortunate to make a buck. Many "rich people" are honest, hard-working, and generous.

Lest there be any confusion, I can declare without hesitation that I do not fall into the category of rich. But I do know and work with people who are "rich", and I am continually amazed at their success, which has come from hard work and strength of character.

A couple years ago, a smart man told me something very simple: "Successful people make and keep commitments."

Let's stop maligning successful people for being successful. Would we rather have a country full of people who never strive for excellence? I hope not.

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Something about health care

I admit it -- I have not read the legislature's draft bills for health care reform, nor do I intend to. So I'm relying on bloggers to keep me informed, which certainly doesn't make me an authority. But thanks to my lovely disclaimer, I get to go ahead and write my thoughts, lacking though they may be.

My favorite blog quote on the issue comes from Joe Kristan:

The government that brought us profitable and money-saving innovations like Fannie Mae, Freddie Mac, Amtrak and the Postal Service now is going to try its hand at health insurance.

The idea of government running the health care system scares the dickens out of me.

As with many issues of public policy, I have no problem with the ideal that everyone gets the health care they need.

It is the way in which we work toward that ideal and the sacrifices we make along the way that terrify me.

I've spent much of the past few years dealing with two very large government bureaucracies: the IRS and the military. So my confidence in a government health care system is, well, not there.

CNN Money writes about 5 freedoms you'd lose in health care reform:

1. Freedom to choose what's in your plan
2. Freedom to be rewarded for healthy living, or pay your real costs
3. Freedom to choose high-deductible coverage
4. Freedom to keep your existing plan
5. Freedom to choose your doctors

I don't much like the sound of this. But the President isn't calling to talk to me, so I'll have to settle for writing here.

Peter Pappas provides a great round-up of the discussion from key tax bloggers, and here are some posts to check out:

• Taxgirl: Congress Puts Brakes on Health Care Reform
• Taxgirl: Health Care Plan Leaves Huge Hole in the Budget
• Taxprof: House Marks Up Health Care Reform Bill
• Tax Foundation: Who Should Pay for Health Care Reform?
• The Tax Lawyer: Taxing the Rich Because You Can: The Beginning of Totalitarianism
• Kay Bell: Healthcare surtax not progressive enough

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Fair is fair

As a nation we have grown accustom to certain tax benefits, including the exclusion of health insurance benefits from income.

For most of my life, my health insurance has been provided by an employer (whether my own employer that of my parents or husband), so I've certainly benefited from the provision. But just because I benefit doesn't make it fair.

This is one of those concepts with which some people struggle. When considering the issue, an experience from high school comes to mind. It was back in my semester of Economics. During a discussion on Affirmative Action, a friend of mine spoke out against it. To her arguments, the teacher countered that she should be in favor of AA because it would likely help her (as a white female).

So that teacher lost all credibility with me at that point. Just because something helps me doesn't make it right.

For a good explanation for why it is fair to tax health insurance, I recommend the Taxgirl's post.

Of course, both the tax code and government spending are full of provisions that are not exactly fair, so maybe this isn't the issue to "straighten out" first. And the whole discussion may be irrelevant, since the measure is stalling out in Congress (see the latest post from Taxgirl). But we shall see what we shall see.

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Obama targets multinational corporations

The President spoke today of his administration's plans to increase the amount of taxes paid by U.S.-based multinational corporations.

He began his remarks with this statement: "Let's begin with a simple premise: Nobody likes paying taxes, particularly in times of economic stress. But most Americans meet their responsibilities because they understand that it's an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being."

Agreed!

Here are a few key statements he made:

• "For years, we've talked about shutting down overseas tax havens."
• "I'm asking Congress to pass some commonsense measures."
• "These and other reforms will save American taxpayers $210 billion over the next 10 years."
• "We're beginning to restore fairness and balance to our tax code."

So what is the plan?

The White House released a Fact Sheet on its plan, which provides detail on the following goals:

(1) Replacing Tax Advantages for Creating Jobs Overseas With Incentives to Create Them at Home

• Reforming Deferral Rules to Curb A Tax Advantage for Investing and Reinvesting Overseas
• Closing Foreign Tax Credit Loopholes
• Using Savings To Make Permanent The Tax Credit for Investing in Research and Experimentation at Home
  

(2) Getting Tough on Overseas Tax Havens

• Eliminating Loopholes for "Disappearing" Offshore Subsidiaries
• Cracking Down on the Abuse of Tax Havens by Individuals
• Devoting New Resources for IRS Enforcement to Help Close the International Tax Gap
  

What's next?

We'll see how this all plays out with Congress. Here are a few links for more on the story...

The Tax Lawyer's Blog: Obama Vows to Close Foreign Tax Loopholes
TaxGirl: Obama Set to Shake Up Corporate Tax "Loopholes" Today
CNN Money: Obama plans corporate tax crackdown
Bloomberg: Obama Seeks End of Corporate Tax Break

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