Tax reform

Conservatives have won the debate on taxes—for now. No one likes to pay for things, and anti-tax zealots have tapped into this frustration and anger to set the terms of the debate. They've framed every tax increase as government overreach and an assault on liberty, and voters have lapped up their rhetoric, sometimes against their self-interest. Ted Cruz comes to mind, with his utterly logic-deprived and thus unworkable  "close the IRS" demagoguery.

It's time to change the conversation. Rather than view taxes as an imposition, it's time to recognize the immense amounts people get to keep after taxes. And it's absurd. Those with million-dollar annual incomes—even those who play by the rules and don't use various loopholes to pay nothing —still get to keep over half a million. Every year. This is not even to mention the billionaires who increase their wealth by several percent every year on interest alone—that is, without putting in any effort in whatsoever.

People often talk about the wealthy as if they have earned most or all of their success. This is not only offensive to the millions of blue-collar workers who toil every day in menial jobs and barely scrape by—it's also simply not rooted in reality. The vast majority of the ultra-rich got where they are as a result of favorable family circumstances, or luck. Were we to quantify how much of their success is a result of their own effort, it wouldn't exceed 10% in the vast majority of cases. So why do these people get to keep 65% of their income? Something is seriously wrong here.

 

Living comfortably after taxes

Underlying any discussion about taxes needs to be a realistic assessment of how much money people need to life comfortably. It's simple to figure out—private and governmental organizations produce cost of living indexes to measure this exactly. We know for a fact how much a person in a given situation needs to live at a reasonable standard, taking into account family size and the cost of goods and rent. Knowing what we do about the cost of living, there is no reason for anyone to make more money than necessary for a comfortable lifestyle. Luxury cars, luxury watches, and so on are nothing other than tools to enable the human tendency toward greed. There is absolutely no justification for someone to accumulate excessive wealth. To suggest there is, is to suggest that the wealthy are more deserving, and thus inherently better people. We know from repeated experience that this is not the case. If anything, those who accumulate wealth are often both the least ethical and the most detrimental to society. If anything, people with character traits that make them good bankers—and who act upon those impulses—deserve to make less than others who practice good ethics.

So let everyone keep as much money as someone in their situation needs to live comfortably. Allocate the excess income to those in lower-paying jobs who are being under-rewarded. Any income left after allocating taxes to social programs and cost of living can be given as a one-time bonus on a case-by-case bonus. Just as with corporate bonuses today, it's not guaranteed and may be taken away at any time.

Rather than think about taxes in a negative sense—how much of their income a person will lose—it's time to think about them in a positive sense: how much income a person gets to keep.

 

Examples

For example, someone making $1 million today with a family of four in New York will get to keep $200,000. This will be more than enough to cover rent, food, health care, and plenty of entertainment, even if their spouse isn't working. One thing it won't allow for is the purchasing of luxury cars (which serve only to incite class warfare, appealing to the basest human instincts). If this person wants a car—which is entirely superfluous in a transit city like New York—they will need to sacrifice other things, like expensive new TVs and laptops. They will make enough money to live comfortably, not wastefully.

Meanwhile, a single parent in Omaha, making $30,000 today, will keep all of that and receive compensation of an additional $20,000 to provide proper nutrition, health care, and developmental opportunities for their child. They will live comfortably, and yes, they will probably have a refrigerator.

If a person generates enough revenue for their employer, and does so without simultaneously destroying wealth elsewhere (as bankers have been proven to do at a 7:1 ratio), they may be granted a bonus. Factors in deciding bonuses include the societal benefit of their work (education and finance stand on opposite ends of this spectrum). The key to making bonuses fair is that the government delivers them, and without an eye toward self-enhancement (profit). No longer are corporations able to make perverse reward structures where those, for instance, who crash our economy make out with any bonus at all, let alone a hefty one. Those who harm others deserve only a subsistence income.

What I'm proposing is a transition from a mostly capitalist society to a mostly socialist one. It's a fair and equal society with incentive to produce. It combines the best of capitalism with the best of socialism while smoothing out the rough edges of each.

 

Enforcement

The most obvious question is enforcement. The good news is that we already have an organization with 90,000 employees ready to get to work: the Internal Revenue Service, of course. Whereas these employees now spend much of their time auditing the poor and processing deductions for the wealthy, they will start assessing the income a person deserves to keep. They'll be given greater latitude to assess individual situations—rather than assume the wealthy deserve their income and the poor deserve their lack of it. By drastically simplifying the tax code, these people can do meaningful work that requires human judgment, not bureacratic processing better suited to computers.

To make good use of the revenue, we need a more muscular government — one that isn't hobbled by anarchist Tea Partiers. Our federal government has as one of its foundational functions the collection of taxes for the greater national good. The creation of outstanding public works following World War II and the 2008 recession speak to the value of fair taxes that treat the rich like all other human beings.

The Democratic candidates in the 2016 election have started talking about the issues. A realistic hope is that our next president can rage the top marginal tax rates before 2020 closer to 50% (as seen in the U.K.) The results will speak for themselves. When Americans see that our economy is healthier and that the middle class is stronger, they will start to support truly fair income distribution.

Those who believe in meritocracy should recognize the incontrovertible fact that our tax system is broken. It is anti-egalitarian. And they should be the first to fix it.

You can also find an older version of this post on Medium.