Congresswoman Alexandria Ocasio Cortez’s gown worn at the Met Gala that read “Tax the Rich” sparked both outrage and support. Regardless of where you stand on the issue, it opens up the opportunity for a discussion on taxation. Changes to the tax structure are popular themes during elections and when trying to get media attention, but they lose momentum when it comes to governing. A change in taxes could change the support base of an elected official and therefore changing the tax structure is not worth the political risk. It’s easier to just spend and let someone else figure out how to pay.
It doesn’t have to be. Like any change, backlash can be mitigated by putting in place a fair and transparent system that everyone is aware of. Any tax, but above all a new tax or a change in the tax structure, should derive from these four principles: Neutrality, Transparency, Simplicity, Predictability. These four principles will help ensure the implementation of a just system and lead to a more informed debate on what needs to be done and why. It can also help depersonalize and depolarize the debate if we focus on first principles rather than sound clips.
The principle of neutrality is simple. The tax structure should not favor one interest or category over another. The purpose of taxes is to generate income that contributes to the public good. Taxes should not punish or reward one group over another. Fines, penalties and subsidies are punishment and reward mechanisms, taxes should be neutral.
Transparency is an essential characteristic which is also at the heart of democratic government. In a democracy, a policy and its effects must be clear. It should always be clear who pays taxes, how much, and for what purpose. It becomes an almost impossible task in our current tax structure – with volumes of codes and exemptions – which leads directly to the third element: simplicity.
Since the 1950s, the federal tax code has grown from 1.4 million words to over 10 million – 13 times more than the Bible. This prevents most citizens from knowing who is paying what and why. It also makes a political debate on taxes impossible. No one, or at least very few, will be able to disentangle our tax code and its almost endless implications for the rest of us in order to have an informed debate. A murky and complex tax system not only makes reasoned debate impossible; it erodes trust in those who make and enforce the tax code.
Predictability comes from simplicity. Every taxpayer needs to know what to pay, why and when. If you’ve ever been surprised at the amount of an income tax refund or an income tax bill, then you will agree that the current income tax structure is unpredictable. This can also be true for property taxes. A tax appraiser, insurance company, and real estate agent will all appraise the same property at different amounts. Each of these experts would have to come to the same conclusion if there was an objective way to value real estate.
There will always be a debate about the tax rate and who should pay. Currently, we cannot have a productive debate about what needs to be done because we don’t know what is being done and we cannot link the effects to the cause. Before moving forward with a tax debate, we need to clarify what makes a fair tax system. It won’t eliminate the disagreement, but it does mean that we can have a sane discussion of what should be taxed and by how much. The current tax system is an ambiguous and complex arrangement of random distribution of wealth without any liability. This means that there can be no informed and civil discourse and will only amplify polarization and disinformation.
Kyle Scott, Ph.D., MBA, is Communications Officer at the 1889 Institute of Oklahoma City. He can be contacted at [email protected]