The New York Times has a must read article this week exploring tax loopholes. (I know, I know. You’re rolling your eyes and scoffing about an article on taxes described as a “must read.” But, seriously: go check it out.)
The article dives into anecdotes about auditing, some "most ridiculous" cases, and answers the title question: "What’s the easiest way to cheat on your taxes?" But then the writers tackle the question of why the system seems so weighted against regular people, to the benefit of corporations and the rich.
First, experts agree that the tax code is written in a way to benefit the wealthy:
Businesses, rich people, Congressmen and attorneys spend a shockingly large amount of time lobbying for tax breaks or exploiting the ones that exist. When the modern income tax was created in 1913, the code was 27 pages long. Last year, it was 5,296 pages.
Second, the tax code is constantly undergoing revision in a way to benefit those same groups, while leaving the burden of full taxation only on those without paid representation.
The government didn’t set out to target these people [who have no or few tax exemptions] — it’s just that married people who rent and make a decent living don’t hire lobbyists or attract activists to write op-eds.
And third, experts debunk the notion that tax cuts pay for themselves. Even conservative policy economists acknowledge that the only thing we know about lowering taxes is that it lowers government revenue needed for schools, safety, and other important public services.
Politicians sometimes say that lower tax rates lead to higher economic growth, which in turn leads to higher overall tax revenue. This may have been true in the early 1960s, when the top tax rate was 91 percent, but the top tax rate today is 35 percent. For decades, lower tax rates have led to lower government revenues, says Alan Viard, an economist at the American Enterprise Institute, a conservative policy group. “The Reagan tax cuts, on the whole, reduced revenue,” he explains. “The Bush tax cuts clearly reduced revenue. There is no dispute among economists about that.”
Our tax system is exquisitely complicated. As the authors of this article write, “If economists ran the tax system, there would be virtually no exemptions or loopholes. But economists don’t run the tax system!” Lobbyists for big businesses and the wealthy do. In the meantime, the rest of us dutifully pay our share and wonder why our taxes aren’t enough to adequately fund our schools, bridge construction, or other public services we’re all counting on.