A few years ago Malcom Forbes (I think it was) proposed a 17% flat tax – the same rate for everyone, no loopholes. That proposal would actually have increased revenue. How is that possible? Lower rates for everyone, but higher revenue? Crazy! But true. The increase in revenue comes from what Forbes (I think) called “loopholes”.
“Loophole”, when applied to the tax code, is a conservative code word that the liberals have not deciphered. Because really, no one wants loopholes in the tax code. Loopholes allow the rich to get richer, at the expense of the little guy. Of course liberals hate loopholes.
But in this case, “loophole” actually means “policy”. There are essentially two ways for our government to fund a goal: collect money and then distribute it where needed, or not collect money from where it’s needed in the first place.
Ideally, the tax code would be about exactly one thing: collecting revenue. But it is MASSIVELY more efficient, especially with our terribly inefficient government, to not collect money than it is to collect it, filter it through the bureaucracy, and return a fraction of the amount to the point of need.
Our current tax code is a relatively simple set of rules for collecting revenue, and a gargantuan codex of exceptions. Many, perhaps even most, of those exceptions are defensible for the good they do. Food for hungry children. Incentives for businesses to reinvest in themselves. It’s all over the map.
There are also purely evil clauses in the tax code, carefully designed to benefit specific campaign donors. Actually, there’s quite a lot of those. Actual loopholes.
So: we can’t just wave our hand and sweep tax law clean of all “loopholes”. A lot of people would suffer, and finally we’d pass a bunch of other laws to fund those goals in a less-efficient manner. But somehow we have to weed out all that evil.
From an engineering standpoint, it’s simple. Break the one huge, incomprehensible law into maybe five hundred smaller laws.
First you have the tax revenue collection law. It’s a simple baseline describing brackets or whatever. How we bring the money IN.
Second you have a framework that allows separate laws for single, specific exceptions to that rule. Single. Specific. Each voted on by congress separately.
“Madness!” you cry. “My legislator could never understand 500 separate bills well enough to vote responsibly.” You’re probably right, but your legislator already cannot understand the 500 exceptions in the one tax bill she votes on now. At least she could abstain on policy decisions she couldn’t get to.
So much debating, so much deal-making… so much more work for our legislators. THAT’S THEIR JOB! And when the chips fall, we will have a list of who voted for each provision independently. We would have an exact list of the people who supported “cash for bankers” and who supported “breakfast for children”. There would still be deals, but the deals would be a lot more transparent. And I think that’s a good thing. Each provision of the code would have to stand on its own merits. It is exactly what our legislators DON’T want. It’s a lot harder to hide the fact that you’re in the pocket of a special interest when that vote sits out there on its own.
Implementing this plan would be bloody and painful. Cash cows would wither in the light of inspection (vampire cash cows?), political careers built on hiding shit in the tax code would end. On the downside, the turmoil would probably paralyze government for a year or two, and more than a few of the programs I deem worthy would not survive. People would suffer.
But honestly I think the pain would in the end be worth it. If every “loophole” were scrutinized separately, we could eliminate a lot of pork while making the government a much more efficient expression of the voice of the people.