the profseitz blog

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Political, Not Pretty: How to Fix the Tax Code

Compared to other developed countries, the United States doesn’t collect much tax at all. Tax revenue at all levels of government adds up to less than 25 percent of the nation’s gross domestic product, putting us behind every other rich country and even some poor ones.

via A Tax Code of Politics, Not Practicality – NYTimes.com

There are several illuminating things in this article that I want you all to think about.  First, are you surprised by the fact that we pay lower taxes here than in other wealthy countries?  The highest tax country in the world, Sweden, has a tax rate of over 40%.  Now that may seem high, but let’s compare Apples to Apples… The table below is from OECD data and YES, it’s a bit dated, but I think the point still stands.  Here we see that when you add to our tax rate all the amenities that we pay privately, including health care premiums, retirement, daycare, and education, we wind up paying BASICALLY THE SAME AMOUNT, and one would suspect that we may not be getting the “bulk” discount a government might get by purchasing these services for a whole nation…what do you think?

Now, this whole taxation matter is made MUCH worse by the fact that there is a perception (which is most likely proven true by the data) that our tax system is “unfair” – that we are paying our fair share of taxes, but everyone else is getting away with something.  The complexity of the tax code in this country can only come from a hyper-political process, where expect ions are made for particular industries that donate, and where politicians use the tax code to incentivize and disincentivize certain behaviors – like buying a house, because the interest is deductible). It seems to be some magical process that no one understands and a number pops out each year that you either owe or go to Vegas with!  Do you do your own taxes? Do you feel like our tax code is too complex?

Now, to go beyond just complaining about taxes, what might we do to fix the tax code?  Would one simple rate for everyone make folks feel that everyone is paying their fair share?  What would you do to fix the tax code?

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This entry was posted on April 12, 2012 by in Uncategorized.
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