Toward a FAIRer tax

Most criticisms of our tax code center on the fact that it's much too complicated, and it favors the wealthy at the expense of the poor.

Criticism about the tax code's complexity is accurate, but it may come as a surprise to many that the part about exploiting poor people is nonsense. Despite the "tax cuts for the rich" President Bush passed early in his first term, the wealthiest Americans ended up carrying more of the federal tax load than ever before. According to the nonpartisan Tax Foundation, up to 40 percent of Americans - those from the middle- to low-income brackets - pay no federal income tax at all.

The foundation reveals that 89 million Americans didn't have a high enough income to pay federal taxes last year, while another 42.5 million tax filers found, after they took all their deductions and credits, that they had no tax liability.

This is distressing, says Tax Foundation President Scott A Hodge, as America is becoming divided between a growing class of people who pay no federal income tax, and a shrinking class who bear most of the burden.

People who pay no federal taxes have no incentive to cut them. In fact their incentive is to keep raising them if it means more government benefits. Obviously, as Hodge points out, this makes tax reform difficult to accomplish, because non-taxpayers stand to gain nothing by changing the system.

Also fighting meaningful tax reform is the cottage industry of tax and legal experts who make billions off the dysfunctional tax code.

In a truly fair and democratic society, says Hodge, the tax base would be broad based with everyone paying their fair share. Serious tax reform should be designed to bring back into the tax system all nontaxpayers who can afford to pay some taxes, but aren't.

The Tax Foundation has recommended to President Bush's tax reform commission that a single-rate tax be levied on consumption or income. This would bring everybody back into the tax system, so the tax could be relatively low. The foundation's recommendation is very much in line with the FAIR Tax plan that this newspaper has long endorsed - a national retail sales tax of about 25 percent that would cover all federal expenditures, including national defense, Social Security, and Medicare.

The tax would exempt necessities such as food and medicine and rebate legitimately poor people who honestly can't afford to pay the tax. The tax is fair; wealthier people would still pay most of the taxes because they consume more. But no one could dodge the tax, because they would pay it whenever they made a purchase.

We're encouraged by the Tax Foundation's recommendations and urge the tax commission, President Bush and Congress to take them seriously. Let's enact real tax reform before taxpayers and the nonpayers tear this nation apart.