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BOHANON & STYRING: Tax fairness begins with government honesty

October 14, 2017

Economic AnalysisCongress has “pivoted” from health care to taxes. This means we’re doomed to much high-sounding rhetoric about “fairness.” Sen. Russell B. Long, Senate Finance Committee chairman from 1966 to 1981, was known to invoke an old saying when asserting that the only thing a politician needed to know about tax fairness is, “Don’t tax me. Don’t tax thee. Tax that man behind that tree.” It’s always some third party who isn’t paying his “fair share.” If we could only get these scofflaws “behind the tree” to pay up, government could provide all the good things of life with no pain. Well, no pain to whatever audience the politician happens to be wooing at the moment.

Here’s a better idea. Let’s have transparency about taxes before we try to conquer new “fairness” mountaintops. So herewith we offer Cecil and Bill’s Three-Point Plan to Tell It Like It Is.

1. Abolish the corporate income tax. Attribute corporate earnings to shareholders and have them pay income tax. Astute readers of this column know corporations don’t pay taxes. People (shareholders, employees, customers) really pay the corporate tax. Fine. Make real people pay. This gets rid of the Big Corporation “man behind the tree.”

2. Fully fund Social Security with government bonds. Actuaries tell us Social Security is $80 trillion in the hole. Make it “solvent” by issuing $80 trillion of new government bonds and giving them to the Social Security Trust Fund. If politicians are serious about “not cutting Social Security,” this doesn’t change a thing. It recognizes the promises we’ve made to our elders. If our political leaders aren’t frightened of the $20 trillion in overt federal debt, maybe publicly showing the $80 trillion of equally real Social Security debt will get their attention.

3. Get rid of withholding. The IRS has managed the impossible: Make paying taxes fun for many people. Quite a trick. The taxpayer doesn’t look at how much the government has taken—only at the nice, fat refund check. Stop the periodic and unfelt drip from the paycheck. Make the taxpayer write a big check to the U.S. Treasury once a year. It just might raise the question, “What am I getting for all of this money?”

None of these things will happen. Shareholders, for example, wouldn’t like having a tax liability heaped on them where before they had none. We’d just like to take away a few of those trees men are hiding behind.•

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Bohanon is a professor of economics at Ball State University. Styring is an economist and independent researcher. Both also blog at INforefront.com. Send comments to ibjedit@ibj.com.

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