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GUEST COMMENTARY: Not all taxes have to hurt

Friday, November 11, 2011 | 4:06 p.m. CST

Taxes are deeply emotional and make for hot political theater. Whenever the T-word is blurted out, our anxiety zooms.

That's the whole idea. Millionaires, who rightfully are the target for paying more, want us to think that any changes in the tax code will mean that we'll all be paying more too.

Not so. The goal with this reform is to finally catch up with those shadowy, double-breasted, wing-tipped figures with turned-up collars. They don't want us to see them, but they're there.

These are the folks who quietly take big positions in the stock market, buy or sell masses of foreign currencies, or speculate millions in derivatives. There's no tax on any of these purchases.

For the wealthiest investors, money made from these transactions is their regular income. Compare that with your own purchase or sale of a car or house. In most states, purchases for us normal folks are taxed to the hilt.

Happily, America's nurses, Bill Gates and a good sampling of economists all want to tax those speculative deals, either to pay directly for good causes or to reduce government deficits.

National Nurses United has already protested in 60 cities in favor of a half-percent tax on Wall Street. The union points out that it could raise as much as $350 billion annually.

And that's not all. The oh-so-familiar sales tax also harbors a glaring loophole, namely that it's hard to enforce on phone or Internet purchases. Of course we all know and love that loophole.

But this sneaky discount for online shoppers is quietly putting states, counties, and cities in the red, while putting local merchants in the tank. Real stores can't compete if they have to collect it while electronic sellers don't. One more nail in the coffin of our downtowns.

Known informally as the "Amazon Loophole," in honor of one of its prime beneficiaries, several states are now trying to work out a means of collecting an Internet sales tax themselves. At the same time, they're pressuring Congress to create a national Internet collection system. You can just imagine how the industry is lobbying to fight that one off.

There are plenty of other high-profile tax loopholes. They mainly benefit the big corporations and hedge funds with enough money to pay lobbyists to create them.

Tellingly, The New York Times last year ran a photo of an ordinary-looking building in the Cayman Islands that provides postal box addresses to hundreds of U.S. companies. This certifies them as "foreign" corporations, thus eligible to receive favorable tax treatment.

General Electric famously paid no U.S. corporate income tax at all last year by making creative use of this gimmick and similar ones.

And did you know that the supposed ills of Social Security stem largely from not collecting that tax on income above $107,000? How did that happen?

Our tax structure is riddled with loopholes like these. There's no need to cut valuable social programs when such relatively painless revenue sources remain untapped.

OtherWords.org columnist William A. Collins is a former state representative, a former mayor of Norwalk, Conn., and a member of the national board for Veterans For Peace.


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Comments

Jimmy Bearfield November 12, 2011 | 6:27 p.m.

"And did you know that the supposed ills of Social Security stem largely from not collecting that tax on income above $107,000? How did that happen?"

The tax has a cap because benefits are capped.

(Report Comment)
John Schultz November 13, 2011 | 12:05 a.m.

And according to http://www.cato.org/pub_display.php?pub_... removal of the Social Security tax cap would only add a few years to the 100% solvency of the fund. Note that this piece was published in 2010, which is the most current bit I could find on the cap.

"We could always raise taxes or cut benefits enough to bring the system into balance. Some have suggested removing the cap on income subject to the payroll tax. But while that would be the largest tax increase in U.S. history, at least $1.3 trillion over the first 10 years, it would increase Social Security's cash-flow solvency by just seven years. Raising taxes or cutting benefits will make an already bad deal worse for younger workers, many of whom will end up paying more in taxes than they receive in benefits. And raising taxes will do nothing to fix the fundamental problems of ownership, inheritability and choice."

The last sentence is my biggest objection to Social Security, by the way.

I also liked Obama's sleight of hand in the linked story from the article:

"For the vast majority of Americans, every dime you earn, you're paying some in Social Security," Obama said at an event with college students in Virginia. "But for (billionaire investor) Warren Buffett, he stops paying at a little bit over $100,000 and then the next $50 billion he's not paying a dime in Social Security taxes."

Buffet pays himself a salary of $100K a year, so he pays Social Security tax on his entire income. The rest of the money he makes are from investments, which are not taxed for Social Security.

One final comment on this piece, will the author also address the massive loopholes that the middle class enjoys in the tax code, or are we only tackling the rich? I'm speaking of the mortgage interest deduction and tax credits for dependent children, among others. Why should I receive an annual tax credit for having kids for crying out loud? Taxes should be for funding essential government services, not promoting social policies.

(Report Comment)

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