Apr 21, 2019 5 min read

In the United States, April is tax month. Nobody likes to pay taxes, but as Supreme Court Justice Oliver Wendell Holmes Jr. famously said, “Taxes are what we pay for a civilized society.”

We need to rethink our tax system, and the way we think about taxes. Edwin R.A. Seligman, an early tax scholar, asserted that a good tax system should be transparent, simple and fair. Complexity and lack of transparency create an environment in which the motivated can game the system, and avoid paying their fair share. And it does matter when people don’t pay their taxes, because that shifts the burden of government to people who do.

An example of special interests manipulating the system are evident in a bill that just passed the House, the Taxpayer First Act, which would actually prohibit the federal government from creating free software that would allow taxpayers to calculate their taxes on their own. Not surprisingly, the bipartisan bill is supported by many recipients of campaign contributions from Intuit (makers of Turbotax) and H&R Block, who profit by selling tax software. Under earlier agreements with the government, these companies agreed to allow people who made less than $66,000 per year to use it for free, but only 3% of taxpayers use this option. Many may not know about it, and if you try to access it, the companies try to up-sell products that they do charge for.

Other advanced countries have a much more efficient tax system for most wage earners. At the end of the tax year, they provide the taxpayers a return based on the information they have received from other entities (employers, banks, etc.), and all the taxpayer has to do is look it over, and if it’s right, they sign it and it’s done.

Another characteristic of other systems is that the returns (at least the income and taxes paid) are publicly available. Many Americans (especially wealthy ones) consider questions of wealth and income to be private, and have long resisted the release of that information. But making it public would enhance the efficiency of the economic system, reduce tax cheating, and reduce inequality.

Information from the first income tax (during the Civil War) was public, and the information was made public again in 1924 (under the modern income tax). Markets need information to work efficiently, and making income data public would not only help markets, but allow public policy based on income to be much more effective because researchers could access accurate data.

Lilly Ledbetter (after whom the Lilly Ledbetter Fair Pay Act is named), was paid less than her male counterparts for years, but never knew. Had she been able to see the income of her fellow employees, she could have raised the issue of gender discrimination decades earlier.

At the highest levels, corporations are required to publicly report the compensation of their highest paid employees, which allows corporate executives to have enough information to negotiate a market rate for their services. Employers, of course, would prefer that workers know only their own wages, to avoid creating demands for higher wages from employees not making as much as their peers. When employers are privy to wage data but employees are not, employers are able to pay some employees less than market wages, which exacerbates inequality.

Finally, we need to stop underfunding the IRS. Republicans seem to think that weakening the IRS is like reducing taxes, but what it really does is punish people who pay the taxes they owe, forcing them to pay for the slack created by people who don’t. During the Republican control of Congress from 2010-16, the number of returns filed increased by 7%, while IRS funding declined by 18%. Congress also directed the IRS to focus on fraud in the Earned Income Tax Credit program (used by the poor), which reduced the resources available to go after the much more complicated (but also more lucrative) tax fraud among the wealthy. The IRS estimates that business owners are not paying $125 billion in taxes due each year.

We need to change the way we think about taxes. When President Trump refused to release his recent tax returns, and a return that was made public showed he had taken a huge loss (almost a billion dollars) which would have allowed him to not pay taxes for many years, Trump responded that not paying taxes “makes me smart.” If we were all that smart, we’d have no government. Trump is like a businessman who thinks of his customers as suckers. The attitude that only suckers pay taxes is the attitude of a grifter, someone who wants to get more than he gives.

I was always taught that is it better to give than to receive, and that I should always try to pull more than my own weight. We should have that attitude toward taxes. People who pay more in taxes than they receive in services should be praised for their productivity. They are the pillars on which our society is built. The government should praise publicly people who paid the most taxes, and they should be feted. Being on this list should be an honor, better than making it on Forbes magazine’s list of the wealthiest people.

Kent James is a resident of East Washington and has degrees in history and policy management from Carnegie Mellon University.