Decoding the Tax Code

Tax time is just around the corner, and that invites an examination of the U.S. tax code. For politicians, the Internal Revenue Code means that high-rise stack of documents they occasionally display to accompany press conferences. Taxpayers would do well to regard another code, the deceptive vocabulary politicians deploy to frame the issue. Take, for example, the concept of “progressive” taxation. 

In this scheme, a worker earning $100,000 per year is taxed at a higher rate than a worker earning $50,000 per year. This higher rate comes packaged as “progressive,” which is highly misleading. In modern parlance, progressive means pro-humanity and anti–bad things. In reality, the worker is being punished for being more productive. The system that imposes a higher rate of taxation on more productive workers is properly described as a “punitive” tax.

Politicians sometimes propose a “flat tax,” meaning the two workers would be taxed at the same rate. Since “flat” has a negative connotation, a “fair tax” would be a better description. In sports, a level playing field and a single set of rules form the framework for fairness. All workers paying the same tax rate exemplifies a fair tax, and under a fair tax government will still gain more revenue from the worker earning $100,000. This system will have more chance of taking hold if advocates describe it as fair rather than flat. 

On top of income, sales, and property taxes, some countries impose what they call a “value-added tax,” on everything from a shoe-shine to a luxury yacht. The government thus takes more money from the consumer at point of sale, but what the tax adds by way of value is not exactly clear. This would be better called an “extraction” or “money subtracted tax,” and if embattled taxpayers remain opposed it would be hard to blame them. After all, as this writer has often noted, government is already getting the workers’ money before the workers who earned it. If any politicians think that is unfair and unjust they sure are keeping quiet about it.

K. Lloyd Billingsley is a Policy Fellow at the Independent Institute and a columnist at American Greatness.
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