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OPINION | DANA KELLEY: Simplify tax law

by Dana Kelley | October 22, 2021 at 2:51 a.m.

Last week, Sen. Tom Cotton used the term "surveillance scheme" to describe the proposed expansion of IRS access to aggregate bank activity over $600. His polite terminology presumably arose in deference to his status as a member of the "world's greatest deliberative body."

Unbridled government arrogance leads to abusive, intrusive and oppressive ideas that are packaged and promoted with noble-sounding sales pitches.

After widespread pushback, the Biden administration and the Treasury Department scaled back its proposed threshold this week from $600 to $10,000. That's still ridiculously low--and only a diversionary tactic to disguise (1) an unacceptably authoritarian mindset regarding individual citizens' right to privacy about their money; and (2) the fact that complex tax laws, not compliance with them, are the real problem.

It is the inherent nature of all governments to pursue more control and power. That's as true now as it was a couple of centuries ago. And that's why the nature of our Constitution was then, and is now, to check against inevitable government attempts and forays at overreach.

Thank goodness for the Fourth Amendment, which reads, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated."

Democrats claim the goal here is to crack down on the top 1 percent, who they believe aren't paying all the taxes they owe. Naturally, the best way bureaucrats can figure out to do that is to look at the bank accounts of the other 99 percent.

"Soaking the rich" traditionally sells well with middle- to lower-income voters. That's the way the 16th Amendment got ratified; voters were convinced the only people affected were going to be the wealthy.

The Revenue Act of 1913 established a 1 percent tax on any single filer earning more than $3,000, which is $82,293 in today's dollars. The next bracket--a 2 percent tax--didn't kick in until income reached $20,000, the equivalent of $548,620 today.

The top rate of 7 percent only applied to incomes above $500,000, or adjusted for inflation, anyone with 2021 income of $13,715,500.

Only 3 percent of the U.S. population at the time was subject to the income tax.

A family in 1913 earning just under the threshold amount paid zero income tax. A family in 2021 earning the equivalent amount will pay a 22 percent tax rate.

Today, roughly two out of three American households have incomes under $100,000, and yet instead of being exempted, as originally baited and sold (the original married couple exemption was $4,000, or $109,724 today), income tax is levied on the very first dollar of income.

And, unlike the original income-tax structure in which tax due was submitted at the end of the year, for wage earners today the tax is deducted from every paycheck. The government prevents taxpayers from ever possessing their tax money.

After only a mere three years, congressional Democrats doubled the top tax rate to 15 percent in 1916 by promising it only affected the super-rich with incomes above $2 million ($49.4 million today).

Thus began the ongoing tax modification legislation that has produced a labyrinth of statutes, regulations, rulings, clarifications and case-law decisions encompassing more than 75,000 pages--and expanding.

Biden & Co. blames the tax gap on the IRS' inability to punish evasion. Most wealthy Americans aren't breaking tax laws, they're simply employing accountants and attorneys to structure their finances in ways that legally minimize their tax liability.

In other words, Democrats are now whining about all the loopholes they created by helping construct a monstrously complex tax code.

If the tax system has become "unfair" and "inequitable," then the obvious answer is to change it and rewrite the law to simplify it and close loopholes. True tax reform has been overdue for decades.

Instead, Democrats want to demonize the wealthy in order to expand data collection on everyone else.

Treasury Secretary Janet Yellen complains about a $7 trillion tax gap over the next decade, which "deprives the country of resources to fund core priorities."

But she wants to track annual--that means over 12 months--aggregate bank account activity of only $10,000 or more. Why the threshold amount is still so low (one-16th-million of the annual $160 billion tax-gap revenue the government hopes to reclaim) hasn't been explained, except with vague references to prevention of "gaming the system."

Even by agreeing to exempt W2 wage earners, the proposed reporting still targets mainly small-business owners and entrepreneurs rather than the top 1 percent.

As outrageous as it is for the government to brazenly seek to snoop more into every small-time banking account, it's more disturbing that millions of Americans seem so cavalier about surrendering their financial privacy.

Our precious unalienable rights have been purchased and secured many times over by blood, sweat, tears and supreme sacrifices by our fellow citizens who valued freedom and liberty above all earthly possessions.

If the tax gap has gotten too big, it's time to finally demand simplification of the tax code, not give up more privacy rights.


Dana D. Kelley is a freelance writer from Jonesboro.

Print Headline: Simplify tax law

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