It’s been a while since I wrote to The Leader, and I would like thank Tom Reed for providing me with fodder. In an article this morning (4/14/15) Reed is quoted as saying that he believes a slew of IRS related bills will prevent the targeting of individuals and organization based on their beliefs.
Fair enough. As long as the law allows faith-based organizations to have 501 (c) 3 status (though I cannot for the life of me see the logic behind that), then the IRS has no business targeting them. Point is, they haven’t. What Reed is obviously referring to is the scandal of a couple of years back when the IRS office in Cincinnati was, indeed, scrutinizing a group of organizations, particularly those with Tea Party in their name. However, beliefs had nothing to do with it. They were looking to see whether these groups were abusing their 501 (c) 4 status which applies to social welfare organizations and local associations of employees. Predominantly political activity is prohibited. And that is what the IRS was looking for.
The bills that Reed is co-sponsoring have some merit, except for H.R. 1295 which would allow organizations to simply tell the IRS that they are going to be operating under (c)4 rules. So if the Koch brothers or Karl Rove tells the IRS that their new institution is a social welfare organization and not a PAC, we are just going to believe them? It makes me think of the anonymous quote I came across: “The wealthy have controlled this country by convincing chickens to vote for Colonel Sanders, turkeys to vote for Thanksgiving, and middle class voters to send their own jobs overseas.” Now Tom Reed wants them to be able to choose their IRS status as well.
The second problem I have with Reed’s remarks is that he wants “a tax code that is simple, fair and competitive”. You mean like it is now, when everyone competes to see who can get the biggest tax breaks? Of course, as in any competition, the strong win and the weak loose. I am all in favor of simple, yes, please. I am all in favor of fair. Unfortunately, not everyone sees fair the same way.
My idea of fair would be to do away with income tax altogether: what you earn you should be able to keep. Instead I would tax – quite heavily – unearned income. That includes capital gains, inheritance (above a reasonable threshold), mineral royalties, rental income and exploitation of the commons. In the latter category would be timber from public lands, fossil fuel extraction – the so-called and long overdue carbon tax – as well as a tax on water for non-municipal use. So if Painted Post wants to sell our water to frackers in Pennsylvania, then they pay a heft tax on the proceeds. Or if Crestwood wants to withdraw water from Seneca Lake to produce the brine needed to store their gases, they will pay for the water plus a hefty tax on top.
In the list above of unearned income, I did not include bonuses and stock options which make up such a large part of executive compensation packages. Let’s take an almost imaginary example of a CEO whose salary is 1.25 million. This is not excessive and we assume that he is worth it. At 39.6%, his tax bill is $495,000, leaving 755,000 to take home. If his salary had been 5.25 million, he would have paid 2,079,000 in tax and taken home 3,171,000. But as it happens, the 4 million difference was paid as a bonus which is taxed at a flat rate of 2 5%. It cost the company the same, but this CEO ended up with an additional $584,000 in his pocket and the government had $584,000 less in its coffers. That amount would have paid Excellus’s new premium for 2,704 Medicare recipients.
Whose idea of fair is that?