Tax Policies – November 2012

November 6th will decide who gets to be the President for the next four years.

This day will also decide whether the Democrats retain control of the Senate or if the Republicans will control that body as well as what might change in the House.

Whatever changes there may be Congress and the elected President have some extremely important decisions to make as it relates to the country’s future.  One of the biggest of those policy decisions deals with future tax policy. 

According to the Manhattan Institute, the United States has one of the highest national corporate marginal tax rates of any country in the industrialized world.  At 35% the United States is 5% higher than Australia, 20% higher than Germany and even 11% higher than the United Kingdom.  The worldwide average without the U.S. in the picture is 21.1%.

Who pays this tax is also the topic of much discussion.  The Congressional Budget Office has run some  general-equilibrium models to determine who pays these taxes.  After all, corporations pass their tax burden along to either their workers or their investors.  In one scenario the CBO estimated that 75% of the tax burden is borne by the investors and 25% is borne by the workers.  Other models have estimated that as high as 40% of the corporate tax burden is borne by the workers.

Tax policy has been a big topic during the presidential campaign and every pronouncement from either candidate immediately becomes a major topic of discussion among analysts on both sides.  Think tank analysis abounds with papers on what the impact of each candidate’s  tax policy would be on a segment of our society.

The big problem, however, is our current tax policy is so convoluted and so complicated that a clear picture on a tax policy change cannot emerge until the law is passed, rules are written and bureaucrats in the Internal Revenue Service begin implementation.

Throw into the mix the desire by some political groups to use tax policy to influence citizen behavior and it becomes even more complicated.  The normal citizen and certainly any small business is left with no alternative but to hire a professional who has the time to review the thousands of pages of federal rules and read the thousands of pages of tax rulings which make up our tax policy.

The amount of money businesses and citizens spend to keep from running afoul of the IRS is no doubt staggering. 

Wyoming Farm Bureau has had policy since 2003 urging that a “fair tax” system be a priority on a national level.  The so called Fair Tax (National Retail Tax Act) seeks to make the tax system less complicated and more understandable to all Americans.

There doesn’t seem to be much appetite in the political world to overhaul our tax policy to the degree advocated by supporters of a fair tax system, but the more complicated our current tax system becomes, the greater the burden on every member of our society.  These complexities also add to the fog surrounding political campaigns and desires by politicians to mask their social agendas behind a Gordian Knot of tax policies. 

How much longer can we as a nation go without some meaningful simplification to our tax policy?

By Ken Hamilton, Wyoming Farm Bureau Federation Executive Vice President

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