Of course by now you are aware of the tax paid by our Olympic athletes upon returning home after representing our country abroad. There is not any better example of the backward nature of our tax code in action. Too many people get caught up in the class warfare aspect of the tax code to realize that America punishes success in every form. Whether your fortunes are won here in the States or across the pond, no one can escape the reach of the IRS. It should be noted that this is unique to America in developed nations, and none of our competition faces such a stringent punishment for winning. Although Sen. Marco Rubio is proposing a bill to eliminate the tax on our elite sportsmen this only serves to scratch the surface of the problem. While it would be great to have our young athletes competing tax free it would be an economic boom if we could do the same. If our companies could compete without the additional burden of a 35% tax rate then our economy could have the opportunity to excel that it so desperately needs.
But we know that the elimination of the corporate tax would allow our companies to compete in ways unimaginable now. The choices we have available are a tax system that shows its wear under economic downturns or one that allows for success and remains stable throughout tough times. To study the difference we can look to California. All states have been hit by the economic crises and California, despite its large economy, has not been spared. The loss of jobs has had a devastating effect and the unemployment rate still stands at 10.7%, well above the 8.3% national average. This of course has a negative impact on the state’s tax revenues. California is in a tough enough spot as it is. The state was planning on $1.9 billion from the Facebook IPO. The stock’s poor performance has cost the state hundreds of millions of dollars that would go a long way to help ease the financial burden. That is one reason why the state is putting forth Proposition 30 on this November’s ballot. It includes several different tax increases to meet the state’s budget needs. But the point is that the current systems of taxation are unpredictable and subject to drastic change. A common complaint about a sales tax is that it would be difficult to project. But as California has shown, it is far more stable than an income tax or even a property tax. The job loss has starved the income tax revenue, but the prolonged joblessness is now taking its effect on the property tax revenue. California is an expensive place to live and the loss of income has led to a rise in foreclosures. The state is feeling the impact of prolonged, aggregate, personal tragedy, but the sales tax remains stable.
It is one thing to misread how a stock will trade and plan accordingly. California made a bet with their budget and lost to the tune of hundreds of millions. However, our tax code on the national level is not caught missing millions in bad bets. It is found giving away billions to frauds. According to a recent report we have lost $280 million in Tampa alone. The same report indicated that by best estimates we would pay out $21 billion in fraudulent tax refunds in the next five years. In 2010 it is possible that $5.2 billion was paid out fraudulently and sources disclose that the problem is growing. The sad part about that statement is that $21 billion over five years looks to be a modest estimate. Now I understand when the debt problem is in the trillions it is tough to bicker over wasted billions, but I am willing to bet that the American public is sick and tired of paying taxes that pay for fraud and want a system that is not rife with it.
Part of the problem with the tax code is exactly what Senator Rubio is trying to accomplish with his bill protecting Olympic athletes. While it is literally maddening to expect our finest athletes to be penalized for victory that we fully expect and support, the answer is not to further complicate the tax code with yet another loophole. What we owe these champions and all other Americans is the Olympian effort needed to overhaul the tax code. Our current system is built on the constant manipulation of the tax code to score political points or curry political favor. We deserve something run by the people and for the people. There is a clear difference between the two codes. The same difference between a roller coaster and a train. The current tax code is similar to a roller coaster. There are supreme highs and lows, it takes people on a twisting series of turns, loops, corkscrews, and most of the time it is difficult to ascertain just which way is up. Looking at a roller coaster from the ground looks like a terrible mess of wood or steel and after you are finished you could never describe what just happened. A train is predictable, uniform, treats all equally, and functional. While a roller coaster may be fun it would quickly lose its luster when it is forced into everyday life by federal mandate, the lines would be long and the one could never be sure of the maintenance. A train provides the stability needed to plan for the future. In fact, it was a rail line that connected the east to the west of this country with the driving of a golden spike. What a more fitting model to use for a tax code. We could connect the left and right with the signing of a single bill. The rich lose all loopholes that have been crafted into law over a period of one hundred years. The poor no longer have the payroll taxes disproportionately taken from their paycheck. All Americans will benefit from the freedom that our businesses, both large and small, will regain. The only downside is it requires heavy lifting. No change like this will happen on its own. We will run the gauntlet and see this cause through until conclusion. Like the Olympians in London we will put forth our best effort and not rest until we receive the gold. We are off to a good start. Check back next week for a plan for success that we can all get behind.