The Wall Street Journal reported today that Senator Kent Conrad of North Dakota is starting a new push for tax hikes for the rich. As the articles presents, there is ample evidence to support Mr. Conrad's pushes. For those of you not familiar with the tax code of the U.S., it is not true that wealthy people pay a nominally lower tax rate, however taking into account deductions and exemptions, their rate is effectively lower. As the WSJ notes, the capital gains taxes are key in this estimation. These taxes are lower than other income taxes under the assumption that they promote investment. Wealthy people, being more plugged into investing, naturally benefit more from this break. For 2008-2012, the short term capital gains tax is 10%.
But is the issue really a poorly constructed tax code for the wealthy? No, it is a poorly constructed tax code FOR ALL. Off the top of my head, the IRS estimate is that over $1 billion in tax revenues are lost each year due misfiled taxes. These losses do not stem from purposeful fraud, but simply because the payers can't understand the code. Although, I would remiss to not mention that our system is far more streamlined than it once was. There are currently 6 income tax brackets for households. From 1971-1981, there were 15. While the issue of an unfairly lenient tax burden on the wealthy may be perceived as an entirely different issue than the obtuse tax code as a whole, I believe tackling the latter problem will make resolving the former much less, say, emotional. A clearer tax code makes identifying loopholes much less difficult. The fact that it takes a tax expert to explain how the wealthy are managing to pay less sums my argument pretty well.