Comments for the President's Advisory Panel on Federal Tax Reform

from

Sean Brooks

Private Citizen

6009 Seminole St.

Berwyn Heights, MD 20740

\(240\) 876-8969

<seanbrooks@msn.com>

> **1. Headaches, unnecessary complexity, and burdens that taxpayers -
> both individuals and businesses - face because of the existing
> system:**
>
> Excessive record keeping, and the ever present fear of an audit for
> failing to follow one of the myriad rules.
>
> **2. Aspects of the tax system that are unfair:**
>
> Any taxes on productivity are inherently counterproductive to making
> America a better place to live. Taxes on wages are akin to co-opting a
> person's individual ownership. Taxes on profits are theoretically
> viable in that profits only exist with imperfect competition, however
> the artificial conditions for defining profit are subject to
> manipulation and create their own set of distortions. A better
> solution would be to make companies pay for advantages granted to them
> by the government: extraction and use rights, licenses, and patents.
> Such fees could be determined by auction, with a limited grace period
> after the initial application for a patent, in order to encourage
> innovation.
>
> The failure to tax pollution is an unfair burden on the citizens and
> non-polluters. Capturing such an externality through taxation could
> reduce federal expenditures in environmental regulation while raising
> revenue, reducing pollution, and reducing dependence on (imported)
> fossil fuels.
>
> Mortgage interest deductions are, by exclusion, a tax on renters, the
> very group the deduction is supposed to benefit. Being able to deduct
> \$1,000,000 on up to two homes is patently ridiculous, if the goal is
> to get people who are spending 40% of their income on rent to become
> homeowners.
>
> Similar actions by similar people are taxed differently: the income
> spent for my friends and I to play a round of golf is taxed, while the
> income spent for my business associates and I to play a round of golf
> is not taxed.
>
> The mere complexity of the tax code ensures that only those with the
> ability to pay for professional assistance can reduce their burden.
>
> **3. Specific Examples of how the tax code distorts important business
> or personal decisions.**
>
> Taxing wages through payroll and income taxes causes an incentive to
> use unpaid labor. For example 'big box' super stores use the unpaid
> labor of customers searching for their purchases, rather than the paid
> labor of salespersons assisting customers. Another example, apparent
> to anyone who lives or works inside the Capital Beltway, is the
> prevalence of commuting rather than paying higher housing costs to
> live close to work. Such distortions result in unproductive work, and
> is wasted effort in that it improves the lives of no one.
>
> Exempting capital gains in Real Estate tends to encourage keeping
> valuable property out of ideal use, which keeps people out of work or
> out of places to live. A great example is the group of one & two story
> buildings that are vacant or filled with dingy nail salons adjacent to
> DC's new convention center. Such properties would likely be used as
> upscale boutiques and shops with relatively well-paid employees. The
> upper floors could be used as offices or condominiums. However, the
> owners merely hold out, waiting for the price to be right in order for
> them to cash in on the effort of others to improve the city. Ideally,
> such properties should have to pay the full opportunity cost of
> keeping those sites underdeveloped, in the form of taxes approaching
> the rental value of unimproved land. I realize that property tax is
> not generally a Federal concern, but various Federal programs could
> encourage states to implement property taxes on unimproved land value,
> ideally while reducing taxes on improvements, sales, and income.
>
> Allowing businesses to deduct health insurance premiums for employees,
> but not allowing individuals to do so virtually ensures that market
> forces determining healthcare prices are severely distorted. If you do
> nothing else, fix this. Look to the Swiss for a market based reform
> that may be acceptable to both sides of the aisle.
>
> **4. Goals that the Panel should try to achieve as it evaluates the
> existing tax system and recommends options for reform.**
>
> Gradual and well-announced changes allow for companies and individuals
> to adapt to new tax schemes. A stable but sub-optimal economic system
> is better than an unstable but more optimal one.
>
> The panel should not confuse commerce with consumption, and realize
> that all value is derived from commerce or potential commerce.
>
> The panel should attempt to create a system where the vast majority of
> citizen's have a stake in the Nation's economy.
>
> If the panel likes catchy slogans: tax waste, not work; tax what you
> take, not what you make.
>
> The panel should attempt to shift taxes from labor and production to
> consumption of irreproducible resources. Making such resources more
> expensive will require higher employment of labor and capitol,
> increasing the returns to each.
>
> The panel should consider a Citizen's Dividend similar to the Alaska
> Permanent Trust to replace a portion of the progressive nature of
> income taxes, including the EITC.
>
> The panel should realize that there are rising superpowers in the
> world, and if the U.S. is to retain it's current quality of life, it
> needs to eliminate economic distortions, remove inhibitions (taxes) on
> labor and capital, and encourage the efficient use of our domestic
> natural resources. Think Adam Smith and not John Maynard Keynes, or
> better yet, think Henry George.