In this year of 2015 the American System of Taxation is set in such a fashion to totally favor of the wealthy and the large corporations, at the expense of everyone else. Probably not since shortly before the French Revolution in the late 19th Century has a system of taxation been so unfair as to place most of its burden upon the middle and lower classes. If the general public became aware of the total extent of this there would be an outcry throughout most of the society.
In prerevolutionary France the nobility and church paid no taxes and wealthy members of the middle class paid a bonus one year to the government and never again had to pay taxes for themselves or their businesses. Poorer class of society bore the burden of paying taxes. In the United States we have lobbyists representing the wealthy and their businesses and they tend to control much of the legislation passed.
The very wealthy have somehow created the illusion that taxing the rich limits economic growth, particularly among members of the Republicans Party which they largely finance. Their slogan is that the rich create jobs. Of course there has never been any evidence of this. Invariably, the former Speaker of the House of Representatives, John Boehner, has stated publically that the very rich create jobs. He has strongly implied that taxing them would limit economic growth.
Practically all federal, state and municipal taxes are regressive. The income taxes for a married couple filing jointly is graduated up to $457,600, but regressive for any amount above that figure. Above that amount it becomes $127,962.50 no matter how high the earnings go, to one million, to one billion or beyond. The maximum graduated level is slightly lower for a single filing his or her taxes.
All other taxes with the exception of federal and state income taxes up to a certain level, are regressive. Most are usage taxes. Here the argument for them is that they are fair because everyone pays the same amount. The fallacy here is that if all these taxes are taken as a percentage of income then the more the individual earns the lower is the tax as a percentage of his income. Consequently the poor and middle class, the overall majority of the population, pay a larger percentage of their incomes in these so-called fair taxes where everyone pays the same amount regardless of their actual incomes.
The United States tax code is 71,000 pages. This document was not written all at once; it came into existence on a piecemeal basis over a large number of years. Many bits and pieces were passed for the benefit of specific individuals and companies or special interests mostly with aid by lobbyists. A goodly number of these taxes were sentences or even clauses added to other bills at the last minute and had no relationship to the bill in which they originally existed.
And since for the last six or so years every Republican has signed a pledge to Grover Norquist not to raise taxes. This has made all these subsidies and loopholes sacrosanct; doing away with any of them would be raising taxes. It could also cut political contributions to their political party.
It is important to remember that a Congressional Bill does not have to deal with just one subject. It can deal with any number of topics. But that bill has to be passed as one whole unit or not passed. In addition any number of amendments on virtually any subject can be added to it. Unlike some of the states which have a line item veto, that is any sentence or group of sentences can be individually vetoed by the governor before he signs the bill, a federal bill can only be signed and totally approved by the President or vetoed and totally rejected.
Perhaps it time to reform this practice. Ronald Reagan, as President, had a line item veto when he was Governor of California but not as President of the United States. He complained vociferously about this fact. Numerous other presidents have made similar comments. Whatever it would take to change the current practice would be a long step in the direction of reform.
Too many times a bill has to be passed and unrelated changes have been added to it. In order to keep the government functioning the President has to sign the bill. A line item veto would certainly make his job both easier and saner.
The tax code allows numerous deductions that are taken from the yearly income. Some of these have definitions that have been expanded phenomenally. For example in 1913 the home mortgage interest deduction was added. It was added to encourage home ownership. (Interestingly countries like Australia and Canada do not have a similar law but do have the same large amount of home ownership as the United States.) The law was to make home ownership more affordable.
In more modern times Congress declared in a new bill that boats can be homes if they have a kitchen, bathroom, and sleeping quarters. The luxury boating industry had been able to buy its way into home mortgages. Three percent of the boating industry qualifies as homes and interest paid on their purchase loans is deductible.
For example someone like Microsoft CEO, Paul Allen, has a $200 million yacht that comes equipped with an indoor pool, basketball court and its own submarine. It also has a kitchen, bathrooms, and sleeping quarters. He is able to deduct the interest paid on his ocean going home from his yearly income taxes.
One Congressman, Tim Walz (D-Minnesota) stated that the law was passed to make home ownership more affordable for the middle class. He wrote a bill: Ending Taxpayer Subsidies for Yacht’s Act, hoping to end the practice by the wealthy. The chairman of the committee that handled the bill in committee is a Republican and did not even allow the bill to come up for examination. The bill died in committee; it never even came up for a vote there. Would it have passed if it came up on the floor of the House? This is a tax loophole that benefits a few people at the very top, according to Walz.
The House of Representatives is composed of 19 standing committees and the Senate of 17. The Speaker of the House and the Majority Leader of the Senate is responsible for assigning bills to the proper standing committee.
The House Rules Committee manages the flow of bills to the full House by scheduling their flow. They can also ignore a bill if they think it appropriate. In the Senate the majority floor leader controls the bills. He can also ignore a bill.
The Standing Committees generally have jurisdiction over a specific set of issues such as Agriculture, Appropriations, Foreign Affairs, and Commerce. Each has one or several functions. They hold hearings, can amend, and report a bill under their jurisdiction. The chairman can also remove a bill from consideration and the committee votes on whether or not to forward a bill to their entire house or remove it from consideration.
The House originates all revenue bills and the Senate has the power of “advice and consent” over the President’s appointments and treaties. Whatever is not directly stated in the Constitution is controlled by the Ways & Means Committee, which has more representation by the majority party. The Ethics Committee has equal representation by both parties.
Obviously the committee system is necessary because there are too many bills proposed for them to go directly to one of the Houses of Congress. Obviously the Committee, or Subcommittee for that matter, which is made up of a small number of Congressmen and women, can more easily do everything necessary, marking up the bill and even possibly changing it. It can kill the final version or recommend it for passage by the full body of the House or Senate.
In addition, as we’ve seen, the chairperson of the committee, who comes from the majority party of his/her particular House has almost dictatorial power in running the committee he/she chairs. This person does this by almost completely controlling the agenda of the committee. They can and have ignored one or some of the bills the committee is supposed to deal with. In this way a bill can be killed without ever having a hearing. And this can be done to a bill that will probably pass. It can even be done to a bill that has been passed in the other House. Once this is done it is almost impossible to bring such a bill before the House or Senate. And this is what has happened to every bill that has attempted to do away with any subsidy or tax loophole.
In all fairness it should also be stated that the same power exists in both Houses of Congress. Both the Speaker of the House and the Majority Leader of the Senate have done so with and without good reason.
From 2011 on, when they took control of the House of Representatives, the Republican majority had passed a bill to do away with Affordable Health Care (Obamacare) at least 50 times. Harry Reed, the then majority leader of the Senate never once even brought it to the floor of the Senate. The same thing happened to a large number of bill passed by the then Democratic Senate.
Interestingly after the Republicans won control of the Senate in 2014 by a slight margin both they and the House, which has no Constitutional ability to do so, attempted to stop the President from negotiating with Iran. The negotiations were being done by the leaders of the United Nations, which also included the U.S. It was not an American treaty. It did, however, include the U.S. as one of the six nations negotiating with Iran. Both Republican Houses of Congress wanted to pass laws controlling this two year process. Apparently the members of the House hadn’t read the Constitution or didn’t care what it said; and young Senator Tom Cotton attempted with 46 other Senate signatures to openly negotiate with Iran.
Can reform be brought about in the Committee System? One possibility would be to change the rules on Committees requiring that all bills be examined that receiver a 40% approval rate by all the members of the committee. This could be done once a week and would require a bit more work by the committee. It would be following the example of the Supreme Court. It takes four affirmative votes out of nine for them to accept a case. Would Congress be willing be willing to bring about such a rule change?
Barak Obama, during his campaign for the presidency in 2008 promised, among other things, to end numerous loopholes and subsidies but he couldn’t get any of those bills through Congress. He wanted to eliminate “special tax breaks for oil and gas companies, including special expensing rules, foreign tax credit benefits, and manufacturing deductions for the rich oil and gas firms.
The American Petroleum Institute stated, I imagine proudly, that none of President Obama’s proposed bills, which would be presented by a member of Congress in one or both Houses of Congress, were enacted into law; in fact, they were dead upon arrival in either House. Is lobbying sometimes open bribery?
When a bill is presented in either House of Congress it is given a number and sent by the Ways & Means Committee to a specific Standing Committee to be examined. Each member of Congress is generally on at least two committees. In the case of the House of Representatives most committees are also broken into subcommittees. The Chair of each committee sets the agenda for each meeting. From 2011, when the Republicans gained the majority in the House of Representatives, the chairman became a Republican and, from what I understand, no tax reform bill made it to a committee for examination and recommendation. This also occurred in the Senate from 2014 on when the Republicans received a slight majority there.
From 2009 to 2010 both the House and Senate were very busy fighting off a giant depression and Republicans were busy fighting off Affordable Health Care (Obamacare) which they failed to keep from passing. There would have been little or any time for the Democratic Congress to do anything else. And if such a bill came up in the Senate it could have been easily filibustered. In the House of Representatives extended debate and amendments to the bill, which would add endlessly, to the extended debate, would have easily killed any bill.
If we ask why any loophole of subsidy bill would present a problem? The answer is that a very large percentage of Congressmen or women are dependent upon these very companies for large political contributions. Are they then dependent upon bribes? The answer is legally no, but technically yes.
In order for an individual to run for either House of Congress he/she needs large amounts of money for staff, adds, mailings, television commercials, etc. This money is supplied for Republicans and many Democrats by political contributions. For example Ted Cruz’s current presidential campaign is currently being financed mostly by four very rich individuals. I suspect that if he got elected he would do nothing to make any of these individuals unhappy about anything. The same attitude would be true for any House or Senate member.
The contributors, individuals and companies, which make large contributions to political campaigns have purchased almost instant access to the people they have financially funded. In addition many government officials also have use of company jets and free expensive vacations. Is it bribery or an exchange among friends? The legislators are supposed to represent their constituents who elect them. But who is primary? Is it the constituents or the large contributors?
Whether the legislator truly believes he is acting for the good of his state or understands that he is paying a debt by supporting his major contributor’s interests is really beside the point. The interests of the large contributors are primary in the minds of the legislators. To go against their interests would be an act of financial suicide. It would cut off large portions of their funding and they could easily loose them the support of their party as well as that of the large contributor.
Why then have the Republicans, as a group, refuted the concept of climate change. Presumably for them the planet is getting less inhabitable not because of man’s increasing pollution but probably because God is ticked off with people.
Can the current system be adjusted so that Congress can go back to the original purpose of the Founding Fathers, to serve the people of the United States? Interesting question! Not too long ago the Supreme Court in the Citizen’s United Case expanded the meaning of a part of the First Amendment to make the spending of money part of the Free Speech clause of the First Amendment to the Constitution. This has led to almost unlimited spending in political elections because money is now an expression of free speech. To limit contributions in a political election is now to limit the expression of free speech.
The political system, by the way it is set up, practically puts every politician susceptible to some level of corruption. Can this system be changed? Another interesting question. Can tax reform come about? Not by the current organization of Congress.