Herndon, Va.: Dr. Fox: I'm married, but my family and I agree the whole tax code is out of whack. (We were hit for the first time this year by the AMT!) Rather than focus on specific inequities, shouldn't the entire federal income tax code be changed?
John O. Fox: The central argument of my first book, If Americans Really Understood the Income Tax (2001) was precisely that. I argued that both true conservatives and true liberals should demand that Congress get out of the business of micromanaging our economic decisions through the tax laws, and should also stop using the tax laws to reward certain forms of social behavior. In fact, about half of our individual income isn't taxed because of one tax relief measure or another. The consequence is a tax code that produces highly arbitrary results. People with equal abilities to pay rarely pay equally, and often people with much higher abilities to pay pay less. I believe our system should be reformed so that our tax burdens have much more to do with our ability to pay taxes than our ability to avoid them. What does this mean?
It means that Congress would retain only the most compelling tax relief measures, and, in return, it would greatly lower the tax rates of everyone. Most taxpayers would then pay a tax rate no greater than 10%, and people at the top wouldn't pay more than about 28%. In that case, we wouldn't have a homeownership tax subsidy where 22% of the tax savings went to the top 2% of all income earners, and only 3% of the tax savings went to the bottom half, as is true with the home mortgage interest deduction. If Congress than had to decide about subsidies for homeownership, it would be hard pressed, before the bright lights of a Congressional hearing, to tell the bottom half of all taxpayers that they would receive only 3% of the benefits. In short, social policies of the government would be much more transparent, and, I believe fairer, as would the income tax. And we could have greater respect for a tax code that is so central to our nation's destiny.
