Mick Ireland: Taxation: reform or abolition
July 24, 2010
Bombarded as we are by political rhetoric hostile to regulation and government in general, most Americans would be surprised to learn that state, federal and local taxes consume a smaller portion of personal income (9.2%) than at any time since 1950.
That so many are in an uproar about taxation may be more about the obvious need for reform rather than an objective need to chop taxes, which averaged 12% of personal income since 1950 and are now about a third lower as a percentage of personal income. What Americans want is a fair system that shares the burden in a way that asks the most of those who benefit most from civilization, isn’t full of loopholes and treats taxpayers fairly.
At the federal level, we have a system that allows offshore tax havens to shield more than a trillion dollars in earnings from taxation. We have loopholes that effectively reduce taxation on multi-million dollar CEO bonuses to a 15% tax rate, far less than the rate imposed on many middle-class families. Energy companies like BP with record profits are still being subsidized ($4 billion last year) with tax breaks to create unnecessary incentives to drill.
In Colorado, we have a property tax system that gives too much weight to data about rising property values and over-emphasizes speculative and boom prices using a “weighted regression” system in establishing values for property taxation. The result, mandated by law, was over- valuation of property last year at a time when incomes were falling.
Locally, we still have sales tax leakage and unfair avoidance by a small minority of businesses. We also have “agricultural” tax rates (exemptions) for properties that are farms or ranches only in the eyes of the law and are in reality luxury residences, some of which pay less tax on their huge holdings than mobile home owners pay on their tiny plots.
The answer to these abuses is not to create a national sales tax that shifts the burden to the least able to pay. Nor is the solution to shield $100 million estates from all taxation or cut rates for the top 1% of earners. These and other “solutions” propounded by special interests are exercises in political maneuvering, not serious proposals for a fair system of funding necessary government operations.
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Unfortunately, the notion of civic responsibility to pay for a civilized society has been demonized to the extent that many truly believe that we can continue to cut or eliminate taxes and maintain basic services. The result can be under investment in institutions and services that pay dividends over generations.
This “disinvestment” has already essentially privatized our system of higher education to the point that only 9% of students from poor Colorado families will graduate from college and middle-class families are expected to pay a net $20,000 a year for state schools, after grants and aid are considered. Our transportation system is not much more than a maintenance program with little room in the budget for transit needs or added capacity. Such neglect is hardly benign and will put Colorado in an inferior position to attract low-impact, high-tech jobs.
Case in point: Colorado Springs, home to anti-tax crusader Douglas Bruce. Last November, the voters declined to support a tax for basic services, rallying around the Tea Party sentiments by a wide margin. The city has closed 124 of 135 parks, community centers are gone and more than one third of street lights in less affluent neighborhoods have been turned off. Trash cans are gone, mowing is a volunteer thing at many city parks.
Here in Aspen, we acted proactively, basically capping revenue at previous levels and reducing the mill levy so that revenue remains stable. City service cuts and reductions in work force have been selective, aimed at minimizing adverse impacts to residents and visitors. A small ($145,000) program has generated interest and vitality in the downtown. The desire for a smaller tax burden has been balanced against services that make our quality of life great and our attraction to tourists high.
I can only hope that the state and national governments will adopt a balanced approach that emphasizes protection of necessary services, elimination of waste and a tax policy that relies on closing loopholes, increasing efficiency of collection and a burden equitably distributed rather than the meat axe approach that has befallen other communities.
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