5 principles to guide our tax code

By Jeff Windham

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Every four years, the presidential candidates tout their tax plans. These plans have a few things in common: They're long and complex, pundits attack them, voters don't read them and they never become law as written.

Perhaps this time, rather than long and complex proposals, the candidates should simply articulate their fundamental understanding of what tax policy should be. Then, if elected, these principles can be the foundation around which the tax code is written.

Will this happen? It's doubtful, but let me offer the following five income tax principles as a guide:

1. Everyone should pay something.

We're all citizens of the United States and should contribute to its success. Even $25 a year charged to those in the bottom 10 percent of income would help. Is it heartless to ask someone with so little to contribute? I would counter that there is dignity in being part of the solution far more valuable than $25. We all have a stake in the outcome.

2. The tax code should not be a disincentive to earn.

A growing economy is necessary for the United States to meet our obligations and ensure our standard of living. The economy is best when the most people are the most productive for the longest time possible. How many of us have known a co-worker or friend faced with an opportunity to earn more, through overtime, promotion or forgoing retirement, and responded that with the additional taxes it was not worth it. This is ultimately harmful to the individual and society. Marginal tax rates must be low enough so as not to be a disincentive to earn.

3. All income should be treated the same.

Whether income is earned, received capital gains, inherited, or found on the street, it should all be taxed the same. Some conservatives argue that inherited income has already been taxed once when it was earned. True, but it's also true that all money was taxed before. When you earn money at your job, it gets taxed; when you use that money to pay your mechanic, the mechanic gets taxed again; when the mechanic buys a hamburger at the local diner, the waitress pays tax on the tip. The underlying principle should be that money is taxed when it becomes income to another person, period. Why should capital gains be different from earned income? The push for low taxes on capital gains is only logical in a tax system with high punitive rates on other types of income. Keep marginal rates low across the board and the need for lower rates on certain types of income disappears.

4. Taxes on business should be zero.

Businesses have and never will pay a cent in income taxes. Business and corporations don't earn money, spend money or pay income taxes - only people who own them and work in them do. The entire concept of a tax on business is just a way to hide more taxes. Make the tax on business zero, and charge tax when it distributes income to its owners.

5. Use the tax code to raise revenue, not control behavior.

The tax code is the single-biggest tool politicians have to control behavior and limit freedom. But in a free society, freedom means the option to choose things others would not choose for us. So I choose to donate to this or that charity, own a home or rent, buy a hybrid or SUV - of what business is it to the government? Why should one be treated favorably in the tax code over another? Because a politician decided what was best? Use the tax code to raise revenue; otherwise, leave us alone.

Jeff Windham of Bettendorf is an engineering manager for the Department of Defense. He holds a bachelor's degree in Aerospace Engineering from Mississippi State and a master's degree in Business Administration from Texas A&M. Comments: JJW563@yahoo.com