VPR’s Bob Kinzel recently did a short news piece on Vermont tax reform. It was a follow up on Speaker Smith and Governor Shumlin’s previously announced efforts to work on solving their disagreements on tax reform over the summer. Kinzel says:
The two sides do agree on one thing. To determine a person’s tax burden, they want to shift from using an individual’s “taxable income,” to what’s known as “adjusted gross income.” This number is larger because it comes before applying a series of deductions.
If you use this “adjusted gross” number, and most states do, you can lower the tax rate without changing a person’s tax burden.[added emphasis]
What is so often called a burden was once known as our common shared tax obligation. No taxes are fun to pay but we all know at one level these obligations support public services-roads schools, fire and police that benefit everyone-the common good.
But faced with a choice of using the term tax obligation or tax burden VPR’s Kinzel opted for calling it a burden. So the loaded term tax burden supplants tax bill or tax obligation even on Vermont Public Radio.
Now VPR certainly is not part of a government, and its funding is voluntary, not mandatory. But what if, for fun, VPR’s fund raising terms were forced to reflect Kinzel’s preferred loaded language. Making a onetime gift of any amount would become a onetime pledge burden to VPR. Sustaining VPR members who pay monthly by credit card, so important to funding, would be aghast to find themselves under a sustaining member burden.
Expanding on this concept might hit VPR’s endowment hard. If the estate tax can so easily morph into something called a “death tax” what might VPR’s subtle funding suggestion; “remember VPR in your will” become ? Updated it might be recast as a death pledge – “when creating your will don’t forget the possibility of making a VPR death pledge”
I could even imagine calls coming in from loyal listeners begging for pledge relief. People who would normally contribute happily would think twice about taking on an onerous pledge burden – even for that spiffy travel coffee mug gift or bumper sticker.
Politicians like this idea because it appears that they can lower tax RATES without lowering tax REVENUES.
Federal gross adjusted income (AGI) is a higher figure than federal taxable income, so naturally, a smaller percentage of AGI can generate the same amount as a higher percentage of taxable income. It should be noted, in passing, that the idea came from the report of the “blue ribbon” tax commission a few years ago.
The assumption is that Vermonters are dumb enough not to realize that their tax bills didn’t go down, but will rush to the polls to support those who lowered their rates. Or alternatively, that out-of-staters considering moving to Vermont will be fooled by Vermont’s new “lower rates.” (This latter piece of cynicism appears to assume that we should want to attract only the dumbest out-of-staters.
If the tax code were as simple as politicians appear to believe, then the problem might be linguistic only, and of small consequence. But as the Israelis say, if grandmother had wheels, she’d be a bus.
The fact of the matter is that AGI INCLUDES all business deductions, and quite of few of the other devices which make US tax codes so complex: capital gains, dividends, oil depletion, accelerated depreciation, etc. So by arbitrarily choosing AGI (and thus eliminating federal deductions), state officials are choosing to INCLUDE, for example, deductions for lavish business meals and entertainment, but to EXCLUDE deductions for charitable organizations and excessive medical expenditures.
Perhaps there’s a good reason for doing so, but if that’s the case, I haven’t seen it articulated in ANY of the discussions about this plan.
I have no problem whatever with intelligent, conscious reform of the Vermont tax system. Indeed, I believe it makes a lot of sense. But doing it right means rigorous examination of everything involved, not the kinds of sleight-of-hand tricks currently being discussed.
Failing that, if politicians want high income earners to pay more taxes — which I wholeheartedly support — they should simply raise rates or establish another higher tax bracket. That’s the direct, honest, and straightforward way to collect more revenues, rather than creating yet more inequities and complexities in the code.
The dumbest idea so far is the cap on deductions, which BENEFITS some high-income earners at the expense of others, for no apparently well-conceived reason. That’s the WRONG way to make tax law.
It’s about time we stop letting the language of tax-bashing slide.
“Obligation” is a much better word for the responsibility all able citizens have to contribute to the services and protections which are enjoyed in some way or other by all members of society.
It’s become all too easy for the disenchanted or the selfish to compartmentalize government as “them” and citizens as “us.” That’s not just counter-productive, it is a cop-out from the responsibility we all share for our own government…whether we do so actively by informing ourselves and voting; or passively by not informing ourselves, not voting, and perpetuating the myth that we are powerless against evil government forces.