In the late 1970s, I had lunch with the commissioner of the Internal Revenue Service and several others. During the wide-ranging conversation, I offered my check-off proposal for the 1040 tax return. Over one hundred million of these forms are sent out every January. Since the tax system exists for the benefit of the people, why not allow prominent' space where taxpayers can voluntarily check off minimum dues to join an independent, nationwide, membership-controlled taxpayers association? Its full-time, independent, nongovernment staff would be vigilant on the fairness of the tax system, its enforcement, and how the money is spent or misspent. The commissioner seemed to like my proposal, but after reflecting a moment or two he said he could not support it. Why, I asked? Then came one of the most memorable replies in all my experience with governmental officials. "Because," he explained, "it would cause undue clutter on the tax return."
Clutter? I murmured something about the existing clutter throughout the individual tax returns. I'm sure he had other objections, for he was a serious man.
Engraved in stone at the top of the IRS headquarters are the words of Oliver Wendell Holmes Jr., a Justice of the Supreme Court of the United States: "Taxes are what we pay for civilized society." Holmes practiced what he preached and then some, leaving his entire estate of one million dollars to the U.S. government.
By his example, Justice Holmes was directing our attention to the public or common good, and away from the individual discomfort over contributing tax revenues. Today, many prominent corporatists would scoff at such a view. For them, taxes are something to be diminished, avoided, or evaded whether by exemptions, deductions, depreciations or other write-offs, shelters and tax havens, forgiveness or waivers, safe harbors, outright statutory tax cuts, and acquiescent regulatory opinions. Holmes would have greeted such schemes with patrician contempt. Taxes helped the people become a community with decent public services, prevented clear and present dangers, filled gaps in the private economy, built and maintained public works (now called infrastructure), delivered the mail, and provided law and order (through the courts, through the regulatory and law enforcement agencies).
For millions of individuals, acceptance of their tax obligations would increase if they thought everyone was paying their fair share and the monies were being used efficiently and wisely. Since that is not the case, cynicism reigns and much manual or clerical work is done off the books. The attitude of cynicism is buttressed by selfishness -- looking out for number one. There are plenty of tax preparation services and unscrupulous outfits touting "pay no tax" schemes, which cater to this desire to exit.
It is difficult to square fiscal abandonment of country and community with patriotism. But when Congress and the president allow massive escapes from tax responsibilities for large corporations and the wealthy, the sense of patriotism attached to paying taxes goes out the window for many people. To check out, instead of forcefully voicing one's grievances, only worsens the situation. Because the indentured government demands that smaller taxpayers pay a larger share than is fair, these taxpayers should be more demanding of their government. When some taxpayers complained bitterly to their representatives about mistreatment by the IRS, the resulting public hearings excoriated the IRS in the full glare, of mass media. Many television viewers enjoyed seeing the tax collectors get their comeuppance. However, other consequences of IRS-bashing were not so widely publicized. Despite more taxpayers and a growing complex economy, the IRS budget has been slashed or blocked from expanding, which only benefits tax avoidance and evasion schemes of the multinational corporations and the super-rich. Moreover, Congress pressured the IRS to go after low-income workers for alleged fraud in the earned income tax credit. Less money for the IRS to corral the big fish and more pressure on go after the poor -- grotesque priorities. Television viewers witnessed a congressional hearing extravaganza in exchange for more burdens on their 1040 returns.
In 1998, Charles O. Rossotti, head of the IRS, testified that tax avoidance and tax evasion cost each taxpayer an average of more than $1,600 per year. That's based on what he knows. What Rossotti doesn't know, nor does anyone, is the aggregate amount of avoidances and evasions offshore (parking trillions of dollars outside U.S. jurisdiction) and the size of the business conducted off the books. In addition, Rossotti's estimates are limited to the confines of drastic reductions on taxes from capital gains and dividends. His $1,600 figure, therefore, is very much an understatement. In any case, hotel magnate Leona Helmsley's immortal utterance that "only the little people pay taxes" correctly implied that wealthy people and large companies who rig the system burden the rest of America. Instead of thanking Ms. Helmsley for her candor, the editorial writers expressed outrage over her arrogance.
If the "little people" pay a higher total percentage of their income in various taxes than the very rich, why not think of a way to dramatize this situation? Frequent media exposes of tax dodges by companies and the wealthy have failed to produce the necessary agitation for change. Even the proposed moves to Bermuda tax havens by companies such as Stanley Works, based in New Britain, Connecticut, failed to move Congress to pass legislation to limit these offshore tax havens, a bill introduced by the late Senator Paul Wellstone and Senator Charles Grassley. These offshore tax escapees still operate in the United States and receive all the public services and contracts as if they were paying their taxes to the U.S. Treasury.
The Stanley Works caper created an uproar. Before announcing his intention, the new CEO, John M. Trani, laid off thousands of workers making $14 an hour and shifted the work to China where their counterparts were making 25 to 30 cents an hour. The workers in New Britain spent their last hours packing machinery for shipment to Shanghai. The proposed Bermuda move was the last straw for the workers, many of whom were shareholders who had to vote on Trani's decision. Mass demonstrations ensued, while Connecticut Attorney General Richard Blumenthal charged Trani with rigging the forthcoming vote -- a charge with serious ramifications for Trani's future with the company he was strip-mining.
At a subsequent Congressional hearing, conservative Republicans and Democrats joined to condemn Trani and other companies contemplating the abandonment of their community and country for a Bermuda mail drop. The House Republican leadership faced a revolt of its rank and file. One hundred and ten Republicans joined the Democrats and passed legislation in 2002 to bar the corporate tax haven companies from obtaining contracts with the new Department of Homeland Security. Since then nothing has happened either in the Senate or the House. The gesture, although a factor in ending Trani's trip to Bermuda, was primarily for the benefit of incumbent candidates in the 2002 elections.
All this gives you the idea that no matter how clear it is to people, liberals and conservatives alike, that tax havens and other tax avoidance schemes are wrong and unfair, and no matter how much media is devoted to exposing them, nothing has changed by way of legislative corrections.
Taxpayer Appreciation Day
Over the years, you may have watched ABC Nightly News and its series "It's Your Money," which has documented how special privileges and wasteful federal projects benefited the cloying companies featured. There's scarce evidence that these reports on abuses of taxpayer dollars, seen by millions of people, led to reforms. So why not a new approach? First taxpayers should develop a proprietary interest in where their tax dollars are going instead of simply listening to pandering politicians talking tax cuts for them when they really mean for the wealthy. "It's Your Money," so why not launch a Taxpayer Appreciation Day on April 15 of each year? Millions of individual taxpayers would demand that all those corporations that receive taxpayer subsidies, giveaways, bailouts, and other forms of corporate welfare take a day off from feeding at our trough and express their thanks at various public events.
Although most taxpayers may not realize it, much of our economy -- including flashy, "urban renewal" sports complexes and gallerias, scientific advances, and many emerging industries -- result from taxpayer-financed programs whose fruits go mostly to big businesses. The commercial real estate industry is permeated with tax subsidies called "incentives." Taxpayer dollars have funded the discoveries at NASA, the Department of Defense, the National Institutes of Health, and other federal agencies -- and yet these innovations are given away to companies that brag about them as if they'd played a role in the progress.
Taxpayer dollars have been a major factor in the growth or emergence of the aviation and aerospace industry, the biotechnology industry, the pharmaceutical firms, the semiconductor and computer businesses, the telecommunications, containerization, and medical device industries, among others. These industries are not needy, but greedy. Uncle Sam, without us looking over his shoulder, is a soft touch. A few years ago, in testimony before Congress, Andrew Grove, CEO of the hugely profitable Intel Corporation, urged legislators to appropriate more taxpayer money for basic research in his industry, which he said concentrated its capital on product development and production. Talk about entitlements!
Some may say that corporations send income taxes to Washington, too. Less and less, even in the face of record-setting profits. Corporate tax payments in 2003 constituted a mere 7.4 percent of federal revenues, down from 28 percent during Eisenhower's term in office. Some large corporations are heading for tax-exempt land. The General Accounting Office reported that during the booming late nineties, over half of U.S. corporations paid no federal income taxes at all, and others sheltered most of their income. Individuals pay more than four to five times as much in federal income tax revenues, apart from payroll taxes.
So back to the Taxpayer Appreciation Day and some exciting events of gratitude:
• General Electric bought RCA, which owned NBC in the mid-1980s, with the billions from an outrageous tax loophole that Reagan demanded and Congress passed in 1981. This bonanza allowed GE to pay no federal income taxes on three years of large profits, a savings totaling over $6 billion. The company received a refund of $125 million to boot. All these tax cuts gave GE the money to buy RCA. GE should arrange one of its media extravaganzas on NBC television to say" Thank You, Taxpayers." One of these featured taxpayers could be anyone of the hundreds of thousands of GE employees who single-handedly paid more in federal income taxes than the major multinational company at which she worked during those three years.
• The drug companies, already benefiting from generous tax credits, constantly use their ads to ballyhoo their discoveries. What they don't say is that many of the important nonredundant therapeutic drugs, including most of the anticancer drugs, were developed in whole or in part with taxpayer money. The medicines developed under the auspices of both the National Institutes of Health and the Department of Defense have been given away free, under monopoly marketing rights, to individual drug companies. Since the drug companies spend deductible billions on advertisements each year, they can spare a day on April 15 to advertise a "Thank You, Taxpayers" message. For our part, we might start questioning "why drug prices are so high when we taxpayers are paying so much of the research bill in the first place.
• The timber and mining companies receive vast sweetheart deals from taxpayers. We build the roads in our national forests for Big Timber companies to use. Under the 1872 Mining Act, hard rock mining companies get our minerals (on our public land) free on discovery. No matter how rich the minerals beneath the ground, these companies pay us no more than the maximum $5 per acre designated in that 132-year- old law. Only in America can they get such a deal. As an example of the giveaway, a Canadian company received ownership of $9 billion worth of gold (our gold) on federal land in Nevada from the Department of the Interior for about $30,000. Private timber companies can cut down ancient, giant trees for a pittance in the Tongass National Forest. Timber and mining companies support many timber museums around the country. How about a graphic display of appreciation to taxpayers at these museums, as well as on their websites: "Thanks from Weyerhauser, the taxpayer draining company."
• Television broadcasters were given $70 billion worth of digital spectrum by a supine Congress in 1997. Starting in 1927, radio and later television stations have received a free license for the use of our public airwaves. Wouldn't take much for these broadcasters to say thank you. They control our public airwaves for free and can easily communicate their gratitude. Please do it in prime-time, guys.
• What about all those professional Sports corporations that play and profit in taxpayer funded stadiums, ballparks, and arenas? A parade of the owners and players would serve as a Thank You to the taxpaying fans, who, despite such subsidized largess, still pay through the nose for tickets and parking.
• McDonald's for years received taxpayer subsidies to promote the company overseas as part of a foreign marketing access program. Marriott, Intel, and other companies receive local tax abatements and other facilities. They've got the restaurants and the ballrooms to accommodate smashing appreciation parties in hometown America. Ronald McDonald can be the Master of Ceremonies.
• Corporate welfare is everywhere. How about the HMOs and the for-profit hospital chains? Or the military weapons contractors with their reimbursed over-runs and other runaway expenses. These companies have great public relations firms that can develop flamboyant displays of gratitude to taxpayers. We just have to make sure that these outlays are not tax-deductible because they are certainly "not ordinary and necessary business expenses."
Taxpayer Appreciation Day will launch a longer, much more engaging public debate about our tax system and its vast behavioral impact. Which do you think most people would prefer to have deductible: tobacco and liquor consumption at business occasions or their children's college tuition? The tax laws say yes to the former and no to the latter. Hiring a belly-dancer to entertain clients is deductible; going for an uncovered physical checkup is not.
Tax incentives don't reflect Our societal needs. Instead they direct savings toward our crassest activities, such as gambling casinos. These incentives can undermine the common good and enhance the lifestyles of the rich and famous. Jimmy Carter used to call Our tax system a "disgrace to the human race" and he was not just referring to its complexity and unfairness. It sways us, individually and collectively, toward behavior that drains the best intentions of Our society and the greatest promise of its future. It compels individual taxpayers, trying to pay their own bills, to subsidize big companies to make more of a profit. Why, for example, in the early 1980s, should General Motors and the city of Detroit demand and receive over $300 million in local, state, and federal subsidies to build a luxury car factory in Detroit, with the city further agreeing to demolish, through eminent domain, a peaceful neighborhood of hundreds of homes, small businesses, and churches to make room? GM, which could have built the plant nearby on an abandoned auto plant site, had assured these city officials that the factory would employ 6,000 workers when, in fact, the highly automated facility hired only 3,000 laborers: But the company's subsidy was not cut proportionately.
The courts allow such condemnation proceedings, a form of corporate socialism, that transfers private property to corporations. The disparities between the corporate plutocrats and plain citizens who sweat it out every day transcend dollars. Companies can fly their lobbyists to Washington for their goodies and deduct the expenses. When individual citizens do the same" it's on them. The binding of a book is not large enough to chronicle the crude power plays and money deals embedded in thousands of pages of tax statutes, tax regulations, and special tax advisories. But I'll highlight just a few of the favors bestowed upon the demanding rich to get your dander up:
• Why should the Treasury write out virtual checks, called tax credits, in the millions of dollars to Microsoft, a company which had $62 billion cash in the bank in Spring 2004 -- probably a world record. The fact that Microsoft was judged in federal court to be a monopolist should have disqualified it from receiving welfare.
• For a long time, Washington has been giving a cornucopia of tax benefits to U.S. companies for shipping jobs and factories abroad. Similarly, the government gives big- time aircraft, tank, and other weapons exporters (who often export to the most repressive regimes) tax subsidies and export credits exceeding over a billion dollars a year. In years past, these tax subsidies were even extended to U.S. tobacco companies setting up production facilities for their cancer sticks in foreign countries.
• The estate tax is slated to be eliminated altogether by 2010, even though fewer than 2 percent (a declining percentage, as the phase-out continues) of persons who leave the richest estates pay any federal estate tax at all. With exemptions for estates rising each year, apart from free spousal transfers and a welter of other ways to arrange estate planning to minimize taxes, by 2009 only 3,000 of the wealthiest estates would be subject to the estate tax. So brazen was this estate tax abolition drive, which was geared to Bush's affluent circles of friends, that then candidate George W. Bush went around rural America justifying repeal on the basis of saving family farms: "To keep farms in the family, we are going to get rid of the death tax." He gave not one example where a farm loss had actually been due to the estate tax. After being selected president, he was still unable to give one example of any farms lost because of the estate tax. No one in his government or at the American Farm Bureau Federation could give him one instance.
This ploy was just one of the false premises that made it easy for a majority in Congress both to go along with Bush and receive grateful campaign cash from contributors. Another was the claim that administering the estate tax, and paying lawyers to avoid it, cost as much as the tax raised. The more accurate figure is 6 cents for every $1 raised, according to Rutgers University business professors Charles Davenport and Jay Soled.
In a remarkable transcendence of their own interests, over 1,000 rich people, led by Bill Gates Sr., Warren Buffett, and George Soros, declared their opposition to estate tax repeal. What is more, Mr. Gates has started a series of personal testimonials by his group called "We did not do it by ourselves." Gates Sr. began his Own testimonial by saying he went to college on the GI Bill. After he married, he and his wife bought their first home with a Veterans' Administration loan. He later became successful as a Seattle attorney and gave his son, Bill Gates Jr., seed money to start a company called Microsoft which benefited almost immediately from additional federal tax credits.
• There is a Wisconsin law requiring the state's Department of Revenue to provide Wisconsin residents meeting certain conditions with the amount of state income tax reported by corporations. These companies are not human beings deserving the sanctity of privacy, nor are they entitled to a privileged relationship with the Treasury Department. These companies are artificial legal entities, endowed with privileges, powers, and advantages that no individual can possess. Corporate tax returns should also be made public for a reason outlined by Charles Lewis and Bill Allison in their book The Cheating of America: If corporate tax returns were public, investors would have another tool to determine whether the glowing earnings statements companies like to release have any basis in reality. The truth of the matter is that many profitable companies tell the public one thing and the IRS something else entirely. Corporations might be less willing to engage in elaborate tax shelters if they had to reconcile the bottom lines they report to the public with the ones they report confidentially to the government.
Tax Avoidance + the Lack of Enforcement
Tax avoidance, which is legal, and tax evasion, which is not, are more related than distinct. The large companies employ skilled attorneys to draft the provisions, popularly known as loopholes, and then send lobbyists to Capitol Hill to muscle key staffers of key members of the tax-writing House and Senate Committees (many of whom probably have received contributions from these same attorneys or their clients). Regularly, well-honed amendments are buried in bills that run hundreds of pages long. These amendments are often so obscure, and so part of the swapping customs between legislators, few people in Congress know who they are benefiting or how much shifting the burden or reducing services will cost the little taxpayer. Occasionally, reporters are tipped off, bur often months after the legislation has passed. GM and Ford benefited handsomely from one short paragraph that got through in a lengthy bill over a decade ago. The Washington Post was the first to expose its presence -- about five months after the bill became law. The champions among the tax bar are those adroit attorneys who can transform what was an evasion into an avoidance. Bur even if they cross the line back into evasion for their clients, as their tax shelter production factory often does, the risk of persecution is minimal. These matters are routinely settled, if the IRS brings any action at all.
During my aforementioned lunch with the IRS commissioner, I teasingly asked whether he agreed with those who said the insurance section of the tax code is so complex and obscure that Einstein's theory of relativity is comprehensible to more people. He replied that he would not be at all surprised if that were true. "Then how can the IRS enforce such provisions?" I asked. He said that it's difficult to enforce these rules, in part because it is very hard to find an available expert to consult and to testify for the IRS.
Try to put yourself in the place of the IRS. Tax compliance by the rich and powerful is vanishing, but the agency can't publicize their awareness of this trend for obvious reasons. Conventional "tax avoidance schemes and crimes," says the Center for Public Integrity, "are frankly beyond the current competence and budget of the Internal Revenue Service." But this worrisome pattern is nothing compared to what is emerging: As corporations evolve due to new technology and globalization, they simultaneously evolve new loopholes and ways of manipulating the tax system. The Center puts it this way: "Because of exploding technologies and their inability to regulate cyberspace, governments today find themselves impotent to tax trillions of dollars in potential new revenue from electronic commerce." A book titled The Sovereign Individual by James Dale Davidson calls cyberspace "the ultimate offshore jurisdiction. An economy with no taxes. Bermuda in the sky with diamonds." Global corporations are reaching a stage where they can decide how, where, and even if they want to be taxed.
During the past twenty-five years, the trend has been unmistakable. Both relatively and absolutely, corporations pay less income tax. Relative to the middle class and the poor, the super wealthy are paying on the whole a smaller percentage of their income in overall taxes. Nominal corporate tax rates, the effective rate actually paid, and the taxes on capital gains and dividends all have been dropping. The tax burden continues to shift from the wealthy to the working class. These trends exacerbate already sharp disparities in wealth and income in the United States -- the worst disparities in the Western World.
The slide into deeper plutocracy has continued under Republican and Democratic administrations, at both the federal and state levels. Apart from blocking the repeal of the estate tax under Clinton, the Democrats appear helpless. A clutch of them have essentially joined the Republicans, and the party as a whole cannot muster the unity or energy to stop the Republicrats from further plundering the American middle class. In the words of David Cay Johnston, the New York Times Pulitzer Prize winner and author of the excellent bestseller Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich and Cheat Everybody Else: "There is an underground economy among the super rich that lets them understate their true income and overstate their tax deductions.... The major change taking place is a shifting of burdens off the super-rich and onto everyone below them. It is a shift that began with the Democrats in 1983 and that has been increased dramatically since the Republicans won control of the House in 1995," five years before Bill Clinton left office.
Where have the Democrats been? If they couldn't play offense, what about defense? Well, for starters, they were dialing for the same corporate dollars. Second, many seemed to have lost their moorings regarding the public philosophy and rationale of progressive taxation, including that of unearned income. Third, some bought into the theory that cutting taxes on the wealthy and corporations automatically increased investment and economic growth. They forgot that taxes were much higher in the prosperous 1960s, and that tax-cuts can cause ballooning deficits (hugely generated by Ronald Reagan) that inflict their own pain on the economy. Last, they've lost the semantic advantage in the debate over taxes. Johnston writes of the Republicans' chief semanticist, Frank Luntz, promoting the use of the phrase "death tax" instead of estate tax or inheritance tax. For a drive to eliminate the capital gains tax, he recommended use of the phrase "savings and investment tax." For the effort to privatize social security, he said "Social Security" should never be mentioned, and instead should be replaced by "retirement security." Personalize, personalize, personalize, said Luntz, and you win the debate over tax policy. Luntz was so contemptuous of the Democrats that he even openly advised them on how to develop their own effective language, such as describing the estate tax as "billionaire's tax." The Democrats' response -- grumble, mumble, and jumble their message. Writing in Harper's magazine last December, even a mellowed George McGovern could say that "most of today's liberals are too intimidated for my taste." He mentioned the poet Robert Frost's observation that a liberal is someone who "won't take his own side in a quarrel."
In the midst of the tax fairness crisis, there is an easy initiative for the Democrats: press Congress to give the IRS an adequate budget, skilled staff, and the authority to go after the tax evasions and tax avoidance schemes of the global corporations arid the super-affluent classes. They• need go no further than the rationale given and documented by Johnston:
Our tax system is being used to create a nation with fewer stable jobs and less secure retirement income. The tax system is being used by the rich, through their allies in Congress, to shift risks off themselves and onto everyone else. And perhaps worst of all, our tax system now forces most Americans to subsidize the lifestyles of the very rich, who enjoy the benefits of Our democracy Without paying their fair share of its price.
The triumph of the oligarchs extends further still. Not only is the IRS inadequately funded to cope with the increasing assaults on its enforcement duties in areas offering the greatest revenue recovery, but its resources are getting squeezed even tighter. Under Clinton and a Republican Congress, the number of revenue agents decreased, as did the number of audits of the corporate wealthy. During the fiscal year 1989 to 1999, with 14 percent more returns being filed, Lewis and Allison report that "the number. of permanent IRS employees dropped 26 percent (from 111,980 to 82,563). The President and Congress also cut the staff of the IRS Office of Examination staff, including revenue agents and tax auditors, by 34 percent, from 31,315 to 20,736.... Under political pressure, the IRS is auditing poor people more often then well-heeled taxpayers. And tax-related prosecutions are half what they were nearly twenty years ago." The two authors couldn't get answers from officials as to why this was happening. So, they posed a series of questions "that no one in Washington is particularly able or anxious to answer ... without considerable squirming, hemming, and hawing":
How serious are our federal officials in both parties, at both ends of Pennsylvania Avenue, about upholding the current tax laws today for all Americans? Politicians should be asked bluntly whether they favor or not increased enforcement of the existing tax laws. Do they think the poor should be audited more often than the rich? Should billionaires be able to renounce their U.S. citizenship in order to avoid taxes, and still be able to return home for months on end because the law barring their reentry is rarely, if ever, enforced.
Increasing enforcement resources, now being requested by the IRS, would certainly produce more revenue. But what happens instead? Audits of the biggest corporations, which pay 85 percent of the corporate income tax, declined: two out of three were investigated in the late 1980s, but that number has slipped to one out of three.
In terms of the IRS itself not allocating small resources for big gains, Johnston found the work of IRS partnership specialist Jerry Curnutt most astonishing. Out of his small Dallas office, Curnutt's pair of CD-ROMs contained financial details reported by all two million partnerships in the United States. He found that a huge amount of tax cheating had escaped the Service's attention because a key question was not asked on the partnership tax return form: whether the partner had a domestic tax-exempt partner. After constant requests, Curnutt, staying on long after he was eligible for retirement, could not persuade the IRS to find room in its "budget to pay for the keystrokes to capture this data," wrote Johnston, "even though it was costing the government billions and billions of dollars. " Commissioner Charles O. Rossotti, in his final report, confirmed Curnutt's claims -- "that a few dollars to capture one more line of data from partnership tax returns could bring in billions of dollars in taxes" -- with figures ranging from Rossotti's $7 billion to other much higher estimates annually. To date, neither the IRS nor congressional tax committees have moved to correct this data gap.
By the time he was ready to leave his five-year term of office as commissioner of the IRS, Charles Rossotti was prepared to speak out more forcefully. When Republican Congressman Amory Houghton, chairman of the IRS Oversight Subcommittee, could not answer questions from the press about widespread tax dodges and the implosion of tax law enforcement at the IRS, he was embarrassed enough to schedule a tax cheat hearing in October 2002. Commissioner Rossotti was scheduled to be the lead-off witness. But the hearing was cancelled without explanation. Somehow Johnston got a hold of Rossotti's testimony that included the following message to Houghton:
The tax system continues to grow in complexity, while the resource base of the IRS is not growing and in real terms is shrinking. Basically, demands and resources are going in the opposite direction. This is systematically undermining one of the most important foundations of the American economy.
The last point raises a fundamental question: whether the federal income tax is salvageable or even deserves to be saved in its present form. The powers that be and the campaign contributors are one and the same, and unlikely to adopt the patriotic wisdom of Oliver Wendell Holmes. There will become ever-more evasive tax escapees, continuing to shift the tax burden to work and away from wealth. It is time for a raging public debate about reversing this trend. As Business Week's chief economist William Wolman pointed out in his book The Judas Economy, there is a relentless increase in the returns on capital as compared with the returns on labor. Beyond shifting the tax burden back to wealth and away from work, a rational society would tax those things we like the least -- pollution, gambling, the addictive industries, lurid luxuries, and high turnover currency trading and stock, bond, and derivatives transactions. The latter alone, given its vast volumes and velocity, can become the subject of an international treaty to provide enormous revenues from tiny taxes for the signatory nations.
It is time for integrated thought about taxes to clarify goals, collect revenues, and expend them efficiently. The taxpayers who have the greatest stake in progressive tax fairness, tax simplicity, and the spending of tax revenues are the far larger number of small taxpayers who have the votes, who collectively have the vision and who are not expatriating. They remain in the United States. They should be given the same standing to sue the federal government. They should also seek a well-promoted check-off on that 1040 tax return so that they can voluntarily contribute up to $300 to a public campaign election fund as the first step toward reforming the monetized political climate that is corrupting both federal and state tax systems. We are a long way from a goal of taxation espoused by Adam Smith: "to remedy inequality of riches as much as possible by relieving the poor and burdening the rich." Corporatism is also a long way from conservatism.