The New York Times alleges that President Donald Trump paid $750 in federal income taxes in 2016 and 2017. Whether or not this is true (the Times has not made public its evidence), a tax system that lets some people — the super rich and the super poor — pay no taxes while most Americans pay a lot in taxes is corrupt and unsustainable.
By contrast, in 2016, households in the middle 20% of the U.S. income distribution earned roughly $60,000 and paid $2,200 (both on average) in federal income taxes, according to the Congressional Budget Office.
No one really likes taxes or paying taxes. But paying one’s fair share is one of the duties we all owe our country. As Warren Buffett has said, if his executive assistant pays a higher rate of taxes than he does, something is very wrong — the system is inequitable and unfair.
And there are specifics in the tax code that are inexplicable and incomprehensible, except as special favors for those who can afford lobbyists. Why, for example, does the tax code, crafted by both Democrats and Republicans, allow a business taxpayer to write off personal expenses, such as haircuts and greens fees, as business deductions? Why do real estate developers enjoy such generous tax exemptions? Why are there provisions on capital gains that allow them to pay very little or no federal income taxes?
Further, the IRS is increasingly unable to do its job as a result of lack of oversight and support from Congress. A report co-written by former Harvard President and Treasury Secretary Larry Summers for the National Bureau of Economic Research says that $7.5 trillion in taxes will go uncollected in the next 10 years because the IRS simply does not have the means to enforce the tax law.
During the 2016 campaign, Trump repeatedly criticized tax avoidance by the super rich, saying that he believed rich Americans should pay more in taxes on every dollar of additional income. He was right.
Trump also campaigned on a promise to stop the wealthy from ripping off the middle class. This promise helped him get elected. He was right on that point, too.
But, four years later, Trump has tax strategies available to him that are simply not available to the vast majority of his supporters. Wage-earning Americans have taxes garnished directly from their paychecks. Someone in Trump’s position, however, can hire tax lawyers and accountants to push the rules right up to the line of fraud.
In 1977, President Jimmy Carter’s federal tax burden for the previous year was zero, thanks to a tax credit earned from purchasing equipment for his farm. Carter voluntarily paid the Treasury $6,000, equivalent to 15% of his income, compared to the 14% paid by the average taxpayer that year. Maybe that makes him a chump or maybe that makes him a patriot. But just as in 1977 and 2016, the tax code is still unjust and irrational and needs to be fixed.
