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Michael Cianchette is a Navy reservist who served in Afghanistan. He is in-house counsel to a number of businesses in southern Maine and was a chief counsel to former Gov. Paul LePage.
Increase taxes on imports! Eliminate taxes on tips! Institute taxes on unrealized gains!
Our two major candidates for president — Kamala Harris and Donald Trump — sound like carnival barkers when it comes to the tax code. It seems as if they will say anything to get attention and, with it, votes.
Actually, that’s not quite right. Barkers are unabashedly entertainers trying to entice people to play games which, sometimes, aren’t as fair as they may appear. People running for the White House are supposed to be serious about putting forward fair, responsible policies.
Our tax code is, to put it mildly, a mess. The proposals from both Harris and Trump would only make it worse.
Increased import taxes — tariffs — burden consumers. However, these are often hidden behind the retail price paid at the register. Unlike sales taxes in Maine where customers see how much Augusta is taking, Washington forces the tax to be paid at the dock and baked into the final price.
These hidden taxes make it easy for politicians to play coy and say they never raised taxes on Americans. They raised taxes on foreign countries! Nevermind that it increases Americans’ cost of living.
Meanwhile, the proposal to eliminate taxes on tips is one of the most transparent pandering efforts in recent memory. Trump was in the White House previously and never tried to enact the idea. Harris is the sitting vice president and never once pushed for that policy.
But now we have a competitive race and it is always popular to argue for tax cuts. From the Boston Tea Party forward, distaste for taxation is baked into America’s DNA.
Yet, unfortunately, some amount of taxes are a necessary unpleasantness. Given the fact that Congress — both parties — have saddled our country’s future with more than $30 trillion of debt, we have to find a way to pay it off. That means program cuts and tax collections.
The essence of the idea to eliminate taxes on tips is the inverse of the Democrats’ proposal to tax unrealized gains. The former seeks to benefit a preferred group that happens to be a large voting bloc. The latter wants to target an unpopular, remarkably small subset of our population.
History is instructive once more. In 1913, when the first federal income tax after the ratification of the 16th Amendment was proposed, it was pushed by progressive Democrats and heavily focused on “the rich.” The first $4,000 of income — the equivalent of $128,000 today — was exempt from tax for a married couple.
If that same couple made $20,000, or $642,000 in today’s dollars? Their federal tax burden was $140 or $4,500 after inflation. The super-ultra-mega rich earning $500,000 annually in 1913 or $16 million today paid a top marginal tax rate of 7 percent.
Washington’s desire to tax people quickly outgrew its “target the rich” approach. Things are different today, to say the least. If the past is prologue, creating an entirely new tax regime for “unrealized gains” will turn into an ever-broadening revenue source for the federal government.
If it does, what happens to a retiree who bought their home in the 1970s that now has ballooned in value? Congratulations; their local government would whack them with property taxes on the market value and Washington would send a bill for all that imaginary income — their “unrealized gain” — they’ve earned.
Harris and Trump should shelve the pandering and get serious. The last time we paid down debt was when President Bill Clinton and congressional Republicans worked together. The last time we really reformed the tax code was in 1986 when President Ronald Reagan and congressional Democrats worked together.
One part of that reform rarely talked about was making the tax code source agnostic. The reform of 1986 treated wages, dividends, tips, capital gains, and other income types near equally in terms of rates. That is no longer the case, but is something worth considering once again.
There are some real discussions to be had. Taxes are serious business and our national debt is a serious problem. The campaign may feel like a circus at times, but those who want to sit in the White House owe us something more. It’s time we demanded it from them.
