Published in the Martinsburg Journal, November 19, 2017

My Fantasy Tax Reform

Light-years in the past, Congress promised federal tax reform. That was

three weeks ago.


We don’t know the details, but the good news for many is that the

Standard Deduction could be doubled. The bad news is that expenses

usually itemized on “Schedule A” will be changed. Many homeowners take

their mortgage interest, real estate taxes, state taxes and donations to

non-profits, and subtract that from their earned income. It usually totals far

more than the Standard Deduction, lowering their taxable income.


The thought of losing those write-offs is probably creating a panic right

now, if we weren’t already in a panic over the threat of nuclear war.

However, it’s the loss of the state tax deduction that got my attention.

West Virginia is not cheap to live in, no matter what anyone from Maryland

tells you. The state tax rate here is effectively higher than Illinois, which

doesn’t tax any pensions or Social Security. When money you’ve earned

is clawed back by the state you live in for taxes, it is not earned income

anymore. You were just the middleman between your employer and your

government.


So in the spirit of Mitt Romney, who famously quoted an 1886 Supreme

Court case when he said “Corporations are people,” my Fantasy Tax

Reform would make that phrase true in the reverse. If Corporations are

People, then People are Corporations. We should be able to deduct

expenses the same way businesses do.


First, all operating expenses for maintaining your personhood would be

deductible. That includes all types of insurance, bad debts, all taxes,

professional services, and payments to employees (i.e. the babysitter).

Since education is an investment, tuition would be a straight deduction, not

just a tiny credit. And health is also an investment, so all medical and

dental costs paid by yourself would be deductions off the top, not the 7%

pittance allowed now. Improving our health and intellect is just like

upgrading machinery in a factory, or updating your office computer system.

By the way, interest on loans of any kind would be fully deductible.


For the middle-class, taxable income would exclude your bank savings.

Few people are likely to stash cash due to current low interest rates. But

adequate individual savings could mean fewer government programs

would be needed to support people when their safety nets fail. That’s

worth the deduction.


On the flip side, corporations would have to follow the same rules

individuals do; the IRS says if you sell your house for a profit (over a

certain amount) you’ll owe Capital Gains tax. Private individuals can’t

take a Capital Loss from a home sale, only a Capital Gain. But

corporations can sell property and equipment at a loss, and write the

Loss off their Gains. Millions of American homeowners should have been

able to do the same when the real estate market crash in 2008 put their

homes “underwater.”


Also, in my Fantasy Tax Reform, you can choose which type of

appropriations you’d like to contribute to. If the military is your priority,

check the box for BOMBS AND BOMBERS. If you want to support

diplomacy or infrastructure, check the box for BRIDGE BUILDING. If

you want to preserve the environment, UN-CHECK the box for EPA. If

you want to help repay the national debt, check BLACK HOLE. At least

this would give us a more democratic way of electing where our taxes

go, rather than electing representatives who then decide where our taxes

go.


The last item on my list really is a fantasy. You’d earn a tax credit for

every call or letter to your state representatives letting them know what

you’d like them to do on your behalf, or thanking them for doing

something you agree with, regardless of political party.


Dream on!