Guild Companies

It's probably by design that tax time falls in the middle of April. Spring takes some of the sting out of sending your money to Washington. Imagine having to sign the check in the middle of winter; the suicide rate would soar. On one level, you can think of paying taxes as a communal penance performed in atonement for our collective anxieties. On another, taxes are a symbolic reminder of our interdependence, a financial acknowledgement that we are not fully self-sufficient and are therefore in need of various federal services and protections. Metaphorically, paying taxes is like putting fuel in the national gas tank. It's OK as long as the nation is running well and everyone is putting in their share.

Regardless of your political leanings, you don't need an MBA or a lunch with Alan Greenspan to know that the nation is not running well and that everyone is not paying their fair share. My current favorites are Sprint CEO William Esrey and his protege Ron LeMay, who tried paying no taxes on $288 million in stock-option profits! By contrast, if you're an IT professional making $50,000, you'll be paying the feds 27 percent. The type of tax shelters Esrey and LeMay employed are apparently so shady that law firms routinely charged between $50,000 and $75,000 just for a letter certifying legality--a transparent ploy to keep their clients out of jail. "Gee, your honor, I didn't know. Says here it was all perfectly legal." (And to think I was agonizing about deducting four books on management theory as business expenses.)

Back when Leona Helmsley infamously uttered "only little people pay taxes," she appeared to be genuinely confused. Why would anyone harass her about tax evasion? Everyone in her financial circles understood the rules quite clearly. She was only doing what she believed her social rank and financial position entitled her to do. In her own endearing way, Leona was saying, "Let them eat cake." Unlike Marie Antoinette, however, she was allowed to keep her head, but did have to serve a little time at Club Fed, in a room that probably held a comforting resemblance to one of her hotel suites.

In its way, Helmsley's downfall was a win for all of us tax-paying little people. Rare evidence that, if pushed far enough, the IRS would actually turn on the aristocracy. But that was then. The trouble is, her momentary indiscretion is rapidly being turned into the law of the land.

The good news, or the bad news, depending on your bracket, is that the federal government is hell-bent on plugging its revenue stream. In fact, if you listen to what passes for political discourse in the media, you would think that the government could be run without any taxes at all (or at least without taxes from the sources that could best afford to pay them). Attempting to codify Leona's maxim, the House passed a $726 billion tax reduction package, with about half the benefits going to the top 1 percent of taxpayers. While nearly half of all taxpayers will get less than $100 of relief, someone making a million dollars a year will be granted a cut of $92,000. The Senate, historically more restrained than the House, reduced the package by half.

If the public is understandably resistant to new taxation, it is equally skeptical of programs that cosmetically lower their tax burden while providing massive relief for those at the top of the economic scale. It wasn't always so. After World War II, when income-tax rates were comparatively progressive, 85 percent of taxpayers described the system as fair, an unthinkable majority today. Less than 35 years later, 80 percent believed the opposite. What happened? Essentially, powerful interests that didn't like the old system organized to change it. William Greider offers an instructive example of how tax policy is manipulated in his superb book Who Will Tell the People. "From 1977 to 1990," he writes, "Congress enacted seven major tax bills and many other minor ones. . . . The results of this legislative torrent are startlingly one-sided."

Consider, if Congress had done nothing since 1977, nine out of ten Americans would actually be paying less, since a smaller share of their growing income would be annexed by the federal government. "Yet, paradoxically, the government would be collecting more revenue each year--almost $70 billion more--if none of those tax bills had been enacted." So where did the money go? "The tax burden for the richest 1 percent of the population fell cumulatively by a staggering 36 percent," documents Greider, while the middle class shouldered an increase of 7 percent.

Without fail, the publicly stated justification for tax legislation is always economic growth and jobs, and no shortage of experts is trotted out to reassure the public of the benefits of proposed policy changes. These experts, however, represent the same brokerage houses, investment banking interests, lobbyists, and economic think tanks that wrote the policies in the first place. The interests of the average citizen are nowhere represented, nor are citizens positioned to engage in perpetual tax wars.

Greider concludes: "Among all their other disadvantages, citizens are particularly handicapped because the tax debate never ends. It is a continuum of politics that stretches over years. The monied classes understand this and know they can afford to accept trade-offs in one season because they will be back again next time, with new reasons to plead for tax relief. If political parties were reliable organizations, they would defend the citizenry against these perennial raids on the public treasury. The present reality is that both political parties collaborate with the raiders."

Such deformed power relationships are why, in spite of trillion-dollar corporate scandals, off-shore tax havens are still protected and the IRS enforcement budget remains a fraction of what it used to be. It is also the reason why, in spite of massive deficits, the government insists on expediting and making retroactive a variety of tax cuts that have become the central, inviolate element of an otherwise absent economic policy.

The latest cuts are the tempting icing atop the unhealthy cake and bear an uncanny resemblance to Greider's example. Citizens for Tax Justice, a nonpartisan watchdog group, reports that 31 percent of all Americans will get absolutely nothing from the tax cut proposal. Additionally, it will cost the treasury an estimated $1.8 trillion over the next decade and guarantees to double the national debt to a staggering $7 trillion, placing an unconscionable burden on future generations.

None of this will create jobs, because most industries are running well below capacity and the problem is not more investment, but a lack of purchasing power among the very people who will not benefit from the tax cuts.

Meanwhile, the states are an aggregate $85 billion in the red and dropping services faster than Ivana dumped Donald. All of this will result in decades of disproportionate liability for future workers, and those nearing retirement age are likely to be faced with mounting inflation. Once the economy cycles out of recession, the government will be competing with the private sector for borrowed funds. Since the available money supply is inherently limited, too many borrowers chasing too few dollars will send interest rates soaring.

Paying taxes, like other civic responsibilities, isn't always pleasant or convenient. But it is the inevitable result of living in a complex society that holds the common good as an enduring value. Where the right to self-interest intersects with the responsibility to the common good, there lies the measure of a healthy society.

Native fishing villages would often have large communal cooking pots into which each fisherman contributed a portion of his catch so that everyone could eat if they were hungry or unable to fish. It was, in a sense, a primitive method of taxation by which the survival of the village was ensured by the labor and good will of its members. All that was required for the system to work was a belief that we are all in this together. Somewhere that belief has been lost. It has been replaced by an obsession among the most successful in our village to find new ways to disengage from communal obligations.

A simplified, progressive tax system would solve many of our problems, but in its absence I came across this reasonable suggestion from Oscar Wilde: "Rich bachelors should be heavily taxed," he said. "It is not fair that some men should be happier than others." My wife read the quote and said Wilde was a pig. But being in the happily married minority, Wilde's solution works for me.