I’m actually talking about a book by Philip Stern—not the way you feel approaching the tax deadline. I may be the only person who remembers this book from the early 1970’s, but The Rape of the Taxpayer changed my life with taxes. With example after example, Stern showed that tax policy is really social policy. And as my accounting career blossomed and I grew older, I watched how this social policy changed with the beliefs of who’s leading the show.
Since 1974 when that book was published, there have been 35 tax acts, 20 of those since 2000. Some of these were small but when the big tax changes came through, you could easily see the shift in which beliefs were being promoted. For example, when I first started preparing tax returns in 1976, the top tax rate of 70% applied to unearned income (interest and dividends) while earned income (from jobs and small businesses) was capped at 50%. The belief was that people who worked hard for their money should pay less than those whose income came from investments.
Now, the top rate on most domestic dividends is capped at 20% and the top rate for any kind of income, earned or unearned is 39.6%. A huge shift in numbers but also a huge shift in who deserves to pay less taxes. Along with that shift, deductions have come and gone—mostly gone. But those deductions can have a charmed life with certain deductions being sacrosanct (charitable contributions) and others slowly dwindling away (meals and entertainment).
So next time you sign your tax return, give some thought to what belief the tax laws are supporting. More importantly, ask yourself why?
I’m not about to say what’s right or wrong—just saying—it’s interesting!
