Double Take: Unequal Taxation of Equals

BY PAUL BONNER

by Lester B. Snyder
Vandeplas Publishing, 2007, 281 pp.

In the backward world envisioned 135 years ago by Samuel Butler in Erewhon , taxation is regressive, on the theory that a business fortune is evidence of society’s esteem toward its holder. Rather than the social Darwinism that Butler parodied, however, America subsequently developed a progressive system, which is alive, if not well, nearly a century later.

In diagnosing its ills, San Diego University law professor Lester Snyder has come to the same conclusion as many other reformers: A radical cure is needed. In the “double take” of the book’s title, Snyder demonstrates the tax code’s failure to live up to that bedrock principle of fair taxation, the equal treatment of similarly situated taxpayers.

He finds double standards and therefore government-sanctioned redistribution of wealth in the law’s differing treatment of earned vs. unearned income, hobby loss rules, preferential rates for capital gains, and the antiquated and punitive $3,000-a-year capital loss limitation. Also marriage penalties, marriage bonuses, passive investment rules, divorce property settlements and preferential treatment of donations ­­to charitable organizations of securities and cash versus other assets—all are discriminatory, he says. Even free parking and other tax-exempt employee perks come in for some spleen.

Snyder prescribes a flat rate somewhere under 20%, exempting the first $20,000 or $25,000 a year. He would retain deductibility of employer-paid health care and some home mortgage expense, adding a deduction for renters. Preferential capital gains rates would be abolished, as would pass-through taxation of business profits on individual returns.

If ever there were an open season on the tax code, it would seem to be now, as Congress frets over the alternative minimum tax and presidential hopefuls peddle their own, in some cases radical, cures. Although the tax code’s inequities raise serious and pressing issues, it remains unclear from Double Take and other such books from where the bipartisan resolve to adopt a new scheme would come. Given America’s seemingly increasing penchant for partisan stalemate, it’s hard to imagine it ever happening except in Butler’s mythical land, whose name is an anagram for “nowhere.”

RESOURCES

Keeping you informed and prepared amid the coronavirus crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.

SPONSORED

Building process maps: Template and instructions

Documenting your financial close process and finding opportunities for automation are more important than ever. Our customizable slide deck has instructions, a risk assessment questionnaire, and bonus checklists that will help you map out your process.