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The fairness of the current tax system is perhaps best described by Thomas Piketty, a
mathematician, economist and historian, in his book “Capital in the Twenty First
Century”, published this year in 2014. He explains that the American tax system favors
the rich i.e. the rich are getting richer and the wage earners are getting relatively poorer,
especially over the past 30 years. Interestingly, in 1984, Showdown at Gucci Gulch
mentions Gary Hercht an assistant principal from NY talking along the same lines. In a
discussion group conducted by The Wall Street Journal he says, “My feeling with the
federal tax goes back to the same old story: the rich get richer, the poor stay poor, and the
middle class gets poor too.”
Nearly 30 years ago, Showdown at Gucci Gulch mentions Democratic Senator Robert
Byrd of West Virginia talking on national television of a “mother of three children who in
1983 earned $ 12,000. On that income she paid more in taxes than Boeing, GE, DuPont
and Texaco, all put together.” Politicians were using this statement and others like it to
gain the sympathy and vote of the “American people”. Thirty years later, in January of
2012 Warren Buffet’s secretary is again made the face of an attempted tax reform and the
unfairness of our current tax system. Debbie Boasanek, a salaried employee of Warren
Buffet, is taxed at a higher rate on her salary than Warren Buffet on his income. So what
exactly did change? Nothing. Nothing changed except for the fact that we the “American
People” have simply come to accept that nothing will change and are now but a mass
struggling to keep our heads above water. The lobbyists are still winning and the
politicians are still only concerned about keeping the people with “Big Bucks” happy.
The entire process of the 1986 tax reform as described in the Showdown at Gucci Gulch
is frankly disgusting. I am not trying to diminish the effort of the reform. As mentioned in
Gucci Gulch, “The bill closed loopholes worth roughly $ 300 billion over five years and
replaced them with lower tax rates. It also raised corporate taxes by $ 120 billion over
five years, the largest corporate tax increase in history.” Prior to this reform most
45corporates were using loopholes and tax shelters to completely avoid paying any tax.
People were disillusioned by the tax system and every person simply wanted to avoid
paying tax because they felt that no one was paying their fair share.
I agree with the lower tax rates that were introduced under the 1986 tax reform for
individuals. Nevertheless, I would prefer all charitable contributions to be deductible, not
just allowed for itemized deductions. I would also like to have retained the sales tax
deduction. Medical expenses are another major expense especially for the middle income
