COMMENTARY:

Reducing Complexity in the Tax Code

Forewarned is forearmed. Any G.W. Bush tax proposal will have one, and only one, goal: to shunt any tax burden even more away from corporations and individuals of wealth, and even more onto the rest of the public.

The proposal can be used to gauge the impact of what David Brock calls “the Republican noise machine” on media outlets. Any outlets (Fox News, the Rev. Moon’s Washington Times, and Clear Channel spring to mind) treating Bush’s proposals at face value as “reforms” are tainted or compromised. Any outlets trying to be even relatively clear about regressive taxes are still trying to preserve some journalistic accuracy and integrity.

Meanwhile, in the public interest, it is important not only to point out gaps and distortions in prevailing representations (“reform”? from Bush?). It is even more important to mount better proposals.

The grain of truth in the campaign to make our taxes yet more regressive is that the tax code is indeed long and unwieldy, and there are legitimate ways to simplify and clarify it. These are precisely the ways the Bush team does not tackle and literally does not mention.

For example, one good way to simplify the tax code would be to simplify the corporate structure. Every small-d democrat, true republican, and progressive should be looking at the raft of nefarious entities legally allowed in the USA today: limited liability companies, limited partnerships, limited liability partnerships, holding companies, shell corporations closely related to dummy companies, off-shore subsidiaries--the list seems endless.

All of these entities have purposes at odds with the public interest: to serve as tax shelters, to allow companies and individuals to conceal assets and money, to occlude records that should be public, to inhibit transparency and accountability, etc. They complicate the task of auditors, regulators and accountants. They enrich corporate lawyers, bookkeepers (or corporate neglectors of bookkeeping), and PR sectors. The financial aim of staving off taxes and scrutiny inevitably expands and develops to serve fraud and chicanery--and therefore ultimately to serve, for example, drug and weapons trade, child trafficking, money laundering, and terrorism.

Eliminating these unnatural and grotesque exhibits of greed and chicanery would also simplify the tax code, which has innumerable sections devoted to them.

Step One. Here is a short list of the peculiar financial entities referred to above, with some web sources for quick definition and information:

“A Limited Liability Partnership or LLP is a relatively new creation that operates much like a limited partnership, but allows the members of the LLP to take an active role in the business of the partnership, without exposing them to personal liability for others' acts except to the extent of their investment in the LLP. Many law and accounting firms now operate as LLPs.”

[Wonder whether limiting LLPs will be part of Bush’s “tort reform”? hahaha.]

“Companies may adopt a variety of different entity structures including sole proprietorships, partnerships, limited liability companies (LLC), S corporations and C corporations and making an appropriate decision can be difficult. Often, it is in a company's best interest to have more than one entity, depending on the amount of assets that are owned.”

Ref.: Good over-all discussion of the pros and cons of LLCs

On setting up a Limited Partnership in Thailand

References: