Loopholes and Tax Amnesty

If the confirmation hearings for Secretary of the Treasury James A. Baker III created a dark cloud around tax reform, the even more recent California amnesty tax program should prompt the Senate Finance Committee to sense a ray or sunshine.

The tax shelters, exemptions, credits and deductions created over the years to spur economic growth have often not only failed to accomplish their goals, but have benefited only a very small percentage of the total eligible taxpayers. This has left a taste of unfairness and contempt for the system in the mouths of the average wage earner unable to take advantage of the loopholes.

The response of those left out has been simply to evade, cheat or even in good conscious pay incorrectly, due largely to the 5,000-plus page maze of regulations embodied in the tax code. The amnesty haul of $100 million in California is evidence of the historic trend.

As for the good intentions behind many of the “incentives for saving investments,” too often these investors are rewarded for investing in unproductive ventures doomed from the moment of inception.

A flat (and for most) lower rate would encourage more investment in production sources without the need to weigh the benefit of tax avoidance against the potential investment appreciation.

Now that the pendulum has swung to the point where every dollar subject to taxation is practically equaled by another dollar that is not, it is time to balance the need of the government to raise money to support its vital functions versus the right cherished in the free enterprise system of individuals to maximize the retention of income to spend or invest as they see fit.

This can only be achieved through tax reform of our present system to achieve a simpler system that is trusted as fair and equitable in its application.

JANE E. LAURIE

Los Angeles