Editor’s Note: Edward J. McCaffery is Robert C. Packard trustee chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of “Fair Not Flat: How to Make the Tax System Better and Simpler” and founder of the People’s Tax Page. The opinions expressed in this commentary are his own. View more opinion at CNN.
Two tax stories, progressing on non-parallel tracks and in seemingly alternate universes, are in the news, both moving full-steam ahead. One story is about all of us, or rather almost all of us: Ordinary workers getting ready this Monday, April 15, for the first tax day after the Trump-inspired Tax Cut and Jobs Act of 2017. We are about to learn first-hand that Trump’s promise to fix our broken tax code was not quite kept.
The other story – the one sucking up all of the oxygen in the media, as per usual – features our reality-TV-host, Taxpayer-in-Chief, President Donald J. Trump, who is embroiled in a battle with House Dems over the release of his tax returns. His minions are vowing that the American people will never see them, even though the law giving Congress the power to obtain them seems as crystal clear as laws can seem these days.
These concurrent storylines underscore a basic and important fact of life in America today. There are two tax systems in our country: One for the many of us who work regular jobs for a living, and a second for those who have wealth and can live off of it, without bothering much about ordinary work.
Trump lives in the second world. True, his tax returns might be more complex than most, as Trump’s staged photographs in tax times past aim to show us. But Trump reportedly gets others to do the hard work of filling out the forms – evidence suggests he personally does not pay much attention to tax details. Perhaps he never developed the habit since he admitted that for years he avoided paying federal income taxes.
Such wealth-without-taxation runs in the family. Son-in-law Jared Kushner is a proud member of the no-tax club, documents suggest. And now, faced with a clear statute mandating that the IRS turn over requested tax returns to Congress so that perhaps we can all see what’s really been going on, our President is fighting the black letter law tooth and nail. The battle is likely to wind its way to the courts, where Trump can use public funds to defend his not-quite-legitimate right to privacy.
As for the rest of us this tax season? We have, quite simply, nowhere to hide. As we sit down to fill out our taxes on or before Monday (or ask for an automatic six-month extension at least), the IRS already knows everything it needs to know about us. Taxes are withheld from our paychecks before we ever even get cash to pay for food or shelter or other necessities. Our employers send a copy of the same W-2 we get, showing all of our salary and taxes withheld, to the government, so as to get their tax breaks for wages paid.
This system of wage-withholding and third-party reporting was introduced during World War II in order to get the working classes to finance the war effort. Workers are still paying, decades later, and not just in income taxes but in payroll taxes as well – all with little choice. Big brother watches us at every step of our financial way.
Trump’s Tax Cut and Jobs Act will make filling out forms simpler for many of us. The standard deduction went up, and itemized deductions (such as the previously unlimited one for state and local income and property taxes) went down. So now almost 90% of income taxpayers will take the standard deduction, compared to about 70% under the old law. These many ordinary households will simply add up the wages from their W-2’s, subtract their standard deduction, and check off a few boxes – nearly a postcard return for the masses.
But simple does not mean painless. (It’s pretty simple to sit in a dentist’s chair and get a root canal, after all.) The income tax for most of us is becoming like the payroll tax: a “simple” tax to compute, but an onerous one to pay. These burdens fall, inescapably, on wages.
In Trump-world, things are different. There are more forms, but fewer, if any, taxes. And none of this may ever see any light of any day because, in the President’s mind at least, his will trumps the IRS and the law. To expand on the late billionaire Leona Helmsley’s observation: maybe transparency, like taxes, is just for the little people.