Riding the taxation trolley to ‘fairness’

Recently, the Daily Herald ran two syndicated columns that explored the old and oft-quoted refrain of “taxing the rich (and corporations) to pay their fair share.” Both essays, “Debunking 5 Tax Day myths” by Veronique de Rugy on the Opinion page and “A constitutional amendment to deliver property tax relief for Illinois homeowners” by Frank Manzo IV on the front page of the Suburban Business section (April 19), highlight the underlying issue in varying degrees with salient arguments.

But they, like many others — particularly politicians, miss an important caveat.

How do you define “income?” And how do the rich earn/report income to be taxed?

This isn’t an apples-to-apples comparison — more like apples-to-imported Crown melons.

First, the rich may earn/report a “low” salary or none, instead collecting stock as compensation and retaining those shares long-term as assets so that they amount to unrealized capital gains until they sell. Same with real estate.

Next, they might borrow against their stock and real estate holdings and use the loan proceeds as non-taxable income. Then they can pass this on to their heirs as appreciable, nontaxable assets.

Third, they might practice creative accounting whereby personal expenses can be classified as business expenses and certain deductions can show operating losses that lower taxable income.

Fourth, they might make charitable contributions/donations to minimize capital gains, maintain offshore tax haven accounts and invest in health savings accounts (HSAs) to minimize their tax burden legally.

Sloganeering for “progressive taxation” and “wealth distribution” doesn’t really amount to anything beyond emotional manipulation. Making “the rich pay their fair share” involves redefining and simplifying the tax codes based on a standard, universal application, classification and definition of the term “income” and how it’s earned.

Good luck with that.

R.D. Barlow

Schaumburg