![]() Constitution supports this view based on its requirement for equal protection. Horizontal equity is the fundamental principle that taxpayers who have the same amount of income should pay the same amount of taxes. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The 2014 report included a passage from The Wealth of Nations by Adam Smith, “the father of capitalism” and the “the father of economics”: Even worse, the policies for the TCJA’s choices in picking winners and losers is questionable at best. ![]() But the TCJA created a minimum tax on intangible income under section 951A, an export subsidy under section 250, a 20 percent deduction under section 199A for qualifying business income of only some passthrough businesses, which benefits real estate moguls while excluding medical professionals and consultants, again, a large portion of America’s evolving economy. America’s economy is service-based, and intangible property is the lifeline for scientists, engineers, and technologically innovative companies that drive the success of America’s companies. The TCJA mostly picked winners and losers, dividing not only the country but also the world. ![]() Hatch explained that “the key is to understand the complexities and wade through them to engineer a tax system that enhances efficiency, fairness, and simplicity.” He went on to state that the costs of compliance alone are staggering, and that “those costs are nothing compared to the economic distortions created by a tax system that, far too often, picks winners and losers.”ĭespite Republican leaders making such statements, the Tax Cuts and Jobs Act was passed three years later. In the foreword to a 2014 Senate Finance Committee report on tax reform, 2 then-Sen. So let’s fill in the picture by elaborating on the topics discussed in our previous article and by addressing fairness in tax and whether the law should be used to pick winners and losers. It is extraordinarily difficult to determine how tax rate changes affect taxpayers because it involves determining who ultimately bears the burden of rate increases and factoring in the code provisions altered by rate changes. In our previous two articles, we covered how tax rate disparities on business income affect choice-of-entity determinations, as well as potential changes to net operating losses and estate and gift tax proposals that focus on eliminating the section 1014 basis step-up. In this article, the third in a series, Willis and Bodger explore whether the evolving Biden-Harris tax plan will create a fairer tax code by applying tax principles of fairness to proposals to increase capital gains tax rates and permit indexing for inflation, repeal the state and local tax deduction cap, and eliminate the carried interest loophole. Jed Bodger ( is the vice president of taxation at Sierra Nevada Corp. Before joining Tax Analysts, he was the corporate tax leader in the national office of BDO USA LLP. ![]() He formerly worked in the mergers and acquisitions and international tax groups at PwC and with the Treasury Office of Tax Policy, the IRS, and the Senate Finance Committee. Willis on Twitter is a contributing editor with TaxNotes.
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