10 Ways the Tax System is Unfair to Middle-Class Americans

On Tax Day, Ron calls for comprehensive tax reform that works for all Americans. Here are just ten ways the broken tax code hurts middle-class families:

1. Unfair tax treatment of wage income vs. wealth. 

Taxes on wealth, such as capital gains, are often subject to a lower tax rate than wages and salaries, which the vast majority of every day Oregonians rely on for most of their income. A fair tax system would narrow the disparity between tax rates on income from wealth and income from work

2. The tax code is too complex. 

Without access to expensive financial planners, many families aren’t event aware of the tax credits they could take advantage of hidden in the 74,608 page tax code.  Students from Oregon, like Eugene’s Amber Lee, miss out on tax breaks to help with the costs of higher education.

3. It takes Americans far too much time to complete their taxes.  

Everyone deserves their April back!  It shouldn’t take U.S. taxpayers 6.1 billion hours and $168 billion per year to file their taxes.

4. Small, family businesses are forced to navigate confusing rules and requirements.  

According to the National Small Business Association, 40% of small businesses reported spending more than 80 hours a year dealing with federal taxes in 2014. Businesses in Oregon and across the country should be using this time to grow their businesses, not figuring out their taxes.

5. Upside-down retirement tax breaks. 

Our tax code makes it harder for typical Americans to save for retirement as incentives for retirement saving benefit high-income families far more than middle- and low-income families.  According to the Congressional Budget Office, only 16% of retirement tax benefits go to the bottom 60% of U.S. households by income.

6. Those who ask for help from the IRS often can’t even get it. 

It’s middle and low-income Americans who cannot afford expensive accountants that rely on the IRS for tax help. Customer service has declined in recent years due to budget cuts, so much that calling the IRS is like shouting into a void. Only 4 in 10 U.S. taxpayers calling into the IRS for help can get through to a real person. IRS budget cuts have led to inadequate service meaning billions in taxpayer dollars go uncollected every year. Many well-off taxpayers know this and have little fear of getting audited.

7. Scams, fraud and identity theft are on the rise. 

According to the Federal Trade Commission the #1 complaint they receive is tax-related identity theft.   In 2013 43% of all identify theft complaints to the FCC were tax related, up from 15% in 2010.  

8. The well-off are gaming the system through offshore tax avoidance. 

Billions of dollars are being hidden in undisclosed off-shore accounts, leaving taxpayers and small business to foot the bill.  Last year alone the Treasury and state governments lost nearly $110 billion in tax revenues through offshore tax havens. 

9. No basic standards for tax-return preparers. 

Without basic standards, too many unaffiliated tax-return preparers are incompetent or even unethical, giving taxpayers incorrect advice and potentially depriving them of their refund – something that many Oregon families depend on. Senators Wyden and Cardin are fighting to set basic standards that tax-preparers must meet. Learn more here.

10. The tax code is filled with loopholes that encourage the use of complicated financial products to lower the tax burden on investments. 

Earlier this year Senator Wyden released a report detailing a number of these strategies. Once identified, these loopholes must be sealed shut.