Ordinarily, my 3rd Tuesday missive comments on the major economic indicators and their effect on people in general. Recently the Congress’s attempt at gaining revenue caught my eye. Specifically, the Minimum Book Income Tax (MBIT) of a proposed 15%. Basically, it would compare a company’s Taxable Income (TI) to the Book Income (BI) they report. If the BI is greater than the TI, that company will pay 15% of that BI. If the TI is greater, then they’ll pay that amount. I believe this to be genius.

There’s been some kind of tax in the US since Colonial times. In the early days, it took many forms other than a tax on income. The Stamp Act, Estate Taxes, etc., were raised when money was needed. Once the purpose was met, the taxes would sunset. Around 1913, the first Income Tax Act in the US came to be. It was written on a single page. As Congress is want, over 108 years they have ‘fine-tuned’ our nation’s tax laws. Currently there are roughly 10,000 sections of tax code in our laws. Each tax code individually mow takes an average 174 pages to write. Ah, progress.

Many tax codes congress passes are intended to lead citizens to act a certain way by either penalizing them (higher taxes) if they don’t follow or rewarding them (lower taxes) if the stay in line. Many more are intended to assist certain groups over others, or granting Preferential Treatment. Now try to imagine 108 years of ‘specific interests’ being served, year after year, layer after layer, targeted code after targeted code. That’s how we accumulated 10,000 sections of goodies. To bring you up to date graphically, please study the included Taxpayers Roadmap, courtesy of the IRS.

The current administration and congress are trying to find a way to raise significant revenue to try to cover the significant new spending they are working on passing. The MBIT is an effort to make corporations pay for much more of it than under existing tax code. It’s genius. In theory, the government spent 108 years using tax codes to get what they wanted, seemingly regardless of the sanity of their actions. Now the sum of their actions is in the headlines all the time, “XYZ Company is only paying 1.2% of their income in taxes!”. But XYZ Company is only following the existing tax code! Talk about being in jeopardy.

Now congress is saying “We were just kidding. We really can’t honor all our past commitments.” So instead of fixing and simplifying the 10,000 sections and making the code indeed fair, their solution is the MBIT. Add one more tax code that overrides all those past focused tax breaks, etc., and the revenue will flow in and the taxpayers it affects will be held accountable. So simple. Sounds a lot like the Flat Tax that is proposed regularly.

This new revenue will just flow in and cover much more spending. Until one group or another, one specific interest group gets a break from the MBIT. Imagine, pass this tax and in 108 years those around will complain about the 125,000 books of Tax Codes that congress built and how now no pays any tax. Everyone has their own break on the MBIT.