Not all taxes have to hurt

Taxes are a deeply emotional subject and make for hot political theater. Whenever the T-word is blurted out, our anxiety zooms. That’s the whole idea. Millionaires, who rightfully are the target for paying more, want us to think that any changes in the tax code will mean that we’ll all be paying more, too.

Not so. The goal with this reform is to finally catch up those taking advantage of loopholes.They don’t want us to see them, but they’re there. Is Mitt Romney one of them? We’ll have to read his tax returns to find out.

In general, these are the folks who quietly take big positions in the stock market, buy or sell masses of foreign currencies, or speculate millions in derivatives. There’s no tax on any of these purchases. For the wealthiest investors, money made from these transactions is their regular income. Compare that with your own purchase or sale of a car or house. In most states, purchases for us normal folks are taxed to the hilt.

And that’s not all. The oh-so-familiar sales tax also harbors a glaring loophole, namely that it’s hard to enforce on phone or Internet purchases. Of course we all know and love that loophole. But this sneaky discount for online shoppers is quietly putting states, counties and cities in the red, while putting local merchants in the tank. Real stores can’t compete if they have to collect it while electronic sellers don’t. One more nail in the coffin of our downtowns.

Known informally as the “Amazon Loophole,” in honor of one of its prime beneficiaries, several states are now trying to work out a means of collecting an Internet sales tax themselves.

There are plenty of other high-profile tax loopholes. They mainly benefit the big corporations and hedge funds with enough money to pay lobbyists to create them. Tellingly, The New York Times last year ran a photo of an ordinary-looking building in the Cayman Islands that provides postal box addresses to hundreds of U.S. companies. This certifies them as “foreign” corporations, thus eligible to receive favorable tax treatment. Our tax structure is riddled with loopholes like these. There’s no need to cut valuable social programs when such relatively painless revenue sources remain untapped.

Columnist William A. Collins is a former state representative and a former mayor of Norwalk.