Four ways to improve U.S. tax system (2024)

The United States tax system could be improved by going back to its constitutional roots as a tax on upper classes that doesn’t apply to working class families, says a tax expert from Vanderbilt Law School.

“When our income tax system started, it was meant to be a tax on success,” said Beverly Moran, a professor of law and sociology and a leading tax scholar. “Only 2 percent of people in the country were ever supposed to file, and only 1 percent were supposed to pay.”

Class tax to mass tax

That theory died with World War II, “when the income tax went from being a class tax to a mass tax,” Moran says.

Decades later during the Reagan administration, tax rates on the highest incomes were reduced shifting more of the burden on the less wealthy.

Four ideas to improve the tax system

Acknowledging that it’s unlikely that the tax code will be reversed back to its pre-World War II status any time soon, Moran suggests four ideas that would make the tax code fairer for everybody.

1. Integrate the taxes on gifts, estates, income, corporations and shareholder-level income into one overall tax, in the process eliminating loopholes used by wealthy people to avoid paying taxes.
2. Equalize the tax rates between ordinary income and capital gains income, instead of taxing capital gains at a lower rate.
3. Remove the cap on social security taxes, so that high-income people continue to pay the tax on all their income.
4. Decrease pressure on the IRS to audit poor people.

“If the largest tax payers would be audited with the same enthusiasm as the poorest tax payers, that would be a way to make things easier and at least have people be less scared,” Moran said.