Headscratcher (12)

The most important feature of Hong Kong's tax law is a flat income tax with a universal rate of fifteen percent. Their entire tax law is written in about two hundred pages.

The United States tax code, as of 2010, filled seventy one thousand, six hundred and eighty four pages.

Taking into account all forms of revenue, the tax burden in Hong Kong is just under 16% of Gross Domestic Product. In the United States, taxes raised by the Federal government, between 1970 and 2009 averaged a little over 18% of GDP while inflicting top marginal rates of as much as 70% (prior to 1981) on the better off and rich. That the top marginal rate of tax is now "only" 35% is an improvement but still higher than is either fair or economically effective.

Few complain much about the relatively simple Hong Kong tax code, which raises almost as much as does the IRS, while almost everyone complains about the insane complexity of the IRS Code.

The difference, of course, is that the United States uses the tax code to engage in social engineering while partially - but only partially - mitigating the punitive effects of the higher marginal tax rates with a bizarre array of deductions, exemptions, and credits designed to reward favored groups and buy votes.

It is strange that there is not a single Representative or Senator who has dared to introduce a Tax Reform Bill based on the Hong Kong Tax Law. There are two features in every word processor that should make the task easy: they are 'copy' and 'paste'.

President Reagan made a good start with the 1986 Tax Reform but, in the past twenty five years, self serving politicians have largely emasculated that excellent piece of legislation. That Mr. Reagan's professed admirers are so disinclined to act is a headscratcher indeed!