Editor:

I’d like to make a few points in regard to RuthAnne Frost’s column on income tax that was published on June 2 (“Federal income tax needs serious makeover”). Hopefully my comments will provide another perspective on the matter.

Before I go into the bigger issue, I’d like to address Frost’s complaints about the public school funding system. I run a company that provides services to elementary schools. Because our business model depends on the schools’ revenue, I’ve become some what familiar with the funding system.

Public school funding comes from three sources: federal, state and local funding. About half the funds come from the state and about half come from local sources. Money from the federal government typically only makes up a small portion of the schools’ income (although the amount grows as the income of the local population drops).

Local funding usually generates from property taxes. There are very few tax deductions for property taxes. Those who make more money and who are more likely to claim deductions on their returns usually pay more money in property taxes. Also, those who have bigger families are more likely to have bigger houses and pay more in property taxes.

Because schools only get a small portion of funding from the federal government and because of the balance in funding provided by property taxes from those who are wealthy and who have large families, the exemptions Frost decries don’t really affect the school systems that much.

Now for the big issue. Frost vilifies America’s businesses for seeking to reduce their tax burden. However, it is this exact motive that has led government to write in tax credits, deductions and exemptions into the tax code. These tax reductions motivate businesses to do well.

First, they motivate businesses to do business. Businesses employ people. They do a better job of keeping people alive and happy than any welfare system on earth could. By reducing taxes for people who start and run businesses, the government encourages people to employ themselves and to employ other people. Believe me, this is a major motivation for people to start a business.

On this point, I’d like to say that just like people, businesses only pay taxes if they make money. Frost mentions that only 60 percent of businesses paid taxes between 1996 and 2000. Given that 95 percent of businesses are small businesses and only 80 percent of new businesses survive the first five years, followed by the fact that 80 percent of those survivors die off in the next five years, there is a good reason why these businesses didn’t pay taxes. They weren’t making enough money to cover their costs.

Second, tax reductions motivate businesses to act in a socially responsible manner. A small list of these deductions includes hiring minorities, investing in minority and female-owned businesses, providing retirement money for employees, hiring ex-convicts and giving money to charity.

Don’t knock American businesses because we seek to reduce our tax burden. The government expects and encourages us to do this so that we can provide essential and critical services to society. Our society needs these tax breaks to survive.

Jason Moore

Alumnus