During a recent government meeting, lawmakers engaged in a robust discussion about the complexities of the U.S. tax code and its implications for income inequality. A prominent theme was the urgent need to simplify the tax system, which many participants described as a \"grotesque and complex monstrosity.\"

One senator highlighted the growing issue of income inequality, asserting that the current tax structure exacerbates this problem. He proposed a radical shift in how corporate income is taxed, suggesting that the 5% of American businesses classified as C corporations should be taxed similarly to the 95% of other businesses, at the ownership level annually. This change, he argued, would address the issue of corporate income that remains untaxed, which distorts the mergers and acquisitions market.

The discussion also touched on capital gains tax, which was criticized for being arbitrary. The senator proposed indexing capital gains to account for inflation, thereby taxing only the real gains rather than inflationary increases. He emphasized that all income should be treated equally, advocating for a tax code that reflects the principle that income is income.

Concerns were raised regarding the stepped-up basis, a tax provision that allows heirs to inherit assets without incurring capital gains tax on appreciation that occurred during the decedent's lifetime. Some participants argued that taxing this basis would lead to double taxation and disproportionately affect family businesses, potentially forcing them to sell to larger corporations.

The meeting concluded with a consensus on the need for a simpler, more rational tax system that could help mitigate income inequality. Lawmakers expressed a willingness to collaborate across party lines to address these pressing issues, with a focus on ensuring that the wealthy contribute fairly to the nation's fiscal responsibilities.