Saturday, April 12, 2008

Taxes Schmaxes

Tuesday is April 15, the most sacred holy day on the federal government's calender, the day that income tax returns are due. So, if you haven't started yours yet, good luck! As you're wasting your valuable time digging through forms and going cross-eyed looking at tax tables, just remember: You're not alone.

According to the Tax Foundation, in 2005 individuals, businesses, and nonprofits spent about 6 billion hours complying with the federal income tax code, costing the economy over $265.1 billion. That 6 billion man-hours per year represents a work force of over 2,884,000 people. That's larger than the populations of Dallas, Detroit and Washington, D.C. combined. Imagine if the federal government sent in troops to commandeer the populations of those three cities and forced them all to do paperwork. The American people might (might!) get upset about that, but that's essentially what the government does every year by making us comply with the labyrinthine tax code.

The cost of complying with the tax code falls disproportionately on the poor and small businesses. The amount of money spent on tax preparation represents a higher percent of their incomes than of higher income taxpayers and large corporations. You heard me right liberals, the income tax is REGRESSIVE!

Also, since all businesses pass these compliance costs onto consumers, we all end up paying about 25% more for the goods and services we consume. So the guy with a minimum wage job ends up paying the income taxes for huge corporations every time he buys himself a pop or a bag of chips.

Long story short: The income tax sucks a fat one. Isn't there a better way? Why, yes, there is! The purely libertarian answer is- scrap the income tax and replace it with nothing. The United States went a long time without one before. But, since there's no way that the federal government will ever stop its big spending ways cold turkey, (unless there's some kind of economic Armageddon or armed revolt [down Bawb, down!]), we have to find a fairly "revenue-neutral" plan that is significantly better than the income tax. That would be the FairTax.

The FairTax (yes, it's one word) is a plan to replace the income tax with a national retail sales tax. Not only would you NOT have to file a return, the feds wouldn't skim anything off your weekly paycheck. All the federal taxes you would pay would be at the cash register.

To use's own description: "The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion legislation, the repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 1025) abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax -- administered primarily by existing state sales tax authorities. The IRS is disbanded and defunded. The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system."

Although any tax system is a pain in the butt, the FairTax would be a vast improvement over the current system. It would eliminate the hidden income tax compliance costs passed on to consumers so our goods will be more competitive abroad and cheaper at home (making the new tax less noticeable at the cash register too). It would free up your entire paycheck and stop taxing the interest you earn. People who don't file income tax returns, such as drug dealers and illegal aliens, will begin to pay their fair share.

The FairTax plan seems to be gaining momentum. It was supported by Mike Huckabee, Ron Paul, Mike Gravel and a couple other presidential candidates. It is co-sponsored by a few Democrats and Republicans in Congress every year. The fact that a majority of elected Democrats and Republicans don't support it means it's gotta be good. It's the 21st century, it's time for the early-industrial-era income tax to go!

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Anonymous said...

I have been involved in paying income taxes since the late 1950's I have studied long and hard to find a way to change the immoral, intrusive and expensive income tax but I did not have what it takes to find this great idea.I will continue to support the FairTax because of all the possibilities it is the best presented thus far.I have seen it grow from a mere glimmer in the eye of a few intelligent people to now having 70 co-sponsors in the U. S. House of representatives. The rest of the congressmen/women need to be replaced.

Anonymous said...

While FairTax seems like the only way to go, I do wonder about the provision that requires the Federal Government to pay the FairTax as well. How much sense does it make to use tax payer dollars to pay the consumption tax? In areas where the USG buys services and goods that compete in the civilian marketplace perhaps, but on the price of an AH-64D Longbow Apache? That makes no sense.