Saturday, January 26, 2008

Why Are Taxes So Complicated? And a Simple Proposal to Fix Them.

The U.S. Tax System is broken. Any system that requires professional help, the use of a computer to file, and costs a bunch to file is broken in my opinion. The Federal Government estimates is takes 3 billion hours per year to comply with the tax code. The mean hourly wage in the United States is $18.84/hour. That means on average it costs at least $56 billion per year for Americans to file their taxes. We should absolutely scrap the entire U.S. Tax Code as it exists today.

What should we replace it with? I'd say a national sales tax is one simple solution. 45 of 50 states already collect a sales tax, so the incremental cost of implementing the system shouldn't be too much and we have already proven that collectin sales taxes CAN work. While I can't say I am an expert on it yet, the Fair Tax proposal seems to be a fairly evolved attempt at a flat national sales tax. It is supposedly bipartisan, though it appears to only have the support of two democrats in Congress which is not exactly a ringing endorsement. It gives rebates up to the poverty level, sheltering the poor from taxes altogether. It will dramatically reduce the cost of compliance since we already have a redundant sales tax system in place. Evasion will probably be no worse than under the current income tax system (some likely to happen under both systems).

1 comment:

Anonymous said...

Has Congress EVER left their grubby paws off ANY tax bill? OK, what do they do with it? I'll tell you: they "adjust" it for "fairness". BY the time all the "adjustments" are done, we'll have just as complicated a system as we do now, and there will be a Great Cry for an Income Tax, to capture all that money that The Rich are concealing from the people.

Which is all immaterial; it will never get passed. Tell the average guy that he's going to pay an additional 23% on every damned thing he buys, and he's going to say "No way!" and shut off his brain. All the fancy explanations about how "fair" it is and rebates and such will produce what every teacher in the world has experienced - a simple refusal to work at understanding. The schoolteacher has sticks and carrots to encourage that effort. FairTax proponents don't. If the size of the federal gov't could be reduced enough to require a rate of 10% or less, it might pass, but that will happen right around the time of those flying pigs.

Which is yet a third reason, and the probable reason that only 2 Democrats have signed up for it, despite its "bipartisan" label. The politicians would have to admit that the federal government is now consuming TWENTY_THREE percent of all the resources in the country, and this is something that is now hidden behind the smokescreen of "witholding".