In the true spirit of the kind of bipartisanship that led members of Congress to “date” across the aisle for the State of the Union spectacle, we take a look now at an issue that SHOULD be bipartisan. After all, didn’t our Prez use part of his SOTU to argue for some type of reform of the tax system? Why, yes, he did:
“Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change. So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years – without adding to the deficit.”(I don’t think I’ve ever quoted the Anointed One in an article before. See, even I am feeling warm, fuzzy, civil, and bipartisan!)
Anyway, a reform such as he described would benefit not only business but us little guys filing individual returns, as well. While the pundits argue about how complicated all this would be to sort out, one interesting proposal deserves the highest consideration.
This proposal is very attractive due to its relative simplicity. Abolish the Internal Revenue Service. Shut it down. Close the doors. Unplug the phone. Send the whole stinkin’ IRS bureaucracy to its eternal reward (and something tells me that the IRS has earned a trip south, not north). Anyway – END IT.
Crazy, you say? Impossible? Well, legislation to do EXACTLY that is currently before Congress. H.R. 25 and S. 296 are the latest incarnations of the so-called FairTax. And here are the top 7 reasons to put the IRS out of its (our) misery for good – and I do mean FOR GOOD. For the good of our country and every single taxpayer and business in it.
A quick note, first. This truly can be a bipartisan issue, in the sense that it is not really about how the government is spending its money. Conservatives still need to battle to drastically cut spending and greatly reduce the size of government. But this proposal isn’t about that, per se. In fact, the FairTax is said to be “revenue neutral” with the present income and payroll tax system, meaning it would fund the federal budget at current levels. So what IS it about? It’s about how to collect the money the government would need – in a more fair, less intrusive way: A carefully crafted plan that shifts the tax burden from the earner to the consumer. In a nutshell: The FairTax people figure a 23% tax would do the trick (see their website for detailed and convincing explanations). Certainly, when you add up all the hidden tax you currently pay, it’s easy to see how any given individual would come out ahead.
More information ahead…
Reason #7 to abolish the IRS – it has way, WAY too much power and is a threat to our liberty
The most important reason to abolish the IRS is that it is an agency with agents who have, for all intents and purposes, unlimited power – with no real accountability. Unlike in a court of law, you are not innocent until proven guilty. The agency wields tremendous power over individual citizens and businesses. Let’s face it – the IRS has a [VIOLENT IMAGERY ALERT] metaphorical gun to your head. If you don’t pay, they have the power to take virtually everything (including your freedom) away from you. What’s more, this power can be – and HAS been – abused for political reasons, as audits can be used to target political enemies.
And let’s talk about privacy. Why does anyone else have the right to know where you work, how much you make, and what you choose to do with your money? They do NOT. The FairTax, in abolishing the IRS, restores individual privacy rights. This is yet another reason the Left should get on board. After all, they’re big fans of privacy in the bedroom and in the abortion clinic; shouldn’t our wallets and our very livelihoods be subject to privacy as well?
And speaking of the bedroom – in eliminating the IRS, the FairTax also does away with the need to declare who you live with (marriage clarification).
So, all those political footballs can be retired. Congress can quit bickering over tax cuts, who deserves special treatment in the tax code, and whether the rich are paying their fair share. Those arguments are all off the table, meaning that government cannot use the tax code to penalize any one group or individual.
What’s more, abolishing the IRS restores to churches and nonprofit organizations the First Amendment rights they now hesitate to use, for fear of losing tax-exempt status.
(A quick aside about those churches and nonprofits: What would happen to charitable donations if tax incentives to make them disappeared? Nobody knows for sure, but if all Americans had more spendable income, there is some research to suggest the nonprofits would not unduly suffer. Another factor to consider is that said nonprofits would no longer incur the costs associated with filing tax returns and paying Social Security and Medicare payments for employees.)
The existence of the IRS is an assault on liberty. With the FairTax, the coercive, punitive power of the state is given a swift kick in the booty.
Next: It’s simple…
Reason #6 to abolish the IRS – the KISS principle (keep it simple, stupid)
The FairTax doesn’t just eliminate the IRS. It eliminates income tax entirely. And payroll taxes of all kinds, including Social Security. And corporate, gift, estate, capital gains, self-employment, Medicare, death, alternative minimum… all GONE.
So how does the government keep functioning? It’s pretty simple. Even as it repeals the 16th amendment that first allowed Congress to levy an income tax (through companion legislation), the FairTax sets up a clear and straightforward national retail sales tax.
By the way, there’s a reason they had to amend the Constitution, back in 1913, to legalize the income tax. It’s because the Founding Fathers, wise men all, believed that taxing private income was economic madness. And they have been proven perfectly correct – our economy grew and people prospered for our first 124 years. Even then, the original income tax only affected those with very high annual incomes, the tax code was 14 pages, and a return was one page long.
ANYWAY. The people behind the FairTax have thought through all the angles, and they’ve preemptively struck down many objections that bureaucracy-lovers and IRS agents could throw their way. One key element is a so-called prebate to ensure that no American pays federal taxes on spending up to the poverty level. This pretty much demolishes the oft-heard argument that the FairTax is regressive and results in a higher overall tax burden for lower and middle income folks. That is simply not true.
However, the prebate is the part of the FairTax with which I’m most uncomfortable, simply because it is the most bureaucratic part of the FairTax solution. Everybody gets a prebate check? Others have proposed not taxing any food items in order to alleviate a disproportionate impact on the poor, but the FairTax people point out, rightly so, that exempting ANY product or service opens the door to, as their site puts it, “the army of lobbyists and special interest groups that plague and distort our taxation system today.”
True enough. But philosophically, why should any group be exempted from any part of the proposal?
Simplification is better served by dropping the overly fussy “fairness” of the proposal.
That being said, the FairTax as it stands is still a proposal worth serious consideration. For one thing, collection of this sales tax requires very little added bureaucracy – because after all, the states are already collecting sales tax. The FairTax lays out a plan for the states, too, to make sure they can easily collect and transfer money to the federal government.
Of course, it goes without saying that there is nothing simple in our current tax system. The complexity is so insane that even tax accountants – specialists in IRS regulations – can’t tell you FOR SURE if you’re in 100% compliance. (Within the past year, the commissioner of the IRS admitted he used a tax preparer because the tax code is “complex.” If HE can’t figure it out, why should we have to?) Special interest groups have riddled the tax code with exceptions, loopholes – chaos. That’s a big part of why the tax code is now some 60,000 pages long, across multiple volumes – 9 million words!
Getting rid of all those pages, and the IRS, would also simplify retirement planning. No special knowledge of tax law would be necessary, because there would be no need for your 401(k), IRA, HSA, or any of those other accounts designed to protect your savings from taxes.
But I don’t really need to belabor the “simplification” argument. After all, if even our current president recognizes that this is a problem, the only ones left to argue in favor of the status quo are the criminally insane.
Next: Keep what you earn…
Reason #5 to abolish the IRS – we should not be punished for working
Perhaps back when the income tax was first implemented, the American work ethic was strong enough that it wasn’t a threat to our way of life. Now, however, we live in a time when millions of people find a government handout preferable to putting in eight hours a day – and in some ways, you can’t blame them. It is certainly de-motivating when taxes take such a huge chunk of your income.
It’s time to stop penalizing us for having a work ethic! The FairTax completely eliminates this societal scourge by shifting the tax burden to a consumption-based tax. The reason that’s preferable? It puts YOU in control.
Imagine! You keep every penny you earn. Your paycheck is truly, for the first time in your life, a check with all your pay. What you do with it is up to you! Wealthy people may pay more tax due to their ability to buy more stuff, but nobody is forcing them to. You can be as frugal or as spendy as you wish.
The FairTax authors have definitely included some inducements to frugality. For one thing, sales tax is only collected once, which means that there’s no tax on used goods. Used house? No sales tax. Used car? No sales tax. Used refrigerator? Used clothing? Used tennis racquet? No sales tax on any of it. Uncle Sam gets only one shot at taxing any one thing.
What’s more, even on new purchases, if it’s not for personal consumption, it’s not taxed. In other words, business owners or farmers buying new equipment don’t pay the consumption tax. In this way and a lot of others, the FairTax supports every aspect of the working world, from the business owner to the working man.
The more you work, the more money you should have. Ultimately, this should be a truism, not the joke it currently is.
Next: What it would do to our economy…
Reason #4 to abolish the IRS – to make the economy go BOOM
Along with the economic advantages already outlined, the FairTax would actually bring down the cost of goods. Why? Because, according to economists, about 20% of what you pay for any given good or service right now is what the business has to tack on to cover the cost of compliance with our onerous tax regulations. Take that away, let businesses compete with prices unaffected by the monster tax code, toss in consumers with big fat whole paychecks – talk about a stimulus!
What’s more, since our insanely-complex and burdensome tax code is chasing more and more jobs out of the country, the FairTax would bring them all back as businesses would be lured by the promise of no corporate taxes and thus no burdensome compliance costs. (It costs a company about $3 in compliance costs to pay $1 in payroll and income taxes!) The U.S. could become the most attractive tax-free haven in the world for doing business – again: jobs, jobs, jobs.
Other economic benefits:
- U.S. exports could compete with foreign goods, as imports would be subject to the same FairTax as domestic products; positive effect on trade deficit
- Reduces production costs for currently subsidized businesses like farming, leading to a reduction in subsidies, which would reduce the federal budget (aka spending cuts)
- Consumption has been shown to be more stable than income, therefore the tax revenue stream would likely be a more predictable amount… Federal Reserve rates based on current consumption instead of future earnings result in surer inflation prevention
- By eliminating capital gains tax, investments in business would be encouraged
- By eliminating the death tax, families could keep their farms and businesses
- By eliminating the gift tax, individuals could offer tax-free assistance to each other
- By eliminating the need for states, counties, municipalities and school districts to pay FICA, those entities would see significant increases in their available budget revenues
“It moves many individuals now providing tax advice (return preparation, advice, accounting, planning, and records maintenance) into an expansive economy where they will be producing goods and services. There they can add to the standard of living of all Americans and likely earn more than they do currently, instead of shuffling paper for the government (and not contributing anything economically to society).”Probably not an argument that will fly with your well-compensated CPA, but philosophically it’s spot on.
Next: The biggest economic argument deserves a page all its own…
Reason #3 to abolish the IRS – the crazy, obscene costs of the current tax system
You may not be able to rattle off a specific figure, but you have a pretty good idea what the IRS is costing YOU. Hassle, time, anxiety and angst – and that’s before you ever get around to writing a check to Uncle Sam. Eliminating the current tax code isn’t being proposed to starve the government of all funding. It’s being proposed because the current tax code is an obscenely enormous drain on American business, American families, and the American psyche.
I know many people who supplement their regular paycheck with free-lance work. That is to say, they’re working more than one job in order to provide for their families and raise their standard of living. In more than one case, this has resulted in a very unpleasant surprise at tax time, when their untaxed (but legally reported) free-lance income results in an unexpected bonus – to Uncle Sam. Is it right that hard-working folks working two jobs should find, at the end of the year, that they must take out a loan to pay taxes – or risk further interest, penalties, or even prison? Of course, these threats apply to any family or individual who guesses wrong on their withholding tax, as well. Why do we let the government cause us this stress?
And the cost… the cost to our economy is staggering. Estimates of what American families and businesses waste attempting to comply with the IRS range from $250 to $600 BILLION per year. That’s $1000 to $2000 for every man, woman and child in the country, because businesses typically pass those tax compliance costs on to the consumer – so individuals and families are paying for that, too.
The FairTax eliminates approximately 90% of those costs, which in and of itself is a reason to consider it.
Next: Crimestoppers on the case…
Reason #2 to abolish the IRS – stopping all kinds of bad guys
Stopping them from at least some of their crime, at least.
Let’s start with crime committed by some real scumbags, like your gang members, Mafioso, or drug dealers. They don’t pay income tax on their sometimes considerable income – but with the FairTax, they would pay their taxes just like everyone else. After all, they will still want their sports cars, designer sunglasses and assorted “bling,” will they not? When these people are roped into the tax pool, an estimated $1 trillion is brought back into the system. The tax base would now be comprised of everyone who spends money in the U.S.! (Which, by the way, includes tourists. They’re not criminals, of course, but they will add to that much broader tax base – some 51 million extra taxpayers from foreign countries alone!)
Here’s another criminal group that will be roped in – immigrants who broke the law to be here. They’re not paying any taxes, but they’re sucking the lifeblood out of government benefits. How awesome would it be to make them taxpayers too – simply by taxing the stuff they buy? As we all know, this aspect alone would add millions and millions of taxpayers into the system.
The FairTax would eliminate the temptation to commit a number of crimes, as well. For one thing, there would be no benefit to working “under the table.” Right now, people who don’t report their income (tax cheaters) aren’t paying into the system – but under the FairTax, this problem vanishes, as does every other tax fraud-related crime, which currently costs the Treasury a figure running into at least the tens of billions.
It would also eliminate certain crimes of political corruption, as politicians would be unable to repay big donors with tax favors. Again, this is another one of those points that in and of itself is a powerful argument for this type of change.
Finally, it eliminates even the possibility that an otherwise honest taxpaying citizen might be tempted by adverse circumstance to cheat. After all, when was the last time you cheated on your sales tax?
Next: A reason we can all get behind!
Reason #1 to abolish the IRS – go green!
This is one to throw out to your Lefty friends to get them on board with deep-sixing the IRS. Despite the advent of electronic filing and all, the IRS sends out 8 billion pages of forms and instructions each year. Fun fact: Laid end to end, that would stretch around the earth 28 times.
And tell this to your tree-hugger friends: It takes 300,000 trees each year to produce all the paper the IRS needs.
More importantly, the FairTax promotes recycling and reuse. After all, if pre-owned cars, furniture, clothes and houses are not taxed, more people will use them. Waste not want not.
The FairTax proposal isn’t perfect; many conservatives are concerned about the prebate aspect. Others question the math and the research. But these are fairly minor quibbles in light of the bigger questions – does the IRS promote individual liberty or deny it? Is the IRS a boon to our way of life and economic system, or a curse? Is it right that we spend vast quantities of time, energy and money trying to “game” the system and/or worrying about a possible audit – when we could replace the system with something more simple, more fair, and more economically sound?