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Lower and Simplify Taxes!

Comment

It's that joyous time of year: income tax time. So I spend time with my accountant. I don't want to see him, but I must. I could not do what he's doing. The tax code has grown so complex that today most Americans hire someone to do their taxes.

For the money I pay my accountant, I could get a hundred massages. I could buy a fancy motorcycle. I could take a cruise ship to Venice and back.

Better yet, I could do some good in the world. I could pay for two Habitat for Humanity homes or help three kids escape government schools by paying their tuition at a good Catholic school.

What a shame that I pay my accountant instead.

How'd we get to this point? U.S taxes were once simple! The government funded itself on tariffs and excise taxes. It didn't violate our privacy by asking us how much we made or how many dependents we have.

But in 1913, the politicians decided they needed an income tax.

At first, they took little money: just 1 percent on incomes between $20,000 and $50,000. Those were big incomes — adjusted for inflation, $50,000 is $1.1 million today. The top bracket paid 6 percent, but that only applied to people who earned at least $11 million in today's dollars. Anyone who made less than $400,000 paid no income tax.

But leave the amounts aside. The increase in complexity is just as evil.

In 1913, the first tax form and instructions totaled four simple pages. Today's 1040, with instructions, totals 176 pages. How did this happen? Because politicians win votes by giving gifts to favored groups.

Pandering legislators applaud themselves for offering tax credits to special interests. The favored groups cheer their tax breaks, but the result is that everyone else pays more, and everyone must spend more time deciphering the rules.

And with every credit, the tax code gets more complicated. The code is now 3,784,745 words long, not counting the 2009 and 2010 changes. It will get worse in the future.

Americans spend more than 7 billion hours trying to comply, according to a forthcoming study from the National Taxpayer Union (NTU).

"That is the equivalent of 3.7 million employees working 40-hour weeks year-round without any vacation.

That's more workers than are employed at the five biggest employers among Fortune 500 companies," writes David Keating in the NTU study.

"Counting time and money for individual taxpayers, the compliance burden would total an incredible $103 billion for individual taxpayers alone."

That doesn't include the time spent doing state and local forms, or more important: the burden of "tax minimization strategies" on the economy.

And we haven't even mentioned the corporate income tax. But don't worry. The IRS stands ready to assist the bewildered. "If a taxpayer needs help beyond the basic form," Keating writes, "the IRS now lists 1,909 publications, forms, and instructions for download (some are duplicates in different languages) from its Web site — up from the 1,770 NTU logged last year." Thanks a lot, IRS.

This is insane. How dare a government that supposedly serves the people impose on us this way? Politicians who pass these tax laws aren't our representatives. They're our rulers! They increase the tax burden and its complexity, and then demand we pay them homage to get exemptions for little pieces of our lives.

What are we to do? Some people say scrap the income tax for the Fair Tax, a national sales tax. Others want a flat income tax of, maybe, 17 percent. One form; no deductions.

There's always danger in proposing a replacement for the income tax: We could end up with two taxes. I wouldn't put it past our greedy Congress to promise that a national sales tax — or worse, a value-added tax — would replace the income tax then, once the new taxes are in place, to say that the need for revenue is so great that they must retain the income tax, too.

Let's not take our eye off the ball: lower and much simpler taxes.

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at <a href="http://www.johnstossel.com" <http://www.johnstossel.com>>johnstossel.com</a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

12 Comments | Post Comment
I heard, somewhere, that The IRS has a NEW, New simplified Tax Form. It's called 1040-E-Z-EST. Name, Address, How much did you make? Send it in.
Comment: #1
Posted by: David Henricks
Tue Apr 13, 2010 10:37 PM
I've pretty much reached my limit of hearing about the people who don't pay income tax. Are those people also exempt from pay all the other taxes we're plagued with??? I've also reached my limit of hearing that tax cuts only benefit the wealthy. Since I'm not helping Bill Gates spend his money I don't care how much a tax cut saves him. My only concern is how much it saves me. And when we read that congress has used tax dollars to fund a program to try to find out who invented the tent and a program to try to find out if George Washington wore boxers or briefs, it does indeed make it somewhat difficult to justify some of the taxes we're forced to pay. And just exactly why is it that almost NOBODY ever says that if congress had less money to spend they'd have to be a little wiser about what they spent that money on?????????
Comment: #2
Posted by: Pat Riley
Wed Apr 14, 2010 5:44 AM
I find myself agreeing with you more and more lately John. And I agree with Pat in comment #2. I'm tired of hearing that if you make more than $50,000 a year you are rich. Are you kidding me? And now I read a report that says the Oracle of Omaha (Buffett) pays the equivalent of 13-14% tax rate. I pay a bigger percentage of my income than that. Of course, I don't have a platoon of accountants trying to hide my income and look for loopholes. 46% of this country's people don't even pay taxes, yet the rest of us (who bust our butts day in and day out) keep shouldering the load...more and more and more. I wish I could sit around all day and do nothing...Oh, wait, I could do that and get a free monthly check for all of my hard work. HA!! I am a strong supporter of either a flat tax or "fair tax" without loopholes for the "richies". Yet, I'm tired of the media jumping on the bandwagon that a national flat tax would only hurt the "poor". The "richies" have to eat too...and if they want to go buy a Porche or fly around in a fancy corporate jet, fine...but they too would have to pay 17% on everything!!! No loopholes!!!
Just my 2 cents. Which in todays dollars equals about.... .000137 cents. God Help Us!!
Comment: #3
Posted by: TR
Wed Apr 14, 2010 7:07 AM
How about "No taxes, No representation" --that means, if you don't pay taxes you don't vote. It comes from the premise that contributed to the start of our great country: we were fighting against 'taxation without representation'. So it should be said that if you don't pay taxes (that's 47% of our country) you don't have a right to vote.
This may never happen, but I would settle for a flat tax on EVERYONE, rich and poor alike. If you buy a yatch or groceries or shoes for your children, if you buy stocks and bonds, or shop at Wal-Mart, it's the same tax. Therefore the rich who buy more, pay more. The poor who buy less, pay less. This would be a total replacement of income tax not an addition to it.
Comment: #4
Posted by: ja altman
Wed Apr 14, 2010 11:58 AM
Wouldn't you think that the first rule of sound governance would be to make laws as simple and easy-to-understand as possible?
Comment: #5
Posted by: Kevin Davern
Wed Apr 14, 2010 1:25 PM
John,

Great article.

"Let's not take our eye off the ball: lower and much simpler taxes."

That's just one ball - an even bigger ball is getting the government to spend less money. Talking about lowering taxes without lowering spending will end badly for our nation in the long run. (I still ultimately want to lower taxes for sure and simplify the tax code - I think a 2-5% national sales tax would be enough. Never anymore than that and ZERO exemptions or loopholes. Everyone pays. Period.).

If we lower taxes and don't cut spending we'll keep on building up the deficit until D.C. will be forced to deal with the massive burden of debt. It could be any one or a combination of these:

1. Increase taxes
2. Print money (inflate money supply to pay off debt - destroying savers, middle class and poor in process)
3. Let our nation default on its debt.

I'm sure there are other solutions but nothing could be really good.

Maybe lowering taxes would force D.C. to recognize how wildly they spend? yeah right.
Comment: #6
Posted by: Ryan
Wed Apr 14, 2010 4:28 PM
John,

The Tax Code has nothing to do with create revenue.

It is completely about controlling and manipulating the People.

A tax discourages action - a tax "break" or "credit" encourages action.

One of the stated government reasons it taxes is "..to create political incentives for public policy..."

By these simple levers, the Public is manipulated into repression "these things" and supporting "those things" - taxes are a nose-ring attached to a Politician's leash.
Comment: #7
Posted by: Black Flag
Thu Apr 15, 2010 10:26 PM
John

You mention the danger of replacing the federal income tax with The Fair Tax yet you illustrate perfectly the danger the American people have been exposed to for the last 97 years by explaining its history. It went from a simple seemingly innocuous tax to the intrusive, increasingly complex and convoluted system we have today. The executive and legislative branches of government have attempted to "simplify and lower" taxes in the past. The result is a tax code of more than 67,500 pages. You fail to mention how you would simplify the tax code. I can only assume your method will still retain the IRS and some type of tax on income.It will still give Congress the power to tax our hard earned money at their discretion before Americans see their paychecks. The tinkering you suggest will only revert back to what we have today over time only faster thanks to the thousands of lobbyists that didn't exist in 1913. There is a reason Karl Marx included a heavy progressive tax on income. He understood people will eventually be discouraged from producing and working. Eventually they will depend on the state for their existence. Given you don't trust Congress not to have both a national sales tax on top of the income tax code then what makes you think they will simplify the tax code and lower taxes after 97 years?

You forget Congress is not the government. The people are the government. An increasing number are understanding the income tax code is beyond repair. It needs to be replaced. It appears you have not read up on the Fair Tax Act(HR25/S296) enough to realize it will replace all federal income taxes with a national sales tax and abolish the IRS by defunding that agency. There is also concurrent legislation (House Joint Resolution 16) to repeal the 16th Amendment. It would no longer be The Fair Tax if Congress attempted to change the bill but that is where the people come into play. There has been a growing Fair Tax grassroots movement for many years. The result is more cosponsors in each session of Congress since The Fair Tax was first introduce in 1999. The current count is up to 66 cosponsors. It is more than any other tax related legislation before Congress. The Fair Tax will fulfill the simplification and lowering of the tax rate you seek. No longer will people have to fill out forms annually or quarterly. They will pay the tax when they make a purchase. It doesn't get any simpler. No longer will people have to pay for the embedded corporate income taxes included in the price of all goods and services at each stage of production they ultimately pay. Instead people will be taxed only once at the final stage of production and only on new items. Founding father and first Secretary of the Treasury Alexander Hamilton wrote of the advantage for a consumption tax in his Federalist Paper #21. He realized such a tax empowers the people to control the executive and legislative branches by allowing the former to decide when and how often they pay the tax based on their decision to make a purchase.

It's time to end the socialist style income tax code that has been increasingly used over the last 97 years to control and punish the people. It's time to make April 15th just another day by passing The Fair Tax.






Comment: #8
Posted by: DH
Thu Apr 22, 2010 7:51 PM
Great article John. Clearly even back in 1913, we had a 'tax-the-rich' policy. I agree with most of the above comments, to include NO representation without taxation. I think that ONLY the Fair Tax provides for such. It's a given that people who do not pay into the system, who have no money on the line, will vote FOR more entitlements. Let them have some skin in the game too. I would like to cover in more detail the Fair Tax plan that John mentioned.

The Fair Tax gets rid of the need to file; the flat tax does not.

The Fair Tax will NOT encourage black markets, as some have argued, because what person wants to pay FULL retail, to include the consumption tax, on all the items they need to produce their product? By the time they did that, they will have to charge way too much for their end product in order to turn a profit.

The Fair Tax protects the American people, ALL of them, from being taxed on what it costs to provide themselves with shelter and food and utilities, based upon NUMBER in the household, not productivity. If you want to LIMIT something, penalize it--read TAX it. Arguably, we ALWAYS want to encourage growth in the economy, so why not lift the penalties for production?

The Fair Tax does not penalize savings or investment earnings. That alone will bring the 13 trillion currently sitting in offshore bank accounts back home! Imagine what that would do for the economy?

The Fair Tax, with no tax on business to business transactions, encourages not only more investment by US companies, but would likely bring foreign investors here with their manufacturing and production plants.

There will no longer be the IRS, an institution that 'gets it wrong' 25% of the time, yet has the power to freeze your accounts BEFORE a 'finding of guilt'. Would YOU still have your job as a cashier if your register was off plus or minus by 25% with regularity? Why do we tolerate it from the IRS?

The Fair Tax makes ALL persons participate in the funding of the federal government, to include those currently working under the table, drug dealers, prostitutes, even tourists. And why not? They use our police depts, fire depts, hospitals, roads, courts, jails, prisons, schools, bridges, SS, medicare, welfare etc. Why shouldn't they contribute to maintaining the systems that they largely only benefit from? They have no way around paying taxes once they spend one DIME over the poverty line. And, of course, that's only people with SS #s. Those who are not legal citizens or permanent residents will pay the consumption tax on everything they buy.

The Fair Tax is the BEST STIMULUS package for the current economic woes of this country! We need to pass the Fair Tax! Then, yes, we NEED to seriously cut spending and the size and scope of the Federal government. But, first, we have GOT to focus on generating jobs! No flat tax that keeps the current system of taxing productivity is going to do AS much AS quickly as the Fair Tax (HR 25) will. We need to make this THE ISSUE this election cycle!

P

Comment: #9
Posted by: norwegianwood
Fri Apr 23, 2010 7:48 PM
norwegianwood,

Have you even read HR25? Section 801-806 lays a significant implicit tax on interest bearing investment and debt instruments. Section 905 places a 23% tax on income generated in the US by foreign owned businesses, hardly an incentive for foreign businesses to relocate to the US.

In addition, what is your source for your claim that there is $13 trillion in US owned offshore accounts? According to the Tax Justice Network, in 2005, there was $1.6 trillion in offshore accounts owned by North Americans, and there are 23 sovereign nations in NA. Best estimate for American owned offshore assets is around $700 billion, and failing an IRS amnesty provision of some sort, that wealth is unlikely to come rushing home!

You are wrong to believe that the Fairtax would ensure that everyone would contribute to funding the federal government. Due to the prebate, (a huge cash grant entitlement), there would be 30 million workers annually that would pay no net federal tax, yet all would qualify for full SS pension and health care benefits. Compare that to the less than 1 million workers today that pay no income tax and can use the refundable tax credits to totally offset their payroll contributions. 30 million freeloaders--is that good for the country?

In addition, when viewed from the perspective of a retiree, how is it fair to double tax my after tax savings when spent, and how is it fair to force me to resume paying for my SS pension and health care benefits with my sales tax dollars?

Finally, you may believe that there would be little or no illegal tax evasion, but many studies say otherwise. And, perhaps just as important, how about legal tax avoidance? Won't families change their buying habits when faced with a 30% or higher sales tax?

I believe that a national consumption tax would be better for our nation, but the Fairtax has some unconstitutional features and has too many moving parts to ever get serious Congressional consideration. It is likely that the number of cosponsors peaked in the 110th Congress with 72 House members signing on. So far in the 111th, there are only 61 House cosponsors, not exactly a sign of progress!

The current focus should be on reducing the size and cost of the federal government, not on tinkering with how the government collects their revenue!
Comment: #10
Posted by: Dutchman3
Sat Apr 24, 2010 12:58 AM
Dutchman3
Yes I have read HR 25. With regards to the implicit tax in 801-806, currently the institutions providing such already 'impose' implicit taxes in their 'costs for services,' since they pay their employees managing said accounts and therefore, they pay the current 'embedded' FICA tax..which translates into the cost of their 'fees for services' anyway. The same is true with regards to your argument on paying double taxation for your social security. The fact of the matter is that because ALL businesses wrap their costs--to include FICA for their employees every step of the way--into the final price you pay at the register, you are already paying those taxes again! More to the point, since there is no 'lock-box' or 'special account' for the collection of SS or medicare revenue; it isn't as if you pay ONLY into that account ..it's ALL part of the 'general fund' and has always been treated as such. In either scenario, you are paying into the general fund and you are paying those FICA dollars every time you purchase an item because corporations do NOT pay those costs, but transfer them on as 'costs' to the consumer. IF it makes you feel better, given that Senior Citizens are only about 1/3 of the US population, consider YOUR actual dollars being applied ONLY to that 2/3 of the US budget NOT associated with SS/Medicare revenues. With regards to the costs to foreign companies doing business here in the US, again, those costs are CURRENTLY paid by those foreign businesses BUT at great cost for compliance officers and accountants with the current system of FICA on all of their employees...this eliminates those compliance costs from those businesses, so, again, you have no argument. With regards to your ridiculous claim that the amount in offshore accounts is in the 1.6 trillion range: The claim I made comes from the 2000 Merrill Lynch & Gemini Consulting Study World Wealth Report-cited in Boortz' book- "estimates that one third of the wealth of the world's 'high-net-worth- individuals is held in offshore accounts." And that is in the year 2000! The figure at that time was 11 trillion, so estimates now are in the 12 -13 trillion range. I did say 'back home' when I intended to say 'back here'...Otherwise, I did not state that it was all US wealth, but that HERE is where that money would come. I believe that to be the case. Given that the consumption tax basically replaces the current level of embedded FICA taxes on fees for maintaining these accounts here in the US, and there would be no ADDITIONAL taxes on top of those tax-embedded-fees, the result will be better tax advantages here. Add to that there will no longer be the lobbying and accountant fees associated with hiding/sheltering those monies..the savings will be remarkable! With regards to free-loaders and changes in spending habits, those are variables always in flux, but I will suggest to you that ONLY those with 'legal' documentation of citizenship will be getting the prebate, and it's based, again, on number in household, NOT income, meaning that the amount is not specifically geared toward any group of people with any particular 'tendencies'. The fact that illegals might find it less viable to come to the US illegal, since their cost of living WILL be adversely affected by the consumption tax, might limit the number willing to come illegally. And if not, at least those who do come illegally are participating to fund the infrastructure they strain. With regards to the intimation that the lower number of cosponsors this Congress versus last has ANYTHING to do with the legislation 'losing popular support', it's a bogus argument. It has MORE to do with the type of legislator that wants to return power back to the people and those who want to retain it in Washington, and the number of 'freshman' Congressional Reps who 'tend' to do what the 'party hardliners' tell them to do until they 'get their own legs,' than it does with popularity of the ACTUAL legislation. More importantly, it is US, the PEOPLE, who will MAKE it an issue TO support. I would argue IF legislators don't like it...it's likely because they don't want to give up their lobbyist monies or ability to manipulate the economy and the taxpayer at their whim.
Comment: #11
Posted by: norwegianwood
Sat Apr 24, 2010 2:25 PM
I agree. Start tax reform with a new slate.
Please start all your good advice on tax reform with citing:
Number of pages in U.S. Internal Revenue Code Tax Code
7,500 pages (60 lines per page) PLUS 67,000 pages of complexities (about 8 years ago)

About 7 years ago I counted 740 tax bills in Congress taking up 24 megabytes and more than 3.4 million words
Comment: #12
Posted by: Reigh Gunderson
Fri Sep 16, 2011 4:19 PM
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