Reforming The Tax Code

National Review Online: A Strong Prescription Of Change Could Cure America’s Ailing Economy

(National Review Online)  This column was written by Michael Burgess and Newt Gingrich.

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Nothing is certain except death and taxes, and physicians will tell you that death is much less complicated than the American tax code.

The complexity of today’s tax code is a consequence of countless deductions and exemptions aimed at promoting a variety of congressionally determined policy agendas. The result is federal law loaded with opportunities for avoiding taxes and exploiting loopholes at the expense of fellow Americans. Behind every loophole there is a lobbyist.

Everyone is familiar with the problems inherent in our convoluted tax code. Criticizing it is as American as apple pie and baseball. And for good reason. Each year Americans spend billions of hours and billions of dollars complying with the complex code. We also spend countless more hours complaining about it.

Time is precious, and often we don’t have enough time for personal priorities like raising our families, cooking dinner, or even spending time with friends. Then there is the dollars-and-cents side of the equation, where time is money and resources are spent navigating tax law instead of spent growing the economy and creating jobs.

Taken together, this argues for a strong prescription of real change: Reform the tax code.

When President Reagan cut taxes in 1981, several good things happened. The economy grew, revenues increased, and jobs were created.

It’s hard to think of better medicine for our ailing economy than replicating successful reform of the tax code on an even greater scale.

How do we do it? Flatten tax rates; simplify the code; and, shift the burden away from our families and small businesses. The encouraging news is we have a practical and effective blueprint for delivering this real change across-the-board. It’s called the optional flat tax plan, or the “one page, one rate” tax plan.

In 1981, Robert Hall and Alvin Rabushka proposed a boldly simple tax structure that would transform the Internal Revenue Service and our economy by creating a single rate of taxation for all Americans.

Today, several states have implemented this single rate structure, and from Utah to Massachusetts, citizens are seeing the benefits.

In Colorado, a single income-tax rate generated so much surplus revenue that one lawmaker actually proposed reducing the rate ten years after its implementation, and today the rate is below its original level. In Indiana, the economy boomed after a single rate went into effect in 2003. Since that time, corporate income tax receipts have increased by almost 250 percent. Admiring such success, Governor Mark Sanford of South Carolina currently is pushing for an optional flat tax on Palmetto State income.

In Congress, members like Michael Burgess of Texas, David Dreier of California, and Paul Ryan of Wisconsin are working to establish an optional tax structure for the United States that is flatter and simpler. Senators Arlen Specter and Sam Brownback support similar measures on the other side of the Capitol.

A faster, flatter, fairer tax structure would be simple: tax returns would be done on a single page, perhaps even on a postcard. Subtract from your income a standard deduction, multiply the result by a fixed single rate of taxation, and the process is over. Gone will be the stressful hours spent figuring out whether your military service or marital status will adversely affect your return. No more headaches trying to determine where estimated tax payments go. Tax preparation fees might be money spent on something more rewarding.

Secondly, a new deduction, which would be above the established poverty level, means an optional flat tax would not unfairly target the poor. Approximately the lowest 42 percent of income earners would potentially be exempt from paying taxes altogether, and any taxes they did pay would only be on the amount that exceeded the deduction.

An optional flat tax would also eliminate the Alternative Minimum Tax. And if a person had twice as much income as another, he or she would be taxed twice as much. Furthermore, a single rate tax structure would eliminate taxes on savings, capital gains, and dividends. Saving would increase and businesses would expand to create new jobs. By reducing dramatically the world’s second-highest corporate income tax rate means that U.S. companies would have less incentive to move their jobs abroad. And here is where the all-American principle of freedom comes into the prescription: opting for a one rate, one page tax plan would be entirely left up to the individual or business to decide, not Uncle Sam.

An optional flat tax would save taxpayers more than $100 billion per year and reduce compliance costs by over 90 percent. This is a stimulus package that would have an immediate effect on our American economy.

Recent polling by American Solutions shows that over 80 percent of Americans favor the option of filing taxes on a one page tax return with one rate. After all, who would complain about making something easier, less costly, and less time consuming?

This is a political year, with elections right around the corner. You can’t help but hear talk about change. Let’s consider how the right change could improve the most complicated of institutions (the IRS), save time, money, and some peace of mind for the taxpayer, and most importantly, deliver enduring prosperity for all Americans. An optional flat tax is a plan for real change worthy of everyone’s vote. It’s also a plan that will finally make taxes less complicated than death.

[sanserve]

How To Create A Fairer Tax Environment

Can lawmakers who don't have the courage or intelligence to outlaw texting while driving really be expected to create a saner tax structure? Hmmm.

Developing a fairer tax environment is much less an economics problem than it is a political dilemma and, as many of you observed, it is unlikely that anything "tax" will be improved upon until there is some serious facial (and cultural) change in Washington.

Politicians focus on one issue at a time, and pretend to have problems dealing with inter-related programs. Tenured politicians have a vested interest in resisting any change that involves their spheres of influence. Both parties are embarrassingly mired in twentieth century class warfare that stifles all forms of productive debate.

Tax cuts don't just benefit the rich. In fact, they provide the opportunity for everyone to attain greater wealth. Demand directs resources far better than punitive taxation. Money in consumer hands will fuel social and environmentally friendly change.

"You cannot eliminate revenue from one program without replacing it from another, equally complicated, one", career politicians will say philosophically. They have little to gain from simplifying the tax collection system --- yet it is obvious that a whole new approach would solve most of the economic woes plaguing us today, domestic and international.

So what would become of all the CPAs, tax attorneys, and offshore laundries--- new jobs as consultants, auditors, and regulators perhaps?

Survey responses outlined constructive and manageable solutions to our multiple tax problems. If they could only be dealt with as a whole "New Deal" (catchy phrase), a fairer tax structure would be in reach.

Several basic concepts need to be accepted: (a) don't tax the job creators, (b) tax consumption instead of income, and (c) regulate shareholder abuse in the form of obscene executive pay. Then, enforce compliance with the intent of a simplified tax code.

A smarter tax system would allow more people to become wealthy honestly; smarter regulation of thieves in high places would improve the image of big business (and big government) significantly.

There are 44,000 pages in the Internal Revenue Code (IRC) alone, 5.5 million words, incomprehensible at best. Obviously, there is a lot more to be said about each of the ideas that follow. Here are the top survey ideas; the first two were discussed in previous results articles as consumer spending enhancers and job creators, respectively.

For the rest of the Article, just Google the title.

Steve Selengut
sanserve (at) aol.com
http://www.kiawahgolfinvestmentseminars.com
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

[wdrussell1]

It will have to take people power, because neither political party is going to do anything about it.

[nascarpaul]

Flat tax is the way to go. Let the land sharks find another job. IRS(IDIOTS RUNNING STUPID:I had to toss that in there)employees, I feel for you. My mom was a bookkeeper, but she could have found other work. The jobs created would be enough for the whole country. (except illegals,which shouldn''t be here anyway) It works for states and it will work for the U.S.A. (yes not USA,JAPAN)

[babooph]

"Tax reform" has been the propaganda systems scam for slowly shifting the burden of taxes to the middle class-with the exemption from Soc. sec. tax & the 15% cap gains ,the rich pay a lesser % than the middle class-Under Ike the rich top bracket wasclose to 60% higher!!!!!!They warn of class warfare-The war is long over & the middle class lost-the propaganda system sold them out & brainwashed them for the lobbyists years ago.

[davidhinkson]

How about the government cancel all the wars, programs and ways they spend our money. Get our country out of debt and then tax EVERYONE a small amount for the priviledge of living in America. The rich don''t use the roads, military and medicare any more than the poor do and so they shouldn''t have to pay more. Everyone thinks that we couldn''t survive without all of the rich people''s money, but guess what our country didn''t even have income tax until about 100 years ago. It has just given the government a pool of funds to fight over and waste.

[ioweign]

I''ll meet you at the harbor!

Posted by davids1016 at 04:51 PM : Apr 15, 2008

No you won''t. Try a border. Some are just leaving...

[ioweign]

When President Reagan cut taxes in 1981, several good things happened. The economy grew, revenues increased, and jobs were created.

Reagan didn''t cut taxes - he just deferred them. It was under Reagan that our National Debt soared.

http://zfacts.com/p/318.html

[juwboy]

Oops, PERSPICACITY.

[juwboy]

Tax simplification will never happen, especially in an election year, because of a major side-effect that no-one, apparently, has the persipacity to foresee.

Tax simplification will add millions to the unemployment numbers -- IRS employees, accountants, tax preparers, H & R Block personnel, CBS finacial pundits ... the list goes on and on and on ...

[samthetvcat]

omg that sanctimonious Newt Gingrich is on Fox now and all that goes through my head when he prattles on is that he cheated on his wife, what a hypcrite for him to constantly speak on morality . . . maybe that''s unfair, but I don''t think he''s got a strong enough relationship to objective truth to speak with authority. Is that unfair? Any Gingrich fans out there? There must be more to him if he''s so popular, wouldn''t you think? What''s the deal with him that I''m missing . . .

[samthetvcat]

PS This piece also confuses two concepts - they seem to be trying to sell the idea that simplifying the tax code will therefore lead to lower taxes for people. The reality is that there''s a deficit and taxes have to be paid . . .

We dems are gambling that where it''s at for this Presidential campaign''ll come down ACTUALLY simplifying the issue to its essence which is that we can''t keep spending more than we can afford and we''re not going to sell pie in the sky ideas we can''t deliver on that weren''t going to solve the problem anyway . . .

[samthetvcat]

"When President Reagan cut taxes in 1981, several good things happened. The economy grew, revenues increased, and jobs were created."

Reagan already showed that deficit spending doesn''t work - EVER - and Bush just went and proved it again. Bush has also proven that supply-side economics aren''t compatible with free-trade when there is great income disparity between nations.

McReaganwannabe seems to be stuck in the early eighties - I think Hillary already showed that a selling point of ''optimism'' rooted in nostalgia for good times past isn''t the slam dunk establishment candidates seem to think it might be . . .

Same goes with ideas like ''swiftboating'', ''directing the story of the candidate'', etc

[trillion1]

It makes too much sense for the goverment to understand.

[cyberus-2009]

Sorry I disagree with the ''fair tax'' setup simply because while it claims to return taxes paid up to poverty level that still takes that money away from low/middle income people until its returned, plus a consumption tax will alway affect lower incomes more than the highest because they have to spend a higher percentage of their income to live AND low/middle income have less/no opportunity to buy outside the country to avoid the tax.

Thats IMO ... but I''m radical .. I think a flat tax with a personal deduction for the person earning the income and NO OTHER DEDUCTIONS is the ONLY fair tax.

[ricinboerne]

I''ve been reading about the "Fair Tax" for a while now, and you are right -- it makes total sense. http://www.fairtax.org.

[davids1016]

Flat tax isn''t a bad idea, but "fair tax" is a better one. The comment that we should let government do its job is misconceived. Government fails at every turn. The current tax system is devised to set the American taxpayer up to fail. People don''t know what they don''t know and pay higher taxes by not comprehending the complexity of the law. Let me know when the next "tea party" is. I''ll meet you at the harbor!

[davids1016]

Flat tax isn''t a bad idea, but "fair tax" is a better one. The comment that we should let government did its job and misconceived. Government fails at every turn. The current tax system is devised to set the American taxpayer up to fail. People don''t know what they don''t know and pay higher taxes by not comprehending the complexity of the law. Let me know when the next "tea party" is. I meet you at the harbor!

[cyberus-2009]

If they did a flat tax it couldn''t be *optional*.

If it were optional then they could continue to loophole the standard code while pointing at the flat tax, another "look over there" scheme.

Don''t get me wrong ... I''m all for the flat tax system, but for everyone, not just the people that can''t afford a battalion of accountants to decide which method saves more money this year or a battalion of lobbyists to further loophole the standard code.

[Razzl]

Anyone who finds their forms a burden can fill out form EZ. The complexity of the code is mostly because NRO''s conservative business allies demand all kinds of special considerations, not because of things Congress wants to do. In the end it all gets down to the unspoken conservative agenda to reduce government''s resources because they know the public doesn''t agree with their world view and will not put them into power. Conservative resentment of government is best handled by strengthening government and letting it do its job until they despair and give up, not by humoring them as they offer up these crackpot sideshow issues.

[reddboots]

Got a question...if you''re going to transfer the tax burden away from families and small businesses to larger businesses, how do you figure those businesses will expand to create new jobs? I''ve got to be missing a piece somewhere...