Taxation is out of control in this country. We have local, state and federal direct taxes, there are hidden taxes in the purchase price of every service or product we buy. Easily half of our living is confiscated by government. The government created inflation is another tax that favors a few wealthy yet steadily reduces the buying power power of the rest of us.
Insult is added to this injury by imposing the most asinine, absurd tax code imaginable — over 60,000 pages worth. Many persons rather than try to sort out the incomprehensible tax code pay others to figure it for them which in effect amounts to an additional tax. I’ve read where it is estimated that a billion hours are wasted annually in complying with the tax code. That’s a billion hours that could have been devoted to something useful and productive.
Currently congress is going through a big charade about simplifying and fixing the tax code. I call it a charade because they are not fixing anything; they are just putting band-aids on a broken system that cannot be repaired because it is fundamentally flawed. In 1986 congress went through a similar exercise on tax reform and look at what we got?
Just over a century ago, the federal income tax came into being when the 16th amendment was ratified. I have read where the rhetoric that was floating around then to gain support for the 16th and the income tax was that it would never be more than a few percent. What a cruel joke that was! Utah was not among the ratifiers of the 16th and there is evidence that the constitutional requirement for three fourths of the states ratifying it was not reached. But regardless of whether it was legally ratified, we have had a century of dealing with income tax. Several generations have grown up with income tax and are steeped in the idea that it is the only viable way to finance government. It is not; there are much better far less frustrating, costly, unfair and painful ways to do it. The fundamental flaw in the income tax is that is an income tax. Here are just a few complications that come of taxing income:
- The necessity of having an IRS bureaucracy. Regardless of how the code is simplified — even if it is made simple flat rate, it will be necessary for everyone generating income to declare their income on some kind of tax return. It will still be necessary for the government to tax us to pay the wages an army of bean counters to sort through the millions of tax returns.
- With income tax, everyone must account for every last dollar of income. To insure that everyone is accurately reporting their income, an IRS or equivalent agency must have authority to snoop into all of our personal financial affairs which is a violation of the rights guaranteed to us in the fourth amendment. The temptation will always be there to hide income sources from the government. Those who succeed at this effectively shift an unfair portion of the tax burden to the honest person. With income tax comes the additional burden on government of enforcing the tax laws and when the tax cops come after you, you are presumed guilty unless you can prove you are innocent.
- With the income tax, the tax burden always ends being unfairly distributed. Because of the invasion of privacy implicit in the income tax, politicians have the power to favor or disfavor any group they choose — they have the ultimate say on who bears the tax burden. Some current proposals call for giving families a tax break, but still the power to grant that break remains with the politicians. Down the road we can expect that will the continual pressure from special interest groups and lobbyists they will gradually chip away at any breaks they may give now. When ever we favor one sector of society we disfavor others. We have seen in recent years how some in positions of power have used taxation as a weapon against their political enemies. The bottom line is that government should not have the power to favor or disfavor any one sector because it will always end up unfairly distributing the tax burden.
- With the 16th, the federal government could now tax business income. Many seem to think that is a good idea, “let those wealthy corporations pay the taxes” they might say. This is a delusion. Businesses do not pay taxes, they collect taxes. A tax paid by a business is nothing more than a operating expense that along with employee wages, materials, equipment, facilities, utilities, etc. must be factored into the final price charged to the customer in order for the business to remain profitable. The end customer ends up paying the tax — he just doesn’t realize he is paying the tax. Business taxes make it difficult for American made products to compete in foreign markets. Business taxes are a dishonest, subtle means for politicians to strap taxes on their constituents without looking like they increasing the tax burden.
The best solution to this plight, of course, would be for the federal government to stay within constitutional bounds and the need for federal taxation would all but disappear, as was the case before the 16th amendment. But as we have become a nation addicted to government subsidies, benefits and hand outs, that does not appear likely. We can at least come up with a less painful means of financing this socialistic mess we have gotten ourselves into. A century of unpleasant experience should make it plain that income tax is not the way.
Tax should be collected at one and only one point in the economy. A point that is very visible and out in the open. The politicians should not have the option of the creative subterfuge they now employ in disguising taxes in the multitude of taxation avenues they now utilize.
The point at which tax is collected should be one that everyone is universally subject to, that no one can honestly or dishonestly circumvent. The solution is a simple single tax collected at the point of retail sales. With income tax we must account for a multitude of very diverse means of acquiring income. With a consumption tax or collecting tax at the point of retail sales, all those various means of acquiring income have naturally distilled down to the one simple reason we all have for working to acquire income: so that we may trade our income for things we need and want. Those with greater income spend more and therefore pay a proportionally greater amount in taxes. There is no favoritism, each individual determines their own taxes by the amount they spend. Consider some of the benefits.
- No more tax returns. April 15th becomes just another day unless it happens to be your birthday or anniversary.
- You take home 100% of your wages. Your employer no longer has to withhold anything to send to the IRS.
- The government no longer has any knowledge of or interest in how you acquired your income. Whether it be from wages, investments, self employment, or jobs you do on the side, how you acquired it is no longer of concern to the government. If you sell your house, there is not a bunch of stupid, intrusive rules about how you use the proceeds. The death tax disappears. You can pass what ever you have acquired in life to your descendants without government confiscation. Even persons who acquire income illegally — like drug dealers, thieves and embezzlers will at least have to pay taxes on their ill gotten gain. With our personal finances becoming our own private affair, the government can no longer bestow tax favors or disfavors on anyone.
- From collecting tax to processing the truck loads of paperwork to enforcing the tax laws, the IRS has got to be one of the biggest, most costly bureaucracies in the government. If all taxes were collected at the point of retail sales, the matter of collecting taxes reduces to essentially the same task of state and local governments collecting sales tax. The tax cops now have only a small fraction of as many entities to watch and the incentive for those entities to cheat or even their ability to cheat is greatly reduced. The paperwork for the retailer is simple: just add a fixed percentage of the sale price for federal tax like they already do with state sales tax.
Some might think “Oh no! not another tax!” They might think that its hard enough to put groceries on the table without another tax on them. They fail to recognize that not only will they have all of their wages as take home pay, but that the prices of all commodities will quickly fall dramatically. Consider the cost of a loaf of bread. The farmer who raises the wheat pays taxes on his operation which become part of the price he must charge for his wheat. The shipper that transports the wheat the miller pays taxes. Now the price of that wheat includes the taxes paid by two entities. After the miller comes more shipping, the baker, more shipping and finally the retailer. Each business that handled that wheat paid business taxes that ultimately get passed to the end purchaser who bought the bread to feed his family. How much of the price of that loaf of bread is the actual cost of producing the bread and how much of is taxes deceptively and dishonestly hidden in the price of the bread? — a third? maybe half? With restricting all taxation to the point of retail sales, nothing can be hidden. Consider too that the cost of doing business for each business in the chain is further reduced because no longer is it necessary for them to pay office staff to handle the myriad of tax issues.
A very well thought out implementation of consumption tax already exists. It is called the FairTax. Look it up online and read the details about it. In fact it has a number of sponsors and cosponsors in congress already and has been introduced in the house as HR 25 and the senate as S 18.
Such a change would amount to a massive relinquishing of power by the political establishment and we cannot expect that they will give it away easily. In the current dialog on tax reform, they make certain that these proposals are not brought into the discussion and that the media remains silent about them. As citizens we need to look at the position of political candidates on this issue. For example, in the republican primary earlier this year for the seat vacated by Jason Chaffetz, of the three contenders, Chris Herrod was the one candidate who stated on his web page that he favored the FairTax — but of course, he did not win the election. It is up to us as citizens to become informed and demand real tax reform both in the voting booth and by pressure on those already in office.
Darrel Russon
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