LET'S GET RID OF THE INCOME TAX MESS

Below is a piece written by the National Communications Director of the FairTax.org. It is rather long, but a good read.


The Income Tax Mess
By
Ken Hoagland

This year American businesses and individual taxpayers will, astoundingly, pay more than $265 billion in tax preparation costs just to comply with our nearly indecipherable 67,500 pages of income tax regulations. Although universally despised, the income tax system has, for all the wrong reasons, strong defenders in Washington.

The income tax is big business in Washington. More than half of all lobby expenditures in any given year are devoted to winning tax code breaks. While Republicans and Democrats disagree on almost everything else, in Congress they are equally enamored of manipulating the tax code. Providing special breaks for favored constituents, punishing political opponents and affecting the behavior of citizens is pursued with equal vigor on both sides of the aisle. The process has created a complex mess.

Warren Buffet and other American millionaires and billionaires will pay a lower tax rate again this year than their secretaries. If you are married, you will pay higher taxes than two people living together. If you continue working while collecting Social Security, your benefits will be taxed. If you are an American business, “embedded” income and payroll tax costs will account for as much as 20 percent of the price of your goods and services.

These costs and the highest corporate tax rate in the world make American products are far less competitive both here and abroad. Our income tax system has actually helped drive more than $12 trillion of American wealth offshore in recent years.

But if you happen to find a job on the House Ways and Means Committee, the Senate Finance Committee or the Joint Committee on Taxation as either a staffer or, better yet, an elected representative, you have a bright future with the tax code. Seven figure signing bonuses are not uncommon when “K St” tax lobby firms are looking for talent and connections. Is it any wonder that taxpayers hear frequent promises that “something must be done” but that the tax code only gets more complex, unfair and dysfunctional?

The difference between what is owed and what is collected by the IRS is about $350 billion and will result in average tax bills being about $2,000 higher than they would be otherwise. Many middle class taxpayers would have been hit with an additional $2,000 tax this year if not for another one-year legislative “patch” of the 1969 error of the tax writing committees in not indexing the Alternative Minimum Tax for inflation. While every eligible taxpayer is looking forward to welcome rebates this year, the money to stimulate our economy is, in fact, borrowed from China and other lender nations. There is a better way.

The most viable alternative to the current system remains the FairTax, a progressive national consumption tax with 70 Congressional co-sponsors and a growing citizen base clamoring for change. Unlike the current system, it taxes the $1.5 trillion underground economy, transforms twelve million illegal immigrants into taxpayers as consumers, and ends the marriage penalty, the corporate tax, the capital gains tax, the inheritance tax and all income and payroll taxes.

It eliminates all federal taxes on the poor, gives the middle class a healthy tax break and taxes billionaire’s spending at an equal level. Every wage earner takes home their entire (federal withholding free) paycheck under the FairTax.

It also provides a far broader base of revenues into the faltering Social Security and Medicare programs. Most experts concede that adoption of the FairTax would stimulate trillions of dollars of foreign investment into the US economy but for predictably self- interested reasons the tax lobby hates the FairTax despite its clear benefits to the nation.

Even without prominent FairTax advocate and Presidential candidate Mike Huckabee on the campaign trail and despite blatant distortions from Washington, the national FairTax campaign continues to grow at the grassroots level. Like all citizen driven reforms, it is building toward the day when enough taxpayers can finally overcome Congress’ self-interest in their favorite plaything, the cause of our annual tax torture and a millstone around the neck of our economy.