Posted on 06/18/2003 6:19:59 PM PDT by commish
WHY THE FLAT TAX IS A GOOD IDEA
By: Senator Richard Shelby
In May of this year, Congress passed a $330 billion tax cut. I strongly supported this initiative, and in fact, I would have preferred an even more robust tax cut. During the tax debate, I also introduced legislation that would change our current taxpaying system, but in an entirely different way - it’s called the flat tax.
Flat tax legislation would repeal the current Internal Revenue Code and replace it with a flat tax rate that would apply to all taxpayers. This means that all taxpayers would be taxed at an equal rate - seventeen percent. No more unfair special interest deductions, or unclear provisions, or painstaking forms to fill out. The flat tax simplifies every part of the taxpaying process, while providing a more fair system for all Americans to follow.
I have been a national advocate for this issue for nearly twenty years. I first introduced legislation to reform the U.S. tax code with a flat rate system on May 23, 1984, when I served in the United States House of Representatives. Since that time, I have introduced similar flat tax legislation five more times in the Senate. Before his retirement in 2002, Representative Dick Armey (R-TX) and I partnered on this cause forming the “Congressional Flat Tax Caucus” and encouraged our colleagues to join us in this important initiative.
We know all too well that the tax code is painfully inefficient, and the complexities overwhelm the average taxpayer. Since 1986, there have been more than 6,500 changes to the Internal Revenue Code. Each time Congress has the opportunity to make one of these changes, we add new layers of complexity and confusion to an already labyrinthine maze that no one can fully comprehend.
Our current tax code is convoluted and penalizes those who lack the resources to prepare their own taxes or hire a professional to determine their tax liability. Because the tax code is so complex, even the Internal Revenue Service’s (IRS) own experts are often uncertain of what is required to be in compliance with the current law. According to Daniel Pilla, a tax litigation consultant, in 1993 the IRS telephone taxpayer assistance program provided about 8.5 million Americans the wrong answers to even the most basic inquiries about the tax laws. If the IRS, the very federal agency charged with enforcing the tax laws, cannot figure out the code, how can we expect the American people to do so?
My proposed flat tax will eliminate the complexity and correct the vast and pervasive inequities of the current system by dramatically simplifying the tax code. Rather than wade through stacks of complicated IRS forms and instruction manuals, under a flat tax, taxpayers will file a simple postcard size return. This simple form is easily completed in minutes without the use of expensive professional assistance.
Under a flat tax, all American taxpayers would be taxed at the same rate, 17% when the tax is fully implemented. In place of itemized deductions that often favor special interest groups, the bill I introduced this Congress would give each taxpayer a generous standard deduction of $12,790, or $25,580 in the case of joint filers. Taxpayers would receive an additional $5,510 standard deduction for each dependant. Therefore, a family of four would need to make over $36,600 before they would pay a single penny of taxes.
People will not have to hire an accountant or attorney simply to comply with the law. Everyone will fill out the same simple return, everyone will be taxed at the same rate, and everyone will pay their fare share.
The time for major tax reform is now. Proposed amendments to the current tax code only perpetuate the complexities and inequalities of the current system. The flat tax would not only simplify the tax code so that all taxpayers could easily complete their own returns, it would more importantly treat all Americans equally. Only by treating every taxpayer equally can our tax code ever achieve true fairness.
The time has come to scrap the Tax Code.
It's interesting how the government expects us all to understand the millions of pages of IRS laws and regulations, but likewise considers us too stupid to understand our Constitutional Rights (and therefore need to have politicians interpret them for us), which are only a few hundred words.
There are still far fewer businesses than there are individuals. Besides, over 40 states already have sales tax collection mechanisms in place.
Thus giving different answers and results to different citizens, is that not a 14th Amd. issue of equal protection? If ones liberty is at stake, I don't see how it can't be.
Armey's "17%" flat tax also retains the current FICA taxes, so that family making less than $36,000 is still paying roughly $2,600 in payroll taxes (and their employers are paying an additional $2,600 as well).
Armey also says nothing about corporate income taxes. What rate do businesses get charged? What deductions or depreciations are they allowed? Will that side of the income tax system still be open to tweaking by special interest groups? Will the flat tax supporters ever admit that it will still act like a VAT, tacking on 20-40% to the cost of goods and services via corporate and payroll taxes and compliance costs?
Income taxes are bad from a liberty viewpoint in that they are still invasive. They are bad from a political standpoint because people are lulled into believing they pay far less than they actually do. They are bad from an economic standpoint because they are a drain on productivity and increase the costs of American goods and services relative to foreign goods and services.
You are correct, there are a lot of questions that need to be answered on the corporate side of the fence, and I would like to see them drop this lower income crap (Everyone should pay equally).
Personally, I would rather see an NRST (VAT) than a Flat tax --- but if the Flat Tax is the first step in that direction, I say let's start walking.
I'm not convinced of its Constitutionality, that could be addressed in the Amendment repealing the 16th, but the "tremendous bureaucracy" is already in place. With only one or two exceptions (New Hampshire and maybe Delaware) every state already collects Sales Tax and could continue to do so under a National Sales Tax.
Any reform that leaves the 16th Amendment in place is no reform at all.
Personally, I would rather see an NRST (VAT) than a Flat tax
An NRST (i.e. National "Retail" Sales Tax) is not a VAT.
A VAT is little more than a corporate income tax generally using a purchase credit/vouchers system in place of deductions and depreciation, though a subtraction method VAT merely does away with depreciation and uses deductibility instead of tax credit/vouchers.
http://www.taxfoundation.org/foundationmessage03-00.html
"Under the WTO definition of the term, a sales tax is an indirect tax, as is an European-style VAT. The economic equivalence of an European-style VAT and a subtraction-method VAT is well-established. A subtraction-method VAT is essentially identical to a business income tax except that all purchases of plant and equipment may be expensed, rather than depreciated as under current U.S. law."
And every man woman and child in the nation, pays federal taxes through higher prices under that VAT, whether it be called a "Flat" tax or Corporate Income Tax.
Definition [ http://www.encyclopedia.com/articles/13330.html ]:
value-added tax
levy imposed on businesses at all levels of production of a good or service, and based on the increase in price, or value, added to the good or service by each level. Because all stages of a value-added tax are ultimately passed on to the consumer in the form of higher prices, it has been described as a hidden sales tax. Originally introduced in France (1954), it is now used by most W European countries.
The National Retail Sales Tax (NRST) on the otherhand is collected only at retail (consumer) sales points, is a totally visible single stage tax, and the opposite of a VAT.
The visibility provides accountability of government to the electorate. In world of corporate tax systems and Vats; an electorate can hardly be expected to exercise "Eternal Vigilence", with horse blinders on.
- "There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.
Walter Williams, World Net Daily, 10-25-2000
- So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
What's fair about a tax on income, (Flat or otherwise)?
- It is fairer to tax people on what they extract from the economy, as roughly measured by their consumption, than to tax them on what they produce for the economy, as roughly measured by their income.
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