taxfairness

Some facts about the present income tax system:

Tax compliance costs taxpayers $.20 for every $1 collected by the IRS.

Tax compliance also costs taxpayers 6.2 billion hours, 1.2 billion hours on Form 1040 alone.

Small businesses have to spend too much of their time and money on tax bookkeeping. Income tax is supposed to be progressive but loopholes and tax shelters have allowed it to be regressive: The wealthiest people can pay little or no tax at all. The system is too cumbersome, too confusing and too inefficient.

Congress intentionally underfunds the collection budget. Agent performance is based on the number of taxpayers they collect more money from rather than the amount of money collected. The wealthiest tax evaders can avoid paying what they owe because one case against a wealthy person with the resources to fight will eat up too much of the IRS collection budget.

Though I am not endorsing the income tax, I want to make the system as uncomplicated and least burdensome as possible.

I propose having a tax exemption on the first $75,000 of earned income per person

A flat tax should be applied to all income above these amounts.

This method will drastically change the entire income tax system. The advantages are:

     1) Taxes would be simpler to calculate and monitor, to ensure accuracy and catch tax evaders.

     2) All shelters and loopholes would be eliminated, so the wealthy pay their share.

     3) The system would be so uncomplicated and efficient that the IRS could collect state income taxes (where applicable) using one form, eliminating collection expenses for individual states while reducing the cost of monitoring the system.

     5) Small business owners could avoid dealing with payroll withholdings, paperwork and expenses in the vast majority of cases so they can concentrate on business.

My goal is to eliminate all income tax and expenses up to the exemption point, which would eliminate income tax for about 75% of Americans. Tax collection costs would be greatly reduced because less IRS agents would be necessary and many offices could be eliminated. Think for a minute how much of the income taxes for incomes up to $75,000 are eaten up by IRS employee payroll and related expenses, office expenses, rent and paper forms. Now picture at least 75% of the IRS staff eliminated, and all but up to five offices closed. At present, any filer who earns one to approximately five thousand dollars actually costs the government in collection costs; not a profitable situation.

Quite a few years ago, I heard a radio talk show host say that in New York City, where he lived, everyone who lived in a building with an elevator was subject to an elevator tax that varied by building. He had just received his bill, and he spoke about the lack of logic in sending him a bill, which cost the city in labor, computer cost, paper bill and envelope, and a 30-cent stamp to collect 22 cents from him. That same poor logic applies to the IRS.

The revenues lost would be made up by:

     1. Making all businesses here and elsewhere subject to IRS tax laws on profits made in the U.S.

     2. Eliminating all the tax-avoidance schemes by allowing only the $75,000-per-person exemption.

     3. Putting more money into the pockets of working class people; the majority of this will end up back in the economy. People will replace that ancient appliance or furniture, or buy a newer, more fuel-efficient vehicle, or do long- needed renovations because they can afford it now without breaking the bank.

This is a “trickle-up” economy, which is a lot more beneficial to more people than giving a tax break to the wealthiest, who will put it into savings instead.

Anybody reading this may be thinking that the tax rate would have to be much higher with this plan. Actually, I believe the tax rate would be lower than the highest current rate. I believe this system could work with a tax rate of around 25%. Remember, this plan would eliminate all the shelters and loopholes that prevent billions of dollars from being collected now. By the IRS’s own admission, about $3 billion of taxes were not paid, mostly by the wealthiest earners.

States with an income tax would see revenues decrease. But with reduced waste in the federal budget and other changes I propose, the money could easily be covered by allocation from the federal government.

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