The latest discussions over economic stimulus should lead us into a serious discussion over how the federal government collects taxes and how we change it. The US Constitution is concise in its language: “All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills.” (Article 1, Section 7)
In 25 words the framers of this great nation established a system to fund the federal government. How did our US Tax Code grow to such a gargantuan document that it requires a forest of trees on which to print?
For years Steve Forbes talked about simplifying the US Tax Code by implementing a flat tax on everyone earning an income in the United States. The idea is simple: completely do away with the Tax Code as it exists now. Start over from scratch and write a one-page law that establishes a fixed percentage of your income as the new tax rate. Rather than a document that is apparently too complex for our current Treasury Secretary and many members of Congress to understand and comply with, we could draft a document that would free millions of Americans, many with multiple part-time jobs, from the onerous requirement of seeking professional tax help every year in order to comply with federal law.
It’s ridiculous that a family of four, earning a combined income of less than $60,000 from three or four low-paying jobs, with two cars and a mortgage, must employ the services of a certified public accountant in order to file its income taxes once a year.
Our current system of taxes seems to reward those who conveniently fit into a host of seemingly custom-fit categories that allows them to take deductions and write off expenses. Some businesses that make millions of dollars annually can effectively not pay any taxes whatsoever because someone in Congress has written into law cleaver ways for that particular enterprise to get all of the money back that it fronted the government throughout the year. Not everyone is entitled to such a luxury.
A flat-tax system would immediately do away with the need for millions of Americans to pay someone else to file their annual tax statements. This alone would save taxpayers money and help boost the economy. More than that, a flat-tax system would eliminate the unfair reward-for-behavior system that Congress has written into the tax code.
Under current tax code statutes the American taxpayer has become little more than a trained circus seal, barking on command for some morsels from our trainers — Congress — just to meet our basic sustenance needs. Those who comply by barking the correct tune and clapping loud enough can earn even more morsels from Congress.
A truly fair and equitable system would be to establish a flat tax on all income. For argument’s sake, let’s establish it at 10 percent. The person making a million dollars a year would pay 10 percent of his income, or $100,000 to the US Treasury. The family making $100,000 a year would pay $10,000 to the US Treasury. Under this system there would be no deductions, credits or breaks. That alone would allow us to eliminate the Internal Revenue Service, as it would streamline the system by which the government is funded. You could hire a few unemployed accountants to record and count the money coming into the treasury. Rather than deducting that money from employee payroll, taxpayers would simply submit their payments once a year with proof of their annual salary. This would release employers from having to do this.
States would require much less income since they’re not tasked with the constitutional obligation of national defense, thus the flat tax charged by states could be much less.
Such a system would also force government to live within its means, knowing that once a year the US Treasury would see an influx of cash payments from taxpayers. It would also give taxpayers a much clearer picture of just how much they’re paying in taxes to those they employ in the state and federal government.
Simplifying the US Tax Code, and the state tax codes, would give greater accountability to the taxpayers and would help shrink the size and reach that government has in our lives. Government has a few necessary roles to play; as it currently stands, government has outgrown the ability of the US taxpayer to support the political empire-building endeavors that our elected officials continue to erect for themselves.