Posted on 04/01/2015 5:17:20 PM PDT by Kaslin
March Madness, baseball and flowers. Spring in America would be so grand without income taxes and the headaches of filing on April 15.
Just about everyone agrees our complex personal and corporate income tax laws are too painful and expensive—tax filing, record keeping and the like costs at least $170 billion a year.
They are unfair—billionaire Warren Buffett laments his tax bracket is lower than his secretary’s.
And the system kills jobs—although some businesses use political influence to pay a fraction of their fair share, most pay much higher taxes than foreign competitors lest they move factories and other activities abroad.
Proposals abound to reform the system by limiting deductions and exemptions to lower rates overall but despite noble intentions, the morass would remain. For example, last year House Ways and Means Committee Chairman David Camp tabled such a scheme but the executive summary numbered 194 pages that only a tax lawyer could reasonably comprehend.
In that rats nest, opportunities would abound for lobbyists to game the legislative process and sustain most of the faults of the present system.
Other industrialized countries limit these problems by relying more on consumption taxes than income taxes, and support is growing among Democrats and Republicans to shift the U.S. system in that direction.
The most efficient solution would junk income taxes altogether in favor of a simple national sales tax—a valued added tax similar to one applied in much of Europe.
In 2014, the Treasury collected $1.7 trillion from corporate and personal income taxes. This could be replaced by a 12 percent sales tax on all private purchases and other payments—be they computer equipment, college tuition or lunch at the corner takeout.
Businesses and institutions would then pay to Treasury the taxes they collected less sales taxes paid on purchases of materials and equipment, rent and the like. This subtraction would avoid the double taxation of materials and equipment businesses purchase and create a value added tax often proposed by advocates of reform.
It would end forever all the headaches associated with valuing inventories, calculating depreciation on capital equipment and other work that cost billions in accounting and legal fees.
A VAT would favor no activity over another, and by taxing goods and services at the point of sale, it would end the problem of U.S. firms parking profits abroad to avoid taxes.
Businesses and institutions would file a three line return, how much tax they collected, how much they paid and the difference. Individuals would file no tax return at all!
Temptations would abound to exclude or exempt all kinds of activities but that is the kind of thinking that gave us the current mess—and inequities, slow growth and exceeding complex tax returns.
Two problems remain. A VAT is not progressive—it taxes rich and poor consumers at the same rate. The elderly, who more or less live on savings, have already paid income taxes on those savings and would be taxed again.
A simple solution would be to raise the rate to 15 percent, and award each parent $3,500 for each child and pay similar amounts to each American over 65.
If Congress wants to spend more, it could raise the rate further. That would make transparent to all the cost of spending more on government activities. If conservatives on Capitol Hill want to cut programs, they could explain to voters how much those savings would lower the rate.
Elegant, egalitarian and efficient, such a value-added tax without exemptions would give Americans the tax reforms they want but privileged rich folks and big businesses spend a fortune avoiding.
The economy would grow faster, create more jobs and Americans would live better and in less fear of the Internal Revenue Service.
With the money saved, April 15 could be declared a national holiday—Tax Freedom Day.
Ping.
I just found out today I owe $5000 because I still work while receiving SS
Did you not know this when you started taking SS? It's in the find print fedgov sends you when you sign up for SS.
Sorry to hear it. You just told us your age—that crap stops when you reach full retirement age of 66.
Ax dem wot?
Getting rid of the income tax would have a very positive affect on US Ex-pariots in that it would relieve them of the onerous re4sponsibility of filing US tax returns when they do not live in the US.
Before 66 they withhold your SS if you go over a certain amount. But since they pay the whole amount monthly, and if you make over a certain amount after 66 they tax 85% of your SS at 25%.
That train left the station and it has passed the point of no return.
“Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.”
Well, Professor, we can’t afford, we don’t want and we don’t need a Value Added Tax in America!
You certainly are smart enough to know the difference between a National Retail Sales Tax (e.g., the FairTax) and a VAT!
VAT creates more problems than it solves, and, historically, has been the government cash cow that it is designed to be, much to the detriment of the people who have to pay, collect and account for it.
VAT benefits accrue SOLELY to the state.
FairTax benefits accrue SOLELY to the people and the economy.
Quite a difference, I’d say, and that reason alone makes the FairTax worth fighting for!
Let us all vow to throw every imaginable roadblock we can in FRont of the VAT in America!
So? Progressive is a description for diseases like cancer that get ever worse until it kills you, not a good plan for fiscal policy.
VATs are terrible, look how well they worked in Europe.
FairTax is a good step, but what we really need to do is get an actual budget, then split that budget by all the Congresscritters. Each state is responsible for it’s Congresscritters share.
Why do they call a ‘value added tax’ ‘value added’? How does taxing something add ‘value’ to it?
Why don’t they call it a ‘tax accumulated tax’? (Although in this article Morici says that businesses get to deduct their own sales taxes and he still calls it a VAT, which doesn’t make sense.)
“Why do they call a ‘value added tax’ ‘value added’? How does taxing something add ‘value’ to it?”
Because they supposedly only taxing the “value” added at that stage of the production process. The problem is in who get’s to determine what “value” is and how much of it is added.
“Why don’t they call it a ‘tax accumulated tax’? (Although in this article Morici says that businesses get to deduct their own sales taxes and he still calls it a VAT, which doesn’t make sense.)”
Morici is peaking about a specific kind of VAT. A subtraction method VAT where all of the taxes added to the products “value” are subtracted from it’s price to the current adders of “value”. In practice there is a great deal of cascading that occurs.
Our current corporate income tax is, in reality, nothing more than a subtraction method VAT.
Bottom line is that VAT’s are simply a method to hide taxes and ALL of the costs of complying with them from consumers.
Taxes on a business as well of all the costs of complying with the tax (the latter is many times much greater than the tax itself) can accrue to any one or any combination of only three places.
1. They can be included in the price of the good or service produced.
2. They can come out of the wages and benefits of the workers engaged in producing the good or service. or
3. They can come out of the return on investment of the stakeholders in the business.
In all cases the tax and compliance costs accrue to individuals and NOT the business itself!
I would be in favor of getting rid of an income tax and replace it with some sort of sales or consumption tax if, and only if, it also includes repeal of the XVI Amendment. If we do not get rid of the part of the Constitution that allows for an income tax then there is nothing to stop a future Congress from re-imposing an income tax.
Getting rid of income tax, especially Corporate Income Tax, would turn the US into a tax haven, with subsequent growth in jobs and prosperity.
It’s a tax on the added value, not a tax that adds value.
The reason they want a VAT is because you can have a VAT and an Income tax - which is what we willg get if there is a VAT.
The Fair Tax requires the repeal of Income Tax Amendment before it goes into force.
They need to end the stupid “prebate” thing.
And the “Fairtax” is still very progressive, and still gives handouts to those who never paid any taxes.
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