The Income Tax and How it Undermines the U.S. Economy

On one day every year, more money is spent by Americans than has been spent on the whole Iraq War. This day is not Christmas or Valentine's Day, or any such fun day as that. This day is April 15, the deadline for Income Tax filing. In case you missed it, filing your Federal Income Taxes is not nearly as fun as opening presents on Christmas morning. It's not even close. Not only is it not fun, but Federal Income Taxes are a huge drain on the American economy, to the tune of $500 billion in 2002, according to the Tax Foundation (Boortz 49).

How did this figure come about? An estimated 5.8 billion hours spent by individuals, businesses, and non-profit organizations in compliance with our monstrosity of a tax code cost Americans approximately $194 billion in 2002 (Boortz 43). Established by the 16th Amendment on February 12, 1913, and having gone through approximately 35 years of reform, the current IRS tax code exceeds 54,000 pages and contains some 2.8 million words (Americans for Fair Taxation). Individuals and businesses usually have to hire professionals called CPAs to interpret and correctly file their taxes.

Not only are these explicit costs crippling, but how much worse are the implicit costs, or in other words, the opportunity costs? Think about it this way: those 5.8 billion hours are not being spent producing anything. As Neal Boortz correctly puts it in his new book, The FairTax Book, that figure is equivalent to the lifespan of 8,700 Americans (Boortz 43). That's almost three times as many people as died on September 11, 2001, every year! Boortz goes further with this analogy:

"What kind of workforce would it take to cover those 5.8 billion hours? If you figure a standard workweek - eight hours a day, five days a week, a few weeks every year off for vacation - it adds up to a workforce of more than 2.77 million people. That's more than the auto industry, the computer manufacturing industry, the aircraft manufacturing industry, talk radio, and the steel industry in the United States combined. (43-4)"

The current tax code continues to cost businesses money in this way: businesses are forced to make tax-decisions instead of economic decisions. That means, instead of making corporate decisions based on what is best for the company's profit, the corporations make decisions based on the lowest-cost tax implications. This hurts businesses in two ways: First, businesses lose potential earnings because the IRS tax code would penalize them for certain decisions. Second, as more of an opportunity cost, business executives actually have to spend time and money on figuring out the tax implications of their decisions. So, not only do the decisions they are forced to make hurt them, but they have to take the time to make those decisions. Corporations could be investing money back into their company, thus growing it and providing more jobs, but instead are having to waste time avoiding high taxes. How much money is lost here?

It is probably impossible to calculate the exact value of all of this time wasted by every American who files Federal Income Taxes, but the Tax Foundation has estimated that, opportunity costs added with the $194 billion compliance cost mentioned earlier, equals a total cost for America exceeding $500 billion. But wait, there's more.

What about embedded taxes? Don't think for a minute that businesses manage the whole tax burden by themselves. They pass a lot of the burden on to consumers, by raising the prices of their goods and services. That's right, you as a consumer are paying an average 22 cents out of every dollar to the businesses to cover their tax costs (Boortz 55). Not only do businesses have to pass the cost on to the consumers they serve, but also to their own employees. If businesses didn't lose money to the IRS, they could afford to pay their employees higher salaries and give them more benefits, including health care and vacation time.

An additional problem with the IRS tax structure is that it creates a desire to move companies overseas. Moving manufacturing plants and corporate headquarters to countries like Germany actually saves money for businesses. Places like Germany, although they don't have a great tax code, certainly have a more economically beneficent tax code. But when businesses move overseas, often referred to as outsourcing, America suffers. Jobs that should be given to Americans are instead given to people who live in those other countries. Additionally, because the regulatory costs and the costs of production are lower in those countries, those products, cars for example, become cheaper and more competitive, further reducing the amount of business done with American companies.

These offshore financial centers shelter trillions of dollars from any participation in the American economy. â€œ[T]he 2000 Merrill Lynch & Gemini Consulting study World Wealth Report estimates that one third of he wealth of the world's high-net-worth individuals is held offshore. How much would that be? Try $11 trillion - $11 trillion sucked out of the American economy, all of it immune to the tax obligations you suffer every April 15 (Boortz 97).

Imagine if all of these trillions of dollars were added back to the American economy. On top of that, imagine saving the $500 billion compliance costs every year. These two things would give a huge boost to the American economy. Fortunately, there is a plan to make this happen, a plan sponsored by Georgia Representative John Linder. The plan is called The FairTax, or H.R. 25.

Bibliography Boortz, Neal & John Linder. The FairTax Book. New York: HarperCollins Publishers, 2005.

McConnell, Campbell R. & Stanley L. Brue. Economics: Principles, Problems, and Policies. 16th ed. McGraw-Hill/Irwin, 2005. Online. Americans for Fair Taxation. . Online. Tax Foundation. .

Chris Liakos is a Political Science major in the University of Georgia. He serves as President of the Georgia Perimeter College Political Science Club in Lawrenceville. After campaiging for the GOP in the Fall of 2004, Chris started a chapter of Students for Saving Social Security at his local campus.

Actually the income tax began as a Constitutional amendment in 1913 and was sold to the voters as a tax on the very top tier of income earners. The "tax" you speak of is the act of withholding portions of a paycheck to prepay the income tax. It was sold as a war measure and the country was assured it would be repealed after the war.

Now we know that both were lies. Maybe not lies when they were told but lies manifested none the less. It is up to us, the people, to do something. There are representatives in congress and the Senate who are sponsoring the fair tax.

There is a huge bureaucracy in Washington and Virginia that feasts off of the tax receipts from the hard working people in this country. They are career slum lords overseeing their real estate for profit only, not for the betterment of their tenants. This huge bureauracy, unelected, is the tyranny that Jefferson, Adams, Franklin, Mason et.al. warned us about. They are bloodsuckers and do not have our interests at heart. They only understand power.

Though unelected they wield considerable power as we can see every day with the major cabinet offices. We, as productive citizens are subject to the whims of millions of unnecessary regulations that bind our creative abilities like tethered sheep.

This bureaucratic morass is extremely entwined with the so called "K-Street" gang of lobbyists who spend millions of dollars of corporate money (the money we all earn for statists corporations as their loyal servants) to bribe the very people we send to congress to clean up the mess. Congress, on the other hand, is strapped by a wicked news media who have decided that the truth lies in government and we should all be a collective bunch of sissies. If any story depicts an individual accomplishment it is spiked in favor of an individual accomplishing because of a government program. You know the drill.

The fair tax, whether you agree with it or not, is at least a step toward ridding ourselves of what has become a hundred times worse than King George's tax on tea. If you don't agree with it please tell the rest of us how we can get rid of K-Street and its intertwined bureaucracy.

Otherwise, shut the hell up and go home.

Actually it is the Second Plank of the Communist Manifesto:

"2. A heavy progressive or graduated income tax."

And, since you brought it up, here are the other nine:

"1. Abolition of property in land and application of all rents of land to public purposes.

"3. Abolition of all rights of inheritance.

"4. Confiscation of the property of all emigrants and rebels.

"5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.

"6. Centralization of the means of communication and transport in the hands of the state.

"7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

"8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.

"9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

"10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc."

Do you recognize any of the other nine that are firmly in place in the United States of America?

The (our) enemies of FReedom have been hard at work, and rather successful, wouldn't you say?

A man much wiser than I once said that Eternal Vigilance is the price of FReedom.

I'd have to say that we have not been vigilant.

However, all is not lost: We the People have an opportunity to begin the process of taking our country back by electing Senators and Representatives who will vote for the FairTax, H.R. 25 and S. 25.

That is just the first step, mind you. There is a lot more to be done after the FairTax becomes law of the land.

We, as productive citizens are subject to the whims of millions of unnecessary regulations that bind our creative abilities like tethered sheep.

The first section addresses many bogus laws -- victimless "crimes" -- beyond the WOD. The remainder addresses Taxman's 64 post. "You" is used generically directed toward those that support violating persons unalienable rights.

If a person thinks they have been harmed by another person's act of possessing a drug then the person should take the drug possessor to court and convince an impartial jury. That way the "victim" may gain restitution for his or her pain and suffering.

You've never done that because you know that even if the judge didn't refuse the case as frivolous it would be highly improbable that you'd ever convince an impartial jury that the mere act of a person possessing drugs caused you harm.

Instead, you'll argue that drug possession and or use causes harm to society -- causes harm to the group. You'll take a communitarian stand. Of course, you'll have to turn a blind eye to reality. That is, for a group of people to exist there is a prerequisite that first the individual must exist.

Each time an individual is sacrificed -- in whole or in part -- the group suffers a loss. Protect the rights of the smallest minority -- the lone individual -- and the rights of all minorities and the majority are protected.

The federal government creates each year, on average, 3,000 new laws and regulations. Each one of those laws has people that support it and will argue why the new law is necessary. Proclaiming that without those new laws people and society will run headlong into destruction.

In reality virtually every person breaks one or more laws several times a year. Yet with every person violating the law people and society have not moved toward self-destruction. Instead, individuals and society have increasingly prospered.

Over the past several years and decades people and society increasingly prospered despite not having the supposed benefits of future laws yet to come. Today, people and society increasingly prosper despite not having the supposed benefits of next year's new laws or, new laws to come five, ten or fifteen years in the future.

Ninety-eight percent of the people do not knowingly initiate force, threat of force or fraud against any person or their property. Though, through widespread ignorance most people negligently support government initiation of force/harm against persons and their property. See War of Two Worlds below.

Setting aside for the moment that government officials in all three branches of government violate laws, if it were possible to apprehend all lawbreakers next week, society would run headlong into destruction. It would come to a screeching halt.

As it is, a very small fraction of lawbreakers are ever apprehended for the laws they violate. The few that are apprehended and punished cause a drain on their lives, families and society. Meanwhile everybody else that violates the same laws, while semi free, pay the price of having their brothers and sisters sacrificed for the greater good of society.

The beneficiaries are the politicians, bureaucrats and their automatons. They're parasites leeching off The People, the hosts. Value destroyers draining value producers.

Ir really is a war, to the death, between two groups of people: 64

War of Two Worlds

Value Producers
vs.
Value Destroyers

Politicians and bureaucrats work diligently to hide and numb much of the emotional dismay and stress that people would otherwise experience from funding the government. There's the politician and bureaucrat acting in a paternalistic superiority over ordinary people as demonstrated by the treatment they give the "patients". That treatment is to create an illusion that masks the pain while never addressing the real problem.

In fact they dare not address the real problem because they are the problem. For they create problems that need not exist in the first place. Problems that drain wealth and hinder the progress of people and society. The people pay trillions of dollars each year for that.

Solution: make the method of paying taxes transparent to everyone. Let each person experience the pain and dismay of paying taxes and soon, very soon in mass, people will increasingly reign in government spending and lawmaking.

In all probability the FairTax is the most transparent.

Benefits of the FairTax

No federal tax withheld from your paycheck.
No FICA taken from your paycheck
Purchase necessities up to the poverty level tax-free.
Beyond poverty level spending total price paid at the cash register is virtually the same price paid today.
Creates a flood of new businesses and jobs...

Rep. Bill Archer, Chairman, House Ways and Means Committee:

"A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."

Abolishes the IRS.
No tax forms to fill out.
No reporting your income to the government.
You gain true financial freedom and financial privacy.
Focuses people's attention on demanding government to cut spending.

That's the short list. For more information see fairtax.org or search: "national sales tax" OR "national retail sales tax"

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.