The Exploding head syndrome:
Posted on 02/20/2006 3:30:35 PM PST by Bigun
Written by Jan Larson
Sunday, February 19, 2006
The Internal Revenue Service reported [1] last week that $345 billion (not a misprint) in taxes owed for 2001 has not been collected. Not to worry, the report also indicates that IRS enforcement efforts will recover approximately $55 billion of this “tax gap.” Bully for the IRS.
Even if the IRS is successful in recovering the amounts they seek, there is simply no way that a $290 billion shortfall can be justified regardless of how it is spun. There are several reasons why taxes rightfully owed are not collected. Many taxpayers underreport income and/or claim undeserved deductions. In other words, a lot of people cheat on their taxes. Is anyone surprised?
Another factor that significantly affects tax compliance is the complexity of the tax code. According to a report [2] from the Americans For Fair Taxation [3], the federal tax code, rules and IRS rulings comprise more than 60,000 pages. While complexity undoubtedly leads to some paying more than they rightfully owe, that complexity also results in billions in unpaid taxes.
The report also indicates that individuals and businesses spent over six billion hours at an estimated cost of $265 billion dollars attempting to comply with the maze of tax rules and regulations. This is equivalent to a workforce of over 2.8 million people spending the entire year doing nothing but tax compliance.
To cover the uncollected taxes, the 130 million U. S. taxpayers are effectively subsidizing the tax cheats to the tune of over $2600 each. In other words, if the cheaters were prevented from cheating, the average taxpayer would see reduction in his or her tax bite by over 30%.
If the tax gap and compliance costs were in and of themselves not sufficient reason to scrap the tax code, the tax code also hurts the U. S. in other ways. The income and payroll taxes ostensibly paid by businesses (but are in fact simply passed along to consumers) make U. S. products less competitive on world markets. This leads to job losses in the U. S. and, as we also saw last week, record trade deficits. The complexity of the tax code also enables politicians to reward and punish via the tax code. This is probably the single worst aspect of the U. S. tax system.
The sheer lunacy of a tax system that fails to collect billions owed, enables political manipulation, hurts the economy and in general works against the taxpaying public is astounding.
There is a solution however. It is a solution that would eliminate individual compliance requirements and make April 15 just another day. This solution would greatly reduce business compliance costs and similarly reduce the size and scope of the IRS. This solution would lead to job growth and economic expansion. This solution would eliminate most of the opportunities for tax cheats and political manipulation. The solution? The Fair Tax.
The Fair Tax would eliminate all income and payroll taxes and would replace them with a national sales tax paid on the retail purchases of new goods and services. The Fair Tax protects low-income individuals and families by rebating taxes paid up to the poverty level.
The first reaction by many people to the idea of a national sales tax is that prices of goods and service would go through the roof. Under the Fair Tax, this is not the case. Consumers are already paying for the corporate income and payroll taxes embedded in the price of virtually all goods and services. It is estimated that these embedded taxes average approximately 22% of the retail price of goods and services. Make no mistake; you are paying these hidden taxes.
Under the Fair Tax individuals would incur no compliance costs and businesses would remit Fair Tax receipts similarly to the way state sales taxes are remitted today. No more armies of lawyers and accountants to figure out IRS regulations. The IRS (or some similar agency) would need to ensure compliance from just the approximately 25 million businesses instead of 155 million businesses and individuals, as is the case today.
Maybe most importantly, the Fair Tax would eliminate the patently unfair manipulations of the tax code that Congress uses to hand out favors to wealthy constituents and lobbyists. The elimination of the incentive and ability to tinker with the tax code would go much farther toward making members of Congress more “ethical” than any other type of reform.
The Fair Tax has been introduced in both the House (H. R. 25) and Senate (S. 25). The House version already has 48 cosponsors. The Americans for Fair Taxation estimate that it would require just 3000 active supporters in each congressional district to make the Fair Tax a reality. Each of the 435 districts represents approximately 300,000 taxpayers. That means that if just one percent of taxpayers became vocal supporters of the Fair Tax and took the time to write and/or call their representatives in Washington, the Fair Tax could become law.
The Fair Tax would be the most significant tax reform since the Boston Tea Party. Don’t leave this reform to others. Take a few minutes to let those in Washington know that the time for the Fair Tax is now. Think about that as you pore over your 1040 this year.
[1] http://www.irs.gov/newsroom/article/0,,id=154496,00.html
[2] http://www.fairtax.org/pdfs/Tax_compliance_facts.pdf
About the Writer: Jan A. Larson is currently employed in private industry in Texas. He holds a bachelor of science degree from the University of Nebraska, a master of science degree from the University of Kansas, and an MBA from Colorado State University. jan@pieofknowledge.com.
Not so, Robbie, I've shown in past threads that the embedded taxes paid by illegals only represents a small part of what they'd pay under the FairTax as any tax on the embedded tac costs would be only calculated on the profits that portion generated for a business.
Something like (using the figure of, say, 15% embedded costs since you guys insist it is close to zero, anyway), the tax contribution on a $100 transaction would be $100 x 0.15 = $15 times the tax rate say 25% or $15 x 0.25 = $3.75 . The FairTax on the same transaction would vontribute $100 x 0.23 = $23 - quite a difference. Note thjat if the embedded cost is less as you claim, the difference is even larger in favor of the FairTax.
The Exploding head syndrome:
Where'd you get that pic of Rightie???
Grimlins with cell phone cameras.
Just take your total purchases and subtract the used things and multiply by 23 percent, Nightie. Anyone who can whiz through the I. T. in 10 minutes (or whatever you claimed) shouldn't find it too big a hill for a climber (note that I'm assuming you're not saving or investing anything since you wouldn't want to benefit under the FairTax).
I didn't realize he had red hair and beard. Great likeness!!
No, it won't require such at all. If you'd read the bill you'd see the provisions exist for simple non-taxing of businesses purchases.
Keep in mind, though, that you have to do the sort of record keeping you mention for the income tax system unless you're just (gasp) evading.
The grimlins tell me they had to soak in turpentine for a week to get the fumes from the explosion off.
Actually, you won't be "subsidizing" anyone to any great extent if you keep your consumption within bounds and instead take advantage of investing to get filthy rich-er so that your kids and grandkids will have the burden of spending all of it.
Think of how warmly they'll think of dear ol' dad/granddad because of your largesse!!! That'd be better than a $400 funeral.
You guys should read the bill to find out about the prebate: "`(2) IDENTIFICATION REQUIREMENTS- In order for a person to be counted as a member of the family for purposes of determining the size of the qualified family, such person must--You're assuming a "guest worker" wouldn't have a bona fide Social Security number. And why wouldn't they be a resident? The bill doesn't say they have to be permanent.
`(A) have a bona fide Social Security number; and
`(B) be a lawful resident of the United States."
I found this paper which indicates the effective tax rate for the S&P 500 is in the neighborhood of 30%.What do you think that tells you? Corporations only pay taxes on profits. You would have to know their sales revenue to know what percentage the tax was of prices.
And income of $17.3 billion, meaning their effective tax rate was 33.5%.Yeah. So? What does that have to do with anything we are talking about?
This one and a hundred others as well over the years.
What you need to realize is that some folks here will throw all manner of chaff into the air in order to obscure the one and only REAL point in the entire discussion which is:
The fairtax bill would remove a tax system which requires an annual annal examination that would make the inquisitors of the Spanish court blush and replaces it with one in which Uncle sugar need not know even so much as your NAME for it's administration! It's called F R E E D O M ! ! !
I lubbit!!!
Indeed! And getting to MAKE such choices is a FREEDOM sort of thing! Something not avaliable currently to be sure.
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