January 10, 2023
Our Federal Income Tax
A Dishonorable Honor System
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Larry has been writing from the conservative point of view since his 2007 retirement from the private sector.
Interesting Readings______________________________TOPICS
Barnyard StenchFreeloaders Best FriendAn Unjust Revenue ProducerBusiness TaxesNational Sales Tax - Change You Really Can BelieveNo FavoritismEntitlement FundingUnderground EconomySales Tax AdvantagesWhat to ExemptCongress Will StonewallThe DisplacedLegitimate Government HiringRecognize and Thank the WealthyNo CompromisingFive Takeaways______________________________
Barnyard StenchDo
you know the Internal Revenue Service (IRS) has 80,000 employees,
collects $4.1 trillion annually, and operates with an annual budget of
$12 billion?
Source: IRS Acting Commissioner Douglas O'Donnell
Hold your nose as you read from the IRS website.
Freeloader’s Best FriendThe federal income tax system is the most powerful method we have for taking from the rich and giving to the poor.
What
started out as a tax in 1861 to pay the cost of the Civil War became
permanent with the 16th Amendment to the Constitution. What started as a
3% tax on individual income greater than $800 has become a mess. Look
at us now.
We
have Social Security and Medicare along with more and more entitlements
for the questionable - key word: questionable - down and out. This is
wrong!
An Unjust Revenue Producer Today, tax rates vary because of two disgraceful notions:
• People with more should pay more.
• People should get a tax break because of circumstances.
These are silly and wrong notions for two reasons:
•
The fewer taxes paid by anyone – including the rich – allows more
consumer spending that, in turn, leads to more jobs and a healthier
economy as the wheels of commerce just turn and turn and turn.
• One person’s tax break is another person’s tax burden.
It
makes sense to stop penalizing the wealthy. Let the rich spend, spend,
and spend some more. Let the millionaires and the billionaires spend
24/7 on luxury homes, expensive vacations, the most prestigious
universities, and all the toys, such as airplanes, yachts, motorcycles,
and automobiles. This kind of spending will go a long way to keep the
economy stronger and the unemployment rate lower. The economy will
thrive because we will purchase more and more consumer products.
According
to CEO John Faraci of International Paper, as reported by Gennine Kelly
of CNBC on September 7, 2011, the economy is 70% consumer-driven.
Therefore, the wealthy do us all a favor when they spend, spend and
spend some more.
It
is wrong to punish the wealthy just because we can. Forcing the wealthy
to pay taxes at higher rates is punishment although our liberal
Washington politicians will not admit the truth. To them, it is a case
of what is ours is theirs. Taxing people when and where you can is
easier than exercising fiscal responsibility.
Business TaxesHere
is a thought: Exempt all businesses from paying any income taxes. After
all, consumers reimburse all business taxes via the built-in (hidden)
method at the point of sale. Without paying income taxes, businesses
would also realize more profits by avoiding tax-related administrative
costs. More profits allow for more investment in equipment and jobs and,
in turn, build a stronger economy.
Our
income tax system is a powerful tool for our government to use in
spreading the wealth among those who have and those who do not have via
mandated social programs. It is a powerful tool because the government
can do whatever it pleases with tax credits and deductions.
Captive audiences are nice for thieves.
There is a better way than income taxes to collect the revenue needed to fund our common needs.
National Sales Tax - Change You Really Can BelieveA
better way to fund our government begins with trashing the income tax
system and implementing a national sales tax so everyone who purchases
goods and services pays equally.
Over
the years, I have never heard of or seen evidence of any individual
initiating a conversation praising the merits of a national sales tax
for generating revenue. Presidential candidates occasionally talk about
what they call a fair tax. Some have advocated filing tax returns via a
postcard-size form. Guess what happens after the election. Such
disinterest strongly suggests apathy on steroids all the way up to our
national government.
No FavoritismA
sales tax would give us more control over the amount of taxes we pay.
For example, we could buy a Ford instead of a Lincoln or a used car
instead of a new car to avoid the higher sales tax attached to the
Lincoln and the new car.
A
built-in benefit of this approach is that rich and poor alike can
adjust their spending to adjust their taxes. The wealthiest man in the
country can buy at the thrift store if he wishes. He will not but he,
along with the rest of us, would have the choice, all in the name of
fair taxes.
Another
advantage of a sales tax is the government will have less of our
personal information. Just this alone is enough reason for trashing our
revenue-collecting honor system. What an honor system it is.
Entitlement FundingThe
sales tax method is a big bummer for freeloaders. They would pay taxes
along with the rest of us because all purchasers of goods and services
would fund all entitlements. Income tax exemptions, credits, and
deductions for the benefit of selected groups would be a thing of the
past.
So, what is right for America and what is wrong for America?
Supporting ourselves is right. Subsidizing selected groups with tax credits and deductions is wrong!
Let
Johnny and Janie Doe fund their kid’s education with their own money,
not with money from their neighbor across the street and not with money
from people living across the country.
Further,
with an equitable sales tax, we should not exempt organizations from
paying taxes or allow organizations to pay at a reduced rate. Exempt
certain goods and services yes, but certain groups no. In addition to
collecting much-needed revenue from organizations, we will reduce the
amount of fraud attributed to individuals who now beat the system by
purchasing through their tax-exempt organization connections.
Underground EconomyIncome tax fraud is a big business itself.
Drug
dealers, for example, do not pay income taxes on their lucrative sales.
However, they would pay the national sales tax assessed when they buy
their classy cars.
We
can say the same for everybody else participating in the underground
economy. Everybody includes drug dealers, prostitutes, babysitters, and
ten-year-old kids who get their spending money from working adults and
on and on and on.
Everybody includes everybody.
Seems like a winning situation for the honest taxpaying citizen.
Consider this:
The
growth of the shadow economy can set off a destructive cycle.
Transactions in the shadow economy escape taxation, thus keeping tax
revenues lower than they otherwise would be. If the tax base or tax
compliance is eroded, governments may respond by raising tax
rates—encouraging a further flight into the shadow economy that further
worsens the budget constraints on the public sector. (On the other hand,
at least two-thirds of the income earned in the shadow economy is
immediately spent on the official economy, resulting in a considerable
positive stimulus effect on the official economy.)
Source: Hiding in the Shadows – The Growth of the Underground Economy:International Monetary FundFriedrich Schneider with Dominik Enste March 2002
Reasonable
patriotic Americans surely agree Schneider and Enste present a good
case for collecting from the people via a national sales tax instead of
the current income tax.
There are more ways to abuse the American people via the income tax system than there are people.
Everybody
does it and we do so with the belief we have duped our friends,
neighbors, co-workers, and family members along with people we do not
know. Actually, we dupe ourselves because each of us must cover the
duping of other dupers.
A national sales tax is right. The federal income tax method that relies on the honor system is wrong.
Sales Tax AdvantagesHere
is a baker’s dozen list of advantages a well-developed national sales
tax program, with collections from individuals and groups, whether for
profit or not for profit, at the retail level has over our federal
income tax system:
•
The people would have an additional $12 billion – the amount currently
used to fund the Internal Revenue Service – for maintaining the public
infrastructure or other worthwhile projects.
• No more stress of keeping records for tax purposes.
• A few dollars saved from not having to pay tax return preparers.
•
We would collect an additional $600 billion to $900 billion annually
without the underground economy according to various estimates.
(However, I am not confident these numbers are reliable as my research
uncovered a wide range of estimates both lower and higher.)
• Our government would have less information about us, something needed for years.
•
It would be fair because the rich and poor alike would pay the same
rate, thereby no longer penalizing the rich for their good fortune,
regardless of whether they earned or inherited their wealth.
•
Businesses would pay no income taxes and therefore no longer need to
build income taxes, and the related administrative costs, into the price
of goods and services for consumers to pay.
• No more grief or inconvenience and no more cost of going through an IRS audit.
• IRS abuse and bullying will end.
• We will no longer need to cover those who falsify income tax returns.
• We will no longer need to cover the amounts tax settlement companies save clients.
• Each of us can have closer control over the taxes we pay by adjusting our spending.
•
By paying taxes as we go, the tax bite will be foremost in the minds of
wage earners instead of “invisible” as when taxes are withheld from
wages, creating greater day-to-day awareness of the cost of funding our
common needs.
Politicians
have given lip service to the sales tax (aka consumption tax) line for
years. Their proposals make no sense at all because they continue the
talk of giving different tax treatments to individuals due to different
circumstances.
Wrong!
Wrong
because shifting the wealth of the wealthy to those with less would
continue. From my research, I learned each of the different suggestions
provides for the capturing of personal information which will no doubt,
in time, lead to a system as botched up as we have now. I much prefer a
sales tax with no personal information gathered and with relief built-in
for the poor.
What to ExemptWe
can exempt tax on items such as some food and household staples, used
clothing, vehicles more than four years old, houses more than 10 years
old but not on newer built automobiles and homes.
These
sales tax exemptions will contribute to a more level the playing field
by removing some of the sting - perhaps all - associated with regressive
tax paying methods.
The socialistic notion of forced shifting of wealth from the rich to the poor by a taxing method should end.
This approach will help us arrive at the end.
Congress Will StonewallWhen
will we achieve this? The answer is never as long as we have buffoons
making up the majority of Congress. They will always value their
backsides more than they value the best interests of all the American
people.
Do you think our “honorable” men and women in Congress want to battle:
• The 80,000 IRS employees plus those earning a living from income tax reporting preparation?
• Constituents who will lose tax credits and deductions?
•
Those who pay no income tax now, while receiving benefits afforded by
the government, but will have to pay taxes at the point of sale?
The answer to each question is no.
The DisplacedHere
is a question for you: What will happen when the Washington politicians
begin serious talks – they talk about it during election campaigns but
then forget the matter – about ending the anti-American federal income
tax, anti-American because it encourages people to turn away from the
admirable concept of rugged individualism?
The
answer is every single person benefiting from the current revenue
collecting method will howl! We have a bunch too including:
• The 80,000 IRS employees whose wages are paid by taxpayers.
• The many private-sector tax preparers including CPAs, attorneys, and neighborhood tax offices.
• Those who evade paying income tax by participating in the underground economy.
• People are exempt from paying income taxes.
The
quick and easy way of taking care of the IRS employees is by buying
them out. The important thing to remember is we do not want to slight
them. The mess is not their fault. After all, they were just looking for
work like any other great American.
Why
not pay each of the 80,000 employees up to $100,000 in a lump sum? That
is a total of $8 billion, less than the current IRS annual budget. Of
the $8 billion, those employees would return perhaps $2 billion to the
treasury in the form of sales tax, depending upon the tax rate, which
some politicians estimate to be 20% to 30% of the cost of purchases. And
let us remember the $2 billion would grow for us due to the multiplier
effect. By the end of the third year, there should be no further expense
incurred for phasing out the IRS.
Now,
you might ask, “What about private sector tax preparers?” Many CPAs
only prepare federal income tax returns part of the year, January
through April. They can survive by concentrating more effort on other
opportunities for which they trained. Tax-preparers employed on a
seasonal basis will lose that portion of their income. However, many
have other income, such as full-time employment or investment income,
perhaps both. Most would likely have to make only minor adjustments to
their lifestyles.
Legitimate Government HiringIt
is the place of our government to employ people for the sole purpose of
satisfying our common needs. It isn’t the place of our government to
continue paying 80,000 people to collect taxes because – as we have
heard time after time – that‘s the way it has always been. In addition,
it is not the place of our government to create jobs that provide no
value to the people or growth for the economy. A government is negligent
when it creates or allows the continuation of a situation detrimental
to its citizens.
Recognize and Thank the WealthyExpect
our wealthy tax-loving liberal friends to balk if forced to give up
their credits and deductions via the sales tax method. The ground will
shake when they can no longer evade paying taxes by whatever means they
invent.
I heard Joe Biden say during the 2008 campaign that we should want to pay more taxes.
Nonsense!
Every taxpayer should want to pay fewer taxes as a way to improve the economy by increasing discretionary spending.
Here
is an interesting idea for your intellectual consumption: Encourage
tax-loving liberals to put their money where their mouths are as a way
to show their patriotism as well as make the lives of us selfish people
easier.
It
is a simple concept achievable by sending a voluntary
“deficit/debt-reduction” checks to the U.S. Treasury. Those do-good
liberals could maintain a public website – not taxpayer-supported –
listing their names and with their additional amounts paid.
Doing
so would be a welcome public service for all of us. For one thing, we
would know if the Joe Biden liberals of the country practice what they
preach. For another thing, we would accumulate revenue while watching
the do-gooders practice the art of one-upmanship to put their names at
the top of the list.
Of course, I jest and, of course, we would hear their silence.
Anyway,
the national sales tax method of collecting revenue might catch on
someday. Some politicians call it a fair tax. Others call it a
consumption tax. Whatever, but be careful no matter the name.
No CompromisingI
have heard suggestions that we could pay our atrocious national debt
with a mix of income and sales taxes. A small sales tax in addition to
our current income tax will generate sufficient revenue to pay the debt
in time assuming the Washington crowd curtails spending but be careful
before buying into the notion.
It would come with risks:
• The income tax will not go away once implemented no matter the language of the legislation. We will be stuck with both.
• It will grow just as state sales tax rates increase when the government wants more money for any reason.
•We
cannot expect corresponding income tax reductions with increasing sales
tax rates as a way to phase out the income tax no matter what
politicians – our “esteemed” proven liars – tell us.
• The government will still have our personal information as long as the “honor-based” income tax system exists.
But
a sales tax only is not likely even though it is the best method of all
for collecting our national revenue requirements. People will not want
to cut away from our present income tax method for funding our common
needs because too many people think they benefit from all its credits
and deductions.
Five TakeawaysRemember these points even if you take nothing else away from this reading:
• All taxpayers pay each tax deduction and each tax credit given to another taxpayer.
• Every dollar a person gains by evading taxes falls on someone else to pay.
• Every dollar a person saves by utilizing an income tax “loophole” falls on someone else to pay.
• If you are the person “benefiting”, then somebody else pays what you do not pay.
•
You pay a share of what another person does not pay whether by taking
deductions, getting credits, evading taxes, or utilizing loopholes.
By
the way, it will take more than token action from our business-as-usual
and status-quo Congress for us to achieve a respectable tax system. If
we do not continuously demand such a change, we will get what we deserve
- you know, continuing the way it has always been.
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Interesting Readings
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