|
|
|
Tax Reform
President Bush has declared Tax Reform as a major priority of his second term. Mr. Bush has created, by Executive Order, a bipartisan panel to advise the Treasury Secretary on options to fundamentally reform our tax laws to make them simpler, fairer and pro-growth. |
|
|
|
|
|
Mr. Bush's own vision of tax reform includes recognizing the importance of home ownership and charitable contributions in the American society.
The Tax Reform committee will hold public meetings and issue a report to the Secretary of the Treasury as early as possible in 2005. This advice will inform the Secretary in his efforts to make recommendations to the President. It seems to me that President Bush is leaning towards recommending a flat tax system. There can be no question that a flat tax system would be much simpler than our current tax code.
| | |
|
But the benefits of a flat tax stops right there. A flat tax system could eliminate filing tax returns for most taxpayers. And doesn't that sound too good to be true.
A single flat tax rate would be applied to salaries, interest income, dividends and other income minus deductions for mortgage interest and charitable contributions. It's uncertain whether real estate taxes would be part of a flat tax system because they tend to favor certain northeastern states with high real estate taxes. For millions of taxpayers, the IRS already receives, via electronic submission, the information needed to prepare their flat tax return. How would you like it if the IRS prepared your return for you and sent you a bill or refund. Sounds pretty simple doesn't it?
Yes, it's simple, but it could be a Trojan Horse. Once a flat tax system is installed and most deductions are gone, Congress could simply raise the flat tax rate to get additional revenue. So the selling point of a flat tax system is simplicity, but the real motivation is to raise deposits to the National Treasury.
The Simplest and Fairest
Dear Mr. President, forget the Secretary of the Treasury's recommendation on tax reform. With all due respect, your Secretary of the Treasury doesn't have the hands on tax experience that I have. Based on my more than thirty years of experience as a CPA working with taxes, the only fair and simple tax system is a National Sales tax. Allow reasonable exemptions for life's necessities, food and clothing and let's stop writing checks to the Internal revenue Service and running to the post office at midnight on April 15th to beat the tax deadline.
Simple
Talk about making our tax system simple? More than 130 million individual income tax returns were filed for the 2003 tax year. With a National Sales Tax, 130 million tax returns would not have to be filed!!! Mr. President, we have lost sight of the original concept of the income tax: to pay the government's bills. Our tax system was not intended to be a social engineering program that encourages home ownership and charitable contributions. Too many individuals working legally and illegally in America simply do not pay income taxes. They never have and they never will. IRS enforcement efforts are futile in the fight against taxing the underground economy and, in general, tax compliance is at an all time low.
Fair
Wouldn't it be nice to see a drug kingpin pay his fair share of taxes? With a national sales tax he would. And don't forget the millions of illegal immigrants who work in the American agriculture and construction industries for cash and never file tax returns yet you can find them shopping at Wal-Mart and in grocery stores. What about the moonlighting police officer and lawn maintenance workers who get paid in cash and don't report it on their tax returns? What about the exotic dancers, restaurant servers, and hair stylists who work for cash tips? What about the small mom and pop stores that receive cash from the sale of their merchandise? Only a National sales tax would tax everyone who earns a buck and that seems fair to me.
Ok, Let's Get Back to Reality
I know the real reason why politicians will not approve a national sales tax. In short, it's because the sales tax rate would be so high that it would create anxiety attacks every time Mr., Ms. and Mrs. America spent a dollar. Just imagine adding a 20% national sales tax, on top of your state's sales tax, to the purchase of a pair of $30 pants or even worse, a $30,000 automobile, truck or SUV. This "Tax Shock" and its resulting furor will finally focus attention on the real culprits behind our onerous tax laws: the elected Representatives and Senators in Washington, DC.
Our exalted leaders in Washington have basically insulated themselves from the tax paying public by creating the dreaded tax agency known as the Internal revenue Service. Most, if not all, of the complaints against our current tax system are diverted from those responsible lawmakers in Washington and directed to their punching bag scapegoats at the Internal Revenue Service.
Currently income taxes are paid through the workplace withholding system. A typical wage earner only looks at their paycheck for one number: NET PAY. The poor wage earner never looks at his or her federal withholding tax or the social security and medicare tax that is being withheld every pay period. Now, if we were to switch to a National Sales Tax, every individual in America would feel the large sucking sound of our Federal Government taking taxes out of their wallets and purses whenever they spent a dollar.
Here's One Final Thought
Mr President, while you're considering the proposals and recommendations of your inexperienced Secretary of the Treasury, how about seeing what you can do to combine April 15th with election day. Don't allow our elected Representatives and Senators to pass hideous tax laws like the Alternative Minimum Tax and then hide behind the Internal Revenue Service. Let's hold Congress accountable for their tax legislation.
Thank you, Mr President.
Income Tax |
|
|
|
|
|
|
|
|
| ©2010 Michael Johnston, CPA. All Rights Reserved. |
|
| |