Chad's spot for various thoughts, musings, poetry, ideas and whatnot

Thursday, July 29, 2004

Tax Code

So, a couple of posts ago I wrote of my desire for a blanced budget. This time I'll write of my desire of how to do it. Al ot of Americans hate taxes. Why is this? Because they have to take a significant amount of time stressing about them and whther they'll have to pay a large lump sum at some point in the year. They also stress out about whether they are paying more than their fair share (whatever that means). So here's how I think we should fix this problem so that Americans worry less about their taxes and resent paying them less.

First, move much of the burden from income tax to sales tax. Most states have a sales tax and you rarely hear of anyone gripping about how those politicians at the state capitol are spending their sales tax dollars. You just pay it. In fact, most people just tend to think of the tax as part of the cost of the purchase. Additionally, you are only taxing what is spent. If people are saving money then it's not being taxed so much. I don't know what this number should be but it should apply to both good and services, to purchases in a store and on the internet and to purchases made by businesses and by individuals. The only exception would be to goods and services exchanged in a barter system. If you want to exempt most food and real medicines I can see that (that's what they did in Florida) but nothing else.

Secondly, flat rate income tax withheld by your employer from the get go. If it's 10% then everyone pays 10% right out of their paycheck. You income tax form could be sent in on a post card. If you make less than a certain amount you get some back (or maybe not). The savings just from doing away with most of the IRS would be enormous. Not tax credits for kids or college or any of the rest. Everyone gives the same percentage. For those who say that the burden is greater on the poor has to realize that income tax was originally cooked up as a way to redistribute wealth in times of severe economic disparity. While some claim that the rich are getting richer and so on, the gap is significantly less than it was at the turn of the 20th century.

Finally, no more capital gains taxes or estate taxes. If you pay up front and for what you buy (cars, houses, Glad wrap, dental floss) then everything else is your to do with what you please. If you make a killing in the market then you'll pay taxes on the profits when you spend the money on the stuff you decide to buy later on. Estate taxes were created to soak the rich and they worked for a while. Now-a-days most smart folks put their money in a living trust and therefore avoid the taxes. Let's get rid of all the paperwork banks and everyone else has to do to keep up with all this and just let people keep what they save. By the way, no more pre-tax 401(k) plans or anything. Pay your income tax up front and put the rest away however you'd like with no worry of having to pay some tax penalty later on.

Do the numbers so that you balance the budget and get it done. This is the second thing I see a lot of people wanting to vote for. The states have been doing it this way for years. There's a lot less complaining about state taxes than there is about federal taxes and I think it's mostly because sales tax makes up most of the burden. My Mom gets madder than all get out when she does her federal taxes because she thinks it's just unfair but doesn't think a think of the 6% of her money the state of Utah takes every time she goes to Smith's for a bag of groceries.

So, Mr's Kerry and Bush take notes...balance the budget and dramatically simplify the tax code. Go the populist route and tell folks to tell their reps to stop listening to interest groups and start listening to the people. Congress will get the hint if you set the tone. Remember the "Contract with America" thing a few years back. Simple essage from the Republican party that got a lot of people to vote for them. You may not have agreed but it made for effective political policy.

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