A tax questionnaire with good choices

We're often asked, Photo: Associated Press

WASHINGTON, D.C., February 21, 2013 — Representative Rob Woodall (R-Ga) is polling Americans about their attitudes toward taxation. Usually these questionnaires offer multiple-choice responses that rival, “Did you stop beating your wife?”

Not this time. In his questionnaire, Woodall offers real choices, without pushing his own agenda.

Let’s us push a little here, based on sound economics (and remembering that economics is, at its core, the opposite of politics). Let’s look at Woodall’s three questions, and put a little perspective [in brackets] into them:

1) What should the federal government do to immediately start fixing the American tax code?

( ) Fix what you can about the current system, but do not waste your time trying to replace it. Taxes are always going to be complicated, but the devil I know is better than the devil I do not know.

[This is the easy way out – nothing is wrong enough to do any work on the subject. We pay the right amount of tax, the code is fair and efficient, and planned tax increases are OK with us.]

( ) We should simplify our current system a lot and eliminate a lot of loopholes. But, I support different tax rates for different people, and there are a lot of deductions and credits that my family likes, depends on, and wants to keep.

[This also means, “don’t change.” Because there is no way to know which loopholes any given constituent likes, it’s impossible to eliminate any of them.]

( ) We should dramatically change our current income tax to a flat income tax, meaning just one or two tax brackets and virtually no deductions or credits.

[This is where the income tax started, and doing this would do nothing to address the real problems of the corrosive IRS, lobbying for loopholes, and confiscatory taxes which could be raised on a whim.]

(X) We should throw out our current income tax code entirely and replace it with a consumption tax, like the FairTax, and eliminate virtually all deductions and credits. By punishing productivity, the income tax is a permanent drag on our economy and must be eliminated.

[Bingo! The Tax Code was completely rewritten in 1986, and has been amended some 60,000 times since then. If my car had been rebuilt in 1986 and I had to take it back to the shop 60,000 times, I’d junk the sucker. Other than using the “Fair Tax” as a guide (no tax is “fair,” and it leaves room for mischief), impose a straight consumption tax. Period. A dollar spent on, say, food or medicine or a house is a dollar not spent on a toy, liquor, or clothing; and there is no way to draw a line for deductions for things – you can’t rationally say, “A $200,000 house gets no tax, but a million-dollar house does.” Might be the same house, but one is in Indianapolis and the other one is in San Diego. Besides, this leaves the biggest problem alone. The biggest problem is a tax structure that can be continuously tweaked and messed with, in ways that cannot be fathomed. A straight sales tax is pretty easy to understand, and a single rate is easy to administer. And consumption is consumption, because money is fungible.]

( ) None of the above capture (sic) my thoughts well.

2) In several of his State of the Union addresses, President Obama has talked about changing the tax code on businesses to try to create more jobs in America. Today, America has the highest corporate tax rate in the world, and that is most certainly among the factors affecting job relocation. What do you think about changing the tax rates for businesses?

( ) Corporations are not paying their fair share today. They should be paying more, and I want you to increase the share of taxes that they pay.

[Who is to determine what a “fair” share is?]

( ) Corporations need to continue paying taxes, but we should eliminate all of the loopholes and credits that make some pay more than others. I support a flat rate for corporations that is near the world average of 25%.

[Corporations are not things, and despite the Supreme Court’s chicanery, they are not people, either. A corporation is what is properly called a “legal fiction,” and is merely a concept. There is no way to efficiently tax a concept.]

( ) America should lead on job creation and tax reform and create a corporate tax that is lower than the world average in order to create more jobs here. The rate should be much lower to provide an incentive to relocate to America, so a 10% to 15% flat rate seems like a good idea.

[This is certainly better than the present system. Offer a bargain, and attract more corporations! It also has the advantage of being easy to sell, politically. Still, it ignores the main problem, which is noted in the next option, below.]

(X) America should take the corporate tax rate to zero. Corporations do not pay taxes today; they collect them. The burden of the tax actually falls on their employees, their customers, and their shareholders. If we really want to bring jobs to America, we will lead the world by taking our corporate rate to zero.

[This is the only economically correct statement of the bunch. A corporation is merely a conduit – a corporation can get money only from investors, employees, or customers – which are all people.]

( ) None of the above capture my thoughts well.

3) Given your goals for Congress this year, where does fundamental tax reform rank?

(X) At the very top of my priority list.

( ) In the top half of my priority list.

( ) In the bottom half of my priority list.

( ) It is not on my priority list.

[If you don’t care about your present or future, give taxation a low rating. If it’s just too complicated for you to grasp, let others tax you as much as THEY think is “fair.” If, however, you understand that “more is more” and that having a mechanism through which politicians can manipulate and track every move you make is a very bad idea, then tax policies (whether you “understand it all” or not) are important.

*****

Woodall has produced a decent survey, but there is more to consider here. Tthe IRS needs to be flat-out eliminated. It holds power to investigate, seize, and ruin, beyond anything the Inquisition ever dreamed of. For any reason – or no reason at all, just a suspicion – you can have your assets frozen or confiscated, your life destroyed, your career shredded. Because the IRS just takes (and doesn’t blow up) buildings, bank accounts, and lives (how many suicides, divorces, bankruptcies, and breakdowns are due to IRS actions?), the general public doesn’t notice the destructive power wielded by the IRS.

The IRS acts arbitrarily (have you noticed how, when they “help” you with your tax form, they don’t guarantee they’re giving you the right answer, and if they give you the wrong answer, you’re still on the hook?) and sometimes capriciously (remember the rash of audits of conservative organizations during Bill Clinton’s first years in office?); they can do what they wish.

Even Congress is terrified of the IRS, because it can single out a Member for destruction through harassment. So, the watchdog is afraid of the baby!

Even the most honest and thorough citizen cannot be sure he’s paying the right amount of tax. Hordes of accountants and lawyers are no protection against changing rules and interpretations, and professionals’ fees put them out of reach of average citizens. Common sense, seeking the advice of the IRS itself, and precedent, don’t mean anything, either.

Think, too, of the productivity that could be unleashed, if all the time spent on keeping track of things for the IRS could be used productively. Think of all these smart accountants, freed from endless review of ever-changing laws and precedents – think how much productive good they could perform! Think of all the ditches that all those IRS employees could dig, if they were only doing something that helped, rather than something that merely sucks the life out of their country, constantly threatening the population.

All the money wasted in tax preparation, record-keeping, auditing, investigation, forfeiture, accounting fees, lawyers’ fees, prosecution, and incarceration – all that would be available for productivity. All the ulcers, headaches, and sweaty sleepless nights caused by the impossibility of grasping the tax code – all that would be gone. And, best for the American people and worst for politicians – the perpetual threat of IRS actions would be removed from the very structure of our Republic.

The only tax scheme that will ultimately be a blessing rather than a curse is one that is simple, transparent, and has nothing to do with loopholes, lobbyists, fraud; and has nothing to do with the IRS.


READ MORE from Tim Kern at Talking Sense



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Tim Kern

Tim Kern taught economics for fifteen years, and discovered that understanding life is easy; it’s recognizing reality that takes practice. He holds a music degree, and later earned an MBA in finance from Northwestern University. He has lived across the US, and now makes his home in Anderson, Indiana.

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