Taxation

The U.S. tax code is hopelessly complex. The complexity was highlighted recently as we watched first hand one Obama appointee after another having tax reviews that came back unfavorably. If the Secretary of the Treasury couldn’t do his taxes correctly what does that say about the system? Or even worse, right now the Chairman of the House Ways and Means Committee, the committee in Congress that literally is in charge of writing this nation’s tax laws, is under investigation for not paying his taxes! It’s astounding.  I do not believe that all of these people were trying to cheat the government. They, along with millions of Americans each year have been trapped by an IRS interpretation of a tax code that is understood by all to be unreadable. I think that it is essential to good government that any law, tax related or otherwise be written in simple language, and easily understandable by anyone who does not have a law degree.

President Reagan’s ‘simplification’ of the tax code -where he closed loopholes and other items, added thousands of pages to the code. I don’t think the simplification of the code is the primary issue though; it’s the end result that matters. Are the American people paying more or less to the federal government? Are they allowed more or less personal freedom to determine their own options? Is the federal government more or less intrusive into the lives of the American people or not? Those are the important issues at the end of the process, not necessarily the length of the legislation. Would I like for a bill to be short and clear and easy to understand in order to reach those end objectives? Absolutely. But would I be willing to put up with a longer piece of legislation that creates the expansion of personal liberty? Absolutely.   Ultimately I feel that a flat tax should be seriously considered and debated. A flat tax would improve the citizens understanding of tax law, increase revenue to the government, minimize special interest money’s impact on policy; and for the first time taxes will be fairly applied to all tax payers.  

A word about VAT taxes and a National Sales tax

Right now Speaker Pelosi is sending out trial balloons about a value-added tax (VAT). VAT will add a layer of taxation each time a good or service is improved.  If we look at a product like roofing shingles, it starts with each component: Asphalt, granules, fiberglass for example.  Each of these materials is taxed to start with, and then as the manufacturer starts putting them together a “value” is added and another tax may be applied. This is a bad idea on so many levels. VAT taxes are insidious because most of the tax is hidden; they raise costs on all products and services – sometimes dramatically.  By nature, VAT is regressive in that it will affect Americans with lower incomes disproportionately. VAT taxes hurt consumers and business alike and will only serve to further damage the fragile economy.

I am also opposed to a nationwide sales tax for a number of reasons   The first is that just as the VAT is regressive, the national sales tax will cost lower-income Americans more of their income than those with higher incomes; it is regressive.  

Secondly, if any national sales tax were introduced without a specific amendment to the U.S. Constitution barring a federal income tax at some point the United States will have both forms of taxation. Expanding the ways for politicians to tax us is not the solution. If we are going to open a new avenue of taxation (national sales tax) we must end existing tax schemes (income tax) once and for all.   

However, there is FAIR TAX legislation before Congress which could alleviate these two issues creating a more fair, commonsense tax structure and the legislation should be acted upon. By amending the Constitution to prohibit an income tax and instituting provisions to address the regressive nature of a sales tax for those of limited income it is possible to create a simple, fair and straightforward tax structure for our nation. The FAIR TAX legislation, like the flat tax concept, needs to be explored and voted upon because either option is far superior to the tangled mess we currently have. 

Increasing taxes at the federal level to pay for the decisions of this administration and Congress is not the way to an economic recovery.