Happy tax day!

Albert Einstein said “The most confusing force in the universe is the United States income tax code”. If Albert Einstein couldn’t understand this tax code, what are the chances you will ever be able to?

There are 60,000 page tax code. 9,000,000 words. H&R Block made mistakes on their own taxes last year. If you send your taxes to three different accountants, they’ll come back with 4 different answers. Congress had to have a special office to help them with their tax returns. Think about that, if the authors of the tax code can’t do their own taxes, what are the chances you can?

I have a Masters Degree in Business Administration; it took me about 40 hours (plus my wife about 10 with the supporting bills/expenses), at least a dozen forms/schedules, and it ended up being over 24 pages long — and I still might get in trouble, because I simplified this year, and didn’t do all the AMT (Alternative Minimum Tax) stuff, on business supplies that were depreciated to nothing in the mid 1990’s. But I was tired of paying an accountant over $700/year. My taxes aren’t quite average; the average American only spends ONLY 36 hours and a little over $100 on taxes; but is that really that much better? You give up almost an entire work week, just to do your taxes. Remember, it doesn’t have to be like this.

What are the problems?

Well, despite the problems mentioned above; the huge complexity, confusion, corruption, there are lots of reason to change the system. Here’s just a few:

1) Efficiency : Up to $250B is spent every year in just collecting the taxes. We have this huge IRS that treats everyone like criminals, because they can’t figure out the mess that the IRS has made. Imagine how much better things would be, if it took you a few minutes instead of 36 hours to do your taxes. Multiply that efficiency over the entire population and all businesses. A quarter of a trillion dollars and 6 Billion hours would be saved each year! It would almost equal to the entire deficit on its own.

2) Morality : Graduated tax has its roots in Carl Marx. Flat taxes have their roots in the Bible (based on the tithe). The facts, are that the current tax code is based on making us more like the Russian Federation. Only the Russian Federation doesn’t believe in it any more; they realized the folly of wealth redistribution (Communism), and so they’ve converted to Capitalism and a flat tax! Think of that, the Russians are more free and less communist than we are (economically). The same with the Chinese! You can’t have a moral system, that tries to treat everyone unequally, that has institutionalized class warfare in the name of “fairness”? We know how well it works; the rich pay Congress to have loopholes put in, then they pay others to exploit those holes for them, the poor get a free ride, and the middle class gets squeezed. The special interests can always make the system work against you and for them, with the help of congress. So you can replace it with something so simple/transparent that others can’t cheat; or let the immoral system go on.

3) Corruption : Half the lobbying in washington is over the tax code. There are incentives for political manipulation, lobbyists, payola. The code is so complex because Congress loves to fight over clauses and loopholes, and pork-wagon programs. Why? Because they know that many are so dumb, that if they steal $10,000 from you, in convoluted ways, then you might not realize it was them. And if they give you a small percentage back, they can use the Press attention to play hero/crusader. And they get to play power broker in-between, and have you or others, bow to them to curry favor. This tax code ruins democracy. You could wipe out half the corruption and half the lobbying by just getting rid of the income tax code. Poof, the world (U.S.) would be a better place.

What is the solution?

The solution I support would be fixed rate tax that would be completely tax neutral (not change the amount coming into the fed). The time to do your taxes, as well as many businesses, would be a small fraction of what they are today. All while being more moral, fair, humane, efficient, less corrupt, less corruptible, and so on.

There are many variants, but all work far better than what we have. The easiest one says that all people (and corporations) pay the same rate. Fair is fair. Stop with the class warfare and vilification of the rich, stop teaching the population to try to pick each others pockets; we’ll all contribute the same percentage. To make it easier on the lower classes and families (progressive), there would be some threshold, where all income earned below that level is tax free. Rough numbers are, the first $15,000 per adult and $8,000 per dependent is free; after that, everyone pays 17%. This means a Family of 4 doesn’t pay tax on anything until after $46,000 (2 adults + 2 children), then they pay 17% on every dollar of income after that.

You could do your taxes on a postcard. Enforcement would be all but eliminated, and you couldn’t get into battles with the IRS over what you owe. It would go something like this; you made $76,000 last year. $76,000 – $46,000 = $30,000. $30,000 x .17 = $5,100. Done! A 3rd grader could do the families taxes. No loopholes. No pork. No lobbyists and politicans fighting over loopholes and pork. Some people’s taxes would go up, some would go down, but it would be dozens times more fair. It would be easier on everyone, rich, poor and middle. There wouldn’t be 10,000 clauses to try to micromanage everyone’s behavior, or to try to vilify the other guy. It says “live and let live”, and “we’ll all contribute the same”.

Some advocate other variants. One that taxes at the employer and eliminates the income tax to you (unless you run a business). That would mean collecting at like 8 million businesses, instead of at 130 million points (all families, individuals and businesses that file taxes). Another solution is a consumption tax solutions (sales or VAT tax), which is also more fair than what we have today, and simpler. But both hide the taxes we pay, so you don’t realize what’s going in. That will make things worse in the future. I’m an advocate for the opposite; more transparency and make everyone see exactly what they’re paying, so they feel a little of the pain, and watchdog their government more. This puts pressure on congress to spend our money wisely.

Many will say it can’t work. But it can. When the Russian Federation decided to be more fair than our tax code, and create fixed taxes, they saw real tax revenues from the Personal Income Tax rise by 25.2% in the first year after the introduction of the flat tax, followed by a 24.6% increase in the second year and a 15.2% increase in the third year. Part of that was how many people went from non-reporting, or using loopholes or hiding to being legitimate, and part was just stimulation of the economy and increases in efficiency. Even if we only saw a fraction of that kind of improvement, it would not only wipe out our deficit, but create a surplus to the point where you could literally afford to give everyone in the nation free healthcare with the savings.

Fair is fair!

Many misguided (or sick) individuals love to attack these reforms as unfair, or worse, claim the current graduated system is fair. They claim that class bigotry is the ultimate success of humanity. They want more “screw the other guy” taxes, in the name of fairness; and they appeal to the lowest elements in society; fear, greed, envy, hate. I’d more prefer to cater to everyone pulling an equal load (even though the system I proposed is still graduated enough to help the poor and middle MORE than the current system).

And who really thinks the current system is fair? Three people earning the same can be taxed radically different amounts based on deductions, understanding, or tax accountants they use. Is that really fair? We tax people with and without kids or homes differently? Those that drive for their job. The top 5% pay over half this nations income tax burden by themselves, and that’s still not enough for them. Is that really fair? A higher salary on the Coasts (high cost of living areas) is much less money than a lower salary in the midwest or lower cost of living areas, yet they are taxed more; is that fair? Is discrimination based on the size of your house, how much you save, what charities you give to, what job you have, really fair?

The people claiming they like the current system because it is fair, are liars or fools. It isn’t close to fair, and can never be made fair because the system is politically driven. It is the tyranny of the majority, combined with biggest lobbyists pay the most graft, and get the best returns. You can’t make the world fair through the tax code; it’s proven to be a disgusting failure that just made things worse (more political). They hid their classism, racism and other bigotry’s in something so complex that no one understands it. It doesn’t modify behavior in the ways they want it to, because people are smarter than the legislators. They adapt, and each new clause, brings dozens of unexpected consequences. Really the advocates are just ignorant hate mongers who can’t do math, and often have too much vested in the status quo and the mess that is today’s code. They are the power-brokers, thieves, or accountants, that don’t want things to be understandable. They claim it is fair to attack others, and unfair to make us all contribute the same. These are the same people that want to punish people for investing or savings, and they should leave thinking to them and let the government control more of their money, and more of their lives; the new American dream. And they get mad because people that have worked (and paid taxes on all their money, their entire lives) are trying to give something to their kids. They want that money to be taxed again (inheritance taxes), and again, and again.

In the end, I calculated what my tax burden would be using the system I advocate, and for me, it would be slightly higher. (About $1,000). So what? For me it isn’t about the money, but about real fairness and a better society. Instead of worrying that my neighbor is getting some loophole that I’m not, or I’m missing a deduction or clause, instead of worrying about others or defenses against the molestation of the busy-bodies, we can focus on ourselves and our own lives! Everyone is sharing the burden, fairly. Far more fairly than the current system.

Most flim-flam scammers use the same techniques; they say they’re going to be “fair”, but then they appeal to people’s greed, use a little slight of hand, and then sucker them into traps and out of their money. This is what all the progressive tax proponents are; scammers! Don’t be suckered! The choice is to let the liars dupe you into adding clause after clause to make it so you pay less or get more than the next guy, and then wham, they nail the rube (you). In the end, if you look at the bottom line, you’ll find that their pockets are lined with even more of your cash. Are you going to remain too stupid to learn from past mistakes, or demand that we all pay our fair share!

Conclusion

Congress has too much vested interest in pork, power brokering, and the current system. Lobbyists have too much interest in their jobs. Businesses fought hard for loopholes that help them but screw their competition. Individuals have been deluded into thinking that government is a better decision maker for their wealth than they are, or that they are somehow winning by all the investment games and money hiding schemes. And the fairness bigots have the underclass duped into thinking that screwing the other guy is the way to get into heaven. All are against tax simplification. The biggest threat? The corrupt politicians. They’ll work on people’s greed and envy and spoon feed them the poison of class warfare, to reward their own interests. They’ll be the agents of evil; trying to scare people, or appeal to their envy. They’ll prove by their actions that they should be fired.

So what can we do about it? Start firing politicians, or at least putting pressure on them until they fix the tax code. It is up to the public to demand a better system. So I’m for making the next few elections have a single deal breaker. I’ll vote against any politician (state, local or federal) that doesn’t actively support tax reform. Period. If enough people do this, change will come. It doesn’t take much. If 5-10% of the population cared, that’s enough of a swing vote to get congress to act! But instead of voting for a swing party, they’ll just agree to swing the vote towards the party that agrees to make the change, and away from the one that doesn’t. We’re really only talking about a few million vocal people.

The choice is to become one of the sheep being lead to the slaughter, or to try to resist and make things better. As Albert Einstien said, “He who joyfully marches in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would suffice.”

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http://www.sltrib.com/opinion/ci_3711730
http://www.factcheck.org/article.aspx?docID=100
http://www.taxfoundation.org/prtopincome.html
http://www.economist.com/opinion/displayStory.cfm?story_id=3861190
http://www.ncpa.org/pi/taxes/tax7.html
Yahoo News Story