A talk about Tax Policy

I figured a long more long post was due, and that it needed to be on Tax Policy.

Lets face facts, our currect tax system is a mess. It's over 60,000 pages of pure crap. Rules, regulations, exemptions, clauses. All of it because of pandering politcians, on both sides, trying to buy votes. And meaningful tax reform is shot down, and sadly, it's by most of the democrats. This isn't to say that democrats are the only problem, republicans have had there fair share in it, but by and large, it's the democrats that don't want to change the status quo very much. Atleast, not in the way that would truly be fair.

So, now you ask, whats the problems, whats the solutions, and how do we implement them?
The problem:
I) Tax Compliance. Our tax code is a mess. We have over 70k amount of words. These words amount to rules and regulations on what, who, where, and how things are taxed. From deductions to exemptions. Tax Foundation, a non-partisan research group, shows through a recent report that as of 2005, 70,640 words are in our entire Tax Code, including Internal Revenue Code and Regulations. In that same report, it's revealed that the code increased by approx. 19% since 1995. 33% increase from 1985-1995, 47% from 1975-1985, and so forth. (1)
These increases mean that there are more rules, the more rules there are, the more complicated things can be. It's so complicated, a whole market is based on our system. Products like TurboTax, and the demand for Tax Accountants only proof this assertion.
Yet again, according to Tax Foundation, in 2005(projected), Compliance cost with our tax code has reached $265.1 Billion. About 22.2% of the federal revenue back then(In 2004, it was about 24.4% of revenue with cost around 243.9B in current dollars.)(2)

As for compliance costs in terms of hours? It's estimated that taxpayers(individuals, businesses, nonprofits) will spend 6 billion hours doing their taxes.
There is also the burden of tax compliance. Businesses are estimated to have $148 billion, or 56% of the burden. With Individuals at around $111 billion with 42% and nonprofits bring up the rear at $7 billion with 4%.
(3)
Imagine if We got rid of our current system, All that wasted money and man power and hours would be freed for more productive matters.

II) Burden of Taxation. There is alot of rhetoric going on about taxes in the political game, with democrats currently leading in it. Both Obama and Hillary proclaim that taxes currently are set to be fair on people. They argue that the "Bush Tax cuts" provide more for the wealthy. In other worlds, for the rich. But thats not at all completely true.
Lets deal with the first problem with the arguement. It is true to some extent. But it's only part of the truth. The rich did indeed benefit, but thats becuase they pay more taxes in the first place. The top 50% pay more than 96% of taxes while the bottom 50 pays less than 4%. The bottom 50% infact sometimes get money back depending on how low they are.
If that doesn't make things seem completely unfair for high income earners, we can look at what the top 1%'s burden is. 1% only brings in almost 40% of the revenue gained from Income taxes.(4)
Basing on these statistics. It seems like the income tax system is indeed unfair. For the Rich! Now Here's the real problem.
the fact that the burden is so heavy on the rich means that the Rich has to have more say. It also means that the poor don't appreciate the lessening of burden they have and how little they pay. If I'm not speaking clearly, I'll rephrase and provide example.
This is like a having three men lifting weights. One of the men is stonger the the two others. He lifts 100 pounds. the other two men combined can lift 100 pounds together. But instead of lifting that much, they lift 80 pounds.
The two men complain about being tired while the stronger man stands there.
Basically. the poor will complain about getting a free ride(Well, no ride's free) when the other guy gets stick picking up the slack. Thats wrong.


III) Withholding. Ah Withholding. What's that you ask? Basically, it's when the Gov't takes your money out of your check before you get it. Have a look at your paystub and look at the deductions. SS Tax, Mediaid/care tax and so forth. That's withholding.
Neal Boortz often considers it the worst plan ever for the taxpayer, but the best idea for the politician. I'm beginning to see why.
Rachel Lucas, in her blog, knew "the meaning of butthurt"
In it, she rants a little about how much she has to pay. She comments about wishing election day was closer to tax day and that if people actually had to write a check out once a year for the total lumpsum of the tax, that people would become more conscious on their taxes. And she's correct. You wouldn't notice if someone took a crumb off your cookie plate but you'd notice if someone took the whole cookie. This is the idea behind withholding. When you don't see the money being taken. You don't miss it. And when you do see the money being taken, it seems small until you see it adding up. This is why withholding is bad for you, the taxpayer, and perfect for the politician. It makes tax increases easier to push and gives more control to the gov't through your lack of full knowledge.

So there you go, I've lists the biggest problems with our tax code(in the U.S.) Now how do we solve it?

The Solution:

Reagen, during his term. Scrapped a bunch of the tax code because it was a complicated mess(and ridiculously high). He did a good job, the only problem was other politicians after him added more and more until it is the way it is now.
1) Keep it simple. Yea, thats it. Keep it Simple. no exemptions, no deductions, treate everyone the same. Flat taxes are good for this.
2) Keep it fair. Everyone should pay the same percentage rate. That simple, thats fair. A progressive income tax is not truly fair. It punishes acheivement and saving. For America, or for anyone, that should not happen.
3) End withholding. Have the people write out the checks one day of the year like before the time of withholding. People will automatically get involved after that.

Of course, we can solve all these problems with an idea like... FairTax
Sure it's progressive. But everything else is just the right set for everything a 23% exclusive tax on the goods and services we buy. Do your research.
If you don't like that, there are various other plans that would do wonders. The FlatTax being one of them. But the FairTax is possibly the best idea we, America, have at the moment. So why not go for it?

(Yes, I'm aware I sound like an ad.)

Hope you enjoyed and learned something throughout this posts. post comments in the comment section. Any isn't should be brought up.