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Taxation and Tax Code Reform Ideas and Plans
Introduction
Reforming the tax code must be a priority. The current structure is not congruent with the original US Constitution, it is designed from a socialist not a free market perspective, it carves out special interests for individuals and corporations, it limits and suppresses individual and corporate wealth potential and growth, it is designed to intimidate and control and it is a nightmare to comply with. Most people acknowledge that the IRS is out of control and most of us would like for the IRS to be disbanded. Now is the perfect time to learn how our economy could soar, harassment by the IRS could disappear, and our tax system could be simple again.
Of the utmost concern is the amount of power the IRS now holds over our lives. Especially now that our health care has been placed under the control of the IRS. Our founding fathers were especially concerned about government taxation its influence and control over the populace.
The power to tax is the power to destroy. This quotation is attributed to Daniel Webster and John Marshal in a Supreme Court case in the year 1819 ( McCulloch v. Maryland.)
Daniel Webster in arguing the case said “ An unlimited power to tax involves, necessarily, a power to destroy.
Chief Justice Marshal in his decision said.” The power of taxing by the States may be exercised so as to destroy it, is too obvious to be denied and that the power to tax involves a power to be denied is not to be denied”
The American Revolution of 1776 rose from several injustices. One most central was taxation and the related concepts of taxation without representation.
After the American Revolution our founding fathers stated their thoughts on how to tax in the US Constitution as follows:
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers
Further, Article I, Section 8 says this:
The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.
Later in Article I, Section 9 (Limits on Congress) this was included in the Constitution:
No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.
Over the last 250 years we have digressed away from the taxation philosophy embraced by our founding fathers and instituted progressive or socialist policy which in our opinion are detrimental to our freedom as individuals and free enterprise system in general.
The modern day tea party movement began in 2009 after the 2008 elections brought in politicians enacting irresponsible economic policies, exploding the national debt, increasing spending and taxes. Tea party groups arose all over the United States using acronym “Taxed Enough Already” in an effort to focus attention for the need for tax and economic reform.
This page is designed to offer explanation of how we deviated from the taxation beliefs of our founding fathers and offer tax policy ideas, suggestions and options that would return our country to a tax policy and structure befitting free men and women and energize the economy and markets using free market principles.
Tax Restructuring Options
Section 1 The Fair Tax
Section 2 The Flat Tax
Section 1 The Fair Tax
An explanation of the Fair Tax is listed below. More information is available at the following website www.fairtax.org.
The FairTax is simple (132 pages), transparent, easy to implement, and FAIR. It is a nonpartisan legislative proposal that would replace all Federal income and payroll taxes with a national retail sales tax, otherwise known as a consumption tax, assessed on all NEW goods and services. There are no exemptions and no deductions. Thus it eliminates lobbyists’ ability to influence the tax code since there are no “perks” to give them. It replaces the Income Tax so the benefits are huge:
- No more complex tax code
- No more preparing and filing individual tax returns
- No more IRS
- No more federal Estate or Gift Taxes
- No matching payroll taxes for businesses
- No rummaging through receipts and records for individual citizens
- No favors, everyone will be treated equally
- No tax on investments including tuitions and advanced training
The tax is included in the purchase price and collected at the point of retail sale. The tax value included in the price appears on the receipt. The Retailer forwards a one-page tax collection report along with the taxes collected to the State monthly. The Retailer maintains the tax collection records for six years. The State oversees the tax collection process and forwards the collected tax (minus ¼ of 1%) to the U.S. Treasury. The U.S. Treasury oversees the States’ tax administration procedures.
If your weekly paycheck is $250.00, you GET $250.00. There is no deduction for:
The FairTax is revenue neutral, which means the government will collect the same amount of tax revenue as the current income tax system, just more efficiently with minimum intrusion.
EVERYONE who buys something new in America pays the FairTax. Everyone includes illegals, the underground, criminal, drug, porn, and visitors to the USA. All of them help pay for our federal government and provide for our retirement.
The FairTax is collected by the State rather than the federal government, with the state keeping a percentage for administering the tax. Businesses also keep a payment for collecting the tax.
The FairTax applies only to new purchases; there is no tax on used items. Thus, the taxpayer determines the amount of taxes they will pay. If you can do just as well with “used”, you pay no tax. If you really want a new BMW, you pay the tax. If you want a new house, you pay the tax. If you are happy with a “used” home, you pay “NO TAX” on the purchase price (service fees and Realtor charges will be taxed).
All the embedded taxes (income tax, matching payroll tax, Capital Gains, tax compliance costs, etc.) paid by every business involved in producing the product or service will be eliminated. The cost of goods and services sold from business-to-business (22% average, accumulated) will be replaced by a 23% FairTax rate.
The FairTax makes taxation of income unconstitutional by supporting repeal of the 16th Amendment which says “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
A monthly tax rebate (called a prebate) based on family size and the National Poverty Level (per HHS) will be distributed to citizens with the following stipulations; all family members must be legal residents of the United States, have valid Social Security numbers and not be imprisoned.
Elimination of the capital gains and corporate taxes makes the USA the most favorable business environment in the world. That means new jobs right here in America, higher wages and a stock market that goes up instead of down – without massive borrowing. The “Made in America” label roars back with needed jobs and better wages and benefits.
FINALLY ------ APRIL 15 BECOMES JUST ANOTHER SPRING DAY.
The FairTax (H.R.25 / S.122) currently has 84 co-sponsors in Congress. Congressman Marlin Stutzman IN-3 is the only Hoosier among them. During his terms in Congress Governor Pence was a FairTax co-sponsor. We can move The FairTax forward by educating and encouraging our Congressmen and Senators to co-sponsor the FairTax… and our Governor, State Representatives, and State Senators to implement a FairTax model at the State Level.
THINK OF THE FAIRTAX AS THE WORLD’S BIGGEST ECONOMIC JUMPER CABLES.
UNLEASH AMERICA’S POTENTIAL FOR GROWTH.
More information available at www.fairtax.org.
Section 2 The Flat Tax
Small Business. Com explains the Fairtax This Way
Reference http://smallbusiness.chron.com/pros-cons-flat-tax-4210.html
A flat tax is a tax system, which refers to a tax on household income, taxes at a uniform rate, regardless of income level. The United States implements a progressive tax system, meaning that high-income earners pay taxes at a higher rate than low-income earners. Although many advocate for a flat tax in the U.S., the system remains progressive.
Simplicity is considered a significant benefit of the flat tax system. One tax rate makes for easy computation by the Internal Revenue Service and straightforward payments from taxpayers. Because the flat tax taxes only one income, it is easier to understand and to report. Taxpayers save the financial cost of complying with current IRS regulations, which often includes lawyers, accountants and other resources.
The flat tax remains a popular idea in part because it eliminates double taxation. It removes the section of the tax code that is biased against the formation of capital. It eliminates the death tax, capital gains tax and double taxation of savings and dividends. Families and individuals are not required to report dividends, interest or other business-related income; this income is taxed at the business level. The flat tax makes it unnecessary to pay interest, dividends and other business tax at the individual levels.
A flat tax employs territorial taxation, which is when the government only taxes income that is generated within national borders. In the global economy, taxes remain a critical component of business; countries with low-taxes benefit from jobs and capital. A good tax policy is important to generate revenue for business and also because the penalty for a poorly received tax system on a global scale may be substantial and long-term. The flat tax eliminates global taxation and allows the United States to compete more evenly in global markets.
Fairness remains a lauded feature of the flat tax. For example, a taxpayer who makes $5,000 pays the same tax rate as someone who earns $500,000. The taxpayer making $500,000 pays more taxes simply because the income is greater, however, this taxpayers pays an equal percent to the $5,000 taxpayer. This tax system does not discriminate based on income level; everyone pays the same percent of income.
Reference http://smallbusiness.chron.com/pros-cons-flat-tax-4210.html
FreedomWorks is recommending the Flat Tax. Below is an article from FreedomWorks
The current U.S. tax system is huge convoluted mess. The Internal Revenue Service (IRS) has six federal income tax brackets ranging from 10 to 35 percent. Our so-called progressive tax system punishes the most productive members of society with a higher tax rate. The current tax system is riddled with loopholes and biases that hurt individuals who save money for the future. Not only does our tax code treat citizens differently but it is hopelessly complicated. According to the IRS, the average taxpayer spends26.5 hours preparing and sending in their taxes. The ever-growing Internal Revenue Code is now over 3 million words. It’s far too complex, intrusive and long.
We can all agree that we clearly need to fix the tax code. The two most common tax reform proposals are the flat tax and the fair tax. Which one is best? First, both the flat tax and the fair tax (if implemented correctly) would likely be better than the current tax system. As Cato Institute scholar Dan Mitchell says, “from an economic perspective, the flat tax and the national sales tax (or fair tax) are virtually identical. Both would junk the current system. Both would restore fairness by taxing at one low rate. Both would eliminate all forms of double taxation.”
FreedomWorks has long concentrated our efforts on implementing a flat tax. The flat tax is simple and would generate more economic growth than the status quo. Instead of our current multi-rate tax system, a flat tax would tax all individuals at the same rate. Under a 10 percent flat tax, someone making $100,000 annually would pay a $10,000 federal income tax. It’s a simple equation. It would not punish productive members of society with a higher tax rate.
I personally advocate the flat tax being as low as possible. Of course, any tax reform should be accompanied by significant spending cuts. The flat tax would remove special interest loopholes from the tax code and allow individuals to file their taxes within five minutes on a form the size of a postcard. It can be implemented through the normal legislative process and it has been successful in dozens of other countries. So far, the flat tax has been adopted in roughly 24 countries. There’s a flat tax revolution going on around the globe and the United States needs to jump on the bandwagon.
I can understand why the fair tax is very appealing to many limited government activists. It has various benefits similar to the flat tax, such as overhauling the current tax code and eliminating all forms of double taxation. The fair tax, however, could be dangerous. If we don’t repeal the 16th Amendment first, we could end up with both an income tax and a national sales tax. The politicians in Washington would love to have both sources of money. Several European governments have added a national sales tax on top of their federal income tax. The same trick could happen in America if we aren’t careful.
Fair tax advocates claim that it would get rid of the IRS but it would likely be replaced with another agency by a different name. The proposal promisesﾠthat most individuals will get a monthly prebate paid in advance. The amount of the prebate is determined by the Department of Health & Human Services' poverty level guidelines. Who would administer this? Unlike the flat tax, the fair tax as a replacement for the income tax has never been implemented in any country. We have no real world examples of what a fair tax would look like in action. Perhaps the fair tax isn’t as politically feasible as the flat tax. It’s important to remember that repealing a constitutional amendment requires the approval of 290 House members, 67 Senators and a majority of the legislatures in three-fourths of the states.
An immediate goal should be to enact a low, single-rate flat tax to greatly improve the tax system. Unfortunately, we have to take it one step at a time. Cato Institute scholar Dan Mitchell has mentioned a proposal that says "in the short run, we rally behind a flat tax. Once that simple and fair system is implemented, we then seek a constitutional amendment that would prohibit an income tax." We all may have different immediate and ultimate objectives. But we shouldn’t let the perfect be the enemy of the better.
As the quote commonly attributed to Winston Churchill goes, “there is no such thing as a good tax.” All taxes hamper economic growth, distort production and punish individuals to varying degrees. With that said, there are tax systems that are worse than others. It’s clear that the current tax code needs to be overhauled. The flat tax is the most political feasible way of improving our tax system for now.
Reference http://www.freedomworks.org/content/flat-tax-vs-fair-tax
A Reason Rupe Poll From April 15, 2014 indicates a majority of Americans favor the Flattax
The latest Reason-Rupe poll asked Americans if they would support or oppose changing the federal tax system to a flat tax, where everyone pays the same percentage of his or her income, finding that 62 percent favor the flat tax and 33 percent are opposed. When asked where they would set the flat tax, the aveage response was 15 percent.
This reflects another recent Reason-Rupe poll finding that 67 percent of Americans say it is "not the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes," while 29 percent say it is.
Strong support for a flat tax extends across income groups (62 percent) among those making less than $30,000 a year and 73 percent among those making more than $110,000 a year. Similarly across education groups and age groups, 6 in 10 say they support the flat tax.
Support for a flat tax extends beyond partisanship, with 66 percent of Republicans, 68 percent of independents, and 52 percent of Democrats in support. Nevertheless, Democrats are more likely to oppose the flat tax (43 percent) compared to Republicans (29 percent) and independents (29 percent).
Americans who say the less government the better and that the free market can better solve problems than a strong government, favor a flat tax by a margin of nearly 50 points (roughly 72 to 25 percent). However, those who think government should be doing more and that we need a strong government to solve problems favor a flat tax by only 8 points (roughly 51 to 45 percent).
These results seem to contradict previous Reason-Rupe poll results finding a majority in support of raising taxes on the wealthy—implying support for a progressive rather than flat tax. In 2012, Reason-Rupe found that 57 percent favored raising taxes "on those making more than $250,000 a year," while 39 percent opposed. Again, in 2013, Reason-Rupe found that 66 percent favored the government raising taxes on “wealthier households,” while 31 percent opposed.
ling data by Reason Rupe shows more Americans favor the Flat Tax.
Reference http://reason.com/poll/2014/04/15/62-percent-of-americans-say-they-favor-a
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