THE IRS
It is difficult to comprehend how 2/3 of both Houses of Congress and 3/4 of the State Legislatures voted for this, but in 1913 they did. 85 years later we are staring in the face of a monster, IRS, that we created and it is about to gobble us up.
The IRS has 110,000 employees. The IRS is five times larger than the FBI. It controls more information about individual Americans than any secret police unit in the world. This monster has become so arrogant and hungry that political feedings are no longer sufficient. Recently it attempted, without Congressional approval, to raise taxes on businesses by 2.9%.
THE "IRON TRIANGLE"
In 1996 we elected a Congress that held out the hope that Tax Reform might have a chance. It didn't happen. In 1996 there were over 9,000 pages of tax regulations. Two years later there are over 10,000 pages of regulations. Imagine! There are over 7 million words in the current "TAX" code.
Tax reform ain't going to happen unless we the voters make it happen! The collection format may change but the system will remain the same. Politicians, Bureaucrats, and Beneficiaries will keep the system intact. Milton Friedman calls this mutually beneficial system the "Iron Triangle".
Special-Interest groups, the Beneficiaries, elect Politicians. Politicians reciprocate by passing legislation that awards billions of tax dollars to Special-Interest groups and non-profit organizations. Many of the Bureaucrats belong to Special-Interest groups. Our Senators and Representatives, too often, do not write the laws. They may have ownership of the "TITLE" of the law but not its contents. They have delegated the responsibility of writing the details of legislation to Bureaucrats. Bureaucrats have a vested interest in maintaining the status quo, their jobs and their causes. They include funding for their advocacy groups in the legislation. The Special-Interest groups receive the money, awards, and use it to elect the politician of choice. If you wonder where the "Save the Spotted Bumble Bee" group gets its money then look no farther than your own pocket. It's your money.
The current system will remain in place until we the voters muster enough courage to elect people that will cut off funding to the Special-Interest groups and non-profit organizations. The current system will remain in place until we the voters demand that our elected officials enact laws or enforce existing laws that prohibit funding of Special-Interest groups and non-profit organizations with tax dollars. The current system will remain in place until we the voters call for accountability. Where does the money go?
The "Iron Triangle" is not impenetrable. The weak link is the Politician. This is the only piece of the triad that we the voters can control. We must elect people who are willing to stand up to the gale force winds of the Beneficiaries and the Bureaucrats. We must elect people who will vote to change the system. A "FLAT TAX" will start the ball rolling towards tax reform by reducing the number of Bureaucrats.
THE "FLAT TAX"
The "Flat Tax" idea has been around for a very long time. Its incorporation into the mainstream thinking has been thwarted because the "Iron Triangle" benefits from a complicated, cumbersome, and intrusive system.
The arguments against the "Flat Tax" are pure poppycock and balderdash!
A "Flat Tax" of 17% may not generate enough revenue to sustain the Federal Government. Tough! Reduce spending to the level of income.
A "Flat Tax" will allow the rich to get off without paying their fair share. A "Flat Tax" is the only fair tax. For decades we have been inundated with propaganda that the rich should pay more. This is a political tactic used to gain votes. Are we jealous of those who have more money than we do? Perhaps they worked harder, were willing to give up things we were not, were just a little bit smarter, or maybe they just had a bit of luck. In actual case documentation it can be shown that the rich pay more taxes when the tax rates are fair.
What will stop the Government from raising the rate? What's to stop them now? In 1996 we elected a Republican Congress on the premise that they would not raise taxes. Many of these politicians signed documents promising not to raise taxes. One of the first things they did was to raise taxes. They did? Yes! But, instead of raising taxes on incomes they targeted a group of people, the smokers. If they can do it to smokers they can do it to anyone.
What about the loss of deductions? Deductions are political candy given out in exchange for our vote. We have been suckered into the belief that we can save money by spending it. We have been duped into the belief that helping others is only beneficial if it is a tax right off. With the "Flat Tax" you will have more than enough left over to give from the heart and not the pocketbook. A family of four will not pay any taxes on the first $36,000.00 of income.
A "Flat Tax" is the fair tax. It will tax income once, it makes no difference whether it is the source or the receiver. It will tax everyone the same. It will eliminate the Inheritance Tax, the tax on income from Savings and Interest, and the Capital Gains tax. It will reduce the personal time and stress of filling out the paperwork to a postcard. And, it will remove most of the power from one of the most intrusive and coercive Government agencies.
THE 'FLAT TAX" UNKNOWNS
Will assets erode; stocks, land, homes, etc.? What will happen to businesses if they cannot depreciate assets? Will workers' fringe benefits be reduced if companies cannot deduct them from income?
OTHER TAX PROPOSALS
Milton Friedman proposed a negative income tax in 1972. It was supported by many. It would pay monies to those who did not make a minimum amount. The beauty of this tax is that it would eliminate the welfare programs and replace them with direct cash assistance. This proposal, like the "Flat Tax" would put us on the road to reform by reducing the number of bureaucrats.
Another proposal is the "Consumption Tax". The theory is to have a National "Sales Tax". We would only pay taxes on what we consume. There is a big problem with this one since there will not be a uniform tax on all consumables. The politicians will target certain items for higher rates via "Value Added Taxes (VAT) or Excise Taxes; gasoline, alcohol, tobacco, SUV's, etc. So, what's wrong with that?
"The problems involved in direct government interference with consumption are not catallactic problems. They go far beyond the scope of catallactics and concern the fundamental issues of human authority from God and is entrusted by Providence to act ast the guardian of the ignorant and stupid populace, then it is certainly its task to regiment every aspect of the subject's conduct. The God-sent ruler knows better what is good for his wards than they do themselves. It is his duty to guard them against the harm they would inflict upon themselves if left alone.
Self-styled "realistic" people fail to recognize the immense importance of the principles implied. They contend that they do not want to deal with the matter from what, they say, is a philosophic and academic point of view. Their approach is, they argue, exclusively guided by practical considerations. It is a fact, the say, that some people harm themselves and their innocent families by consuming narcotic drugs. Only doctrinaires could be so dogmatic as to object to the government's regulation of the drug traffic. Its beneficent effects cannot be contested.
However, the case is not so simple as that. Opium and morphine are certainly dangerous, habit-forming drugs. But once the principle is admitted that it is the duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments. A good case could be made out in favor of the prohibition of alcohol and nicotine. And why limit the government's benevolent providence to the protection of the individual's body only? Is not the harm a man can inflict on his mind and soul even more disastrous than any bodily evils? Why not prevent him from reading bad books and seeing bad plays, from looking at bad paintings and statues and from hearing bad music? The mischief done by bad ideologies, surely, is much more pernicious, both for the individual and for the whole society, than that done by narcotic drugs.
These fears are not merely imaginary specters terrifying secluded doctrinaires. It is a fact that no paternal government, whether ancient or modern, ever shrank from regimenting its subjects' minds, beliefs, and opinions. If one abolishes man's freedom to determine his own consumption, one takes all freedoms away. The naive advocates of government interference with consumption delude themselves when they neglect what they disdainfully call the philosophical aspect of the problem. They unwittingly support the case of censorship, inquisition, religious intolerance, and the persecution of dissenters." Ludwig von Mises
Another proposal which has not received much attention is the system proposed by Rep. Dick Gephardt. This system advocates a progressive tax but it has many good ideas. Details are sketchy, lack of publicity. Any tax proposal that has a progressive tax should be viewed with skepticism. The logical endpoint for any tax system that has a progessive tax is to equalize incomes and wealth to the lowest common denominator, Socialism.
THE NEW SYSTEM, CREATIVE TAXATION
A new and improved method of taxation has emerged in the past couple of years. It is called "Extortion". This method is becoming very popular and lucrative for lawyers and politicians. First you fund law schools with tax dollars to research methods for circumventing existing laws. Next a propaganda campaign is launched against the target, paid for with tax dollars. The target is then approached and threatened. And finally the target is forced into paying large amounts of money to the Federal Government.
There are no political acts which provide greater opportunity and temptation to trample on the rules of justice. Most of us will go along with this "illegal and immoral" takings of monies because we know that every dollar taken from the target is a dollar saved in our pocket.
What in the world is this guy talking about?
COMMENT
There are many legitimate proposals and each should be considered carefully. I am not married to any of these proposals. The end result may be a little of this and a little of that. A tax system should be fair and simple. Note: I am opposed to the "Creative Tax System".