Taxes are Not About Revenue
So it’s April 15th, tax day….well, not exactly for me. I will be sending in a request for an extension today (with a check because I’m pretty sure I’m going to owe something) but I won’t know for sure exactly what my tax burden will be for a view more weeks as I try to get through all the accounting for the handful of businesses that I am involved in. This is probably my 3rd year in a row that I have had to file an extension even though every year I swear it will be the last.
The problem is, doing taxes is too damn hard! I have too much to do to take the many hours required to prepare taxes for the 3 businesses that I operate just to get to the point where I can do my personal taxes. Truth is, I hire somebody. Just like most business owners. It’s already enough work to run the business, market, invoice, pay employees reconcile accounts, apply for licenses, take continuing education, and then do the work that your business was built to do. Putting a ridiculously complicated tax process on top of that is just too much. None of my business make a lot of money, so I do all the work myself. It’s tiring. So, at the end of the day, I don’t have the motivation to try and tackle all the laws, exemptions, fees, forms, etc. to do taxes.
Then, every election year (which is all of them any more) we hear about the two parties ideas about taxes…er…revenue as the democrats call it now (pretty sure they are still taxes, but revenue sure sounds more positive, doesn’t it). Pres. Obama talking about the rich paying their fair share, and the republicans in Congress talking about protecting the job creators. One side trying to close loopholes while creating them, and the other trying to create them while closing them. Pres. Obama going on about middle class tax breaks while the middle class taxes go up and on and on.
The reality is, fixing the tax code in this country would be easy. All the parties could get what they say they want. The problem is, what they say the want, isn’t really what they want. What they really want isn’t tax reform or more revenue or any of that. If they did, we’d have it. What they really want is the club of taxes to pummel the other side. You see, I used to think that most politicians were in it to do some good even though all evidence to the contrary. But I recently read something that James Madison wrote. I will paraphrase He said, even back in the days of the founding of our country when we think of the noble politician, that members of the Continental Congress couldn’t be trusted. That they were second class people who would vote only for what benefited them individually. That’s EXACTLY the feeling that has been stirring just below the surface that I didn’t want to admit. But here is one of the founding fathers, the primary pushers of the Constitution, pointing out what I think most of us already know.
Congress members don’t want to solve any problems unless the solving of the problem will get them elected. But since solving the problem requires far more character than just fighting against the other side, which will also get them elected, most don’t even try. Their goal isn’t to make your life easier. It’s to make their life easier. If your life gets better as a consequence of them improving their position, great, but it’s not a necessity. You don’t believe me? Look at the evidence.
Gun control – They say its about the safety of our children, but even proponents of the gun control law admit that it won’t do anything to stop mass shooting that spurred the debate. Nothing in the gun control bill will make you safer. In fact, violent crime and crime with a firearm are trending down! They are trying to solve a problem that is already becoming less of a problem every year with them doing nothing.
Affordable Health Care – Obamacare was pitched as a way of saving money. But now, even the proponents of the bill are admitting that this isn’t true and that it will actually raise health care rates. The other side said that before the bill was signed. They didn’t solve health care, they made it a bigger problem and tied it into the budget and economy.
There are so many more examples.
So they don’t want to solve the tax problem because if they did, they couldn’t fight about it anymore and that’s what gets most of them their jobs.
Solving taxes, revenue and the budget. Easy. Look at Hong Kong. Simple near flat taxation, no capital gains, inheritance or other taxes and they have massive growth and revenue to the government. You want a tax system that will raise revenue, spur economic growth and would only take the average citizens about 30 minutes to complete on their own with no professional help? Here you go.
Eliminate all federal taxes on individual and create an income tax that taxes wages, tips, royalties and rents but not interest on capital gains and investments. For sole proprietors or small business filing as individuals are partnerships, income would adjusted to exclude expenses directly related to operating the business. Corporations would also fall in this category but would only be taxed on the income remaining after paying all employees and expenses but not dividends (this is why we don’t tax capital gains and interest paid on investements above…because they are already taxed at the corporate level)
Create 3 tax brackets. Low (defined as incomes below 1.25 times the amount required for a citizen to provide the minimum for shelter, food and clothing adjusted for minor dependents and based on national averages), Middle (defines as incomes between 1.25 to 10 times the amount required for a citizen to provide the minimum for shelter, food and clothing and based on national averages. and High (defined as incomes above 10 times the amount required for a citizen to provide the minimum for shelter, food and clothing and based on national averages).
Earners in the low income bracket wouldn’t pay any taxes and would qualify for welfare benefits that would equal a total value of half the difference between their income and the maximum amount of the low income bracket. This is a system that would not reward people for not working, but would be a safety net for those who most need it.
Earners in the middle income bracket would pay a flat tax of 15% and could be adjusted down only for dependents. That adjustment would be 1% per dependent with a maximum reduction of 5%.
Earners in the upper income bracket would pay a flat tax rate of 20% with no deductions of any kind.
The tax form would be simple. Provide your personal information. List your income as defined above and provide supporting documents. Identify your bracket. Apply dependent reductions in rate in you are in the middle bracket. Multiply your income by the tax rate. Pay your taxes.
That’s it. No loopholes. No tax shelters, or endless deductions. No using the tax code to manipulate behavior. Taxes for revenue purposes only. What a concept.