Your View: Guest Column - Will fiddling with ‘tax breaks’ fix our tax code?
BY PHIL SCHILTZ
Sorry, but nibbling around the edges of the gigantic, 77,000-plus page tax code, just won’t work. After the recent revelations of the partisan antics of the IRS, does anyone think the current tax code can be “adjusted” or “tweaked” to make it more fair? We have had 4,428 changes to the tax code in the last 10 years.
What to replace it with? Many are touting the Flat Tax or a VAT (Value Added Tax). The VAT is a sales tax incorporated into the costs down the manufacturing supply chain and is invisible to the consumer. Changes could be made to the VAT without anyone knowing about it, just like the income tax. It, like the income tax, is also a lobbyist’s dream.
The Flat Tax is still an income tax and retains the most regressive of all taxes, the payroll tax for Medicare, Medicaid and Social Security. From the poorest worker to the richest, payroll taxes are paid on the first dollar earned, and when you file your 1040, there are no deductions or refunds on this tax.
The Flat Tax attempts to only modify, again, the existing tax code and continue to use income based taxes which punish productivity. It also keeps the hated IRS to collect, bully, and monitor individual citizens and corporations.
To really make a difference, income based taxes must be eliminated and replaced with a broad-based, transparent, retail sales tax on all new goods and services which amount is printed on the receipt for every purchase. No taxes would be collected on any business to business purchases, used products, or educational tuition. The taxes would be collected only by the final retail sales level and sent to the states to be sent to the Social Security Administration to administer the funds.
Oversight would be by the states on the approximately 15 million to 20 million retail sales stores instead of the IRS on approximately 155.5 million individual filers. A monthly prebate, based only on family size, goes to all legal families (those registered with valid Social Security numbers) which untaxes spending up to the poverty level ... literally untaxing the poor. Since taxation is based on consumption, the FairTax allows taxpayers maximum choice as to the level and timing of taxation. The FairTax rewards hard work, savings, and wealth accumulation. Accumulated wealth, no matter how or when earned, will be taxed only when spent.
The IRS, after completing the last year’s income tax returns, would be defunded and disbanded saving over $12 billion per year. No longer would individuals or manufacturing companies file tax returns. The only filers are retail sales outlets. The lower number of filers and simpler processes would reduce compliance costs by around 90 percent. It would also reduce fraud (noncompliance) as it would take two, retailer and customer, to collude to cheat and it wouldn’t be worth the risk by the retailer.
The FairTax Act bill before Congress, H.R. 25 and S. 122, is only 131 pages. It is a single-rate national sales tax on final retail consumption with no exceptions. See WWW.FAIRTAX.ORG for details.
Phil Schiltz lives in High Point.
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