12 Days of Solutions, Day 5: Two Tax Reform Proposals
As Washington continues to debate how much more of your money belongs to the federal government, Tea Party Patriots wants you to remind your Senators and Congressmen that instead of raising taxes, our elected officials should look to reform the tax code to make it fair, more efficient, and better designed for economic growth.
Two of the most popular forms of tax reform in today’s politics are the “Fair Tax” and “Flat tax.” Either one is better than the current tax code, yet neither is being considered by the establishment leaders in either party.
Why are they better? Consider:
The flat tax consists of a single flat rate with no or few loopholes. This would eliminate the economically inefficient federal tax code America currently has. The current tax code’s labyrinth of loopholes and credits create a situation where many people pay little or no taxes. It’s a system where the more successful one is, the higher precentage they pay in taxes. This essentially encourages people to work less, which is a bad thing for America. The flat tax eliminates this.
The flat tax suffers from two drawbacks. First, it still allows the federal government to directly tax individual Americans. This bypasses a Constitutional check and balance of the Federal Government, the States. Additionally, any kind of income tax incentivizes dishonest behavior in order to keep more of one’s own money.
The fair tax replaces the IRS with a consumption based collection agency, and specifically prohibits income taxation at the federal legislative level. It institutes a national sales tax on all first-hand items. Critics accuse this of being regressive, so its proponents have included a monthly reimbursement check from the federal government to all households equivalent to assessed poverty rate consumption levels. It also exempts all second-hand items (say, a used car) from the tax.
By replacing the current tax code, the fair tax eliminates loopholes in the current code and targets what people purchase, not what they own. However, there is concern that a black market may gain traction through a fair tax system. Additionally, because legislation cannot repeal Constitutional amendments, there is always the threat that the income tax could return – we would then have double taxation. Which is why it would important to repeal the 16th Amendment before instituting the Fair Tax.
In the end, both the flat and fair tax systems are far better than the existing federal tax code. Yet most of Washington is happy to ignore these plans and discuss how best to take more of your money to fund runaway spending. This must change, if America wishes to remain the world’s most powerful nation.