The Federal Tax Code is Part of Our Problem

You may be dismayed to discover that Title 26 of the United States Code–federal tax law–contains no less than 11 subtitles, 100 chapters, and 9,834 subsections.  That comes to 73,608 pages.  God seems to need fewer pages for the entire Bible.  I use the word “dismayed” because any law that affects a citizen has consequences.  Imagine all the possible consequences that may very well appear in almost 74,000 pages.

This isn’t tax law … it’s a tax nightmare.  Maybe Congress agrees since they’re always tinkering with it.  Still, it continues to grow and to become more convoluted.  Taxes are necessary.  I get that.  But this mess called the “tax code” is not necessary.  It’s actually detrimental.  It changes so quickly that millions of us pay professionals to file our taxes because only someone who keeps abreast of the code’s mutations can be trusted to do it properly (except perhaps for the simplest of filings, such as the 1040 EZ).  By the way, Congress tinkers with the US Code so often that the House of Representatives has its own website to keep track of the changes.

Even if everyone agrees that taxes are necessary, the federal government does much more with the tax code than just collect money.  It alters our behavior.  And it does it intentionally.  Things that are encouraged are taxed less while things that are discouraged are taxed more.  It’s a not-too subtle form of manipulation.  From fines to armed agents, government has lots of ways to control us.  It’s also a form of payoff to those who get a nod of approval from government and a way of punishing those who don’t.  Government, through the tax code, picks economic winners and losers.

If we’re serious about reform, the first thing we have to do is stop using the tax code for social control and political payback.  It should be about collecting taxes, period.  That kind of leadership won’t come unless the voters insist on it.  We Americans need to reclaim the time-honored tradition of criticizing the constant government tendency to tax.  For all the falsehoods and misperceptions concerning the contemporary movement known as the Tea Party, these citizens are faithfully exercising a right that goes all the way back to Boston Harbor in 1773.  Thank God for that.

Here are a few thoughts about specific reform of the tax code, brought to you by the Liberty Professor.  I hope to get lots of feedback on these ideas.

1.  America needs a flat tax.  The tax code should be clear, concise, and easy to fulfill.  Citizens shouldn’t have to hire professionals just to satisfy the government need for finance.  Dump the deductions and all the special considerations.  For the genuinely poor, an exception can be made.  Nonetheless, everyone must have “skin in the game.”  Even the poor would be expected to complete a tax form and mail a dollar to the IRS each year.

2.  We must avoid a national sales tax.  Herman Cain, Neal Bortz, and others have proposed a value-added, or national sales tax.  It goes by other names as well and is sometimes referred to as the Fair Tax.  I oppose the idea, not because I necessarily think it bad in itself, but simply because giving another taxation tool to the federal government is a very bad idea.  History proves it.  Once we allow the camel’s nose into the tent with another tax, it will be difficult or impossible to control it.  We should be very afraid of this idea, even if it proposes to do away with income tax altogether.  What is proposed and what will come out of Congress would be two different things.  Can you imagine how many politicians in DC would adore the chance to tax us on the federal level first on our income and then again on our spending?  Perish the thought!

3.  The so-called “progressive” taxation system is immoral.  That’s right.  You read it here.  Increasing the percentage of tax paid by a citizen just because that citizen makes more dollars than another is immoral.  It’s unreasonable and unfair.  It’s a form of legalized robbery.  Government does it because it can and because it’s popular.  It’s not just a tax policy, it’s an ideology of greed.  Some will complain that “the rich should pay more.”  I agree.  And the flat tax assures that they will.  Whatever percentage of income is paid by virtue of a flat-tax system, the rich will pay more.  Whether the universal rate is 10%, or 12%, or 15% of a person’s income, the actual dollar amount will be higher for those whose income is higher.  It’s simple mathematics.

4.  Only people should pay income tax, not corporations.  If businesses and corporations didn’t have to pay federal taxes, imagine how much of their earnings could be invested in building new factories, hiring new employees, and developing new products or services.  All of this money diverted into the coffers of government could be spent on free-market incentives to re-establish and enliven a vibrant economy.  American corporations that have moved their operations overseas would return, and foreign corporations would look to establish businesses in the US.  Only those who prefer government control over free economic enterprise could oppose this idea.

5.  The federal government will have to get smaller.  Proposals such as these would mean a restructuring of the economy.  Money would leave the hands of politicians and bureaucrats and return to the pockets of citizens.  But it would not stay in those pockets.  That’s the nature of capital-related enterprise.  If I have a jingle in my pocket, that jingle will eventually finds its way into yours.  The movement of money is the dynamism of a strong economy.  Politicians like to speak of this when it’s time to find votes, but they don’t really believe it.  Notice how often they speak of the problem of “paying” for tax cuts?  There’s no such thing.  What they really mean is they want and demand the money we have produced.  And once a politician has a hand in your pocket, there’s no end to how deep it will go.

More Americans would rally to these ideas if they had to write a check to government each pay day.  But since government takes “its share” before we get paid, it’s easier for us not to miss it.  If it went into your pocket first and then you had to write a check, you’d be clamoring for a new tax system.

If you hate my suggestions, you probably don’t have much to worry about.  There are very, very few politicians in either of the two major parties who would support such a drastic economic empowerment to the people who make the nation work.  Tea is always better than Kool-Aid, but it takes courage to drink tea.

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4 thoughts on “The Federal Tax Code is Part of Our Problem

  1. For those “Tax the Rich” and “Increase Corporate Taxation” people, consider this: IF there were NO taxation on corporations, executives and investors MIGHT get more money…which would mean MORE taxation. When you consider that Corporations are taxed on their AFTER EXPENSES remainder, a business can buy things for the business that are unnecessary just to lower their tax liability. Not to mention, as The Professor said, when the business expands, they need to hire more people…thus expanding the tax revenue.

  2. Section 8 “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 Excise shall be uniform throughout the United States.” (constitution)

    Just think how much similar our lives would be if we would just follow this simple, but amazing document that The President, House members, Senators, and the military, have pledged allegiance to.

    when I say all excise shall be equal, people scream! Americans have become so used to redistribution that even most conservatives feel it is fair (charitable). I feel that as soon as you take a step away from this statement, corruption starts! I felt this way when I could not afford to buy a magazine, or call my family long distance, so I do not feel it is unfair to feel that way now. If the tax code is not being used to produce wealth in Washington, how is it we send people of moderate means to Washington and they leave with millions. (or property worth millions)
    I promise that if the government leaves more money in the paycheck, I will find a way to help the economy with it! (spend it!) And I am sure that corporations would too.

  3. One of the greatest jurists of his time was Learned Hand. In a 1947 ruling he likened the IRS to “a thicket of verbage.” Wonder what metaphor he would come up with today?

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