I should preface this article by stating that just like I’m not a lawyer or a doctor, I’m also not an economist. In fact I’ve never had even a single class on the subject. But sometimes I think the best ideas frequently come from those without knowledge of a subject that willing to ignore the rules they know nothing about. For that reason this article should be worth its weight in gold.
I’ve thought for a long time, like most have, that the U.S. tax system is way too complex and frequently unfair. It’s done nothing but grow in complexity as special interests have pushed in their supplemental taxes or cuts.
I have a proposal. One the would change the system from a complex burden to a simple process leaving you sleeping peaceful on April 14th.
First off, when embarking on the goal to change the world, you must clearly define what it is you want to accomplish. In a philosophy class in college I learned that we give up rights (like vengeance and keeping all the monetary rewards we reap) to the government in exchange for protection, services, etc. Thus, I understand that we must pay the government something or else we wouldn’t have one. And I do depend on them for at least some things. No, no… aside from lines to wait in at the DMV.
So, what are the goals of a good tax system then?
- The government needs money. Unfortunately, from us.
- Collection should be fair.
- Collection shouldn’t be complex.
That’s it. That’s all that is needed. An important part about my proposed change must be understood though: I’m only setting out to change the complexity. Yes, I’d love to balance the budget and change how things are spent and how much we pay as well but that’s out of scope. This time at least. You have to make one change at a time to ensure yourself that the success or failure was the result of just that change. So, for now, the net income of the government must remain the same before and after I rewrite the tax code.
My solution to the complexity mess is simple and straight forward: completely get rid of income tax. Goodbye. No more 1040 forms. No more April 14th all-nighters. No more file folders of fading or thermically-blackened receipts. Think of all the time you’ve just saved!
But obviously we need to replace the government’s garnishment of our wages with some other income source. That, in my opinion, should entirely be based on sales taxes. All forms of government would get a chunk of the sales tax percentage (just like states and counties already do). Now, I won’t lie to you: it’s gonna be high! But your income will be higher too.
The sales tax should be flat. Adding odd burdens from taxing things at different rates isn’t a good way to reduce complexity. So we won’t.
What gets taxed?
To be a fair system, everything should be taxed except the essentials of living: food, shelter and clothing.
Food from a store should still remain untaxed. It’s a basic necessity of life and people that are struggling and can afford little else are the least taxed, which is the point of the tax brackets we have today. To keep complexity low, though, lets not reinstitute that whole snack-tax thing. Food is food; from caviare to potatoes.
Services need to be taxed too (all of them since anything else is unfair). E.G. car washes, repairs, lawyers, dentists, … A good percentage of business is not product related.
But to obtain a shelter which is not taxed in our fair system we should exclude housing rental services from taxation. Home purchases would remain affected by sales tax though.
I’ve battled with the notion of taxing clothing. The winning side of my breain decided that it’s best to leave clothing purchases being taxed. The cost of clothing deviates wildly and cheap clothing (thus with low taxes) is not hard to find so I don’t believe it would be unfair to the immensely poor.
The goal of this was to reduce complexity in the system and in your life. I think you’ll agree this would succeed. The biggest gain is simply time. As my wise co-worker often advises me: “Time is our most valuable asset”. She’s right. Most services are built on this model: paying for someone else to do your task will save you the time required to do that job (be it fixing a leak, walking the dog, cooking, or mowing the lawn).
People often worry about job losses associated with major changes. What will all the IRS employees do when the complexity loss eliminates their jobs?
They’re already trained accountants specializing in taxes, so the solution is to leave them in an area they understand. Some staff will still need to review and, yes, perform audits of sales tax revenue. But the rest of them should be involved in helping businesses convert to a sales tax based system and after it is running smoothly they can still offer free advice and accounting services. Imagine the IRS being helpful before you run into problems rather than afterwards.
Yes, we could also shrink the government taxation overhead, but remember my proposal is only here to change the collection process and not quantities or budgets.
Think about it. It saves frustration, paperwork, and most importantly: your time. How much productivity could you add to your life with the amount of time you spend doing taxes every year?
Who’s with me?