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Tell It Like It Is

The Flat, The Fair and the Fool’s Tax

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Thomas Segel is responsible for this content, which is not edited by the Wilson County News or

Tell It Like It Is
April 21, 2011 | 1,589 views | Post a comment

Harlingen, Texas, April 16, 2011: This is the time of year when tax talk abounds. When I asked why our national leaders were not addressing the topic of a Flat Tax, email jammed my mailbox, multiple comments were tagged to those publications that printed my commentary and I even triggered some actual tax talk conversations. Most of the messages I received were from people who supported the Fair Tax over the Flat Tax. There were even a few writers who remained advocates of the current income tax system, or as I call it, the Fool’s Tax.

We all know our current tax code is an impossible mess. Nobody even knows for sure how many pages of printed material make up this convoluted collection of tax rates, penalties, deductions, special deals and loopholes. Needless to say, they number in the thousands. We also know Congress has been tinkering around the edges of the tax code for decades but, has not had the backbone nor the desire to do anything meaningful about this overly complicated and wasteful system of siphoning revenue out of the citizenry.

The Flat Tax, by placing a fixed percentage of taxation on the entire population and it income-producing bodies, would change the way we operate over night. As one writer said it would be almost analogous to switching from oil based economy to a hydrogen-based economy. We would move from a system seeped in cronyism and complexity to one that is clean and efficient with one stroke of the presidential pen.

Departing from the Fool’s Tax would mean huge changes for the country. Not only would the taxpayer with even the smallest of mathematical skills be able to file an individual return, but also the tax return form could be reduced to the size of a postcard. Of course, those in the business of making a living off the “business of taxation” would be required to seek out new fields of employment. Gone would be the tax attorneys, the tax preparers and those hundreds of lobbyists who flood the halls of Congress seeking out special tax deals for those they represent. Even the accountants who labor on corporate and individual returns would find their workloads lightened.

There are those who argue the Flat Tax lets the rich off the hook. I have never understood why as a purportedly free and equal society we have any business denigrating those who have more dollars in their pockets. With a pure Flat Tax all income is subject to the same level of taxation with no deductions. At least a dozen countries from Albania to Russia and Hungary to the new government in Iraq now use the Flat Tax system. Even Hong Kong is said to employ the Flat Tax and the United Kingdom, Australia, Panama, Greece and Poland are considering the implementation of this method of financing their government.

The Fair Tax system should also be addressed. Under this plan all federal income taxes would be abolished along with all taxes such as Social Security, Medicare, estate taxes, capital gains, etc. Just as with the Flat Tax, the scope and power of the IRS would be diminished.

In place of the various taxes now being collected, a national sales tax would be established. It would be revenue neutral, in that all government funded programs and services would continue to be funded and the tax would be high enough to cover those costs. Because it is consumption based, people have some control over the amount o taxes they pay. Those who want to pay less in taxes...spend less.

Proponents claim that it does not punish business for expanding or creating jobs, conducting research or donating to charity. Businesses have more money to compete. There is also the claim that the base price of goods and services would be lower because the embedded costs of the current income tax system would not be added to the product or service.

The negative comments on a Fair Tax include arguments that the retail cost of goods and services would increase and because the tax elevated those prices there would be “sticker shock” which would dampen the economy.

There is also the claim that people who paid into Social Security would be double taxed and that savings accounts and retirement would also be double taxed as those monies were spent. The final charge is a Fair Tax would cause people to enter the Black Market to avoid paying any tax to the government.
Almost any form of taxation would be better than what we must now endure because of government ineptitude and the Congressional fear of losing power. We know that would diminish under the Flat or Fair Tax model. But all of this debate over how people should pay their taxes is meaningless if we cannot also reign in the spending binge that exists in Washington D. C.

Semper Fidelis
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