Let me put this in perspective. If you were the only person in the U.S. preparing tax returns, it would have taken you 616,000 years to complete last year's filings.
All of these hours have an implied cost. Loss of productivity, loss of consortium (ask your nearest lawyer), loss of sleep, loss of sanity. And at the end of the process, we get to pay for the pleasure of having done all this work. Imagine -- 616,000 years worth of work all to figure out how much we owe.
But time is only the first lost resource. How about this -- Americans paid nearly $200 billion last year in order to be in compliance with the tax codes. The IRS produces 480 separate forms, and 280 forms to explain those forms. The IRS annually publishes 8 billion pages, enough forest stock to wipe out the habitats of a good two or three endangered species.
And here's the thing, it's not like the current tax system is very efficient at actually corralling tax revenues for the government. The reason is that it is a spider web of loopholes, exemptions, schedules, credits, special preferences, and deductions. It taxes people for saving, for getting married, for dying. It creates an environment of governance thriving upon the ability of politicians to throw some credit or tax benefit to special interest groups to curry favor. And special interests have heeded the message, becoming a boom industry in Washington D.C., a multibillion-dollar special interest in its own right.
The current tax regime hinders economic activity, its sieve-like nature makes it much less progressive than it is intended to be; it hurts people at the bottom of the economic ladder as much as it harms those at the top. In the name of compassion, we have created a system that is evil, lacking in moral tenability in its treatment of the wealthy or the poor.
The system's broken. It's expensive to administer, it's fraught with inconsistencies -- in short, it sucks.
The point of the tax system, simply, is to raise money for federal programs. I'm not going to cast any aspersions on the necessity of any of these spending programs here. But even in this age when good governance no longer seems to require fiscal discipline (i.e., deficit spending), it should be fairly obvious that the most simple way to fund these programs is by growing the base that is taxed. If there is more money being produced in the economy, there is more money available for taxation, and therefore more money available for social programming. Simple.
We look for ways to reduce friction in all other components of the economy, be they additive or reductive. Why would we not approach taxation using the same common sense approach? If friction costs have a compounding negative effect in investing, how could they be anything but restrictive upon the overall economic well-being of Americans given an average cost of $700 per person?
Fortunately, the flat tax gives us a progressive option that taxes us fairly, evenly, and in a straightforward manner. The government can collect a flat-rate income tax at the source for each American earning in excess of a certain amount, with an adjustment upwards made for each dependent child. This tax rate, as approached by the 1999 Freedom and Fairness Restoration Act, would initially be 19%, later to drop down to 17%.
Simply, the more income you have, the more you pay. If you do not earn enough to reach the minimum, you pay no tax. Let me repeat. For the American working poor, the annual income tax would be zero. What could possibly be more progressive than that? And for every dollar over the minimum, the flat rate is 19%. So if the minimum is $25,000, someone making $28,000 would pay 19% of $3000, or $570. Someone making $50,000 would pay 19% of $25,000, or $4750, and someone making $500,000 would pay $90,250. No bee-keeping deductions. No "I live within 36 miles of an empowerment zone" deductions. No "Really rich person with connections to Congress" deductions.
You made this much. You owe this much tax. Deducted at the source of income and collected from the entities paying you the income. It's a moral system based on a fair, common sense approach. It's progressive, it's transparent, it is environmentally sound, it would add 616,000 years of productivity and quality of life back to Americans, and it would increase economic activity by reducing the tax friction on savings and business activities.
Me? I just want my month of March back.
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