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As Long as We Remember...

March 15, 2011

A New Tax Code?

Shawn Burns

The deadline to file taxes is quickly approaching. And, as is usual, new forms are accompanied by page after page of explanations on how, when and why one form or another may or may not be needed.


It’s all so complicated that even the Internal Revenue Service struggles to keep up with all of the rules, regulations and laws.


There are several pieces of legislation before Congress that attempt to address this complicated tax system mess. Currently H.R. 25 and S. 13 are bills proposed in the House and Senate and both are entitled The Fair Tax Act.


Each calls for the abolition of the federal income tax code and replacing it with a national sales tax. It’s not a new idea to be sure. In fact, President Barack Obama’s debt commission floated the idea of a national sales tax, known as a “value added tax.” The difference between the recommendation from the debt commission and the bills before Congress is that the commission proposes adding a national sales tax in addition to the federal personal income tax.


Now, to anyone associated with the IRS, the idea of doing away with the income tax is a scary proposition because both H.R. 25 and S. 13 also contain language that would abolish the IRS as we know it.


Of course, as with every issue, there are pros and cons. And people are feverishly defending their position on both sides of the issue.


Proponents have a long list of the benefits of eliminating the personal income tax and instituting a national sales tax.


Here are just a few.








Current costs of enforcing tax compliance are estimated at $600 billion annually. Proponents of the national sales tax claim that number would drop to somewhere in the neighborhood of $1-5 billion annually.


Now those opposed to the idea of abolishing the federal personal income tax and replacing it with a national sales tax have their list of reasons on why they feel this is a bad idea.


Those opposed say:


·        The IRS would not be eliminated because who else is going to make sure that businesses actually forward the taxes they collect to the Treasury.


·        A national sales tax is a tax on consumption and since low income families spend almost everything they earn on basic necessities, they would pay a higher percentage of their earnings in taxes.


·        There are also complicated formulas and arguments of how a national sales tax could be crushing to renters verses home owners.


Intentional or not, numbers and statistics can be used and manipulated to further any argument, which makes sifting through the myriad of information on both sides of the argument difficult, to say the least.


The idea of replacing the federal income tax with a national sales tax is an interesting idea that deserves to be discussed, debated and researched if, in the end, the result produces a simpler tax system for individuals and businesses alike.


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