Death and Taxes, and We're Working on Death

In this world nothing can be said to be certain, except death and taxes. -- Benjamin Franklin

Ask any American history professor for the causes of the American Revolution, and high taxes is near the top of the list. But today, our taxes are several times higher than those paid by the colonists. Not just in real dollar terms, but in terms of the percentage of your labor that goes into government. What's wrong here?

Firstly, the government wastes money on non-essential functions. Unless you believe the fallacy that our government is more efficient than private industry, you must realize that every dollar spent by the government includes a "friction" charge of government inefficiency. Transfer non-essential services to private industry, and watch productivity go up -- and taxes go down.

Of course, certain functions remain central to the federal government, like national defense. Fortunately for us, there's a good guide already drafted that tells us which functions are essential and which are not. It's called the Constitution, and it lays it all out in black and white. If it ain't in there, don't try to spend federal dollars on it.

The second step to reducing the tax burden is fixing the tax code itself. Beyond the millions of dollars spent to keep the IRS running, how many billions are spent by companies and individuals trying to comply with the law? How many poor business decisions are made because a loophole will allow a tax-writeoff in excess of the loss itself? I can file my 1040 by myself each spring, but there's no man alive that can claim to understand the entire US Tax Code, pictured to the right. This is insane.

Debbie (from In the Bullpen) blogged about a Chicago Sun Times article on this subject, which caught my attention. You should all know I stand for minimization of federal spending outside that enumerated within the Constitution, but the way we collect that tax is important as well. Every engineer will tell you that each added complexity to a system will only add friction and losses. Our entire tax system is nothing but a collection of complex additions!

Rep John Linder is pushing for a solution. The FairTax bill calls for a repeal of all current corporate and individual income taxes, payroll taxes, self-employment taxes, capital gains taxes, estate taxes and gift taxes. It replaces them with a single personal consumption tax (sales tax). Business-to-business transactions are exempt, as are sales of used items (already taxed). To remain progressive, individuals can obtain refunds on taxes paid on consumption up to the poverty level.

This is exceptionally simple, and easy to enforce. It eliminates the arbitrary double- and triple-taxation the current system entails. It's fair, and it will improve efficiency. We need folks like John Linder to help us break out of the "income tax is here to stay" mentality, think outside the box, and think of solutions for our country.

President Bush has formed a tax panel that is recommending simplifying the system. Get in touch with your congressmen and tell them it's not enough to remove a few deductions. It's not just personal income tax that's fatally flawed, it's income tax itself. Don't use the government to discourage income.

Want to learn more? Visit Americans for Fair Tax, and see what you can do to help.

Labels: state's rights, taxes

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