20 + 20 + 1=
Freedom!
I write this article in a gray cloud of near-despair over our list of presidential candidates. They seem to be more interested in carving each other up than in generating enthusiasm among voters to change the present course of government. Herman Cain generated a few moments of such enthusiasm but he was ripped very quickly by his colleagues. Such is life in the political world!
I would like to see someone come out with the Simple Tax system, the only system that has ever been proposed that covers almost all demands for reform the country so badly needs. It meets Republican standards by reducing taxes and yet producing tremendous government regulation of people. It also produces sufficient revenues to balance the Federal budget from the very first year and thereafter. It would pay off the national deft in 10 years or less. Liberal would also see their talking points covered by having the “rich” pay at a higher rate the “poor”. The Flat Tax adherents would also benefit since the fragments of the income tax that would be left would be a Flat tax.
The Simple Tax system would be installed in three or four simple steps. (1) Every taxpayer would have a $250,000. exemption for income tax purposes. This would give a married couple $500,000. exemption on a joint return. Actually, a couple with less than $00,000. Would not file returns. The people making over the total deduction, however, would be taxed on a flat tax basis of 20%, no more and no less. This is the first 20 figure above. Simple, huh”
Corporations would enjoy a decrease in the corporate tax rate to 20%, also on a flat tax basis. That is where the second 20 comes from in the above title. This is not a new type of tax for corporations since they have little in the way of graduated tax.
Next, a transaction tax of 1% would be installed that would apply to every commercial transaction in the country. Governmental transactions would be the only excluded transactions. This tax would be deposited to the U.S. Treasury’s bank account by the “collector” or the tax along with his or her regular deposit. Very simple. At this point, everyone is going to say that no one will keep track of the tax on every deposit they make and the answer to that is that the banks’ computer will be told that everyone is honest and if they don’t separately state the amount of tax on the deposit the computer will just think they were too lazy to keep track of the tax and will automatically compute the proper amount of tax and deposit that amount into the Treasury account. By the way, the bank will get paid a small fee on each deposit made, probably 1% of the tax collected. Lots cheaper for us taxpayers than the cost of the IRS, huh?
The natural knee-jerk reaction against the Simple Tax would be too small to generate sufficient funds to balance the budgets that have been promoted during the last few years. Actually, according to Professor Emeritus Edgar Feige, University of Wisconsin, a 1% rate is too high. The good Professor is a distinguished economist and is probably correct but we purposely used this higher figure for two reasons. The first is that people can remember the rate far better than as percentage of that and also because we actually want to create a surplus from the first day of the new tax. We want to create this surplus to get rid of the monumental national debt of some 15 to 18 trillion dollars we are saddled with.
We have also kept the income tax in our system (for a few years) for a couple of good reasons. One is that we would use these funds for reduction of the national debt and also keeping the old Tax Code alive for just a few more years would erase the need for a two-year (or more) drive for a constitutional convention to get rid of the tax.
The income tax is almost a dead issue in the present day. Marxists of the world still hang on to the concept of “tax the rich” but almost every other country in the world has added some other form of taxation to the income tax in order to produce adequate revenues to pay the bills. The most usual addition to the income tax is the Value Added Tax (VAT), already proposed a couple of years ago by Nancy Pelosi. This is a horrible tax, made to order for corrupt politicians to buy votes and promote Socialism and the welfare state. The result is that the lower class actually ends up with a 50-60% tax burden. Some of these countries are in national headlines almost daily as bankruptcy cases.
The Simple Tax system is not quite as simple as the title indicates. It appeals to every income group and has purposely been designed to not only shield taxpayers from so many layers of taxation that are hidden and controlled by pressure groups operating from the classical “smoke-filled rooms”. It has not been proposed as a way to get rid of other taxes or government expenditure but only as a revenue-raising method. Congress would make those decisions. However, the basic reason for promoting the Simple Tax was to cut the size of government and provide more revenue, at the same time relieving taxpayers from the almost ruinous national debt and proposed deficits for decades to come.
In closing, I feel that I must say, after being a practicing C.P.A. for 45 years, that I have helped thousands of small businesses plan and budget for their futures and I can’t recall that any of those businesses ever budgeted for a deficit, especially for 60 years or more. Go figure.
Contributed by Duard Lawley, CPA(Rt)
Lawley Publishing Co., - www.lawleybooks.com
e-mail dlawley_1@MSN.com