I'm sitting here dreading my annual email from the VodkaAccountant™ detailing how much of my savings the IRS will confiscate this year.
Maybe I wouldn't mind so much if the roads didn't suck and our national defense establishment wasn't being slowly hollowed out. World-class interstates and a world so impressed with our military prowess that they wouldn't dare screw with us or our friends — that's all I ask of Washington. Instead, we get to pay through the nose while getting screwed up... well, you know.
Worse, as Laura Baxter wrote in 2019, the current tax system is far too complex, favors special interest groups, and is easily weaponized by those in power.
We need to nuke the tax code, and on days like today, I (almost) mean that literally.
Presidentish Joe Biden increased the IRS budget by $83 billion last year. and all we got were more audits of the middle class and, according to the Tax Foundation, "yet another layer of tax complexity to an already complex and burdensome federal tax code."
How burdensome? Going by last year's estimates from the White House Office of Information and Regulatory Affairs, the Tax Foundation said that "Americans will spend more than 6.5 billion hours complying with IRS tax filing and reporting requirements in 2022. This is equal to 3.1 million full-time workers doing nothing but tax return paperwork."
If you ever wonder why this great country hardly gets anything done anymore, remember that the tax code has taken the equivalent of several major cities' worth of workers out of production. The Lilliputians have tied down Gulliver with reams of red tape.
There has to be a better way. Here are two.
Deroy Murdock proposed his 0-10-100 plan back in 2015, and it retains the charm of its simplicity. 100% of adults and corporations would pay 10% on everything from wages to tips to gifts to earnings to capital gains and would get zero deductions. Nope, not a single deduction, or mission creep would inevitably kick in. Politically, Murdock's plan might have the best chance, since each side would have to give up something dear. But it would still require an intrusive tax agency of some kind, which makes it less appealing to me.
More appealing is the Fair Tax, which would eliminate payroll taxes and individual and corporate income taxes. Washington would be funded instead by a national sales tax — partly offset by a monthly “prebate” paid to every household. As described by Americans for Fair Taxation, the prebate is “an ‘advance refund’ at the beginning of each month so that purchases made up to the poverty level are tax-free.” You would take home 100 percent of your pay and determine your tax rate by how much you spend.
Conspicuous consumption by the rich would be met with a heavy sales tax burden, but investments in jobs, growth, and innovation would be tax-free.
Other benefits include zero compliance costs for individuals, no more audits, no more loopholes, and vastly reduced opportunities for official corruption and graft. Want to disincentivize illegal immigration? Only citizens and legal residents are eligible for prebate checks, but even illegal aliens would pay at the cash register.
Establishing the Fair Tax would require repealing the 16th Amendment — and that would likely require a convention of states because there's no way Washington would willingly give up that much power. Of course, that's the biggest reason I find it so appealing.
Whatever reform you prefer, any reform must begin with the same step: nuking the entire tax code until the rubble bounces, and then nuking it some more. Not one single line of law or regulation must be left standing, and no current IRS employee should be allowed employment at its replacement — the risk of contagion is all too real.
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