What do you think of this Fair Tax proposal?

Americans Spend 6.6 Billion Hours on Taxes
Email this Story

Apr 15, 9:50 AM (ET)

By MARY DALRYMPLE


WASHINGTON (AP) - People scurrying to meet tonight's tax deadline might consider this: It's taking you and your fellow Americans 6.6 billion hours to do all that paperwork. The basic tax return - the Form 1040 filed by most people every year - accounts for 1.6 billion hours.

The Internal Revenue Service furnished those statistics to the White House budget office, which keeps tabs on the government's bureaucratic demands. The budget office notes that tax work "towers over the entire paperwork burden for the rest of the federal government" and accounts for some 80 percent.

"If anything, those numbers are probably understated," said David Keating, president of the National Taxpayers Union, which reports annually on the increasing complexity and demands of tax returns.

"A lot more of the cost is just planning to do the tax-smart thing. That can actually take a lot more time than reporting what you've done," he said.


Sensitive to the demands that tax laws put on weary taxpayers, the IRS has seven people working full time to reduce the anguish for filers. The IRS Office of Taxpayer Burden Reduction looks for requirements that can be streamlined, reduced or eliminated under the law.

"We're trying to reduce unnecessary burden," said Michael Chesman, the office director.

Some of the burden cannot be avoided because it is a requirement of the tax laws. By attacking unnecessary burden, the office has shaved more than 200 million hours from tax paperwork since the office was created in 2001.

Chesman said the office plans next year to simplify the process for requesting an extension. The idea is to replace the current four-month, and subsequent two-month, deadline extensions with one simpler and automatic six-month extension.

Small changes can make a big difference. Letting more people use the simpler 1040 forms trimmed 5 million hours off the paperwork, for example. But the improvements are often swamped by the burdens associated with new tax laws. President Bush has enacted tax changes every year he has been in office.

For individuals wondering how long they will spend on tax forms, the taxpayers' group said it takes an estimated 26 hours and 48 minutes to prepare the Form 1040 and its most common supporting schedules. That includes keeping records, learning the law, preparing forms, copying and mailing.

That actually is less than last year, when taxpayers could have expected to spend 28 hours and 30 minutes on the same forms.

Tax preparation software has made the task more manageable for many. Where the IRS estimates it takes 13 hours to fill out the Form 1040 by hand, Julie Miller, spokeswoman for Intuit, said its TurboTax software can do the same work in two hours to four hours.

Kathy Burlison, director of tax implementation at H&R Block, said software makes individuals and paid preparers more confident they have not missed something. It also makes mistakes much easier to fix.

Nevertheless, the forms are not just a drain on people's free time, but on the productivity of the country, Keating said.

"That's a huge, dead weight burden, trying to discern the tax code, what it rewards most," he said. "If we turn the nation into a paper-shuffling, law-figuring-out country, no one actually gets anything done."

---

 

Flat tax? No. Marginal utility of a dollar.

Consumption tax? No. Businesses paying that much more for their inputs?

Out present tax system is the worst one there is, admittedly, except for all the others.

 

A national sales tax

George Will

March 31, 2005

WASHINGTON -- The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.


His bill would abolish the IRS and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax and the earned income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street.

``K Street'' is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a cornucopia from which the political class pours benefits on constituencies. By replacing the income tax -- Linder had better repeal the 16th Amendment, to make sure the income tax stays gone -- everyone and all businesses would pay their taxes through economic choices, and K Street's intellectual capital, which consists of knowing how to game the tax code, would be radically depreciated.

Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay ``as much as they choose, when they choose, by how they choose to spend.'' And his bill untaxes the poor by including an advanced monthly rebate, for every household, equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.

Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67 percent of tax filers who do not itemize may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's vast drag on the economy.

Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.

Corporations do not pay payroll and income taxes and compliance costs, they collect them from consumers through prices. So the 23 percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100.

In 1945, corporations paid more than one-third of the government's revenues. Now they pay only 11 percent because corporations, especially multinationals, are voluntary taxpayers. In a world increasingly without borders that block capital movements, corporations pay where the burden is lowest. Linder says $6 trillion in offshore accounts would have an incentive to come home under his plan.

Furthermore, by ending payroll and corporate taxes, America would become the only nation selling goods with no tax component -- such as Europe's value added tax -- in their prices. With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. ``This,'' Linder says, ``would unleash freedom around the globe.''

Critics argue that ending the income tax, with its deductibility of charitable contributions, would depress giving. Linder says: Piffle. In 1980, when the top personal income tax rate was 70 percent, a huge incentive for giving, individual charitable contributions were $40.7 billion. In 1986 the top rate was reduced to 28 percent, and by 1988 charitable giving was $86.7 billion. The lesson, says Linder, is that we give more money when we have more money.

When Speaker Dennis Hastert published a book last year, he was startled that interviewers were most interested in talking about Linder's bill, which then had 54 co-sponsors. This year Hastert added Linder to the Ways and Means Committee. Linder cheerfully says his bill would reduce Ways and Means to ``a B committee'' by ending the political fun of making the tax code ever more baroque for the benefit of K Street's clients. Bliss.


http://www.townhall.com/columnists/georgewill/printgw20050331.shtml

 

Thank you for posting Will's editorial. Linder's Bill will probably never see the light of day, but at least it shows that there are occasionally some people in government and the media who recognize the brilliance of simplicity.

 

So a family is barely making ends meet, and they are so poor with so low of an imcome that they don't pay either state or federal income tax.

Now we are going to add additional cost in the form of a tax to everything they consume, use, wear, or need to live? We are going to tax the food they have to eat, the clothes they have to buy, the housing they need to live, the medicine they need when they are sick? 13% of this nation lives below the poverty level, and we are going to have them pay more for essentials?

Not a fair tax proposal for the poor at all.....

Hey, if you want to tax the shit out of luxury items, legalized gambling and prostitution, cigarettes, booze, and other non essentials, but allow the poor to make ends meet...okay.

Close all the fucking loopholes, return the tax rates for the top 1% to pre-Bush tax cut levels and that is plenty to raise more than enough taxes to pay for what the government needs.

 

Consumer prices will fall because the hidden payroll taxes contained in the cost of labor will no longer be a component of price. And the poor will take home their entire paycheck without any withholding, so they will have more to spend.

Plus, under Linder's bill, the poor get an advance monthy rebate of tax money to cover their tax costs.

In the end, the out of pocket costs will be the same, with the single exception that everyone will be able to decide on how much tax they wish to pay. Because if they consume less, then they will pay less tax. And, the wealthy are by far the greatest consumers of all.

 

It simply is not true that the wealthy necessarily spend more than a middle class family.

Some of the cheapest bastards I have ever met were extremely wealthy, without children, and lived very moderately. They drive older cars, own most of their stuff purchased long ago, and and as tight as Star Jone's jeans.

Their primary expense was property tax and basic cost of living, yet they had a huge income stream from rental property, dividends, etc.

 

We can argue anecdotal evidence all night long and get nowhere. But, generally, middle class people don't live in the same neighborhoods as wealthy and the homes of the wealthy usually cost several magnitudes more than the homes of the middle class. And, middle class generally drive Fords and GM vehicles, while the wealthy drive BMWs and Mercedes. And, I don't see a load of middle class people flying first class -- for the most part, it's the wealthy.

So, while there are a few wealthy scrooges out there who live in manufactured homes and drive old Studebakers, I'd say that the vast majority of the wealthy usually live right up to their class status.

 

The Preposterous Income Tax
By Jan Larson (04/03/2006)

With only two weeks to go until "tax day," have you finished preparing your 2005 return? Maybe you filed your return weeks ago and you're one of the "lucky" ones that got a refund of the interest-free loan you made to the government.

On the other hand maybe you’ve determined that you’re going to have to write a check to the IRS this year. Isn’t it comforting to know that after spending hours digging through indecipherable forms and instructions, gathering receipts and making all the calculations that you now get to pay more?

In the 1960’s television show Green Acres, the main characters, Oliver and Lisa Douglas, had to climb a pole to answer their telephone. To anyone watching, it was preposterous that they would live that way, but it was normal to them.

It is preposterous that we live with the present federal tax code.

Members of Congress talk about tax reform year after year, but little gets done. Tax credits are added, deductions taken away and rates are adjusted from time to time, but every April 15, it is more of the same – wasted time, head scratching and profanity – for the American taxpayer.

Why do we put up with this? Because we’re sheep. Because most taxpayers just muddle along not caring that the tax code is fundamentally unfair, not knowing how much power they’ve ceded to the government and not understanding how damaging the tax code is to America.

There have been various ideas floated in recent years for reforming the tax code. Congress, left to its own devices, will never do more than tweak around the edges of the thousands of pages of tax code rules and regulations. Why? Because tweaking around the edges leaves the power with Congress, not the people. Keeping the tax code complex keeps everyone under the thumb of government.

To remove the power that Congress wields over “we the people” via the tax code, we must slay the dragon.

There are two major schools of thought regarding tax reform: a flat tax on income or a national sales tax, specifically the Fair Tax.

While a flat tax would be preferable to the current mess, it has fundamental flaws. First, it leaves the burden of tax compliance on the shoulders of both businesses and individuals.

Second, given the propensity of Congress to manipulate the tax code, a flat tax wouldn’t remain flat for long. The tax reform of 1986 reduced the number of tax brackets to three, but now there are six.

Third, while a flat tax may be simple for people whose entire income is from wages, all of the complexity of the current tax code would remain for the self-employed and for businesses that would continue to deal with the onerous task of determining just how much income they had.

The Fair Tax would solve all of these problems.

There would no longer be any requirement for individuals to self-report their tax liability (which is preposterous to begin with). Second, the only manipulation that Congress could do would be to adjust the rate up or down. Third, businesses would simply collect the tax in the same way as they collect sales taxes today.

Almost all of the arguments against the Fair Tax have little merit and those that do are really only of concern during the transition period. An example is that a person that has saved after-tax dollars would be taxed again when those dollars are spent. This is true, but when the taxes that are currently embedded (and hidden) in everything we buy today are removed with passage of the Fair Tax, the final price of most goods and services to the consumer will not change much if at all even with the Fair Tax added. Thus the buying power of after-tax savings would be nearly the same.

Some criticize the Fair Tax saying that the 23% rate commonly quoted is really 30%. That all depends on how you view tax rates. Let’s say you bought something for $1.00. The tax added under the Fair Tax would be $0.30 for a total cost of $1.30. If you view the Fair Tax as the percentage of the total price paid, ($0.30 / $1.30) it is 23%. This is the “tax inclusive” rate and is way income tax rates are quoted today. If you’re in the 25% tax bracket, you keep 75 cents while the government takes 25 cents of each extra dollar that you earn. The amount of tax as a percentage of the “spendable” money is really 33% ($0.25 / $0.75). The 23% Fair Tax rate simply allows an apples-to-apples comparison to income tax rates.

Some argue that the “wealthy” won’t pay their “fair share” under the Fair Tax. The short answer is that yes they will, but more than that, do you really think that everyone pays their “fair share” today? The $345 billion in uncollected taxes for 2001 [1] says to me that a lot of people aren’t. Can it really get worse than that under the Fair Tax? It is doubtful.

Some politicians put a negative spin on the Fair Tax for no other reason than they know that they would lose power if the current tax code were eliminated. Politicians curry favor with special interests and contributors via the tax code. No tax code to manipulate means nothing to give to those special interests.

The economic benefits of the Fair Tax are substantial and too numerous to mention here. Suffice it to say that the Fair Tax would bring about unprecedented economic prosperity to the United States. The Americans for Fair Taxation website [2] has more information.

Momentum for the Fair Tax is growing via a grassroots effort all across the country and it has been introduced in both the House (H. R. 25) and Senate (S.25). You too can become part of this effort. Think about that on April 15.

http://americandaily.com/article/12809

 

Another Reason It's Time for the Fair Tax
by Doug Patton
Mar 27, 2006


As April 15th approaches, millions of us are again pouring over receipts, records and other information relevant to our federal income taxes. After getting everything in order, we will be forced by the complexity of the tax code to take it all to an accountant or other tax professional, who will spend a few very expensive hours working through a process our own government doesn't even understand much of the time. Finally, our tax preparer will place in front of us a stack of papers, some of which we will be expected to sign.
Now, do you read every page in that stack, or do you simply place your signature, as I do, on the lines indicated by this individual in whom you have placed so much trust? Millions of us do it every year. But what if among those papers was a consent form to sell your personal information to third parties to market their products and services to you?

This is the convoluted reasoning of the Internal Revenue Service, where career bureaucrats believe that such conduct should be allowed. In fact, the IRS is proposing new rules that would permit tax preparers to sell your private financial information, right up to and including your actual tax return itself, to marketers and data brokers.

Currently, selling client information to third parties for marketing purposes is prohibited. That would change, however, under the proposed rule revision. And since this policy could only benefit the person buying or selling your information, with no imaginable benefit to you, the motivation to obtain permission by any deceptive means necessary seems extremely high. Incredibly, according to a recent article in the Philadelphia Inquirer, IRS officials characterize these changes as "housecleaning measures needed to update regulations adopted before it began accepting returns electronically."

Had enough? There is a solution.

The time has come for Americans to demand that our elected representatives come to grips with the fact that the current federal income tax code is broken and cannot be fixed.

The time has come for all of us to admit to ourselves that this system has been patched and "repaired" far too many times since 1913, when the 16th Amendment brought us direct taxation on our production, with the IRS as its primary enforcement agency.

The time has come to abolish this gargantuan, intrusive, tyrannical bureaucracy, the primary purpose of which is to harass individual taxpayers, who in turn have to hire and trust others to interpret and navigate the treacherous waters of the federal tax laws.

The time has come for the Fair Tax, a consumption-based national sales tax to replace the federal income tax, thereby trading a trillion-dollar anchor for an economic supercharger.

Imagine what you could do for your family, your church, your community, your future, if you had no federal income taxes, including Social Security, withheld from your paycheck.

Imagine the magnet for business the United States of America would become without a corporate income tax.

Imagine if the imbedded corporate taxes driving the cost of every product and service you buy were gone.

In fact, imagine if discounts on consumer products offset the cost of all federal taxes, leaving consumers free to save, give and, well, consume.

Just imagine.

Replacing the burdensome federal income tax with a 23 percent (inclusive) national sales tax would give every American taxpayer an immediate pay raise by allowing us all to keep everything we earn. And since approximately 22 percent of the cost of every product and service we buy represents embedded corporate income tax, competition would drive the cost of everything down by an amount almost directly proportionate to the amount of the consumption tax. In other words, the cost of the sales tax would be offset completely by the discounts on virtually everything.

But the best part of implementing the Fair Tax is abolishing the IRS. No more receipts. No more mileage logs. No more fear of an audit. No more April 15th.

The proposed new regulations are just one more indication that the time has come to turn Americans loose from the bondage of an antiquated tax system that impedes productivity, punishes generosity and penalizes thrift.

http://www.postchronicle.com/commentary/article_21211993.shtml