It is the dreaded tax day for millions of Americans and the same question comes to mind every year: Had enough?
And every year my answer is the same: We should trash this horrible, wasteful tax system. We should begin anew with a simpler, less costly system along with a much smaller government that stops taking so much of our hard-earned dinero.
Burning Up My Brain
I think these incendiary thoughts—-thoughts that go to the heart of our history—each year when the taxing authorities in America remind us that we must report to them. It is not sufficient that we must pay them in various ways each payday—the withholding and other taxes—or whenever we buy something (sales taxes and other imposts).
April 15th is the tax return deadline day. It is a day that reminds us that we have an insane tax system that hurts just about everyone. The system retards growth rate, making it more difficult for people just starting out to find a first job. It is a tax system that reminds me of historical parallels. It also leaves me wondering if we are still the scions of tax rebels who risked everything in the danger of economic liberty.
Uncle Sam and King George
Indeed, today how different is our democratically elected federal government in which few people vote from the imperious government of King George III? His excessive taxes and intrusive, pesky officials were a major part of the American Revolution.
The sentiment of many of those Americans toward the king is very similar to how millions of Americans view their rulers today. But let us remember our forebearers and what they thought of their taxing authority as expressed in the Declaration of Independence: “He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our People, and eat out their substance.”
Sounds eerily similar to America today. I could write endlessly of the insane costs of our wars and military bases around the world. I could destroy entire forests writing about our out of control entitlement spending. I could go on and on writing about that oxymoron called “government enterprise.” That’s when our government actually tries to run things like subways, railroads and various loan agencies. Of course, it makes a mess of all of it. Then it requires the taxpayer to clean up its messes by paying the bill.
An Outrageous Bill
One of the most pricey parts of our flawed tax system is the costs of complying with the tax code. It runs tens of thousands of pages. At times it even mystifies people who are tax experts as well as those charged with enforcing it, the IRS. Those three letters can strike fear in the hearts of millions of Americans, including members of Congress (A number of those who criticized the IRS have ended up being “investigated” by the IRS. That reminds me why President Kennedy, who hated FBI chief J.Edgar Hoover, nevertheless re-appointed him. He had the goods on so many people that even could intimidate the president of the U.S.! Today, the IRS intimidates almost everyone).
But, under our ridiculous and confusing tax rules, it’s easy to investigate almost anyone. The tax code is so convoluted that sometimes almost no one can be sure if he or she is in compliance, or if he or she has taken all the permitted deductions. Proper deductions can reduce the amount one owes to Uncle Whiskers and his merry group of ubiquitous publicans. But, if one takes too many deductions, guess what? You could be audited by the IRS, an agency that can and has ruined many individuals and business.
How Many Strokes Did You Shoot on This Hole?
Still, everyone is looking for legal ways to reduce taxes since we have high tax rates, especially on capital formation. Indeed, these days many corporations would rather complete deals in Canada. That’s where the corporate tax rate is much lighter than in the states. The worst part of our tax code is that it can change behavior; it can change otherwise honest people into tax crooks. Will Rogers said the tax code made more people liars than even their golf scores.
Our tax code, with its many deductions, credits and charges, invites gaming. In effect it invites people to find new imaginative ways to reduce taxation through seemingly legal deductions. But supporters and critics of the current system should concede one crucial point: It is hurting our economy. It hurts both rich and poor, employers as well as employees.
The huge costs of compliance will be passed on to the rest of us. It makes doing business in the United States more expensive than in other places.
And, as GregoryBresiger.com has consistently preached: Costs matter, whether it is a small or large business trying to become profitable and create more jobs or an individual trying to save.
How costly is our tax code?
Billions Go Up in Smoke.
The National Taxpayers Union Foundation (NTUF), which is a non-partisan group, last year found the U.S. economy lost $233.8 billion due to 6.1 billion hours of lost productivity (an estimated value of $202.1 billion) and $31.7 billion in out-of-pocket costs spent complying with a complex and invasive tax code.
That money comes out of everyone’s pocket. It means average people like myself and my wife have to pay more and more each year to expert advisers to keep us out of trouble. It means corporations spend huge amounts to comply; costs that reduce profits and can hurt the company.
But the government hasn’t been reducing. It spends money the way many people eat at an all you can eat restaurant. However, if I had my way, I’d put it on crash diet. Over the last few generations, as our welfare state has expanded along with our warfare state, the number of tax rules in the tax code have exploded.
Get Ready for Some Reading
“Over 75 years ago, the Form 1040 instructions were just two pages long. Today, taxpayers must wade through 209 pages of instructions, quadruple the number in 1985, the year before taxes were simplified, according to the NTFU.
“Between 2009 and 2011 the cost of tax complexity spiked from under $150 billion per year to well over $200 billion per year. It has not fallen below that threshold since, and 2015’s estimates are nearly $10 billion higher than last year, showing complexity costs are back on the rise.”
This proves, once again, the incompetence of government, especially when it greatly expands and when it uses hocus pocus to disguise what it is actually doing. Let us remember all of this happened some 30 years after the tax code was “simplified” in the 1980s under the Reagan administration. Still, it hasn’t become simpler or cheaper for the average taxpayer.
“Simpler” Means You Pay More
Back in 1980, the average tax fee collected by H&R Block was $27.36. As of last year, some 35 years later, it was $215.06, the giant tax advisory service said. That is an increase of some 700 percent. Certainly inflation has driven up prices, but it hasn’t been 700 percent.
Given the insanity of our tax system, tax preparation services have become a boom industry in America. Most taxpayers are paying some professional or use some computer aid to file their taxes. Doing it yourself, many people believe, would just be too dangerous.
So what is to be done?
A Call for Radical Reform
I believe we should junk the current system of different brackets, charges, deductions and God only knows what else. We should replace it with this:
*A Flat Tax on individuals, at a low rate, on everything and everyone. No deductions.
*The abolition of the IRS, with all its fearful power and snooping.
*A constitutional limitation on the government’s ability to spend and tax.
*Zero based budgeting. None of this “well, we spent x-amount last year so now we’ll debate how much more to spend this fiscal year.”
*Sunset provision for all non-essential government departments. Every 10 years each department must justify its existence or it is gone. The goal is to have less government.
*An immediate cut in defense spending, followed by the slow withdrawal of the United States from many of its non-essential defense treaties. If, for example, most European countries don’t want to spend money on defending themselves, that’s their business. Just don’t ask the U.S. to pay their bills.
The goal is for the government to spend and tax much less. The goal is to get less government. The goal is to make April 15th a day to spend time on things that matter most to us and not on filing a tax return.