Is a Simple Flat Tax Really that Simple?

HR25, the Bill currently referred to the House Ways and Means Committee (http://www.opencongress.org/bill/111-h25/show) "strives to repeal the income tax, employment tax, and estate and gift tax, and to replace them with a national sales tax at a rate of 23%. It sets forth provisions for the states’ collection of sales tax revenues and the Treasury’s handling of the remittances of such revenues while setting up two new tax bureaus in the Department of Treasury in the place of the IRS."

This bill does everything we need. It hugely simplifies the tax code while still funding our government. It removes the potential of influence from lobbyists who seek special favors within the tax code. It lifts the tax burden from the lowest income citizens without prejudice.

And most powerfully of all, it repeals the 16th Amendment and returns April 15 to the citizens as just another day.

Nori of WA 9:06AM April 30, 2010

Great Question, but I like the idea of just being FAIR. Old fashioned? Maybe but that's not all bad.

I've read the book, I've studied the reams of research, I've attended a few of the FairTax events and yes I've wated Mike Huckabee, Glenn Beck and Dick Army and all those guys, But all in All the Fair Taix is the better of the three.

My Vote goes to the FAITAX!

You do the math..

Steve Arnold

Loganville, Ga.

Steve Arnold of GA 8:43AM April 30, 2010

Good question, and the answer is no. Flat tax advocates (Glenn Beck is one) actually say: "take the total amount of your income, apply the flat rate, sent it in, and you're finished," or something similar. But, no, that is not how a flat tax would work. Any taxpayer must be permitted to deduct costs of producing income; taxing gross revenues will not work and would be grossly unfair.

And that is the rub for the flat tax. Complexity of the income tax system arises in treatment of deductions - not in the number of different tax rates. Differing tax rates may be unfair, or counter-productive to economic growth, but they are not overly complex in comparison to rules for handling deductions.

If a flat tax states a single, general treatment of deductions, businesses will have to ask clarifications or they will drive a truck through the loophole created by the general rule. If the IRS overly restricts the nature of deductions, businesses can be destroyed.

Other flaws of the flat tax idea: (1) no legislation is proposed, so it is only a concept with no specifics to examine; (2) it remains a tax on earned income, which is the key to middle class prosperity, so the flat tax discourages work and production, which suppresses the middle class; (3) everyone still has to file an income tax return, which means 150 million returns filed every year; (4) the "tax gap" of $450 billion or more annually will remain uncollectable; (5) the underground cash economy will continue to evade paying its fair share of taxes; and (6) taxpayers will beseech Congress for relief from limitations on deductions, so the flat tax would become very complex again, as has occurred in past years.

May I add a few words on the VAT (value added tax)? A VAT is neither a sales tax nor a consumption tax. It taxes production, so it reduces production an destroys jobs as the income tax does. It is largely hidden from the taxpayer, so it is especially destructive of the taxpayers' best interests.

Thanks for asking. U. S. economic growth is greatly burdened by the existing tax system, which is incapable of meeting federal debt obligations. We cannot afford to stay with the present wasteful system. Fundamental reform is an absolute necessity.

Wayne Jett of CA 12:43AM April 30, 2010

Average employee costs in China is $.48/hr; in Mexico it's $3.20/hr. In the US that average employee cost is $14.55/hr. We are either going to be subidizing a permanent underclass in this country (we can't all be CPA's) or we are going to wake up and realize the 800lb gorilla is our tax syatem! That is what drives our jobs overseas, and makes us criminals in our own country. Adding more exemptions only exaserbates the complexity,and the loopholes., allows Congress to pass out "fixes" to constituent problems, drives up the costs of goods, and corrupts the entire nation. According to the IRS Report to Congress 2009, the second largest industry in the US is now compliance with the tax code! What does it do to peoples spirits when lying is the basis of their tax system?

Right now we have 100% of the power, but govt has 100% of the control. We are slaves, paying a slave tax. That is not the legacy I want to pass on to my children. Our parents won WW2; this is our generations battle, the fight to gain liberty back for our progeny. A VAT will not accomplish this. A flat income tax will not accomplish this. The only way to remove the corrupting influence of the income tax from our society is to stop taxing directly, and tax indirectly. The Fair Tax is an American Tax; not a Europena VAT. It's eyes wide open people telling our govt enough already! We know govt costs money; heres how you can tax us. It taxes products made outside the US when they are shipped in, and products made in the US will not be taxed. This gives us a fighting chance. This will allow US to compete by removing the embedded cost of govt from the products we buy, allowing businesses to compete on price while preserving the work ethic so necessary in a free society. It will give us some measure of control over a govt spun out of control, bring jobs into the country using free market principles, and removes from the govt the ability to lord over US with no regard for decency or the rights of free men and women. I support the implementation of an indirect tax system such as the Fair Tax, as a replacement for all payroll taxes, income taxes, death taxes, and other excise taxes. What's your freedom and your childrens freedom worth to you?

James Tudor of IL 10:37PM April 29, 2010