Today’s tax laws grew out of one of two efforts: 1) the desire to raise revenue for government activities, or 2) to "stimulate" certain parts of the economy. All of this has happened over years, and every time Congress attempts to simplify or improve the process, they add another layer of rules and confusion. Everyone keeps saying, "there’s got to be a better way."
Allow me to offer a proposal: A flat tax. This is not an original idea. I used to hear my mother suggest this when I was a boy. I even read about the basic concepts that gave life to this idea in the Old Testament of the Holy Bible. The biblical concept was that you gave a flat 10%, regardless of what you made, back to God since all things originate with Him. On occasion, I hear politicians promoting the concept of a flat tax too.
If you think 10% is too low, remember that the early part of this century is when income taxes in America came into existence. Congress debated putting a cap on how high income taxes could be raised (10% was the suggested amount), but decided not to because common wisdom said no one would ever do anything so outrageous as raising taxes to 10%. Today, big-government advocates think allowing someone to pay less than 20% is outrageous. My, how things change.
The graduated tax scale that dominates our current tax system says that if you are successful you will be punished. Why should someone pay a higher percentage of their income to the government if they have worked hard and been able to create a larger financial return for their efforts? This goes against the concept of free enterprise, which was one of the foundational building blocks of the United States. The only person that this makes sense to is someone who is on the government dole, who wants more of your money so they don’t have to work for their own, or to a politician trying to get votes by promising to give more money to anyone who will vote for them. "Paying your fair share" in taxes, to borrow a phrase politicians like to use today, should be based on paying the same percentage, not an increasing percentage as you make more.
The very wealthy are able to afford the services of high priced lawyers and CPAs who know how to hide large sums of income in tax shelters, providing people a way to keep from paying the higher tax brackets. The middle class, not being financially able to pursue this course, ends up bearing the brunt of the financial burden. If all the loopholes were to be eliminated so there were no deductions and everyone paid the same percentage, this would be a radical overhaul of the tax system and would be truly fair.
The federal government should have a flat tax of ten percent with no deductions. The federal tax would be assessed against personal and business incomes only. This would provide the funds needed to handle the responsibilities of the federal government. For those who think enough revenue would not be generated, don’t forget that there would be cost savings through the reduction in the number of government accountants that would be needed. Let’s not forget all the IRS agents that would be gone, along with an end to paying their benefits and pensions. Don’t forget the savings realized through no longer needing to print up the complicated tax forms and all the pamphlets needed to explain what to do with those forms.
Lowering the tax rate has been proven on several occasions to increase government revenue. This is because the wealthier taxpayer is more willing to pay the lower taxes rather than hide their money. If you had the choice of either hiding your money to avoid the government taking most of it and not having personal access to it, or paying a lower tax and freeing up your cash to use as you see fit, which would you choose? When John Kennedy lowered tax rates, the revenue generated provided the cash reserves that funded the Lyndon Johnson "Great Society" projects. Ronald Reagan lowered taxes and jump-started the economy that produced the economic boom of the 1980s. Imagine what a considerably lower, flat tax would do for our economy.
These changes should be written as a binding law, blocking congress from changing the percentage, or making any exceptions to the zero deductions aspect. In conjunction with the simplification of the tax code, the government should be strictly required to work within the financial limits of their revenues. (Obviously there would have to be exceptions, such as in the case of war) This would force maximizing the results of money spent since there would no longer be this seemingly endless stream of cash drawn on the American people via tax increases. If there isn’t enough money for all the special pork projects or welfare, then these efforts should be left to the states and let the states decide if they wish to continue those particular programs. The Constitution was not written with the idea of providing endless financial support to the various states and their people.
Removing this burden from the federal government would put the burden of raising revenue for extra government activities at the state level where it belongs. The state governments would be held more accountable for any tax increases and the population within a particular state would be more fully aware of how their tax dollars are spent, with more power to say how those dollars would be handled.
Jeff Adams
July 6, 1999