With tax time upon us many of us are turning our attention towards income taxes. But it’s important to remember that income taxes are just a small portion of the total taxes we pay.
Did you know that the IRS employs over 100,000 people and has a 2005 budget of $10.674 billion? Talk about a waste - $10 billion spent on making sure we pay our taxes based on the almost indecipherable tax code and tax law. There are property taxes, TIF taxes, sales taxes, gas taxes, entertainment taxes, hotel taxes, vehicle taxes – heck – there are even taxes be paid on the tires of mobile homes! Many taxes are even disguised. Some, such as the tolls you pay on the roadways aren’t as hidden. Some, like the prices of certain goods, include an increase to pay import taxes.
In short, we Americans are taxed to death. By the time we figure in all the taxes we pay both directly and indirectly we end up keeping about 25% of what we earn. The rest goes to taxes in one way or another.
This has led to an overabundance of funds to local, state and federal governments. Every branch of the government will tell you that they’re under funded, but the truth is they’re not spending properly. If government budgeting were done by someone like you or me we’d find ways to cut the fluff (or pork as it is called) and run the government more efficiently.
Here’s my first proposal: a flat tax with no loopholes or deductions. Every American -man, woman, child, charity, company – everyone is required to pay the federal government 25% of their income. Someone that earns $1000 a year would pay $250 and someone that earns $1,000,000 would pay $250,000.00. The key is that there would be no deductions and no loopholes – everyone would pay the same amount – ¼ of their annual income.
The first thing that a flat tax would do is eliminate the need for 90% of the IRS (by cutting the IRS by 90% we’d realize an immediate savings of almost a billion dollars). Multiply that by years or even decades – the savings would be huge. True, almost 100,000 people would be out of work but they could certainly find work elsewhere in an economy that is booming because people are allowed to keep (and spend) more of the money they earn.
The second thing that a flat tax would accomplish is fair taxation – everyone pays the same percentage. There would be no more claims of “corporate loopholes” or the “tax shelters for the rich” – everyone would pay their share whether it is $250 or $250,000.00
The system would take some getting used to (at least for the first few years) as the details are sorted out.
The key to the system, though, is that the 25% is ALL we would pay in taxes. There would be no sales tax, gas tax or even community/local/state income or property taxes. Every dollar that the states or municipalities need would come from the 25% that we all pay.
With every US entity having to pay a full 25% of taxes would result in an income to the federal government of about $3191.5 billion (at the current taxation rate the federal government isn’t projected to take in that amount until 2011). The excess would be passed down to the states and from there the local municipalities.
Once we have the details ironed out we could, as a nation, adjust the flat tax rate up or down as necessary but again – each and every American citizen and entity would pay the same ¼ of their income. The system could not be fairer.
The poorest will argue that they can’t afford 25% (they’re currently paying less than 10%) and the richest will argue that they will be paying a disproportionate dollar amount (which they would be – they would be paying more in real dollars than poorer folks but the percentage paid would be the same).
The bottom line, though, is that our current tax system is horrible and eats up far too much of our income. We need to streamline our government and budget for it the same as we budget for our own households. No more “black budgets” going to unknown projects, no more pork and no more loopholes.
Let’s all stand up and pay our fair share of our government’s real operating expense.
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