Holidays are wonderful, and most people look forward to and prepare for their favorite ones. You don’t have to work, you can spend time with family, or you can go on a vacation. On top of the immediate effects of a holiday are the joyous feelings of a shared experience with millions of other people.
There’s one day on the American calendar that is nearly the opposite. It’s certainly an experience shared by millions of other people, but instead of joy and relaxation it brings frustration and anxiety. Instead of being able to plan for an inevitable payoff like a vacation, you must carefully prepare for an inevitable payout. April 15 is just around the corner and tax day is upon us.
Besides simply losing money, paying taxes is a painful and aggravating affair. Tax forms are confusing, the tax code is complex and hiring someone to help you through the process is expensive. It’s no wonder that people hate the IRS.
Is all this effort and suffering really necessary? Of course taxation is a necessary and permanent part of life, but there must be some way to change our laws to make the whole process more efficient, less aggravating and fairer.
The number of taxes and national laws pertaining to taxation has exploded since 1913 when we enacted the 16th amendment. This allowed taxes to be levied on personal income, which was done to increase revenue for the federal government.
Since the enactment of the 16th amendment, the tax code has become absurdly complex and is over 60,000 pages long. This is a result of the politicians tinkering with the tax code to support special interests and lobbyists. This is one of the reasons why there is a virtual army of lobbyists surrounding Washington, attempting to curry favors from elected officials.
Extraordinarily wealthy people and organizations are able to avoid taxes because of the great number of deductions and loopholes that they have access to. So, even if many tax rates are increased there is not an increase in revenue. Corporate taxes also have a sneaky way of coming back to the consumers by being embedded in the prices without any kind of mention on your receipt. A lot of taxes we pay are simply hidden in what we buy, making the true cost of taxation ambiguous.
America badly needs to improve its system of taxation and there have been several ideas that claim to do this. One that has been fairly well hashed out, and has even been introduced to congress several times is what has been called the Fairtax.
Enactment of the Fairtax would require two major changes to the current system. First, all income, corporate, estate, capital gains, Social Security and Medicare would have to be abolished and then secondly replaced by a national sales tax that would have to be at a nationally uniform rate.
This major change in taxation would change the entire system in several notable ways. It would end the vast power of the IRS, making it redundant and unnecessary. The vast infrastructure along with the enormous numbers of accountants and experts whose sole function is to interpret and help customers comply with tax laws would be done away with. The time and resources that are used to comply with current tax laws are enormous. According to the estimations of a non-partisan organization, Tax Foundation, Americans spent $324 billion in 2009 for tax compliance costs. This is about 22 percent of total revenue. Taxpayers also devoted over a billion hours of their time to this process.
Having just a single consumption tax will open up the incentive to invest and save. This will also allow for more transparency in our overall tax system. When taxes go up you will know it by simply looking at your receipts. Lobbyists will lose their insidious power over our tax code. If you want to pay fewer taxes then you will have to refrain from excessive consumption. If you are wealthy and want a private yacht, then you will have to pay a hefty price. Taxpayers will have greater control over when and how they will pay their taxes, and April 15 will be just another day.
The Fairtax isn’t a perfect solution by any means and there are concerns over its implementation, effect and political feasibility. There is, however, a great public demand for a change in the system. Citizens and politicians should be addressing our tax problems without battling over whether they should be higher or lower. Maybe they should just be different.
JARRETT STEPMAN likes real holidays very much, evidenced by his excessive consumption of candy. Send him comments at jstepman@ucdavis.edu.
