Chapter 67 Our Insane Income Tax Code
The original Income tax code, a bit over 100 years old, was 400 pages. Today is now runs 70,000 pages! Originally the rate was a fixed 1% and only paid by highest income earners.
The 1935 form 1040 had 2 pages while the current form contains 100 pages of sub-forms and instructions!
It is estimated that the code results in 9 billion hours (that’s 9,000,000,000) to comply with the tax code and that equates to $400 billion in lost economic productivity In either lost personal time or the cost of paid preparers). This does not include the cost to fund the IRS which currently is running at $13+ billion.
The real problem with the tax code is that it has evolved as a result of special interest influence which creates a plethora of complexity to reward those interests.
The solution is relatively simple, but not politically feasible. The following suggestion is taken from one of my earlier posts as simple way to replace our current level of income tax revenue:
“You have heard several potential solutions to this issue and here is my suggestion:
An average flat income tax of (5%) on all gross income except for capital gains. My math could be a bit off here, but the rate stated should be close to working. I would segment this into five categories with gross incomes at or below the poverty level at 0% (currently $25,000 for a family of 4). I would not provide incentives for larger families). For incomes from $25,000 to $50,000 I would make the rate 2%, from $50,000 to $100,000 4%, from $100,000 – $250,000 6%, from $250,000 – $500,000 at 8%, and all over $500,000 at 10%. These rates would become the automatic withholding and there would be no deductions
The above would not change either SS or Medicare tax rates.
I would completely eliminate capital gains taxes. Instead I would propose an annual tax on wealth (assets minus liabilities). The proposed rates would be: 1% for under $500,000, 1.5% for $500,000 – $1,000,000, 2% for $1,000,000 to $5,000,000 and 3% for $5,000,000 to $100,000,000 and 4% over $100,000,000.
Also, a flat national sales tax at 2% on all business sales at retail. I would completely eliminate corporate income taxes.
At this time, I would not suggest any change to the excise tax structure.
Note: I have done my best to ensure that the above would effectively replace the total revenue achieved by the current tax system and freely admit that the results may not be perfect, but you get the idea. These numbers can be tweaked to achieve the desired revenue results.”