Monday, February 27, 2006

Let's Put the Tax Code Where It Belongs

... in the trash.

The Internal Revenue Code is long. In fact, "printed 60 lines to the page, it would fill more than 7500 letter-size pages" according to one source. There is craziness abound in this abomination of economic freedom. One such example is the "double-taxation on dividends" which spawns from corporate income taxes that are included in the dividend and then are compounded when the individual recipient pays dividend taxes. This is why President Bush pushed hard for its elimination back in 2003.

As you can see, compliance with this bohemoth tax code is all but impossible. This may seem farfetched, but let's take a look in recent news shall we. A story erupted with a press release from H&R Block (h/t: TaxProf, the nation's largest tax preparation firm, saying:
The restatement pertains principally to errors in determining the company’s state effective income tax rate, resulting in a cumulative understatement of its state income tax liability of approximately $32 million as of April 30, 2005.
That's right, the company that promises to get you the maximum refund guaranteed can't even get its own taxes right. That doesn't bode well for middle-aged single mothers who sit at home for a week straight at the beginning of April filing their tax returns and praying they don't get audited.

According to the Tax Foundation, compliance costs for the Federal Income Tax alone are $265.1 billion or 22% of receipts from the tax, which come out to around $1.2 trillion. They project that taxpayers will spend about 6 billion hours complying with the tax code this year. Even worse, however, is what is coming -- by 2015, it is projected that compliance costs will grow to $482.7 billion, or nearly half a trillion dollars!

Then there is the Form 1040, otherwise known as the Individual Income Tax Return. MarketWatch has the "Form 1040 lines that lead to the most mistakes". Now, mistakes are always a bad thing, but on a tax return form, they can ruin one's life. (h/t: Club For Growth)

As I've been paying taxes for only a few years now, I really don't have much to complain about. Nevertheless, does it really make a difference? We're talking about money we should gladly give up. It pays for roads, national security, the amazing feats of science going on daily at NASA, and much more. However, when it takes the average American (between one day and one hundred and fifty years old) over 21 hours to file income tax returns, people are bound to get upset. In the same way that nobody likes waiting in line at the Department of Motor Vehicles, nobody likes waiting in line at the post office that second week of April every year.

Reform is badly needed, and not that paper-thin reform from the President's Tax Panel which simply suggested that we abolish the AMT. No, we need to abolish the AMT, payroll taxes, income taxes, estate taxes, gift taxes, and the whole lot of 'em. One, simple tax is all that is needed for the federal government to bring in all of its revenue. That tax is the national consumption tax, or FairTax.

No comments: