Taxes, and tax code changes

With Mike Huckabee forcing the GOP contenders to no longer be considered "top tier", rather "top-five" contenders, it is also bring more discussion about the Fair Tax. Now, I must admit that I am a bit of a fan of the Fair Tax, which is why it upsets me when I hear folks like Romney insist time and again that the Fair Tax would mean a 33% national sales tax, and how it would hurt the retired folks who no longer pay income taxes... Let's stop the political dribble, and discuss real tax reform.

For starters, the Fair Tax will require no more than a 22% National Sales tax. This will be stand alone, no income tax at a national level. The lower rates will still fund the federal government for a few simple reasons:

1. Elimination of defunct government programs/departments/programs


2. The hidden taxes currently built into the current price system will go away - the prices will have to drop as consumers will be outraged to see a corporate profit increase of unreasonable amounts


3. We no longer will have to subsidise those failing to pay income tax. This is a system where more people will be paying into it, so the rates are lower with the same results

The tax code is currently so complicated, with loopholes, tax breaks, multiple taxes... for instance, if you overpay your taxes and your tax write-offs exceed $10,000, the money that was taxed once and then returned to you is taxed a second time the following year as income. There is a tax on savings, tax on dying, even a tax on selling your home too soon... Every aspect of our current tax code suggests that the government wants to penalize growth and innovation.

Imagine a tax system that would either eliminate the entire tax system, levying a one-time tax of 20-30% on income, or a tax system that has a 0% income tax and 22% sales tax. No loopholes, no tricks, no special deductions. Everyone pays tax one time on the same dollar.

The CATO institute suggest a flat income tax, eliminating all other tax loopholes. They suggest a maximum tax rate of 20% for maximum economic advantage. In time, this tax rate will provide economic growth rates upwards of 7-10%. Similar results would be seen with a Fair Tax, but the Fair tax has one HUGE obstacle: the Constitution.

During the era of the new deal, there was a tricky little amendment to the constitution that allowed the federal government to collect an income tax. The Fair Tax will never succeed unless we have a constitutional amendment to repeal the federal income tax, and replace it with a sales tax... furthermore, it would be almost necessary to constitutionally ban a federal income tax to ensure that the government does not hit us with BOTH! This is the reason that the CATO institute has chosen not to endorse the Fair Tax... the means to achieve the intended purpose are too great.

So as we move forward with the Presidential nomination process, we need to listen very closely to those with the biggest ideas on taxes. Senators Obama and Clinton have promised to increase tax rates to those of the 1990's... That is upwards of 40% plus multiple taxes. The only effect of taxes this high are stifled economic growth, higher unemployment rates, and lower disposable income in the hands of the citizens (and thus a lower quality of life).

Who is your candidate of choice when it comes to taxes? How will they best spend my money? And how will they ensure that my money stays in my pockets, not their coffers?