If, like me, you’ll be up late tonight finishing your taxes, you already know how frustrating the current tax code is.
Filled with 68,000 pages of arcane incomprehensible regulations, the tax code is mysterious to all but the wisest of accountants.
One study found that almost 40 percent of callers asking questions of the IRS were either given incorrect information or no answer at all.
It is a bad precedent for democracies to be passing laws that are so complex as to be virtually impossible to follow them.
Besides generating vast amounts of confusion and headaches every April, the system is also grossly inefficient.
The U.S. economy spent roughly $500 billion last year complying with our government’s tax code; this amounts to roughly 4 percent of the entire economy being wasted on tax preparation and schemes to reduce tax obligations.
We spend roughly as much on complying with tax code as we do funding the military every year, clearly our system is broken.
This is why I support a complete overhaul of the tax code. We should replace the monstrous beast that is the present income and payroll tax system with a national sales tax.
There are numerous benefits to this system. For starters, a national sales tax would be simple. At this point, the average person pays the government roughly a 23 percent tax level through many different taxes including: income, capital gains, Social Security, and Medicare taxes.
Under the Fairtax national sales tax proposal, you would simply pay that 23 percent at once whenever you chose to buy something. When you get paid, if you earn $10 an hour, you’ll get 10 dollars per hour, not some substantially smaller fraction of that.
Instead of being forced to pay taxes in an arbitrary manner, the Fairtax allows you to voluntarily pay tax at the level you choose. If you desire to consume tons of products, you will pay more tax, while if you aid the economy by saving your money, you will have a lower tax burden.
This proposal would encourage people to save their money rather than spending every last dollar they have. Seeing as how the national savings rate has been negative for the past few years, it would be a great help to the economy to encourage saving rather than reckless consumption.
Dumping the current tax code would also encourage investments in our nation. Foreigners face high taxes and burdensome regulation if they desire to build businesses within America.
Eliminating corporate taxes and the employer portion of the Social Security tax would make investing in America very enticing for a foreigner. This would reverse the terrible outsourcing trend, bringing jobs and opportunities back into America.
Another nice perk of the Fairtax: The underground economy would have to pay their fair share of tax. Drug dealers, pimps and madams, for instance, don’t report their incomes to the IRS, but would face the Fairtax when buying their Bentleys.
The Fairtax is also as equitable, if not more favorable for lower income people than the current system. The new tax system would automatically refund taxes paid up to the poverty line, so all the essentials of life could be purchased entirely tax-free.
The rich who chose to squander their gigantic incomes on themselves would pay the lion’s share of taxes, while wealthy people who gave their riches to charity would not face a significant tax burden.
Our income tax has turned into a Leviathan. It’s time to abolish the IRS, and replace our preposterously complex tax code with a simple, transparent and fair tax that encourages saving and investment within our nation.
Ian Bezek is a sophomore economics major. His column appears Mondays in the Collegian. Letters and feedback can be sent to firstname.lastname@example.org.