I’ve done thorough blog posts highlighting the economic benefits of the flat tax, but I find that most people are passionate about tax reform because they view the current system as being unfair and corrupt.
They also don’t like the IRS, in part because it has so much arbitrary power to ruin lives.
But it’s not just that is has the power to ruin lives. That can be said about the FBI, the DEA, the BATF, and all sorts of other enforcement agencies.
What irks people about the IRS is that it has so much power combined with the fact that the internal revenue code is a nightmare of complexity that can overwhelm even the most well-intentioned taxpayer. Just spend a couple of minutes watching this video if you don’t believe me.
I’ve already shown depressing charts on the number of pages in the tax code and the number of special breaks in the tax law. To make matters worse, not even the IRS understands how to interpret the law. According to a recent GAO report, the IRS gave the wrong answers on matters of tax law more than 530,000 times in 2010.
Yet if you use inaccurate information from the IRS when filing your taxes, you’re still liable. To add insult to injury (or perhaps injury to injury is the right phrase), you’re then guilty until you prove yourself innocent – notwithstanding the Constitution’s guarantee of presumption of innocence.
Now we have some new information showing the difficulty of complying with a bad tax system.
A new report from the Treasury Department reveals that volunteers (who presumably have the best of intentions) make mistakes in more than 50 percent of cases.
Here are some key excerpts from the report.
Of the 39 tax returns prepared for our auditors, 19 (49 percent) were prepared correctly and 20 (51 percent) were prepared incorrectly. The accuracy rate should not be projected to the entire population of tax returns prepared at the Volunteer Program sites. Nevertheless, if the 20 incorrect tax returns had been filed: 12 (60 percent) taxpayers would not have been refunded a total of $3,996 to which they were entitled, one (5 percent) taxpayer would have received a refund of $303 more than the amount to which he or she was entitled, one (5 percent) taxpayer would have owed $165 less than the amount that should have been owed, and six (30 percent) taxpayers would have owed an additional total of $1,483 in tax and/or penalties. …The IRS also conducted 53 anonymous shopping visits during the 2012 Filing Season. Volunteers prepared tax returns for SPEC function shoppers with a 60 percent accuracy rate.
So here’s the bottom line. We have a completely corrupt tax system that is impossibly complex. Yet every year politicians add new provisions to please their buddies from the lobbyist community.
Wouldn’t it be nice if we could rip up all 72,000 pages and instead have a simple and fair tax system?
Sadly, tax reform is an uphill battle for four very big reasons.
- Politicians don’t want tax reform since it reduces their power to micro-manage the economy and to exchange loopholes for campaign cash.
- The IRS doesn’t want tax reform since there are about 100,000 bureaucrats with comfy jobs overseeing the current system.
- Lobbyists obviously don’t want to reform since that would mean fewer clients paying big bucks to get special favors.
- And the interest groups oppose the flat tax because they want a tilted playing field in order to obtain unearned wealth.
But there are now about 30 nations around the world that have adopted this simple and fair system, so reform isn’t impossible. But it will only happen when voters can convince politicians that they will lose their jobs if they don’t adopt the flat tax.
P.S. I’ll also take a national sales tax, like the Fair Tax, as a replacement. But since I don’t trust politicians, that option requires that we first replace the 16th Amendment with something so ironclad that not even Chief Justice John Roberts would be able to rationalize that an income tax was permissible.
[…] the way, I wrote “theoretically” because many taxpayers have no idea whether they are accurately complying. The tax code is too much of a Byzantine […]
[…] And click here, here, here, or here if you want to peruse my arguments for the flat […]
Flat taxes are not punitive to the poor and middle class and beneficial to the rich. Under a flat tax, the poor are still not technically subject to taxes. After a certain point, everyone pays the exact same rate under a flat tax.
[…] economist Dan Mitchell. “So here’s the bottom line. We have a completely corrupt tax system that is impossibly […]
None of us FairTax proponents likes to admit it, and maybe many don’t realize it, but realistically the only way a complete overhaul of the tax system comes about is if there is a severe depression and some influential people can convince enough citizens that this would be the solution.
As long things are okay, status quo remains.
Hordes of accountants and government bureaucrats have made lifetime choices and careers out of saddling the remainder of the population with this economic inefficiency. Add to that the nearly fifty percent of Americans who pay no taxes (or so they think, or don’t see unemployment, decreased wages, and European level opportunities in life as a tax) under the current system and you have a majority. They are impossible to unseat. The point of no return has passed on many fronts.
But, more importantly, the grand tipping point where circumstances in America no longer lead to the most competitive businesses in the world, that grand tipping point has also passed too.
The fair tax is superior because it eliminates the IRS. The national sales tax would be collected and paid at the point of purchase, processed through current state tax agencies, and forwarded to the Treasury Dept. Don’t overlook the foreign tourists paying our taxes on every purchase made in the US. This alone could exceed current income tax collections.