If you spent 6.1 billion hours doing something, you would think you would have created something most ingenious.
Ironically, that’s how much time American taxpayers spent this year fumbling through stacks of confusing IRS forms. Americans spend about $300 billion a year in tax-preparation costs traversing a mind-bursting 3.4 million word tax code.
The net effect of this archaic tax system is not only its compliance cost, but it ultimately punishes companies for being successful and discourages them from hiring. Taxing our corporations and businesses is a giant hoax. Taxes and tax related costs paid by our companies are simply passed on to the consumer.
Those being impacted most from corporate taxes are the poor who have less to spend. The best way to protect the poor (and the middle class) is to ensure they have good paying jobs and keep more of their hard-earned money. It is estimated if corporate taxes were eliminated consumer prices would be reduced by 25 percent. This would vastly improve the quality of life for all Americans.
Fortunately, some fresh thinking has the potential for turning the onerous U.S. tax code into an engine for job creation and to put millions of our people to work. These ideas can be implemented quickly and thus be a positive force in difficult times.
The two leading options for tax reform are the flat tax and the consumption tax. Both would raise $2.4 trillion, the current level of tax revenue being collected, while vastly improving America’s productivity and competitiveness.
The flat tax would be filed on a postcard-sized form. The only deductions contemplated would be for charitable contributions, child care and healthcare costs and mortgage interest, which politically are very popular with most tax payers.
According to the Heritage Foundation, adopting a 17 percent flat tax “would lead to significant improvements in U.S. economic performance after the first 10 years of its implementation. Specifically, this new tax system would lead to 3.8 million more jobs by the end of the tenth year; add $545 billion to gross domestic product in the tenth year alone; increase the level of personal savings by 50 percent; raise non-residential investment by 9 percent; and expand the nation’s capital stock from $17.8 trillion in 2014 to $19.1 trillion.”
The flat tax eliminates the tax bias against savings and investment, thereby ensuring better economic performance in a competitive global economy.
The consumption tax is best characterized by the FairTax, a nonpartisan piece of legislation that abolishes all federal personal and corporate income taxes, as well as payroll taxes, estate taxes and capital gains taxes. In their place would be one simple 23 percent national sales tax based on what a consumer spends, not on what they earn.
Tax collection would be the responsibility of each state and imposed on all new purchases of products and services. It enables retirees to keep their entire pensions, refunds in advance the sales tax on purchases of basic necessities up to the poverty level, removes the tax advantage of foreign produced products sold in America, and brings transparency and accountability to tax policy.
Best news of all, it abolishes the IRS.
Under the FairTax the rich naturally pay more.
What the two tax reform programs have in common is they take the uncertainty out of business planning allowing business owners to reduce their high marginal tax rates so they are encouraged to take more risk and create more jobs.
Both tax plans would safeguard Social Security and Medicare.
According to Harvard economist Dale Jorgenson, tax reform would boost national wealth by nearly $5 trillion, by increasing the value of all income-producing assets. Imagine how this wealth would filter through the economy in increased share values and investment capital.
We must incentivize our entrepreneurs to get into the game. There is a faulty perception that business owners keep all the money they make to feather their own nests. This is a myth perpetuated by people who have never started or run a small business.
The current tax system rewards cronyism and penalizes entrepreneurs and small business. Enacting a new tax code would be a boon to these over-taxed, hard-pressed job creators.
If the objective is to stimulate private-sector led economic growth, increase tax receipts, simplify compliance, close loopholes, and promote fairness then it starts with adopting a totally new approach to the U.S. tax code. Options are on the table that every tax payer – especially job seekers — should embrace.
© 2015 Moneynews. All rights reserved.