sunset from behind the wire

sunset from behind the wire

Thursday, May 23, 2013

United States Code Title 26 - Reimagined

Today we see the head of an IRS Division standing on the Fifth Amendment before Congress because she has criminal liability for attacking the President's political enemies under the guise of USC 26. It's time to look at the tax code itself and to take away the ability for any president or potentate to wield it like a sword against political rivals.

The Internal Revenue Code of the United States of America (Title 26) is divided into 9834 sections. It's over ten times as long as the Bible (with none of the 'good news'). At nearly 4 million words, the U.S. tax law is so thick and complicated that businesses and individuals spend more than 6 billion hours a year complying with filing requirements, according to a report Wednesday by an independent government watchdog. Since 2001, Congress has made almost 5,000 changes to U.S. tax law. That's an average of more than one a day.

"If tax compliance were an industry, it would be one of the largest in the United States," says the report by Nina E. Olson, the National Taxpayer Advocate.

Context and Precedence
According to the CCH Standard Tax Reporter, the U.S. tax code began with about 400 pages in 1913. Twenty-six years later there were still only 504 pages, but then it exploded to 8,200 pages by 1945. 
The tax code reached 60,000 pages in length before the end of the first term of President George W. Bush, and it reached to over 72,500 pages by the end of the third year of President Barack Obama’s first term of office. 
The total now exceeds 74,000 pages.
  • The Code is Too Complex.
  • The IRS expands like a feeding amoeba as Title 26 expands.
  • The Code feeds corruption. There are over 15,000 registered lobbyists in Washington DC. The majority are lobbying over changes to the tax code. $3.2 billion was spent on lobbying in 2008. The US Congressmen on the House Ways and Means Committee received $55,157,458 in donations during the 2008 election cycle.
  • The Code is often used to tax morality and marginalize success rather than simply to raise revenue.
What is the Solution?

A flat federal tax on income irrespective of how much you make with no provisions for mortgage interest, no earned income credit, no exemptions for having children or paying medical bills. Just a flat tax. You earned this -- you pay that. I realize that this would be unpopular for the 49% of Americans who currently pay no Federal Income Tax, or people who bought homes planning on deducting mortgage interest. Charitable deductions are no longer tax free. Married and unmarried pay the same amount. Capital gains are income. All income is taxed equally. Your taxes would be simple to calculate and predictable. Vast federal bureaucracies would be reduced to small entities (saving money and your peace of mind).

QUESTION: What about the poor?

Answer: They live in the country and should bear the financial responsibilities for running the country too. Much of the 74,000 pages of current tax code is dedicated to protecting the rich, who have armies of attorneys working on ways for them to pay less. (figures lie and liars figure) I believe that the poor would be better off with this sort of system that levels the playing field.

QUESTION: What about loopholes? 

Answer: A loophole is a tax break that doesn't benefit you. If there are no breaks for anything, there are no loopholes.

QUESTION: What should the tax rate be? 

Answer: How much does the country need to take in to pay its bills? If it's 20% then the flat tax would be 20%. ObamaCare: If the nation wants it, maybe their tax goes up by 10% so that the uninsured would have coverage... You'd really feel the Obama charity in your pocket book rather than having it hidden from view.

China charges its citizens 18%, for example.

Imagine a tax code under 100 pages in length. Imagine the disaster that would befall the vast armies of CPA's and tax attorneys who make their living on the 74,000 page tax code who would be forced into another line of work. Imagine all of the IRS employees who would have to go out and find a 'real job'.

...You may say that I'm a dreamer, but I'm not the only one...

It's simply the only way to fix the problem. 

Or do nothing. By the end of this decade, the Tax code will likely exceed 100,000 pages with the ObamaCare disaster requiring more and more "adjustments" to find the money necessary to pay for the nation's healthcare.


6 comments:

  1. Dems are petrified about the IRS abuse of power. They know that sword cuts both ways.

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    Replies
    1. One way to fix the problem would be to simply re-do the tax code and de-fang most of what the IRS could use as a hammer against either side of the political equation.

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  2. I'd agree, flat tax, abolish the IRS... simple...

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  3. I believe the right flat income tax should be 9%. Though, we could start at a graduated 9 -10-11-12, and we could phase out the higher rates. There would be little incentive to not-move-into-the-next-bracket when its only a few points. But with no deductions - 9% is all that's needed. If 15% of EVERY DOLLAR EARNED is what's needed to run a government, the government is too big.

    I believe if we have an income tax, there should be ZERO tax on Capital Gains up to, say, $10 million. And then the rate should be nominal - 2%. That would get capital flowing - which is part of the current problem.

    And ZERO income tax for corporations. Everybody who ever worked in a business knows that its simply passed on to the customer, and "income" is hard to measure (and easy to cheat) make it a sales tax. Yes, the sales tax also raises prices - but its up front, and its a usury type tax.

    The problem would be during the change. For example, as part of the 49% that pay no federal income taxes....I pay well over 10% of my income in other taxes already. So maybe a phasing in of no deductions. Or...maybe I live in the wrong state! But people in my state are used to paying high taxes, and then deducting them, the state will have to change...

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  4. The details can be worked out. If you went to a flat tax TODAY you would also need to factor paying off the massive debt that Obama has run up. There is no way that you could do it on 9% and pay for the ObamaCare juggernaught.

    But that being said, I think that your idea is right on target.

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