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Comments by Ed Sarlls, III (esarlls3@yahoo.com)
Congressional District Leader (TX-22) for Americans for Fair Taxation
(www.fairtax.org, 1-800-FAIR-TAX)

What's wrong with the US tax system:

•   The current system is too complex.
  • Half of Americans need professional help to complete their tax returns.
  • In 1996, a Money Magazine survey of 45 tax experts resulted in 45 different wrong answers. Only a quarter of them came within $1000 of being correct.
  • Even the IRS gave out 8,500,000 wrong answers in 1993.
  • Over 20,000 pages of tax code and regulations.
  • 8,000,000 pages of forms each year - enough to circle the earth 28 times.

•   The current system is inefficient.
  • The IRS employs over 100,000 people. This is more than the FBI and CIA combined. It is also more than all but the largest 36 corporations in the United States.
  • Compliance costs the American taxpayers over $230 Billion each year. Nearly 30% of income tax revenues. For small business, compliance costs up to 7 times as much as the tax itself.
  • Another $200 Billion goes uncollected each year.

• The current system is unfair.
  • The payroll tax is the most regressive tax.
    • The payroll tax only applies to the first $70,000 of wages. Taking up to $10,000 a year from low and middle income families and a decreasing rate for wealthy families.
    • The payroll tax does not apply to non-wage income.
    • The payroll tax is taken from wages without any taxpayer control over how much or when they pay the tax.
    • 74% of Americans support a tax system without a payroll tax.
  • Deductions are also regressive taxes.
    • 75% of taxpayers are not able to itemize deductions.
    • Even if they could, the tax savings is proportional to the tax rate, giving high bracket taxpayers a larger tax benefit than low bracket taxpayers for the same economic activity.
  • Americans fear the IRS. Not because they don't want to pay their fair tax or because they are trying to defraud the system but because the system is so complex that citizens are governed by and penalized by laws they cannot understand.
  • Over 68% of Americans believe the current tax system is unfair.

• The system promotes and discourages the wrong behaviors.
  • The tax system taxes at higher rates economic activity that should be encouraged. This includes savings, investment, success, passing on wealth to your children, and building a successful business.
  • The tax system makes it more expensive to produce products in the United States than to produce them elsewhere.
  • The tax system favors imported goods over domestic goods.

• Loopholes benefit the privileged.
  • The tax code is filled with loopholes designed by tax lobbyists for their clients special interests.
  • There are more lobbyists registered in Washington for tax issues than for any other issue.
  • 85% of Americans support a tax system that eliminates loopholes.

How I think a tax system should work:

• Tax all consumption and tax it once.
• Tax it at a lower rate.
• Tax it fairly, without loopholes for the privileged and with protection for the poor.
• Tax it efficiently, with a minimum of compliance costs to taxpayers and administrative costs to government.
• No taxes on corporations - all corporate taxes will be passed to consumers anyway.
• No paycheck withholding.
• No consumer tax returns.
• Encourage savings and investment.
• Encourage job imports and product exports.

Why not the Flat Tax?

• The income tax has been simplified and flattened before. It always grows back.
• Taxing income creates the opportunity for political mischief.

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Visitor Number since 15-Apr-1999.          Updated 16-Jul-1999.
© 1999 Ed Sarlls, III (esarlls3@yahoo.com) Comments invited.
Opinions expressed here are my own and do not represent my employer, geocities or Americans for Fair Taxation.