Income Tax Madness

I mailed my extended 2006 income taxes yesterday on the October 15th deadline. There was a waiting line to get into the parking lot. Inside there was a line of 25 individuals, most mailing their taxes. The air conditioning was out. The Automated Postal Center machine was "down" with a Postal employee leaning over the open chassis, poking at this gear or this scanning element.

The budget for the IRS is about $11.5B with 115,000 government workers employed! Americans have the dubious distinction of having the most complicated income tax code on the planet. The number of hours spent by many people is huge. An entire industry supports completing and filing income taxes under this hugely complex system. The fact is that if you are fairly productive and successful it is very difficult, if not impossible, for you as a layman to complete your own taxes.

The U.S. is losing the battle for global capital due partly to the fact that our corporate income taxes are the 2nd highest in the world. France, that bastion of socialism and the 35 hour work week, has lower corporate taxes that the U.S.! This high tax rate is an added cost to goods and services that we export, making us less cost competitive in the global economy.

There must be a better solution. There is. We should eliminate the corporate and personal income taxes and replace it all with a national consumption tax. Rebates for comsumption up to a certain level can be provided monthly to ensure that the tax is not regressive for lower income families. No complicated filings, no IRS, no loopholes for special interest, no machinations of any kind.

Large amounts of federal and state revenue would be saved by eliminating the IRS and its state counterparts. Investment would be encouraged and U.S. exports would be more competitive enhancing the economy and job creation. Taxing wages and investment income is a huge disincentive to risk taking and innovation, which powers the economy and creates jobs and wealth for all.

Liberals hate this idea of replacing the income tax with a consumption tax because it limits their ability to confiscate an increasing percentage of wealth from the productive and successful and buy votes with it with all others. In other words, it's fair. But for all the reasons listed above it is such a positive and elegantly simple solution it commands serious consideration.