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Gifts for all occasions in the Galleria! The "What is the Deal?" Deal-of-the-Week: Overstock.com Books, Movies & Videos April 10, 2005 Annual Bloodletting By Jan A. Larson Have you finished your federal income tax return? If so, did you enjoy the experience? If not, why are you procrastinating? April marks the time of year when all working Americans go through the annual ritual of gathering paperwork, scrounging for receipts, breaking pencils, installing software and/or scheduling a visit with their accountant in order to complete their tax returns. Our tax system is "voluntary" in that each business and individual must tell the government how much tax they owe. This, plus the fact that each business and individual must decipher an incomprehensible tax code in order to determine how much tax they owe results in billions of dollars in uncollected taxes each year. This is, of course, insane. The amount of time and money spent by individuals and businesses complying with the tax code is enormous. Americans for Fair Taxation estimates that in addition to the $8 billion annually required operating the Internal Revenue Service, the tax compliance costs result in a $250 billion drag on the U. S. economy. The U. S. Tax Code is one of the most outrageous monstrosities to ever emanate from inside the Washington Beltway. If that wasn't bad enough, it gets worse every year. More tweaks, more rules, more loopholes. Every change that our esteemed Congress makes to the tax code benefits some at the expense of others. One could argue whether tax breaks are warranted for having children, owning a house or buying a hybrid car. Chances are that most people would argue for whatever provisions of the tax code benefit them and against those that don't. The fact of the matter is that no tax credit, deduction or loophole is fair. Many, such as tuition tax credits and the home mortgage deduction are plain and simply examples of social engineering. The Congress decided that going to college and owning a home are good things (and by extension not going to college or not owning a home must be bad). There is a very sound argument that the purpose of the tax code is to generate the revenue needed to operate the government. If that were in fact the case, there would be no social engineering provisions in the tax code. Obviously, Congress has seen fit over the years since the 16th Amendment was ratified to add provisions to the tax code to encourage behavior or, more insidiously, to award favors to various constituencies. Politicians often talk about the need for people, particularly the "rich" to pay their "fair share" of taxes. What is "fair?" For the year 2002 (the latest year for which data is available), the top one percent of taxpayers (the group most often cited as the main beneficiaries of the Bush tax cuts) paid 33.7% of all income taxes collected. The top 50% of earners paid 96% of all taxes. Fair? You decide. A truly "fair" tax would not make distinctions among taxpayers that own a home and those that don't. It wouldn't provide credits for people with children at the expense of those without. A fair tax would eliminate loopholes, breaks and preferences for the few. It would not place an undue burden on those at the bottom on the income scale and would capture tax from the broadest possible base including ill-gotten gains. There would be no deductions, exemptions or credits. There would be no alternative minimum tax. A fair tax would promote economic growth and would remove the burden of tax compliance from American businesses and individuals, making April 15 just another day. The President has made reforming the tax code a priority of his second term. While the idea that our Congress would be inclined to undertake a much needed, but politically difficult wholesale rewrite of the tax code, bills have been introduced in both the House (H.R. 25) and Senate (S. 25) that would do just that. The Fair Tax Act of 2005 would accomplish the goals of changing the U. S. tax code from one of astonishing complexity riddled with breaks, favors and preferences for some with a tax system that is perfectly fair and promotes economic growth without burdening the poor. If you are a taxpayer, you owe it to yourself this April to read about the Fair Tax at http://www.fairtax.org . Then contact your congressman and senators and tell them to support the Fair Tax too. -- Send feedback to the author. The "What is the Deal?" column will appears weekly on the Pie of Knowledge website. Guest submissions are welcome and encouraged. To submit an article to "What is the Deal?" click here. To subscribe to the "What is the Deal?" mailing list and receive early notification when a new column is available, click here. The Pie of Knowledge will never, ever divulge email addresses to any third party for any reason unless so ordered by a court of law. Contributions to the Pie of Knowledge are greatly appreciated. 
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