Taxes are a necessary evil. Government must be paid for. The overtaxing of populations has been a reason for popular revolt for as long as recorded history. Our country separated from England because we were being taxed without a vote in Parliament. As our country grew, more tax revenue was needed, and income tax was legislated in 1913. My grandfather, born in the 1800s, never accepted the need for it.
From comments I’ve collected in the past few years, the TEA party movement, and the recent rhetoric on the campaign trail, it seems that no one is happy about how our government is funded. Even accountants bemoan the amount of time necessary to become proficient in advising clients how to navigate the tax code and not pay more than their fair share. Then there is the question of what the heck is their fair share anyway?
I suggest that the next president launch a commission to rewrite the Income Tax code. If stakeholders collaborate, I believe that the code could be made more understandable as well as easier to amend. It would require an overhaul and update of IRS data systems as well. The current tax code and the less than optimal data system currently in use make it much easier for individuals and businesses to avoid tax on some income. The Russian government, despicable in some ways, has none the less pioneered in collecting taxes through the use of data systems as the taxes are levied.
Of course, I have suggestions for what should be included. First and foremost, the code should be structured to grow the economy. That said, the majority of Americans need to have discretionary income so that they can be consumers of goods and services beyond their basic needs. Investment income should provide jobs as well as consumption of goods and services. Our national value of charity means that tax structure should encourage the not for profit sector.
There has been a lot of talk about the need for a basic income which would be paid out of tax dollars. I disagree with that premise. I believe that we should build on an idea in the most recent tax bill and make the standard deduction equal to a measurement like the ALICE (Asset Limited, Income Constrained, Employed) income measure used by United Way across the country. You can GOOGLE it. This would mean that the income needed for the most basic needs where you live would be tax-free. It would encourage employment. Tax withholding would start only after the standard deduction was met.
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I would like to see a VAT (value added tax) in the business sector. It would also mean that the price of an item would be firm; no tax would be added on. Tax would be added in increments, and it would be much simpler for an individual or business to calculate their costs if a raise in taxes is proposed.
We should allow the deduction of local property taxes from incomes over the ALICE threshold because they are the only way local and state governments finance infrastructure improvements. It is also a way to allow taxpayers to have a say in how much they are willing to pay for things of common benefit to their local area.
I leave it to statisticians, accountants and other stakeholders to determine tax rates, but I do think that long term capital gains rates should give a tax advantage to the number of years the investment is held. Short term stock trading should have tax rates comparable to income tax. This would allow companies to concentrate on long term strategy and employee well-being.
Taxes collected should, of course, be equal to the amount the government must spend to deliver the goods and services most people want. I’ll leave my thoughts on government spending for another day, but I’d welcome comments on the idea of a less cumbersome tax code and more efficient IRS.