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gar1976 · 09-07-2004, 11:27 AM

Here's an article discussing this same topic. The column below is copied and pasted, the link will be below the text. From the Oregonian.

Tax code fix? Look before giant leap
Tuesday, September 07, 2004
ROBERT LANDAUER
Review for a moment some of our federal tax system's most aggravating problems.

The rules are as impenetrable as jungle growth. The Internal Revenue Code is more than 21 megabytes long, with some 2.8 million words. Printed 60 lines to the page, it would fill almost 6,000 letter-size pages.

Costs of obeying the complex rules are staggering. In 2002 individuals, businesses and non-profits spent 5.8 billion hours and more than $194 billion complying with the tax code, the Tax Foundation estimated. "This amounts to imposing a 20.4 cent tax-compliance surcharge for every dollar the income tax system collects."

It costs lower-income taxpayers far more to obey the rules (4.53 percent of adjusted gross income) than those who earn more (0.29 percent for those earning $200,000-plus).

The Byzantine code animates a wildly inefficient tax-shelter industry seen as favoring the rich. This increases enforcement problems throughout the system.

Others see flaws in the current system, too. Sen. Richard Lugar, R-Ind., a non-ideological conservative with credentials as a tax-cutting local official, has long favored a national sales tax to replace the income tax. Bill Clinton, a moderate-liberal and the only president in more than 30 years to produce a budget surplus, toyed briefly with a national sales tax as he studied ways to pay for a national health plan.

In 1998, the House of Representatives was so frustrated with the income tax code that it passed a bill to abolish it by 2003 -- if Congress replaced the tax system in the meantime. It didn't, so the system endures.

Speaking at a Florida campaign forum last month, President Bush expressed interest in a different kind of tax structure, too. "You know, I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously."

There certainly are reasons to check out that terrain. A number of economic models see a national sales tax as increasing capital investment and, thus, gross domestic product, possibly with benefits for employment. Also, interest rates likely would be lower. That would reduce pressure on the national debt, free money for other obligations (Social Security and Medicare?) and aid industries such as construction and homebuilding that are sensitive to interest rates.

Before you get carried away, though, check the Institute on Taxation and Economic Policy's sobering new study of effects of a national sales tax (www.itepnet.org/sale0904.pdf).

Replacing personal and corporate income taxes, Social Security and Medicare taxes and estate taxes with a 30 percent national sales tax (as proposed in H.R. 25) in 2005 "would reduce the revenues those taxes currently provide by 41 percent in 2005, and by larger amounts in later years."

A 2005 national sales tax of 45 percent (more in later years) would be needed to match federal revenues, the study's author told me.

In Oregon and Washington, respectively, the increased federal tax burden at the 45 percent level for the bottom 20 percent of income earners would be $3,782 and $4,663; for the next 20 percent, $4,078 and $3,730; for the middle 20 percent, $3,619 and $3,551; and for the fourth 20 percent, $2,283 and $2,712. Oregonians in the next 15 percent would pay $393 less, Washingtonians $2,129 more.

Oregon income earners in the next 4 percent would pay $10,237 less, those in Washington $11,196 less. The top 1 percent in both states would pay huge amounts less than they do now.

Average federal tax burdens for the bottom 80 percent would rise by $3,440 in Oregon and $3,664 in Washington. For Oregon's top 5 percent, it would fall by an average of $40,880 and by $74,737 in Washington.

Could this be fixed to factor in ability-to-pay and to promote socially useful activities? Possibly yes, with credits and deductions, but then we're back to a complex system.

If you're fixated on getting rid of the IRS, replacing the income tax with a national sales tax or a value-added tax won't help you realize your fantasy. Both need enforcement mechanisms.

Also, changing the tax structure won't end budget deficits, which are largely the result of undisciplined congressional spending practices.

http://www.oregonlive.com/news/orego...9639270760.xml

09-07-2004, 11:27 AM	#3 (permalink)
gar1976 Custom User Title Location: Lurking. Under the desk.	Here's an article discussing this same topic. The column below is copied and pasted, the link will be below the text. From the Oregonian. Tax code fix? Look before giant leap Tuesday, September 07, 2004 ROBERT LANDAUER Review for a moment some of our federal tax system's most aggravating problems. The rules are as impenetrable as jungle growth. The Internal Revenue Code is more than 21 megabytes long, with some 2.8 million words. Printed 60 lines to the page, it would fill almost 6,000 letter-size pages. Costs of obeying the complex rules are staggering. In 2002 individuals, businesses and non-profits spent 5.8 billion hours and more than $194 billion complying with the tax code, the Tax Foundation estimated. "This amounts to imposing a 20.4 cent tax-compliance surcharge for every dollar the income tax system collects." It costs lower-income taxpayers far more to obey the rules (4.53 percent of adjusted gross income) than those who earn more (0.29 percent for those earning $200,000-plus). The Byzantine code animates a wildly inefficient tax-shelter industry seen as favoring the rich. This increases enforcement problems throughout the system. Others see flaws in the current system, too. Sen. Richard Lugar, R-Ind., a non-ideological conservative with credentials as a tax-cutting local official, has long favored a national sales tax to replace the income tax. Bill Clinton, a moderate-liberal and the only president in more than 30 years to produce a budget surplus, toyed briefly with a national sales tax as he studied ways to pay for a national health plan. In 1998, the House of Representatives was so frustrated with the income tax code that it passed a bill to abolish it by 2003 -- if Congress replaced the tax system in the meantime. It didn't, so the system endures. Speaking at a Florida campaign forum last month, President Bush expressed interest in a different kind of tax structure, too. "You know, I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously." There certainly are reasons to check out that terrain. A number of economic models see a national sales tax as increasing capital investment and, thus, gross domestic product, possibly with benefits for employment. Also, interest rates likely would be lower. That would reduce pressure on the national debt, free money for other obligations (Social Security and Medicare?) and aid industries such as construction and homebuilding that are sensitive to interest rates. Before you get carried away, though, check the Institute on Taxation and Economic Policy's sobering new study of effects of a national sales tax (www.itepnet.org/sale0904.pdf). Replacing personal and corporate income taxes, Social Security and Medicare taxes and estate taxes with a 30 percent national sales tax (as proposed in H.R. 25) in 2005 "would reduce the revenues those taxes currently provide by 41 percent in 2005, and by larger amounts in later years." A 2005 national sales tax of 45 percent (more in later years) would be needed to match federal revenues, the study's author told me. In Oregon and Washington, respectively, the increased federal tax burden at the 45 percent level for the bottom 20 percent of income earners would be $3,782 and $4,663; for the next 20 percent, $4,078 and $3,730; for the middle 20 percent, $3,619 and $3,551; and for the fourth 20 percent, $2,283 and $2,712. Oregonians in the next 15 percent would pay $393 less, Washingtonians $2,129 more. Oregon income earners in the next 4 percent would pay $10,237 less, those in Washington $11,196 less. The top 1 percent in both states would pay huge amounts less than they do now. Average federal tax burdens for the bottom 80 percent would rise by $3,440 in Oregon and $3,664 in Washington. For Oregon's top 5 percent, it would fall by an average of $40,880 and by $74,737 in Washington. Could this be fixed to factor in ability-to-pay and to promote socially useful activities? Possibly yes, with credits and deductions, but then we're back to a complex system. If you're fixated on getting rid of the IRS, replacing the income tax with a national sales tax or a value-added tax won't help you realize your fantasy. Both need enforcement mechanisms. Also, changing the tax structure won't end budget deficits, which are largely the result of undisciplined congressional spending practices. http://www.oregonlive.com/news/orego...9639270760.xml