Casualty of Capitalism

Exiled into Wilmington, Delaware by virtue of corporate layoffs. (Note: Unless otherwise stated, all photos on this blog are Copyright 2005, Michael Collins, and cannot be used without permission.)

Location: Wilmington, Delaware, United States

Graduate of University of Maryland School of Law; University of Maryland, College Park (Economics/Political Science).

Thursday, March 31, 2005

Death to the IRS

A very intriguing Op-Ed today by George Will regarding a bill in Congress that would abolish the IRS and repeal the tax code. In its place would be a standard, national sales tax of 23% on all purchases.

Under his bill, he says, all goods, imported and domestic, would be treated equally at the checkout counter, and all taxpayers -- including upward of 50 million foreign visitors annually -- would pay "as much as they choose, when they choose, by how they choose to spend." And his bill untaxes the poor by including an advance monthly rebate for every household equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level.

Today the percentage of taxpayers who rely on professional tax preparers is at an all-time high. The 67 percent of tax filers who do not itemize may think they avoid compliance costs, which include nagging uncertainty about whether one has properly complied with a tax code about the meaning of which experts differ. But everyone pays the cost of the tax system's huge drag on the economy.

Linder says Americans spend 7 billion hours a year filling out IRS forms and at least that much calculating the tax implications of business decisions. Economic growth suffers, because corporate boards waste huge amounts of time on such calculations rather than making economically rational allocations of resources. Money saved on compliance costs would fund job creation.

This proposal would certainly save a lot of wasted time (and time really is money, particularly in the corporate world) and create a much fairer system. The downside is, like Will notes, it would put a lot of lobbyists and attorneys out of work. Downside, you ask? That fact being reason enough to ensure that the bill never passes. Plus, regardless of the rosy picture painted by Rep. Linder and Will, how often do these proposals work as advertised?

I'd definitely like to see the tax code simplified. Linder's proposal is radical and I'd be cautious about tossing out the income tax system entirely.

At the same time, there's plenty of reason to believe that he's on to something.


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