I don’t know anyone who pays their federal income taxes and thinks, “Wow, this system is fantastic! It’s easy to figure out, pleasing to pay, and fair to my family, my business and me.”
Unfortunately, the current federal income tax system is hard to figure out, a pain to pay, and unfair to many hard-working, law-abiding, tax-paying Americans. It’s no wonder some 60 percent of us hire professional tax preparers to file our returns. Even though we pay for the privilege of paying our taxes correctly, we’re still ultimately accountable to the IRS for the accuracy of the contents of our returns.
Perhaps you’re thinking, “How hard could it be for me to forgo the tax pros and do my own federal income tax returns?” If you’re eligible for “short form” filing, fine. If not, you could be in a ton of trouble trying to navigate the choppy waters of the current Title 26 of the U.S. Code of Federal Regulations (the part written by the IRS) , all 20 volumes of it. If money is no object, you can pony up about $1,000 to the U.S. Government Printing Office for your own personal copy of it. Then, with time on your hands and pain in your brain, you can tackle Title 26 for the “correct answers” to your questions regarding your complicated tax situation.
For most of us, what we have here is a “Hobson’s choice,” taking what is offered or nothing at all. Named after Thomas Hobson (1554-1631), “who hired out horses, making his customers take the one nearest the door or none at all.”
Surely, we can do better than this when it comes to paying our fair share of federal income taxes. I think a fair, flat tax deserves serious, thoughtful consideration as a better way. Properly crafted and enacted, it could replace the current complicated and nerve-wracking tax system with a simpler, easier system of generating federal income tax revenue.
Ideally, a fair, flat tax would eliminate itemized deductions and close loopholes that favor wealthier taxpayers and corporations. It would also radically reduce reams of tax forms. It might even lead to fewer tax attorneys, fewer tax audits, and a less powerful IRS.
Under a Cato Institute “two postcard system” proposal, families would get one postcard, write on it their labor income from their W-2 form, subtract an allowance based on family size, and pay taxes to the IRS on the remaining income at a 17 percent rate.
Businesses would get an equally simple postcard. Starting with their total revenue, they subtract wage costs, input costs and investment costs, and pay taxes on the remaining amount at a 17 percent rate.
The two postcard system is no panacea for the problems American taxpayers face with the current federal income tax system, but it could heighten national discussion and debate. If that leads to true tax reform, count me in.
Retired Army Col. Thomas B. Vaughn can be reached at firstname.lastname@example.org.