Thursday, March 31, 2005

Go Go Gadget-Tax!

In an very good peice on Taxes, George F. Will says


The power to tax involves, as Chief Justice John Marshall said, the power to destroy. So does the power of tax reform, which is one reason why Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules.

His bill would abolish the IRS and the many billions of tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes, the alternative minimum tax and the earned income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption...

..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 vast 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...

...Corporations do not pay payroll and income taxes and compliance costs, they collect them from consumers through prices. So the 23 percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation.

Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100...

...Furthermore, by ending payroll and corporate taxes, America would become the only nation selling goods with no tax component -- such as Europe's value added tax -- in their prices. With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. "This," Linder says, "would unleash freedom around the globe."

Critics argue that ending the income tax, with its deductibility of charitable contributions, would depress giving. Piffle, Linder says. In 1980, when the top personal income tax rate was 70 percent, a huge incentive for giving, individual charitable contributions were $40.7 billion. In 1986 the top rate was reduced to 28 percent and by 1988 charitable giving was $86.7 billion. The lesson, says Linder, is that we give more money when we have more money.


This is something that I have been railing about for years now. I think this is a great idea! The more money you put into consumer's hands, the more they are going to spend. Or, more importantly, save. A stronger savings will allow more Venture Capital to fund more of what the US is so good at - ideas.

Hat Tip Dave

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