Tax simplification

Question from Jeff Dunkel

"Do you think that a consumption tax or flat tax would be more fair to taxpayers than the current income tax system?

It seems that one of the biggest complaints is how some people pay too much and some too little in taxes. If you could start from scratch, and it was necessary to choose a taxing system to raise revenue, do you think the current income tax system, flat tax, or consumption tax would be best?"

My response:

Consumption tax has the following benefits, among others:

1. Eliminates evasion. Nobody gets to be paid, "under the table." Even illegal aliens get taxed.
2. People get to choose whether to pay taxes and how much to pay. If you don't want to pay the taxes, you don't buy the product.
3. Simplicity. There are no tables and no exceptions. I believe there should be no exceptions based on type of product, income of consumer, etc.
4. Overhead management task for the government is greatly reduced. Instead of tracking a huge number of individual and corporate taxpayers, we track a far smaller number of businesses who are acting as tax collectors.

Potential problems.

1. Some tax collectors could still evade. Even today, we hear of companies who run off with the sales tax receipts!
2. Black markets will be created reducing receipts.
3. Bartering will increase, also reducing receipts though somewhat minimally.
4. Current tax specialists may lose work volume.

Ironically, as messed up as our current tax system is, I continue to hear that we need to change to flat taxes and yet, along with those proposals, a series of caps, exceptions and variances for any number of reasons which pretty much sabotage the entire concept! If we can shoot for a consistent simplicity, we aren't helping ourselves.

The biggest obstacle of any "new" tax system is that of educating the public about how it works. Since everyone is pretty much familiar with how sales tax works, educating the general public about consumption tax is markedly simplified.

Just brainstorming.

Lou