Monthly Archive: September 2012

US Income Tax Code Obsolete

After almost 100 years US income tax collection has evolved into a complex set of laws that very few of us understand.   How did this happen?  Generally speaking the United States had no permanent income tax until the early 20th century.   Collection of the tax was a simple matter and so was the tax law.   In those days every American knew that tax collected was to pay for World War I.  The National Debt would rise and the tax collected by the government was then used to pay down the National Debt.  But there have been a lot of wars since World War I coupled with a lot of growth in the government bureaucracy and entitlements.   As the government raised tax rates to collect more revenue, tax law would change as well, with hundreds, if not thousands, of pages of new tax laws being created annually as each administration would add and delete tax law provisions in the code.

Fast forward to 2012.  Now a days when we file our tax return and pay our tax, nobody has a clue where the money goes.   All we hear about from each new administration is the need for “tax reform”.  The sad truth today is that no matter how much the tax code changes the system has become corrupted beyond repair.  As a result, revenue collected by the government has been unable to keep up with the costs of running the government. By the way, there is continuous talk about cutting our spending.  That will certainly help.   But as long as Americans have grown accustomed to a life style that the US Tax Code can not accommodate, there will always be annual deficits and a mind-boggling National Debt.  The US Tax Code has in effect become obsolete.

It gets worse.  The added cost of Homeland Security, Health Care Reform, Social Security and Medicare ( many trillions of dollars) to name a few, and the cost of war in Afghanistan and Iraq (many more trillions) has severely “taxed” the already burdened tax system .  Moreover, at same time all these wars are being fought and agencies expanded, the already “over-taxed” tax system is being sabotaged by a new breed of powerful lobbyist that have riddled the tax code with subsidy deductions, exemptions and tax credits.  These subsidies and exemptions change year after year depending on which industry has the best most effective lobbyists.  These highly paid and skilled lobbyists have transformed what once was a simple income tax code into a complex subsidy code, influencing how American taxpayers behave in order to save taxes each year.  Sadly, as a direct result of these lobbyists, the revenue generated by this behavior-subsidy code has dramatically decreased to the point of failure, causing the United States National Debt to rise to a catastrophic $16 Trillion and rapidly approaching $20 Trillion by year 2016 or sooner.

What is the solution?   Eliminate the credits, exemptions, deduction and subsidies from the behavior-subsidy tax code, reduce the top income tax rate to about 15 percent for everyone and create once again a true income tax system.  Add to that true income tax system a National Sales Tax of  about 5 percent and a Value Added Tax of about 5 percent, eliminate the corporate income tax altogether and we might start to generate enough money to pay our bills.   A brand new recipe for financial stability is going to take bold and dramatic change.   If you agree the income tax as it presently is being administered by the government is obsolete, you can make a difference; Let your elected officials hear from you, the sooner the better.