In the past few years, an increasing number of articles and stories about tax reform have appeared in the media and the internet. It is becoming increasingly clear that the current US tax code has become a problem that we must address and solve.
One of the proposed reforms is the flat tax, described in Steve Forbes' book, "The Flat Tax Revolution." The flat tax reform proposal (HR 1040 in the last Congress) was a definite improvement over the current system, which requires excessive amounts of time and paperwork for compliance. Filing a simplified tax return on a postcard is a popular and appealing idea. However, history shows us that a flat income tax doesn't offer a satisfactory or permanent solution to our tax code problems.
The income tax started out as a single rate (flat) tax. Under the control of government and isolated from the People, it gradually grew into an oversized, complex mess, with numerous loopholes, multiple brackets and high rates. In 1986, the tax code was overhauled, simplified and reduced down to two brackets. Many deductions and loopholes were eliminated. Today, we are up to six brackets, and most of the loopholes are back.
This demonstrates that a flat tax simply won't stay flat due to the precedents that have been set. A flat income tax leaves the current tax code in place and sets the stage for another return to the system as it is now; Congress has the power of tax legislation, and citizens have little input or control. Lobbyists have better access to congressmen than we do, and use their influence to procure tax breaks for special interests. Each tax break complicates the tax code just a little more, and they all add up to a code with over 66,000 pages that tax professionals and even the IRS don’t fully understand.
Finally, a flat tax is still a tax on income; a direct tax contrary to the founders' vision as set forth in the Constitution. The income tax was made possible only after politicians did an end run around the Constitution and the people in 1913 and took power that the Constitution denied them.
The solution is to stop using income as a tax base, and use consumption instead. There is only one consumption-based tax replacement proposal that will address the problems generated by our tax code: the FairTax Act of 2007.
The use of income as a tax base has led to our current crop of tax problems, such as bewildering complexity, evasion and high compliance costs; the remedy is to shift emphasis to consumption. Such a tax base is more reliable and stable than adjusted gross income, and reflects wealth more accurately; savings and investment are used in addition to income as spending sources. A tax on spending is a tax on accumulated wealth. The simplicity, high compliance rate and zero compliance cost of such a tax system makes it appealing.
A shift to a consumption tax base and total replacement of the tax code should be the foundation for tax reform, including Social Security and Medicare.
There is only one consumption-based tax replacement proposal that will address the problems generated by our tax code: the FairTax. It is a revenue-neutral proposal with a built-in provision to make it non-regressive, removing all tax burdens from the poor.
In the 109th Congress, the FairTax Act of 2005 (HR/S 25) had 63 congressional co-sponsors; the Flat Tax Bill (HR 1040) had seven. The FairTax Act of 2007, introduced on January 4, 2007, has 42 co-sponsors to date.
Popular support for the FairTax is strong and growing; flat tax support has dwindled as word of the FairTax spreads. Two very successful FairTax rallies have taken place; no flat tax rallies have been held or planned. Neal Boortz and John Linder’s book “The FairTax Book” has outsold Steve Forbes' book "Flat Tax Revolution" by a considerable margin.
Income tax in any form, flat or graduated, is unacceptable. It's time to scrap all income-based taxes once and for all and replace them with a single tax, one that we control. At the same time, we need to repeal the 16th amendment so that income taxes will remain a memory. Once enacted, the FairTax will replace all current federal taxes with one consumption tax. Companion legislation, to be re-introduced to Congress soon, will start the process toward a constitutional amendment that will repeal the 16th amendment.
The flat tax was a good idea in its time, but that time has come and gone. There is a better choice now. Let's give the FairTax a chance.
Chad Sargent
FairTax Volunteer
Raleigh, NC