The Treasury Secretary Speaks About a
Flat Tax!
Volume 12, Number 16
Issue 564
On April 15th on the official Internet site for President George W. Bush (www.whitehouse.gov), Treasury Secretary John Snow responded to an e-mailed question from “Bryan” of Olney, Maryland. Bryan’s question was “do you have any opinions on the flat tax?”
Snow responded, “I think that the idea of a flat tax has a lot of merits, as do other ideas, like consumption-based taxes. I look forward to the discussion about what type of system we could switch to that would be simpler as well as fair.” This makes, in my opinion, Snow into the highest ranking government official to probably ever give the “flat tax” a proper forum.
CBS Marketwatch reported later on April 15th, “WASHINGTON (CBS.MW) -- The Bush administration would try to pass legislation simplifying the tax code if President George Bush is re-elected in November. ‘I'll commit we're going to be addressing Congress with new proposals on the code,’ Snow said in a speech to the U.S. Chamber of Commerce in Philadelphia, according to Reuters. ‘The flat tax merited some discussion as part of the effort. The White House will have to take steps to change the Alternative Minimum Tax, which is capturing more and more middle-income wage earners,’ Snow said.”
Back when I had my radio show, The Entrepreneurs’ HourTM, I did several shows advocating that a simple fair tax would do more to stimulate the economy and promote entrepreneurial spirit than anything else that the government could ever do. Back then--about 2000--there were a few members of Congress advocating something called a “fair tax” at www.fairtax.org and they are still doing it.
Keeping in mind that discussing taxes is more about election (and re-election) than creating and keeping a simple tax system, would I just be falling in line for another sucker-punch if I started jumping up and down that the U. S. Secretary of the Treasury has attempted to elevate the discussion of a flat tax to a national level by giving it a here-to-fore unprecedented endorsement?
The Honorable Arlen Specter, Senator from Pennsylvania, has advocated a flat tax for a long time now. He states “At the present time, we have a Tax Code which has grown to 6.9 million words. That is the count in the year 2000. When the Tax Code was counted in the year 1955, there were 744,000 words. There are 325 forms to be filled out, and the American taxpayers spend more than 5.8 billion hours each year preparing them. And it is estimated by the Tax Foundation that $194 billion is spent each year in complying with the tax laws. I have seen other estimates that place the issue of compliance as high as some $800 billion.”
Specter continues, “In the flat tax legislation that I have introduced, I have retained two deductions. I introduced the flat tax again this year in advance of April 15, on April 11. We were not in session on April 15. During the 104th, 105th, and 106th Congresses I introduced the flat tax legislative proposal to coincide with income tax day. The proposal I have introduced retains the deduction for home interest and charitable contributions. So I have taken the two items that are the most popular and that cost money. That requires the flat tax to be raised from 19 percent to 20 percent.”
David B. Robinson, CPA has been a strong advocate of a flat tax because it would take such a stressful and fearful burden off of 98% of all Americans. I would strongly advocate a flat tax for all normal wage earners and it is my opinion that the following ideas could be encompassed into a manageable system. The time is right to advocate this now. The time is right for every single one of my clients to make this their number one election issue. The time is right for you to write your Senators and members of Congress.
Now, these are David Robinson’s ten ideas for a flat tax system. They are not intended to be all-inclusive and I bet that there are some other good ideas among TaxFaxTM readers. As always, I welcome comments.
First: Strongly and vigorously enforce the requirements that owners of S-Corporations take normal and customary fixed salaries through a normal W-2 process. Make the penalties harsh for not complying with the law.
Second: Do not tax dividends, interest or capital gains, pension contributions, social security or any sort of regular non-W-2 income and simply scrap the tax code completely with regard to any sorts of deductions.
Third: Set a generous floor where no person or family would pay any Federal tax based upon the number of persons in their household.
Fourth: Do away with all hidden Federal taxes including Excise, Social security, Medicare, and user taxes. Make the rate all-inclusive of everything.
Five: Set a simple rate that would require a constitutional amendment to change. Force the government to live within a balanced budget.
Six: Put all business owners and self-employeds in a special category to require a much shorter filing than now but more of a filing than the 98% of Americans who can now have a postcard return because they only have W-2s to be confirmed. Set a low rate--say 20%--for corporate and business profit.
Seven: If 98% of Americans have only W-2s to confirm, haven’t they just about had the right amount of tax withheld already (in a perfect world) and be able to not expect to pay anything or receive any refund?
Eight: Require the 98% of Americans who just have W-2s (and no taxable interest, dividends, or anything else (see “second” above) to file their returns electronically on the Internet by logging into a secure website to simply confirm their W-2s. April 14th/15th could be made national holidays. Libraries could expand their hours. What a novel idea--we could use tax policy to encourage people to go to libraries. Have a DRASTIC “non-filing” penalty for not “filing” (logging-on) by the deadline.
Nine: Vigorously enforce the tax laws, especially employers who cheat our existing laws by illegally treating people as independent contractors and/or paying workers in-cash, “under the table.” Make it simpler for employers to register and report as an employer but make the penalties for mis-classifying people as independent contractors when they are really employees very, very harsh. In fact, make the worker get themselves certified as either a legitimate independent contractor or employee on an annual basis. This way, the employer is forced into proper treatment--temptation has been removed.
Ten: Let people set aside on a tax-free basis up to $100,000 a year for retirement if they want to. Doesn’t this just help the economy--saving and investing, I mean. If you want to stimulate investing, this is a great way to start.
Eleven: Stop having two-faced political policies make their way into our tax code. For example, how can we offer $2,000 tax credits for the purchasers of hybrid gas-electric vehicles while at the same time (speaking out of the other side of our mouth, Mr. President?), allow the purchasers of huge over 6,000 pound sport utility vehicles (like $75,000 Hummers!) to try to deduct the entire cost against their business’ income all in one year.
Twelve: Think about the following: 1) If we are all “created equal,” shouldn’t we all have the same simple tax rate to pay? 2) How much money did you pay to have a professional preparer help you that could have been better spent on something else (present company excluded, of course). 3) How much time did you fret over and worry over your tax return? You could have been doing something else.
Thirteen: I think that the best CPAs will make more money helping people become entrepreneurs rather than just chase papers and forms. If people aren’t afraid to make money--real money--because we now have a simple, easy to understand system, they won’t be afraid to seek the best professionals to consult with them to really and truly advise them how to do it.
Senator Specter states “that the flat tax could be genuinely the size of a postcard and could be filled out in some 15 minutes. Similarly, for the corporate tax, the calculation has been made that it would be revenue neutral at 20 percent. Today, there is an enormous amount of time with the lawyers, the accountants, the tax specialists, figuring out loopholes, figuring out tax avoidance, where it is legal, contrasted with tax evasion, where it is illegal. If, once and for all, we directed our attention to what is economically productive--that is, what makes sense from an economic point of view, without regard to the tax consequences--there would be a burst of energy and productivity, and it would do wonders for our economy. That is the way to stimulate the American economy, instead of tinkering at the edges, which is what many of the tax modifications have been.”
So, how about it? Are you ready as a people to dress up like Indians and throw tea into a harbor?
David B. Robinson, CPA
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