Spring Break
Tax accountants to be unemployed in the future?
A Fair solution to cut taxation costs
Nick Carlson
Issue date: 11/19/08 Section: Opinion
In a few days our spring semester tuition bills will fall due and our parents will once again pull out their checkbooks and dash off another large payment to Rhodes College. For many families in these tough times, writing that large check has become quite a struggle and a source of no small amount of stress and anguish. Wouldn't it be wonderful if parents of college students had more money to cover the cost of tuition and didn't face stress and worry every April 15 when they have to fill out complicated forms to ensure their taxes are paid correctly? While this might seem like a pipe dream at first, there is a piece of serious legislation in Congress that aims to do just this. The proposal is called the FairTax and it represents a radical redo of our entire tax system that could reinvigorate our economy.
The essential basis for the FairTax is that all existing taxes, including the income tax, as well as corporate taxes and all other taxes collected by the federal government would be eliminated. In place of all current federal taxes, a 23% sales tax would be levied on all purchases of goods and services. This rate has been precisely calculated by top economists to insure that it would replace all the revenue that the federal government receives from its current hodgepodge of taxes. Nobel Laureate Economist Vernon L. Smith has calculated that the FairTax's 23% tax rate would completely replace all federal revenue currently collected. This would mean that people would no longer have federal taxes deducted from their paychecks. Also corporations would no longer pay taxes and thus competition would cause the cost savings to be passed on to consumers. Also people's retirement accounts and investment returns would not be taxed. The only tax that a person would have to pay would be a 23% sales tax which would be offset by the cost savings that would accrue from the elimination of all other federal taxes.
This would be of great benefit to the economy because it would save the massive costs involved in tax compliance that are currently built into the tax system. The Government Accountability Office has calculated the efficiency cost of the current tax system as being between 240 billion and 600 billion a year. This money is being spent on income tax return creation and accounting audits for corporations and businesses. That is money that is being entirely wasted, producing nothing useful for society other than government-required paperwork; the FairTax would eliminate all of those costs and return that money to productive uses within the economy.
The essential basis for the FairTax is that all existing taxes, including the income tax, as well as corporate taxes and all other taxes collected by the federal government would be eliminated. In place of all current federal taxes, a 23% sales tax would be levied on all purchases of goods and services. This rate has been precisely calculated by top economists to insure that it would replace all the revenue that the federal government receives from its current hodgepodge of taxes. Nobel Laureate Economist Vernon L. Smith has calculated that the FairTax's 23% tax rate would completely replace all federal revenue currently collected. This would mean that people would no longer have federal taxes deducted from their paychecks. Also corporations would no longer pay taxes and thus competition would cause the cost savings to be passed on to consumers. Also people's retirement accounts and investment returns would not be taxed. The only tax that a person would have to pay would be a 23% sales tax which would be offset by the cost savings that would accrue from the elimination of all other federal taxes.
This would be of great benefit to the economy because it would save the massive costs involved in tax compliance that are currently built into the tax system. The Government Accountability Office has calculated the efficiency cost of the current tax system as being between 240 billion and 600 billion a year. This money is being spent on income tax return creation and accounting audits for corporations and businesses. That is money that is being entirely wasted, producing nothing useful for society other than government-required paperwork; the FairTax would eliminate all of those costs and return that money to productive uses within the economy.
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