Their View: A flat tax would be fairer than the current system
Here's an irritating note for those who have been slaving away on their tax returns. If all taxpayers had paid what they owed, there would have been a $144 billion surplus in the last fiscal year rather than a $247 billion deficit!
Much of this loss of tax revenue comes from under-reporting business income. Another big leak is under-reporting capital gains. Then there are such maneuvers as reporting personal expenses as business expenses.
Many of these evasions are done intentionally, but many are not. That's because of the jungle-like quality of the tax code, which is ever more difficult to understand. An honest person easily can make mistakes in trying to fill out his or her return. And it's so complex that knaves can easily game it. These knaves usually are richer people, well-armed with accountants and tax lawyers, who, truth be told, often also don't understand the code themselves.
The best way to reduce tax cheating would be to simplify the whole code, eliminate special benefits for certain industries (such as real estate) and move to a flat tax. The flatter the tax, the easier to collect the money that's owed. And while some complain that a flat tax would be unfair to poorer people, in fact its simplicity, if it were coupled with some sort of system rebating money to poor people, would make it fairer than the current system, which rewards those with the resources to game the current labyrinthine “system.”
So why not focus on streamlining the tax system and toughening up the penalties for those who cheat in a cleaned-up system that, finally, most literate people could start to understand?
The problem is the American political habit of using the tax “system” to manipulate virtually everything in America is deeply embedded in Congress. The dishonest use of the tax code to pay off favored groups, and to avoid a transparency in federal fiscal policy that might be embarrassing, leads to much tax cheating and undermines trust in government. Congress would prove it's serious about tax equity if it moved in the direction of both tougher enforcement and simplicity. Maybe it even could avoid raising taxes if it did so.
Or maybe most taxpayers like the current arrangement because it lets them avoid knowing how much things really cost.
- The Providence Journal