Despite all your hard work filing – Americans spend about 7.3 billion hours per year complying with all the IRS requirements – the United States still faces a budget deficit that is $1.3 trillion. President Obama and Democrats argue the answer to this is to raise taxes on the rich. Republicans disagree, but only about the raising the rate part.
That is what passes for a tax debate in Washington these days. Neither side wants to confront the reality that the only way to return a sense of sanity to the tax code is by scrapping the thing altogether. In it’s place? A tax code that is simple, low, fair, and honest. In other words, we need a flat tax that greatly eases the burden of compliance and stimulates the economy.
But how would that work?
Step 1: Scrap the code. Entirely. It’s not as impossible as it might sound. Even Obama’s own Bipartisan Deficit Commission, the so-called Simpson-Bowles Commission, called for tax reform that would lower rates and do away with many of the deductions and loopholes currently infecting the code. Not surprisingly, Obama ignored it.
Step 2: Establish a single, flat rate on personal and business income. Again, this isn’t as fantastic as it might sound. The key is in the process. You’ve probably heard that Warren Buffett pays a lower tax rate than his secretary. Let’s just assume this is true. Billionaires like Buffett, and even millionaires like Nancy Pelosi and Mitt Romney, can afford an army of tax lawyers to comb every word in the 3.6-million-word tax code looking for their deductions and loopholes. Can you afford such an army?
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