Too many hours and money spent on tax preparation; it's time for tax reform

TRACKSIDE © by John D’Aloia Jr.      April 26, 2005

Did you perchance look at all the fine print in your current SPRINT bill? Did you note how your taxes again went up, once thanks to the county’s new sales tax and once thanks to the federal government imposing a higher surcharge for the Federal Universal Service Fund?

Taxes, and taxes masquerading as fees or surcharges now account for 20.6 percent of my basic phone bill. (Did you also note in the fine print the action you have to take if you do not want SPRINT to share information they gather about you with others with whom they partner so you can be offered neat things to buy?)

With the tentacles of government into every aspect of society, It is no wonder that one has to work until mid-April just to pay off the federal government, and sometime into June or July to pay off state and local government tax collectors and the cost of the regulations imposed by all levels of government. Only then are your earnings going toward the support of yourself and your family.

The IRS reported that the nation will spend six plus billion hours preparing tax returns. Even at the minimum wage (and accountants do not work for a minimum wage), this represents an amazing amount of person power that is not being put to productive use, a monstrous drag on the economy.

It has been estimated that in addition to the hours spent by individuals and businesses keeping records and filling in forms, $200 billion is spent paying accountants and the software industry to provide the expertise needed in dealing with the zillion of pages of rules and regulations that govern the submission of a tax return. (By one count, there were 1,100 plus IRS forms and documents.)Flat tax anyone?

The Heritage Foundation is floating a flat tax proposal that has been evaluated to provide the same revenue to the federal government as the current system.

Dr. Edwin Feulner, Heritage President, stated that tax reform must meet four broad goals: (1) the tax law must be comprehensible by John Q. Public, (2) the tax should be a revenue raising measure, not an enforcer of favored social policies, (3) the tax should not punish achievement, and (4) the tax rates must be as low as possible, thus encouraging economic growth.

I calculated my federal taxes using the Heritage Flat Tax Form. It took me all of three minutes. Add up wages, salaries, and pensions (but not dividend and interest revenue), subtract a standard personal allowance, and multiply by 17 percent.

No sweating of deductions, no sweating the Alternate Minimum Tax, no concern about whether the charities and organizations you want to support are tax deductible or not, no worrying how to treat dividends and interest or the money you gave to Aunt Bessie.

Know what? I would have paid about 90 percent of what I did pay without having to keep massive records and retaining a CPA to make sure everything was reported correctly on a sheaf of forms. Think of the time and resources that would be regained by individuals and businesses with such a tax system, time and resources that could be put to productive use in society rather than having to be spent serving as a tax-computing slave for the feds, ensuring that all the legal "T"s are crossed and "I"s are dotted.

Getting any major tax reform through Congress will be extremely difficult. Too many persons, The Clerks included, have a vested interest in keeping the status quo, for in so doing, they retain the power they have over citizens through the complexities and idiosyncracies of the tax law.

Feulner recognized the difficulty. He cited an idea of ex-Senator Don Nickles (OK) that might just put pressure on the powers that be. Senator Nickles’ idea was to allow taxpayers to fill out returns under the current system and under a reformed, flat-tax system for one year. They could then file the one that benefits them. If a majority of the returns were for the flat tax system, that system would be enacted and the current system dismantled.

Any thought on how the vote would go? And what are the feds doing with the money extracted from you? As reported by Raymond Sokolov in the Wall Street Journal, we just "spent" $2.5 million "to turn a pyramid on its side, paint it with a rainbow coalition of colors and build a stairway along its side for a stick figure to climb." Find this use - http://pyramid.gov - of your tax dollars in the Constitution. It must be alongside the same section in which the courts found a right to murder human beings in the womb.

See you Trackside.