Let's take it further

I completely agree with my fellow blogger that the tax code is ridiculously, and needlessly, complex.  Through favors to large donors, social engineering, pet projects, compromises, etc., the code has been made into an unwieldy conglomerate of worksheets, rules, schedules, adjustments, line items, etc.  Those who are most well versed in the intricacies of the code are able to manipulate it to such a degree that they are, in many cases, able to avoid most of, if not all of, their obligation.  This was brought to light by the events that were mentioned in the blog.  The large corporations are able to hire the most tax educated individuals to work the system to their advantage.

However, I would like to take their argument and extend it a bit.  I don’t think that the problem is that the businesses are exploiting the built in loopholes and tax breaks.  I think that the problem is the existence of those loopholes and tax breaks.  We need to simplify the tax code to prevent such “abuses”, for lack of a better word.

As is pointed out, the American public is who ends up footing the bill for corporations who avoid their obligations.  And I would submit that the public also pays for companies who fully pay their tax obligation.  I think anyone would agree that all costs are passed along to the public.  With that logic in mind, why wouldn’t we reduce the tax revenue stream to the common factor?  If I were to rewrite the tax code, I would simplify it to a consumption tax only.  Corporations wouldn’t have a tax burden to try to escape from.  They wouldn’t have to use shady, if legal, practices to avoid taxes.  Individuals would be able to see the cost of government in a transparent way when they purchase an end product.

An unintended consequence would possibly be creating a favorable business environment.  Most people agree that cost of business is what causes companies to relocate or establish themselves outside of the United States.  I think it would be a powerful move to make the United States a tax haven for businesses and bring jobs back here.  The United States would be the country that everyone outsourced to instead of the other way around.  I can imagine that this would go a long way to resolving our country’s financial woes.

Having a public who can see their taxes clearly every time they make a purchase would hopefully make them even more financially aware of government spending.  It would encourage accountability in our elected leaders and would encourage people to save.  With a consumption tax, you are only taxed when you spend.  If you save, you won’t be taxed.  You’ll have more money working for you and, when you do spend, more to spend which increases tax revenue for the government.