How Would You Change the US Tax Code?

Lots of suggestions on how to change the US tax code on my post titled Is This Right? 60 Million American Adults Don't Pay Taxes? Here's what one commenter suggested:

Simple tax solution:

Get rid of income tax (and property tax - BS!) and increase sales tax to 25-30%. The more people buy, the more they get taxed. People making min. wage shouldn't be buying expensive stuff like Gucci purses (even though they do) and that way, they won't be taxed as much. It may hurt the economy for the first year or so when people see the large costs to buy something, but Americans don't care - they have credit cards. The rich don't care either, they want to look high class with their 200 jeans and beamer.

or

People with incomes under 15k or 20k pay no taxes. People over that pay a straight 20%, no deductions or any need for a tax advisor or software. If you make 1mil/year, you're taxed 200k. You make 100k, you're taxed 20k a year. Seems fair to me.

Another option:

The spending is the problem. A sales tax to replace all income, payroll, and capital gains taxes would be best because it would give people the incentive to work, save and invest, but as long as government keeps spending the money there's no solution. I read a study in college that showed that all the governments in the world spent about 10-15% of GDP on defense, roads, public safety, and law. Right now we spend more than 35% of GDP on all levels of government. I've seen some estimates that the U.S. economy would grow by almost 7% per year if taxes were cut by 25% (to about 27% of GDP) , but to cut total taxes to 10-15% of GDP, we'd have to cut taxes by more than 65%.

There are a lot of idiots who think they paid no taxes when they get a tax refund, but they forget the gas tax, sales taxes, property taxes, hospitality taxes, car taxes, fees, etc. It's still bad that a lot of people don't pay income tax though, because they will obviously vote to increase the tax they don't pay rather than the ones they do pay. The system will become even more unjust, and people with mobility will leave America or never come in the first place. We are in a global economy and the countries that treat entrepreneurs and business as sponges to be squeezed to pay for welfare will soon find their competitiveness decline. Kind of like the U.S. today. India, China, Russia, Eastern Europe and even the socialist EU countries are having to cut or are cutting taxes big time. The U.S. is falling behind.

And another:

I, for one, would like to see a per-capita tax. Take the total annual spending of the US government, divide it by the number of non-disabled working-age adults, and send those people a bill for their share. It's perfectly efficient, because no wealth would be destroyed in the process of trying to avoid it. Also, disenfranchise anyone who doesn't pay their share of the taxes so that the entire electorate clamors for less and less spending each year.

My contention is that we could fix the whole budget deficit if we simply found a sharp businessperson to identify all the waste in government. This commenter agreed:

The real problem is government spending. I work for a government contractor, and I can tell you from firsthand experience that government can't help but use resources stupidly. People deciding how to use other people's money will never do as good of a job as people deciding how to use their own money.

Now, eliminating the income tax in favor of a national sales tax would probably eliminate some waste associated with collection and compliance, but as long as the government decides how to allocate upwards of 40% of our resources, that staggering waste will dwarf whatever changes we make in the tax system.

So, let's say you were made king or queen of the US. How would you change the tax system? (Assuming you wanted to raise enough money to only cover legitimate government expenses -- not just to fund your own kingdom!) ;-)

Comments

[Jack]

Ahh, the loveliest of topics - one that everybody can have a beef about. And with all those cows, we know what will eventually show up. Ain't it great being the latecomer to the discussion?

What isn't a load of BS however is the people that have pointed out that the taxes question is just half the equation - and it could be easily argued that it is significantly less than half of the solution.

Unfortunately, I don't see much changing in the way of governmental spending without a dramatic shift in all three branches of the government.

Congress has to get serious about balancing the budget, and curtailing social programs is truly the only way to reach that on a permanent basis.

There has to be a President is is willing to force Congress to stop spending our money, and who can keep his pen in his pocket to avoid spending money via Executive Order.

Finally, there has to be a Judicial branch (all the way up to the Supreme Court) that will hold that those social programs proposed to be cut are NOT a right of every American and alien to make it to dry land. Otherwise, the best intentions of the other two branches will be overridden by judicial decree.

It will take time, but it can be done without privatizing everything, and regardless of what taxation scheme we want to use to pay for it. Flat tax, Fair tax, Progressive Tax, Sales Tax, whatever it is, I'll be happy when it can go down for everybody.