Taxing all income the same opens the door to a far-reaching revolutionary reform. Under the single-rate FreedomTax, the tax will be levied, collected, and paid at the source of payment in the case of many forms of income – dividends, … Continue reading →
The history of taxing capital gains as income stems from a dubious, and at the time much criticized, Supreme Court decision that reversed prior Supreme Court decisions holding capital gains not to be income. Job changes are not “income” transactions. Nor, are changes in capital. Income is what “comes in” from having the job, just as it’s what “comes in” from having the investment of capital; e.g., dividends, interest, rents, and including business income. Indeed, capital gains are not considered to be income by economists, who exclude them from their computations of GDP. The exclusion is because capital gains are not income in the economic sense. Continue reading →
An Enemy of Income Tax Reform: The “Business Transfer Tax” (a/k/a “Business Activity Tax” and “Business Flat Tax”)
The “Business-Transfer Tax” in all its forms is a proposal for a dual-tax system, to have a value-added tax built upon a rejiggered income tax. This second tax comes disguised as income-tax reform with the VAT label avoided. Sad to say this ill-conceived proposal amounts to a cover-up and remedy for the failure of U.S. trade negotiators to insist that VAT nations abide by the principles of free trade. But, two wrongs don’t make a right. As an enemy of real income-tax reform, it would make the income tax even more disjointed and difficult to unscramble into a simple, tax-neutral, low-rate income tax. Continue reading →
The FreedomTax would have a design structure freeing most Americans from ever having to file a tax return again, not even a postcard. In most cases, the income tax would be collected at the source of payment. It would substantially reduce income-tax compliance burdens. It would end the present tax system’s drag on the economy and on job and wage growth. It would save the Treasury billions in tax administration costs, and the IRS would be massively downsized into a little-noticed ministerial tax-collection agency. Continue reading →
As a tax reform proposal, the FreedomTax is revolutionary. It’s more than just a proposal to clean up a tax mess. It would overturn and junk the two pillars of the establishment’s system of taxation, replacing that system in its entirety with a true income tax. This new tax would be a 10% flat tax on all income, taxing all income the same so that all income would bear its fair share of the income tax burden. The FreedomTax would dethrone the IRS, transforming it into a mere ministerial agency charged with the benign task of administering a greatly simplified income tax and tax-neutral much like the motor-vehicle fuel tax. Continue reading →
The recently passed federal highway bill, Fixing America’s Surface Transportation Act, or the FAST Act, creates a new section of the U.S. tax code, 7345, entitled, “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” No matter how you look at the two IRS power grabs, it spells trouble for the taxpayer. Whether you’ll become a prisoner in your own country by being denied a passport, or harassed by unethical and ruthless IRS sanctioned private debt collectors to settle an alleged tax debt, …
The Fair Tax does not really abolish the IRS. BUT, the FreedomTax would achieve this goal for nearly everyone. As a simple, tax-efficient income tax providing for the at-source taxation of most income, the FreedomTax would end the universal personal-return filing requirement. This reform will result in most people never again having to file a personal tax return to pay their personal tax to the IRS. The FreedomTax will result in a dramatic down-sizing of the IRS, effectively abolishing it from our lives.
The IRS now requires nearly 95,000 employees and an annual operating budget of almost $13 billion to administer a taxation system having a design based upon over 77,000 pages and 5 million words of incomprehensible tax law. The FreedomTax would have a simple and less-burdensome tax design, estimated to reduce the size of the present Tax Code by 95%.
To really “start over,” the Rand Paul Tax Plan must “blow up” the universal requirement that taxpayers must file with the IRS a personal return reporting all their income and paying the tax as a personal tax. And, it must “blow up” the misguided design of the present system for people and income to be taxed differently. These two pillars – the universal filing requirement and the misguided design – are the source of the income-tax mess today. And, so long as they are viewed as off-the-table for any tax reform, they stand as mountains blocking the road to real tax reform.