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Replace the IRS With What?

It is easy to stir the emotions of a crowd when talking about taxes, but trying to understand the monster of the tax system in our nation is near to impossible.

Many people live constantly in opposition to all taxes.We are taxed every time we turn around and sometimes in mid-turn. We are taxed enough already, many people believe. Everywhere I go speaking to various groups of citizens during this election cycle, the issue of taxes always comes up in the question and answer time.

Several years ago, I hosted a talk show on local radio. Often a friend of mine would drop by the station to express his opinions about the topics under discussion. However, I was not able to keep the radio show going due to allergic reactions to the treatments for my cancer. My friend moved somewhere up north and I seldom hear from him, until last week when he stopped by for a visit on his way to Florida for vacation. He is always filled with many opinions on lots of subjects. His main concern last week was the issue of taxes. He said, “I am a supporter of the Flat, Fair Tax.” I then asked him, which tax he supported, the flat or the fair tax and he said, “Yes!”

His confusion is shared by many people.

The flat and fair taxes are two different systems of reform of the federal tax code. They are not the same. Trying to understand the monster of the tax system in our nation is near to impossible. Trying to find a way to explain the various opinions regarding making reforms to the system is also hard to explain. In this column I will not attempt to explain either tax system. My purpose is to point out the fact that as long as we have the 16th Amendment to our United States Constitution, we have the federal income tax system being overseen by the Internal Revenue Service. The IRS is a bad word to most folks, causing many people to call for it to be abolished. During an election year it is easy to stir a crowd with passionate emotion calling for doing away with the IRS and imposing another system of taxation. I am in favor of doing away with the IRS. I support tax reform. The issue that must be addressed is the reality that doing away with the IRS is not the final answer. The issue is what will replace the IRS.

Do we put in place a national consumption tax? Do we develop a system of graduated or progressive brackets according to the level of financial attainment reached by the taxpayer? A consumption tax would cause all taxes to go up higher and higher as the consumer purchases goods and services. By passing a flat or even fair tax, all deductions would be gone. No loopholes would be allowed, and all would pay a sales tax as they purchase goods or services. From where I stand, the issue of taxes seems to be like the weather — everybody talks about it, but nobody can do anything about taxes, yet, except increase them.

Should we have the Flat Tax or the Fair Tax system to replace the IRS? Tell us in comments. 

Follow Ray Newman on Twitter — @RayNewmanSr.

Kristi Reed (Editor) July 03, 2012 at 12:39 AM
Ray - You know I am a flat tax supporter. I truly believe it would be better than the Fair Tax and most definitely better than the current system. I like your comparison between taxes and the weather - "everybody talks about it, but nobody can do anything about taxes, yet, except increase them." Very true.
R++ One of the Famous Dacula Crew July 03, 2012 at 02:32 AM
Just merge DHS,TSA and the IRS. There's a certain type of synergy with all the man handling between these organizations.
Larry July 03, 2012 at 04:05 AM
Fair tax definitely. Flat tax implies the IRS is still involved and leaves room for manipulation. Fair tax should be renamed national sales tax.
Hank Van Gieson July 06, 2012 at 01:42 AM
We need a consumption tax but not the Fairtax. Why not a VAT which is in use in over 130 nations worldwide? I propose a 10% VAT to replace the income tax, retain the payroll and estate/gift taxes, don't try to tax government operations, and phase in over five years. I call it Fairtax-Lite.
R++ One of the Famous Dacula Crew July 06, 2012 at 04:51 AM
Why retain the death tax? Just because "I can't take it with me when I leave" , I should be able to leave it to whom I see fit free and clear. The government picked at me every working day of my life, it GOT it's share when I was living ...
Hank Van Gieson July 06, 2012 at 11:43 AM
R, Unless you are very wealthy, the estate/gift taxes should be of no concern to you due to the existing rules and exclusions. I had to choose between your point of view and the perception that the Fairtax favors the very wealthy.
R++ One of the Famous Dacula Crew July 06, 2012 at 02:53 PM
Existing rules and Exclusions? They CHANGE every 6 months... As to the “no impact” try operators of small to midsize family farms ( NOT the supersized farmcorps) and repeat that. No - it doesn’t impact you perhaps, but these taxes do HAVE a real impact on the less than “Richie Riches” and NEED to go away in any "reforms".
Hank Van Gieson July 06, 2012 at 03:50 PM
R, I am familiar with the often quoted claim that the est ate tax hurts small farm family businesses. Here is a quote from the unbiased Center on Budget and Policy Priorities: " Proponents of further weakening the estate tax often claim that it causes small businesses and farms to be liquidated. This claim is groundless. In 2001, the American Farm Bureau Federation acknowledged to the New York Times that it could not cite a single example of a farm having to be sold to pay estate taxes, and this was before the estate tax exemption level was more than tripled and the top rate was reduced. [5] More recently, a Congressional Budget Office study found that of the very few farm estates that would owe any tax under the 2009 parameters, all but a handful would have sufficient liquid assets on hand (such as bank accounts, stocks, and bonds) to pay the tax without having to touch the farm or business.[6] And CBO further explained that it may have overestimated the number of small businesses and farm estates with possible liquidity constraints because it was unable to include certain assets held in trusts (such as life insurance trusts) in calculating the liquid assets available to help pay the tax.[7]" I'm not a farmer, but I still believe the estate tax isn't a big deal for small farmers. Get rid of the estate tax on farms and you will simply create a huge loophole for the wealthy imho!
Brian Crawford July 06, 2012 at 04:22 PM
We settled the issue of a progressive tax system long ago. Both the "Flat" and "Fair" tax penalize the middle class and working poor. We can easily solve our tax headaches by eliminating all deductions and tax credits and closing all loopholes.
R++ One of the Famous Dacula Crew July 06, 2012 at 05:29 PM
I’m not for weakling it, I’m for COMPLETE removal if we drive toward a VAT based system, though I can’t say I wish to be or live in a suburb of Europe. Exemptions and phase in points change if the taxes remain as part of a hybrid system, they will rise/change to support additional government spending. Why of course strip ALL the liquidity that’s there to run the business, after all, it BELONGS to Uncle Sam … absolutely BRILLILANT! Bankers always keep the SAME credit levels/payment terms intact after complete management changes. The data here is certainly flawed by the claims made; The Farm Bureau has no links? They supply INSURANCE, estates don’t report that they sellout to make tax payments, check the FEDERAL or state form sets, there is no such item. The damage is done over a 36 or 48 month time period and by the time it’s sold off, in whole or part it MAY have STOPPED operations, so a link is broken. Bankruptcies may be more conducive here as an indicator but I haven’t seen those studies. The reality isn’t groundless as you put forth; it’s just not one that you may be “at risk” of experiencing because they are borne by a “minority” in government think for some reason. cont
R++ One of the Famous Dacula Crew July 06, 2012 at 05:33 PM
The Congressional Budget Office knows about farms? They are challenged in their forecasting of government expenses accurately and now we wish to cite them as a standard in the PRIVATE sector? Again, taxes are subject to CHANGE going forward with VERY little or without any notice, comparisons to past years are meaningless to a degree. Center on Budget and Policy Priorities - considering some of the policy initiatives they focus on, it appears to be for GROWING government, not crops or foodstuffs. http://en.wikipedia.org/wiki/Center_on_Budget_and_Policy_Priorities The Center on Budget and Policy Priorities (CBPP) is an American non-profit think tank that describes itself as a "policy organization ... working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals." “The Center runs an outreach campaign that — working with thousands of organizations across the country, including community groups, businesses, unions, and government agencies — helps eligible families apply for the EITC and the Child Tax Credit.” “The Center is also producing analyses showing that climate-change legislation can generate enough revenue not only to protect low-income families, but also to address other needs related to the fight against global warming without increasing the deficit.” “Although the CBPP claims to be non-partisan some papers of record have characterized it as left of center”
Biscuit July 08, 2012 at 12:13 PM
Fair is fair...a national sales tax that taxes everyone at the same rate...including "visitors" who take advantage of our giving nature but break the law and pay nothing in taxes now. I am hearing a lot of comments about "unles you are wealthy it won't matter". Why should the wealthy pay a higher percentage? If it is a sales tax and you don't want to pay it...don't buy stuff you don't need. The wealthy will buy more and pay more as a result, but not as a penalty to their ability to earn more (primarily based on their choices and decisions) . This country's tax system and the devisive nature is ridiculous and needs to change.

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