Although I suspect that some fairtax supporters would believe exactly the opposite of this, I believe that the current tax system is in urgent need of
reform because it is not sufficiently progressive.
(they would more likely suggest that it is too progressive and not sufficiently rooted in merit, creating a disincentives even on those who despite
their wealth are not actually rich enough to manifest that in the form of consumption.)
The top 20%
of Americans earn 58.7% of all income and owned 91.2% of
privately held wealth in America as of 2000/2001
As of 2005 (I know this won't line up quite perfectly but I haven't found sources that line up right yet) the top 22% of tax payers were only paying
about 55% of taxes.
In other words, their share of income is almost equal or slightly larger than their share of income taxes. That's excluding FICA, which cuts off at
$94,200- the bottom 75% of tax payers pay more in FICA than income taxes, which would add several more percentage points to the gap.
Since the top earners are paying a share of taxes less than their share of income, and DISGUSTINGLY less than their share of wealth, we have a defacto
regressive tax system. This is one of several problems.
There are definate issues of complexity as well which fairtaxers are very concerned about, but, naturally, the reasons for this and potential
solutions are... a bit complex.
The IRS budget itself is only in the tens of millions- remarkably little for a government agency really.
Compliance however is claimed to cost between 100 and 500 Billion annually according to the GAO reports cited by
These compliance costs would take the form of paying tax lawyers, additional accounting staff and infrastructure, paying tax professionals, buying tax
software, paying for electronic refund payment, etc.
They can be reduced by eliminating social-engineering from the tax code, but this must be weighed against the costs of undertaking other programs to
those ends, or the costs (financial and otherwise) of not having certain incentives. Proceedural reviews might be in order, but it is hard for me to
speculate on how much can be trimmed from things such as the need for accountants and tax lawyers.
Many of the complexities, expensive as they may be, exist to protect tax payers. You could eliminate compliance costs by eliminating all writeoffs for
example, but that would ruin many people.
Finding progressive replacements for particularly complex portions of the tax system which require less administrative cost is worthwhile, but will
not necessarily be simple. For instance the prebate necessary to make a sales tax replacement functional would cost more than even the highest
estimates of compliance costs.
Edit to add:
Any chance you can source that quote in your last post semperfoo, and maybe sum up the videos for those unfortunate few (including me) who still have
dialup or otherwise have problems with video?
[edit on 27-12-2006 by The Vagabond]
Second edit to fix link
[edit on 28-12-2006 by The Vagabond]