The National Sales Tax and the Flat Tax Explained by Atlanta CPA
The National Sales Tax and the Flat Tax Explained by Atlanta CPA
Touted as the great fix to the issues of the IRS, both the national sales tax and flat tax may cause many more problems that they attempt to resolve. There is a lot of confusion in both understanding and compliance with tax law. Unequivocally our tax system is fraught with layers upon layers of interpretations, case law, and frequent changes that have often left the remaining legislation even more difficult to manage than before.
Over the years there have been many simplification rules that have truly made our tax system easier to understand and apply but items such as the alternative minimum tax, depreciation rules, and automobile expense recording remain impossible for the layman to understand and for the professional to interpret. Often our tax law is so difficult to understand those whose job it is to ensure their compliance are as confused as taxpayers.
Our initial response in life is to “shoot the messenger” and it is to that end that much of the undue criticism has been levied. People often fail to recall that the IRS did not create itself but instead was created over time by our elected officials. Essentially most every, if not every, law was created by Congress and then signed into law by the President. Though certainly we cannot abolish Congress or the Presidency, nor would we want to; we do need to collectively combine our efforts as a people and demand simplification to our tax code. It is only through this means that we will ever have a system that is easier to understand and easier to comply.
By having a system that the majority of citizens view as fair will, we all have an opportunity to have a system that we are all proud of and that works to collect the just and fair taxes from each of our citizens. There is no doubt that all citizens who live in this country and call the U.S. their home should pay their just and fair taxes whether they are here legally or not. It is only by all people participating together and by pulling their own weight can our system obtain true compliance and success.
For Who is Given Much; Much is Expected
If you will look back to the beginning to time, through the time of the Roman Empire, and up until today that a predominant portion of wealth was held by a minority of our world’s inhabitants. In third world countries this discrepancy is even greater. If you were to go back even to the time that Jesus walked the earth, you will find in his teachings that “for who is given much, much is expected.” I believe his teachings make this clear that this applies not only to our talents and skills but also to our financial resources.
Our present tax system is a graduated tax plan, which assesses no income tax on those with little to no taxable income and this slowly graduates upwards with each substantive change/increase in income. Thus a taxpayer in the highest federal income tax brackets will pay a dramatically higher rate than those at the lower income strata. Our system has long held the standard of charging more to those who have more. I believe charging those who are in the upper income brackets, based upon their heightened wealth, should be able and should pay a substantially higher tax in both terms of dollars and percent. If we were to discredit our present hierarchy of taxes with the more affluent paying a higher portion of the overall tax bill needed to run our federal government then the deficiency would have to be made up elsewhere.
Flat Tax
The premise of a flat tax in its utopianism is not challengeable. It sounds great because it is great as it is fair, with everyone paying the same percentage. As all tax systems would have to be revenue neutral in their application and collection, the flat tax would fail for two substantial reasons. First it will not be fair. The affluent people in the U.S. who now control much of the country’s wealth would soon control even more. It is true that everyone would pay the same tax rate as this would be “fair” but this would result in the poorest of our citizenry paying the same tax rate as our country’s richest.
In order for the tax itself to be revenue neutral, the lowest paid taxpayers would take more of a bite economically in terms of both dollars and percent. Obviously our tax system itself would be easier as people would pay a percent of their gross income, however most of our people would indeed be financially worse off than before if a flat tax ever passed.
National Sales Tax
The national sales tax program, sometimes known as the Fair Tax, has more intellectual appeal as buyers of goods and services would pay a higher sales tax which would replace the federal income tax system we presently now have in place. This also fails on many levels. Foremost is a concern that instead of being a boom to our economy, a bust is much more likely to occur as the products and goods we now buy would be substantially more expensive.
Sure we would have no income taxes being withheld from our paychecks as the IRS as it exist today would be gone, however when goods and services become immediately much more expensive you will face issues such as runaway inflation as people strive to cope and grapple with the inflated values. Also, you will see many of the larger purchases, on which our economy is largely based, come to a standstill as car buyers are shell shocked as the price of vehicles sky rocket because of the new prices. At the least this would cause a major recession and at its worst potentially a depression.
Furthermore, the national sales tax program is supposed to be an asset in making sure all who live and buy here pay their part so that taxpaying citizens are not bearing the burden for those who are either here illegally or do not pay their just taxes. To some degree this intended effect would certainly be attained. However, those who are willing to do a deal under the table to avoid paying taxes would have a much greater temptation and unfortunately a much greater reward if consumer purchases and business dealings were not done in an ethical standard. In fact, the worst fear is that rather than stopping a leak in our economic system, the national sales tax would soon start a series or problematic events. In addition as the most affluent typically spend more in dollars but less in percentage of their gross income, the affluent would again gain more benefit rather than less resulting in the middle and lower class again paying more rather than less in taxes.
At HIS CPA PC we care much more about you than your taxes. As a CPA I remain unconcerned about my livelihood in the event of a change to either a Fair Tax or National Sales Tax for my concern is our people and their right to make just and informed decisions for themselves and their families.
John Dillard is a Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304.
“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”
What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31
Why are these verses here? Learn how HIS CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html
We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Bookkeeping.
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