Senators Jim DeMint and Lindsey Graham, both of South Carolina, have proposed the abolishment of the US individual income tax. They would replace the income tax with an 8.5% national sales tax. There would be an automatic rebate of $1,641 for those under the poverty line. They would also replace the corporate income tax with an 8.5% tax on purchases from suppliers.
This plan is similar to the Fair Tax that has been made popular by talk show host Neal Boortz. A similar bill has already been introduced in the House (HR 25).
This approach would eliminate the 60,000 plus page tax code as it now exists.
Such a move would be a huge savings in administrative and compliance costs to small businesses that now spend thousands of dollars just on tax compliance. What a boom it would be to small business and their employees if this were, somehow, to come to pass. High and complex taxes get in the way of entrepreneurial development and growth in an economy.
Will this bill see the light of day? I hope that it will, but the odds are against it.
Such a change would:
- Take away power from elected officials, which they will not give up without a fight. They will couch it not in terms of their own power, but in "fairness." The media will help them in this deception.
- Threaten the powerful accounting and legal industries. They now help to write and enforce the current system. The tax system as it is now is a billion dollar industry for these folks.
- Threaten the army of lobbyists who focus much of their efforts on tax breaks for their constituents. They will fight to keep this key part of what makes them a value to their employers.
I admire the courage of those leading this true tax reform movement, but fear that the current system may be too entrenched. I encourage all of you who want to see this entrepreneurial economy expand and grow to support this proposal. At least we can dream....
