Topic: Taxation
Tax Time: 1040, Reform the Form When it comes to Income Tax, when zero doesn't seem to be an option, simpler can definately be better.by Gene DeNardo
(libertarian)
Friday, April 3, 2009
"The hardest thing in the world to understand is the income tax." Albert Einstein, physicist
Question: " I understand that Congress is considering a so-called 'flat' tax system. How would this work?" Answer: "If Congress were to pass a 'flat' tax, you'd simply pay a fixed percentage of your income, and you wouldn't have to fill out any complicated forms, and there would be no loopholes for politically connected groups, and normal people would actually understand the tax laws, and giant talking broccoli stalks would come around and mow your lawn for free, because Congress is NOT going to pass a flat tax, you pathetic fool." ~Dave Barry
Nobody likes income tax, and with good reason; what existing tax does more to motivate people not to work than the income tax? Is there a tax that has as many negative effects and little if any positive contributions to the economy and society? I've made my case for the only equitable tax or land fee, when revenue is necessary, in the articles; The Land Value Fee, Why It Works. and Is There A Just Tax?, and I still haven't been convinced otherwise.
But, we do have an income tax and with our absurd amounts of government spending and growth and a federal debt that approaches obscene altitudes accompanied by mud brained politicians, barring a revolution, we will probably continue to have an income tax. That being the case, reform would be a good thing and certainly better than the alternative of more of the same, and what better place to start than that bothersome IRS Form 1040? Reform the 1040 and we have "revolutionized" the income tax, line by line!
Top of Form 1040 to Line 7:Name and Social Security number, period.
All citizens earning the minimum taxed amount of income to fill out a 1040, separately not jointly. No need to exempt yourself or others, no need for filing categories that give preferential treatment because you found a mate or you didn't and no need for the government to "pay" you to have dependents!
Line 7:Income, period.
All income, wages, interest, dividends, capital gains, business, rent, usury, burglary and theft, unearned income and earned, embezzlement, farm and forest, all income!
Line 7 to 22: See above with following exceptions;
Line 10, taxable tax refunds? How can tax that is refunded be taxable? How many categories can the same dollar fit into and be repeatedly taxed?
Line 11, alimony.
Alimony is income? If alimony is a contribution from a former spouse for the upbringing of children, how is that income? If that is the case, shouldn't the spouse of any married couple with children who is earning less than the other spouse pay tax on the difference? Can't the judge determine the "post tax" payment amount when making a decision to simplify matters?
Line 23 to 36: expenses.
Line 23, educator expenses.Any monetary contribution by an employee directly towards the product should be deductible as an expense.
Line 24, certain business expenses of reservists, musicians, etc..
"Certain" business expenses should be deductible and certain shouldn't and they should apply to everybody equally. Everyone "eats" and unless we deduct food from everyone's taxes we should deduct none from anybodies, same with "sleep". Everyone sleeps; we needn't pay for someone to sleep here or there, in this hotel or that. Tax deductions and expensing for travel is a form of a subsidized trade, people should make decisions based on economic conditions including travel, not on government tax deductions.
Line 25 and 29, health savings deduction.
Deductions for health care simply perpetuate higher health care costs. Unmonopolize the health care industry, don't subsidize!
Line 26, moving expenses.
Move where you want but don't expect taxpayers to subsidize your move. If that is the norm, then maybe all "movement" should be deductible, whether from city to city or the couch to the refrigerator!
Line 27, one half of self employment tax.
This seems to infer that self employment taxes are too high, couldn't agree more, fix the problem, lower or eliminate it.
Line 28 and 32, IRA and similar plans.
Save what you want, where you want, when you want but don't ask for other taxpayers to help you save. If the Feds want to direct or augment savings they simply need to stop printing so much money, not instruct people where and how much they should invest!
Line 30, penalty on early withdrawal of savings.
That's too bad! Read the contract before you plop your money down. This, like most deductions, asks the rest of us to help out those who made a financial decision that didn't turn out so good, a miniature version of the AIG debacle.
Line 31a, alimony paid.
This is classic! Tax it on the one hand {line 11} and give a deduction on the other. The IRS seems good at scoring on both ends of the field!
Line 33 and 34, student loan, tuition and fees deduction.
Plain and simple a deduction for overpriced tuition and student loans. Banks don't need anymore help taking advantage of students and schools should be left to and encouraged to compete with each other, not bailed out with a tax deduction when they charge too much. Can it!
Line 35, domestic production.
Another classic "score on both ends of the field" move! Stop subsidizing offshore production and there would be no need to deduct income earned from onshore production.
Line 36, total of all deductions.
A deduction should only be a "direct" cost of the production process. It is a simple concept that has been distorted by years of influence, deal making and caving to special interests. Again, individuals and companies need to be free of subsidies and deductions in order to base their decisions on economic conditions rather than tax advantage. The playing field needs to be without advantage. Surprisingly, we would probably not only see lower taxes but lower prices.
Line 37, adjusted gross income. Simply subtract direct expenses from income.
Line 38 to 41, personal deductions.
This is a bit of a "wage earners" form of deductions or expenses. It could be looked at as the expenses of living and includes Schedule A or itemized deductions. Again, unless we are going to pay everyone for eating and sleeping and travel, these deductions are unnecessary. Besides, if the tax rate is too high, lower the tax rate, don't give special people, special deductions because they spend money in certain predetermined and directed ways. On the other side of the coin, to be fair, business expenses that involve eating, sleeping and travel should be eliminated for the same reasons. The flamboyant five thousand dollar corporate dinner is fine and dandy, but pay for it out of your own deep pocket, not the pocket of the taxpayer. If you want to do business in Singapore, have at it, but too bad it costs more than selling that same software program in your neighborhood. That is a fact of life and a factor of business. Stuff further away costs more; live with the reality of the situation.
Line 44, Tax.
Zero to 36,000: no tax and no need to fill out a 1040.
36,000 to 75,000: 12% tax
75,000 to infinity: 15% tax
To summarize our new reformed form 1040veryEZ:
Name and Social Security Number
Line 1: all income
Line 2: all direct expenses
Line 3: Line 1 minus line 2
Line 4: Tax from above chart.
When to collect the tax is an interesting issue. An idea might be to collect twice a year, at the end of the earning period. Interest would only be incurred if the payer is late, not for the period between receiving the income and tax time. The reasoning is simple; interest can only be relative since we are collecting a tax for the operation of a governing body that represents ourselves. As long as we all agree when the tax payment is due, it makes no sense to charge ourselves interest or fees for the interim period. Obviously, the current IRS doesn't get this concept.
Tax is not "withdrawn" saving untold paperwork and unneeded complication. Employers are not tax collectors. This also eliminates any tax "refund". Every earner simply fills out his or hers own form every six months or whenever it is decided.
Just some simple ideas, nothing incredibly innovative but almost anything would be an improvement over our current system. I can't see ever philosophically supporting an income tax but I am a firm believer in the reality of situations. We will most likely never live in a "utopian" situation, but working toward reform is always admirable. Less harm is always superior to more harm and more closely related to no harm.
The views expressed in this
article are those of Gene DeNardo only and do not represent
the views of Nolan Chart, LLC or its affiliates. Gene DeNardo is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Your proposed tax percentages should be brackets not fixed percentages. Otherwise if you are earning $35k there is very little incentive to move to $37k because you will earn less than $35k after 12% is collected in taxes. So you still need the brackets as 12% of every dollar earned after $36k and 15% of every dollar earned after $75k. The whole thing is still crooked.
In addition to stop forcing employers to be tax collectors, I would also eliminate all employment laws.....Therefore EVERYBODY including employees will be independent contractors. EVERYBODY will be a business owner even if you are an employee. If you are an employee your business is to provide your own hourly services in exchange of some hourly rate agreed independently between the employee and the employer through a contract. NO MORE EMPLOYMENT TAXES...NO MORE WITHOLDING...NO MORE MINIMUM WAGE...etc...
There are three groups of people in government; crooks, morons, and Ron Paul. The crooks do things to benefit themselves or the bigger crooks they represent. The morons aren't capable of independent thought and just do whatever their party tells them. Ron Paul is the most honest man in Washington and the only one dedicated to the constitution. But being one man, Ron Paul cannot fix DC. And the crooks will not do things for the benefit of the people, just for themselves. Same for the morons. So the tax situation will not change until the crooks and morons are thrown out of office.
Unfortunately the American people are totally clueless and so they will continue electing and re-electing the crooks and morons. Nothing will change until that changes. Only when the American people turn off "Desperate Housewives" and start learning something can the situation improve.
Yes you are right on the backets, I was simply roughing it out.
As far as eliminating employment laws, I would bring up two important points, contract law between two parties is upheld as long as it violates no existing law, so whatever agreement between labor and management is agreed upon and laws of harm and injury. Many of these necessarily apply to employment. For instance, it is illegal to pay [or not to pay] humans to test the toxicity of chemical products, not exactly an employment law that a society would want to "free" itself from!
Hi David, you bring up an interesting point about people in general[if we assume it to be true and there is quite a bit of evidence out there]. I have no answer or solution for it but if it is indeed the problem it also explains why there are also so few good leaders.
Posted By: Jahfre Fire Eater
Date: 2009-04-04 11:05:48
Hi Gene,
When it comes to taxes the point isn't to find out what works and why. The point of taxes is not revenue but political power and financial control. If simple revenue was the goal the IRS wouldn't exist and wouldn't employ all those tax parasites. Taxes are tools of politicians who seek power over their opponents. Since everyone is someone's opponent, we all suffer,the consequences of tax politics, continuously.
There is no political power in exhibiting consistent, principled behavior. This is why Ron Paul is considered such a pariah by his fellow Republicans. He encourages them to abandon their quest for political power and influence and act on consitent principles. He makes them all look bad and they know it, so they attack him and those who think like him.
I appreciate your sentiment, Gene, but I don't think it has an relevance in the real world. It misses the point. Today, congress judges whether taxes "work" based on entirely different criteria than you do. The tax code will not be built on principles until congress is populated by people who act on principles.
Once the representatives mostly agree with you, reforming the tax code will not matter because it will be abolished. Electing representatives who will uphold your principles begins in every local communtity. Trying to solve political problems by reason or emotion is futile. It takes individuals acting as individuals, promoting their values and standing on principles, not evangelizing their beliefs and fears. We're still trending dramatically away from this necessary participation as more and more people succumb to the liberal victim mentality and join a friendly herd that will not challenge them to be effective individuals.
yes, it is true people do not realize how important local representation is. Problem is, even the local politicians learn to play the game very early. There are exceptions, but that is the issue, they are merely exceptions.
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