Brutally Honest Rant - 03/28/07

Brutally Honest Audio Rant: Taxation and Reform
Audio Transcripts
03/28/07

[Start Program]

(Computer – Introduction)
(Music intro – “American Idiot Remix” – by Green Day and David Matthews 2)

Good evening and welcome to this week’s Brutally Honest Rant. I’m David Matthews 2, writer of the weekly online column Brutally Honest.

For the past few weeks, I’ve been discussing taxes. No doubt some of you in the United States are pretty much consumed by taxes at this point. If you haven’t already done your federal and state income taxes by now, you’ll have to get started on them pretty quickly.

And that’s why NOW is a great time to talk about taxes, because you’re probably asking yourself why the hell you’re even doing them right now! Why can’t there be an easier way to do this?

Well THERE ARE easier ways of doing this! THERE IS a better way!

But to get there, we need two very important things… we need the WILL to demand it, and we actually NEED that better way to support.

The WILL is something that I’ll talk about next week. Right now let’s talk about the alternatives.

First of all, trying to simply fix or to streamline the taxation process as it is right now is simply NOT AN OPTION! It’s BEEN done… repeatedly! And every time we supposedly “streamline” the process, it only gets more and more complicated and it gets more and more destructive. Remember the 1040EZ? There was very little about it that was “EZ”.

And we are STILL “tweaking” the system TODAY! Every little exception and deduction that Congress passes is just another “tweak”. Even on the state level, every homestead exemption that gets voted on is another “tweak” of a system that is failing. You think that you’re helping out grandma and grandpa, but what you’re really doing is setting yourself up for even more taxes! You’re screwing the system for everyone, including yourself!

In other words, we can’t fix this system. The time when that was possible has passed. Now we gotta scrap the whole system and replace it with something else…

But with WHAT?

Okay, let’s set a simple ground rule here: everyone’s gotta pay. No more of this penalizing success crap! No more exceptions, exemptions, or deductions. Everyone pays, no matter if they make ten thousand or ten million a year. It doesn’t matter if you’re a preacher, a teacher, a politician, a corporate CEO, or the guy who cleans their toilets… you want the government to work for you? You gotta pay the admission price. We’re not going to replace a flawed system with one that will be flawed on the onset.

Now that we have that rule, let’s go ahead and toss out a few suggestions…

We have just taxing corporations and businesses. They bring in billions of dollars and they wield considerable influence in society, so let’s just tax the hell out of them.

Few things: first, just taxing businesses breaks the ground rule of everyone’s gotta pay. Second, businesses simply DO NOT pay taxes like you and I do. Taxes are just overhead to them, and overhead gets passed on down to the consumer in the form of higher prices. So really when you talk about taxing the crap out of businesses, you’re just taxing the crap out of OURSELVES, because WE are the ones who end up paying for them! You gotta think these things through, guys. It’s not enough to run on old anti-business mentalities.

Plus every time we talk about taxing businesses, the first complaint is that we’re hurting the mom-and-pop businesses. And then politicians decide to write up deductions and exceptions so that certain companies won’t pack up shop and leave the country… which they end up doing anyway. So we would pretty much be back to where we are right now with a fatally flawed system.

We have the idea of a flat tax. Now once upon a time I was a really big proponent of this idea! A flat tax based on an established percentage of your income would really work… as long as there are no exceptions, no exemptions, and no deductions. In other words, a TRUE flat tax! Everyone pays, no matter how much money they make. It would really simplify our reporting come tax time. Most of us could even do the paperwork on our own with a scratch pad and a calculator.

The downside to this is that we are STILL using the same framework as with our current system. We are still taxing income, which means that we still have to report it. We would STILL have to deal with Tax Day, and we would still have to deal with the hassles of getting our information out on time.

Plus it wouldn’t take long before this concept is abused and misused. Non-profit organizations and charities will still demand to be exempt, and we’d hear the screams about trust-fund babies like Paris Hilton getting away with not paying any taxes because they don’t make any money.

Then we have the other idea of a flat tax, namely just a specific dollar amount for everyone no matter how much they make. The downside here is that once again we have to deal with the complaints about “the poor” getting hosed and “the rich” not paying “enough” in taxes.

That brings us to my personal favorite… the FairTax Plan.

Get rid of ALL of the taxes that we’re paying now… all of them. Every last one of them. Then put in a 23% sales tax. That’s a tax that EVERYONE has to pay. You buy groceries, you pay the tax. You buy a DVD, you pay the tax. You buy a computer, you pay the tax. You buy a yacht, you pay the tax. You buy a winter mansion in Boca Raton, you pay the tax. You buy stock in Yahoo, you pay the tax.

Now 23% seems like a lot, but once you realize that our current system is responsible for 25% of the price of goods that you’re paying for now, then you’re actually getting a break!

But that’s not all that you would be getting out of this deal. We’re talking about a complete and fundamental shift in our way of life and in our finances.

Tax Day goes away. April 15^th (or 17^th in this case) would be just another boring day. No more 1040 forms. No more 1099 forms. No more W2 forms. No more annual visits to your accountant or to a tax preparer to see if you’re reporting all of your income. You get 100% of your paycheck… every last penny! You would not be penalized for being successful, no matter what income level you’re at! Instead of being encouraged to spend, spend, spend, you’ll have an incentive to SAVE and INVEST and not have to worry about it coming back to hurt you if you DARE to take some of that money out, because it will be YOUR money!

The Middle Class would no longer have a target on their backs under this program! They wouldn’t have to live in fear of the Alternative Minimum Tax, because that would be gone. Everyone pays the same tax, including the trust-fund babies like Paris Hilton. The “tax exempt” status would be GONE for charities and churches, because they wouldn’t have to worry about reporting income! Big Business wouldn’t have an incentive to hire illegal immigrants anymore because it will cost them the same amount of money to hire legal immigrants. That dries up that security threat.

AND that’s not even getting into the concept of a PREBATE! Yes, this program would involve the government actually GIVING YOU MONEY to cover the taxes paid for the basic cost of living per household. (We’re talking BASIC cost of living, mind you. Not Donald Trump’s cost of living.) So if you’re on the low end of the financial spectrum, then it all balances out.

Now obviously I LIKE this concept! It fits the requirement of EVERYONE paying taxes, even those who are here illegally and even those who are just visiting the United States. Companies like Haliburton can move all they want to, but every time their execs show up in this country, they would be paying taxes just like the rest of us! The onus would no longer be ON US to make sure that we report every penny we make.

And obviously there are weak spots to this plan. The IRS would not go away with this system, but they would be leaving US alone and instead be focused on making sure that merchants are paying the taxes. That 23% tax rate can be manipulated, and so can the amount issued to families by the prebate. But these are things that can be easily tracked and fixed. The potential for abuse will continue to be in play, no matter what plan gets enacted, but at least with THIS system we would know what isn’t working and what needs to be fixed.

Now, we have one more tax alternative that needs to be mentioned because some people mistake this for the FairTax Plan and it certainly is NOT the same thing. I’m talking about the Value-Added-Tax, or VAT. The Europeans played with this concept for a while until they realized just how utterly DEVIOUS it really is.

The VAT taxes each business transaction with a built-in sales tax, much like the FairTax. But here’s where the two differ. The VAT taxes the reported “PROFIT” made on each level of transaction for that product, whereas the FairTax plan just taxes the end-point-of-sale. You buy a widget for $10 and sell it for $10.50, then you get taxed on the fifty-cent profit under the VAT rather than adding the tax at the final point of sale under the FairTax plan. The VAT is infinitely more complex than the FairTax plan because companies have to PROVE that they made a “profit” and then to PROVE that they paid the right amount of tax on that “profit”. It is a very complex process that really SLAMS companies with paperwork.

Now think about this: how many times have you heard major motion picture companies complain that they don’t make any money off their big blockbuster releases? How many times have you heard a recording company claim that they’re not making any money off the album sales of their overrated pop stars? How many times have major corporations declared bankruptcy? You don’t think these companies will want exemptions?

How many times have you heard about a company packing up shop and moving overseas? Well guess what? Part of the reason why they do that has to do with the level of bureaucracy they have to deal with in this country! The VAT would make that even worse. And politicians again would know this, and they would be quick to again offer exceptions to try to keep those companies here… which they would accept AND THEN move overseas.

In other words, we would once again be suck with a flawed unjust tax system that would not do what it was created to do.

Let’s get brutally honest here… the VAT is infinitely WORSE than the FairTax, or for that matter any of the other alternatives. The invitation for abuse is great, as is being demonstrated in Europe right now, and politicians would be just as eager to dole out exceptions under the VAT as they are doing right now with our current system.

We need a new tax system that people can get behind. Something that works. Something that the people will know that everyone will have to contribute to. The reason why the idea of a flat tax has lasted this long is because it appeals to our sense of fair play. Everyone pays, and they all pay the same percentage. Simple. Easy-to-understand. People like that. Likewise, the FairTax plan appeals to our sense of fair play because it gets the government off our backs and still allows everyone to pay taxes. Plus it actually GIVES us money! Either way would work in providing a clear and healthy alternative to our current failing system.

Now all we have to do is generate the WILL to make it happen. And I’ll get into THAT next week.

(Computer – some timely stuff that you have to listen to this show to understand)
(Fade Music In – “Impend” by Martin O’Donnell and Michael Salvatori)

One of the really big reasons why our current tax system is failing is because we’ve made it too damned complex. We took something that should have been simple and we turned it into a horror show.

And it didn’t happen all at once! It happened in piecemeal. A deduction here, an exemption there, one percent here, one percent there, and to make up the difference we’d pass the burden over to others who could supposedly “afford” to shoulder it. And when the most powerful complained, politicians would give them an easy break.

They say that the road to hell is always paved with good intentions… well the path to bankruptcy for most Americans is also paved with good intentions. We don’t gamble our income away quickly and immediately. It happens through a bill here and a bill there. In that same light, the demise of our country’s ability to pay for its own services is also paved with good intentions. We think that the exceptions we look for are small, and by themselves they are… but when combined with all of the other exceptions and favors that we’ve already included, it really hurts us, and it has turned our tax system into a failure that can no longer be reformed, but rather its ineptitude DEMANDS that it be replaced.

Now if none of the systems that I outlined tonight interest you, then you’re more than welcome to come up with something else. But you had better act fast, because we need to replace this failed tax system SOONER rather than LATER.

(Pause)

Brutally Honest is a Get Brutal production; all opinions expressed are those of the commentator, and may or may not be shared by the online provider. This is David Matthews 2 saying good night, and I’ll speak with you soon!

(Fade out)
(Computer – Ending/“End of Recording”)

[End of program]
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