Few of us like the present US tax system. What would be a better system and still fund the government?

Answer 1

Many people have considered a consumption tax, which only taxes people when they buy products. More on luxury items and non necessities, less on food and stuff. The great thing about this system is that if you choose to save for a home, education or retirement you can do so with all of the income you choose to save. The other benefit to this system is that you finally get to tax all of the people of the "underground" economy. These are people who have a lot of money but do not pay income tax now. Such as: Drug dealers, prostitutes, illegal aliens, crooks, and the rich who use fancy lawyers and tax loopholes to avoid paying their fare share. These people will never pay income tax on the money the receive, but with a consumption tax, you get them on the back end. Plus sales people and waitpeople don't have to hid or estimate tip income. That's the basic structure, but there are definitely fine points that would need to be hammered out. Beside, this will probably never happen anyway. Too bad.

Answer 2

There are several options, none of which is likely to happen since the current system is so massively convoluted and arcane that fixing it would be a huge endeavor. One option would be a national sales tax that would apply to every purchase every person makes. People with higher incomes invariably purchase more goods (and more expensive goods) than lower income persons. In this way, everyone would contribute to the national budget, but higher income brackets would pay a higher share of the taxes.

A second option is a flat tax whereby you do away with complex tax codes and simply do some simple calculation along the lines of income minus medical, investment, and education expenses and then pay a fixed percentage of the resulting figure.

Another idea - if the main objection to paying taxes is the funding of personally objectionable government projects, is for there to be several choices on the tax return for taxpayers to choose when they submit their tax payment. They could choose a default which would fund whatever the government wants, or they could choose one of several other choices which would more accurately reflect their philosophies (for example, declining to have their taxes applied to current war spending, but choosing to fund small farmers and education, or choosing to fund defense, but refusing to pay for welfare programs). That would probably end up a giant mess though, since something important might get drastically underfunded if public opinion is against it.

Answer 3

I'll stick with an income tax, thank you very much! A graduated income tax is the fairest of all taxes as it takes into consideration the taxpayer's ability to pay.

The tax code does need to be cleaned up, that's for sure. In complex situations it's entirely possible to have different sections of the code in direct conflict with each other. It's also likely that there is plenty of legislation that hasn't been included in the various IRS rules and regulations as well. (Tracking those things down is why a GOOD tax attorney or CPA gets the BIG BUCKS.) Other parts of the code need to be either scrapped or modified for the realities of todays economy. Case in point: The hated AMT.

Replacing the income tax with a massive (25% - 30%) national sales tax (on top of state and local sales taxes than nudge 10% in a few counties) is pure insanity. The poor would be devastated by such a tax hit since they spend virtually 100% of their income on essential goods and services. The wealthy tend to amass wealth. They don't spend every dime that they make so they would pay a MUCH lower percentage of their total income with such a sales tax.

The argument on taxing the so-called "underground economy" fails to consider the unintended consequence of such a high tax rate. Remember, combined it will be upwards of 40% in some locations! The problem is that tax rates that high will lead to another underground economy: Black Marketing! Look at what happens with bootleg tobacco and booze in states with high taxes on those goods. The same undesirable elements as todays underground economy will be the purveyors of black market untaxed goods and we're right back where we started.

The flat tax fails for the same basic reason as the sales tax. It massively overtaxes the poor and middle class while giving a huge tax break to the wealthy. We'd need a flat tax of 25% to 27% to generate the same revenue that the current graduated tax generates. And that would have to be on EVERY dollar -- NO deductions for the poor, education, etc. Since the wealthy have a current maximum tax rate of 35%, and often a total rate of over 30%, a flat tax rate of 25% would be a HUGE tax cut for them. If you take the burden off of one group, you MUST pass it along to another! So, you take from the poor and middle class and give to the rich. Hardly an improvement, unless you're Steve Forbes or Bill Gates!

Answer 4

well - if they abided by the Constitution, and dropped our memberships in the WTO and GATT, UN, and ended CAFTA and NAFTA, then started enforcing import duties on all INCOMING products - then you will see our government capable of paying it's bills without needing to tax our butts into oblivion.