Food For Thought|
Taxes - Reality Check - Flat Tax Needed?
August 6th, 1999
David Lawrence Dewey
"Reading provides knowledge...
knowledge leads to answers."
It's been shown in research that when people lie, the two areas that people lie about the most are sex and money. The American taxpayer has been lied to about sex and now is being lied to about a so called government surplus. There is not 792 billion dollars over ten years to "give" back as they state in Washington. And here is why.
The U.S. Government as of 1998, has a debt of $5 trillion, 479 billion dollars of which the government has not been paying off. Interest annually is 211 billion dollars, which the taxpayers are paying. The debt is increasing and by the year 2001 it will hit $6 trillion, 1 hundred billion dollars. What is ironic is that the U.S. Congress put a cap on the amount the debt could reach. The cap is $5 trillion 950 billion dollars. This was suppose to be passed as part of the so called "balanced budget". And this is called a balanced budget?
Think the size of government is being reduced? Think again. Government employees have increased from 20 million 83 thousand in 1990 to 20 million 201 thousand government employees in 1998. This includes the military. Now you may think this is not much, however, there has been a 34% reduction in the military or 726 thousand. So therefore, in other government agencies, the government has increased by 853 thousand employees since 1990. In addition, running for and remaining in office has become "BIG" business. Tom Foley, former Speaker of the House retired in 1994. His pension, $123,804 dollars a year. Foley, now ambassador to Japan, will collect in excess of $3.276 million dollars if he lives to the age of 70. And it gets worse. When Pat Schroeder retired in 1995 from the House, after only a few years of service, she retired with a pension of $74,915 dollars. She is 59 now and if she lives to 70 will collect $4,182 million dollars in a pension. Overall, retiring Senators and Congressmen over the next 25 years will collect over $2 trillion, 405 million dollars in pensions that will be paid out over the next 25 years. That amount does not include current salaries of the Senate and House. Who says becoming a politician doesn't make you rich. And who is paying for all this? The American taxpayer.
Do we really have a surplus? Are we being told the real truth about the expenses of our government? Does the present accounting methods of the government and present taxing system which is as they say, "not with the times", need a complete overhaul? Are they not only outdated, but unfair and unjust to Americans? Do you dare, no... do you care enough to read further? The madness has got to stop! Do you care enough for your children and future generations to do something about it? Politicians in Washington need to hear that enough is enough and something must change and now! The U.S. Government is not being run like a business. It is being run more like a candy store for politicians and lobbyists for special interests! Sadly, taxpayers are paying for the candy which is actually their money. This so called tax cut is a joke. The average taxpayer would get a reduction of about $99.00. However, those whose income average $900,000.00 would see a reduction of over $20,000.00. Next, cuts in the capital gains and elimination of inheritance taxes paid only by the wealthiest 2 percent of the population and it's easy to see why Republicans are wanting such a large tax cut. What is truly amazing is that only 5 percent of Americans think cutting taxes is more important that supporting health care, Social Security, education, Medicare and Medicaid and cutting the national debt. So, why is this so called tax cut occurring? To mainly benefit the most wealthiest. Sadly, the American taxpayer is again sitting on the side lines and letting themselves get screwed in the long run by letting this occur. Hello... America, it's wakeup time. By the year 2040, Social Security will be running a deficit of $800 billion a year due to a doubling of the retirement population.
The following numbers and figures represent the true and acutal expenses of the United States. This information can be found after digging through layers of on-budget reports, off-budget reports, statements of budget authority and statements of trust accounts. What will be presented is a very simple method of reporting the true actual expenses of the United States. On budget and off budget record keeping doesn't need to be kept. A plain and simple accounting of what is coming in from where and what is truly being spent needs to be kept. Isn't this the way that most Americans keep their books? Social Security trust funds need to be taken out of the general funds and put back where they were before 1962. President Johnson "stole" them to finance the Viet Nam war. The only way he could finance the war without a huge tax increase was by placing them into the general funds. There are billions of dollars of I.O.U.'s in the social security trust funds that the government owes. Shown in tables within this column is the current taxing system. It reflects without any argument how the current tax system is very unfair and unjust to single and married couples without children. The present tax system needs to be changed to a Flat Federal Income Tax and a Federal Sales Tax. U.S. Corporations paid only $188.4 billion dollars in taxes based on $15, trillion, 572 billion dollars in revenues. This represents that corporations paid only 1.21% of their gross receipts or income. Currently, single Americans making the minium wage pay 5.10% of their gross income in federal income taxes. Married couples are paying 6.17%. However, a married couple with 1 or more children pays no taxes and even gets a refund back.
Those examples are just part of what is wrong with the current tax system. Having a Flat Federal Income Tax and a Federal Sales Tax, will eliminate filing yearly tax forms with the IRS. Most importantly, it will eliminate the lobbying by groups for "better" tax breaks. Instead, everyone will be paying the same, straight across the board. A reduced Flat Federal Income Tax helps the poor. A Federal Sales Tax puts the burden on those that make more because they are the ones that are able to spend more. They should be paying more. Instead they are not. A married couple with 2 or more children should not be paying less in taxes than a poor person, a single American or a married couple without children.
The only legitimate purpose of any tax is to provide revenue to cover the actual cost of government. Taxpayers should be able to clearly see the cost of government spending and thereby determine how much government they are willing to pay for. Unfortunately, since its 1913 enactment, the income tax system has fallen prey to a multitude of unintended purposes including income redistribution, social engineering, and government micro-management of saving, investing, and spending decisions. In would almost eliminate the 737 million spent yearly for Internal Revenue Service operational costs. All that would be needed is an audit staff.
Americans have the right to demand that our tax system be equitable, efficient, and supportive of our nation's greatest economic growth potential. Sadly, our current tax system treats individuals unfairly, exacts tremendous administrative and compliance costs, and hinders our economy from realizing its full productive potential. As a result, Americans' opportunity to better their standard of living has been jeopardized. The rich truly have gotten richer, and the middle class have gotten poorer. We presently has a tax code that is 1,371 pages. Who benefits most from these codes? Certainly not the working middle income class. Switching to a straight across the board federal income tax and federal sales tax would eliminate these codes. It would also save a substantial amount of $737 million the IRS spends yearly in operating costs.
Eventually, all sources areas of taxation would be switched to flat taxes with no annual IRS income tax filings. The collection of taxes from revenue sources would increase to monthly from quarterly collections. This would increase cash flow and investment opportunies for the government in further reducing operating expenses of the agencies. The IRS division could be substantially reduced in size. All that would be needed is an auditing staff to audit such areas as reporting of gross receipts from corporations and other areas. Auditing of the American people would cease because everyone would be paying a flat across the board federal income tax and federal sales tax.
Current Tax System
|Imposes high tax rates that discourage work and entrepreneurial activity.||Allows individuals to earn as much as they can without being punished by the tax system.|
|Punishes saving and investing with high tax rates.||Ends high tax rates.|
|Unfairly levies different taxes on people with similar incomes. Special deductions and exemptions often are available to only a select few.||Treats everyone the same, with all taxpayers paying the same low tax rate. Eliminates special deductions and loopholes.|
|Drives investment into unproductive tax shelters.||Ends all tax shelters, allowing more productive investments.|
|Encourages spending more than saving by taxing savings and investment at least twice, sometimes three times.||Ends punitive taxation of savings and investment, leaving individuals free to decide whether to spend, save or invest.|
|Is overly complex with high administrative and compliance cost.||Ends complexity by eliminating the multitude of deductions, exemptions, and credits.|
|Redistributes income and wealth.||Promotes the creation of income and economic opportunity for all Americans.|
So, with those arguments said, here are the results
Other totals such as total amounts reported as incomes for various areas were arrived by totals provided at the IRS,at http://www.irs.gov/prod/tax_stats/index.html.
The area to search in is tax stats and areas of individual and corporate returns reported by line items by forms. On this stats you will find the amounts of total corporate receipts, etc. etc. The latest statistics though are 1996 dollars. Keep in mind the minimum wage increased from $4.25 to $5.15 in Oct. 1996. Actual wages/income was calculated using the actual amount that was paid in social security taxes in 1998.
|Agency||Billions||% of Budget||Legislative Branch||$2.2||0.17%||Judicial Branch||$3.2||0.24%||Dept. of Agriculture||$15.6||1.19%||Dept. of Commerce||$4.3||0.33%||Dept. of Defense-Military||$258.1||19.71%||Dept. of Education||$26.3||2.01%||Dept. of Energy||$17.0||1.30%||Dept. of Health/Human Services||$35.0||2.67%||Dept. of Housing/Urban Development||$33.4||2.55%||Dept. of Interior||$7.4||0.57%||Dept. of Justice||$15.2||1.16%||Dept. of Labor||$10.4||0.79%||Dept. of State||$4.9||0.37%||Dept. of Transportation||$37.4||2.86%||Dept. of Treasury||$10.7||0.82%||Dept. of Veteran Affairs||$18.5||1.41%||Corps. of Engineers||$4.0||0.31%||Other Civil Defense Programs||$0.1||0.01%||Environmental Protection Agency||$6.6||0.50%||Executive Office of the President||$0.2||0.02%||Federal Emergency Management Office||$2.6||0.20%||General Service Adminstration||$0.9||0.07%||International Assistance Programs||$11.4||0.87%||National Aeronautics & Space Admin.||$14.2||1.08%||National Science Foundation||$3.1||0.24%||Office of Personnel Management||$0.2||0.02%||Small Business Administration||$0.8||0.06%||* Social Security Administration||$5.4||N/A||
* The above should be in|
SSA Expenses-see footnote
|-$5.4||N/A||Other Independent Agencies||$5.8||0.044%||
Sub-Total Actual Expenditures
The following amounts are payments to individuals, including veteran pensions, civil service pensions, social security supplemental income. The social security supplemental income is being left here because this is an amount that should not come out of social security trust funds since this amount is not given based on social security earnings. People that do not quality for social security benefits can apply and receive these funds. They are mainly for the poor. The total actual expenditures for this area is $976.6 billion, of which $210.3 billion are Medicare payments and $373.3 billion in Social Security benefits. This leaves a balance of $390.4 billion in payments to other individuals as described above.
|Payments to Individuals||$390.4||29.81%|
Sub-Total U.S. Expenses
|ADD: Contigency Funds 1% of above||$9.4||0.72%|
The following is the total debt of the U.S. $5 trillion, 479 billion dollars as of Dec. 31st, 1998. Paying off the debt has not been addressed by any administration. The interest along a year on this debt is $268.5 billion, less an offset interest earned by the Treasury on funds sold of $55.8 billion. We need to allocate paying off this debt over 75 years. The following amounts must be added into the budget for repayment of the U.S. debt.
|Repayment of Debt/75 years||$73.1||5.58%|
|Interest on U.S. Debt||$268.5||20.50%|
|Less Interest Earned on Funds Sold||-$55.8||-4.26%|
The following amount, $74.7 billion must be added in each year for the next 20 years to balance the Social Security Funds in 20 years.
|To Social Security Trust Funds||$74.7||5.00%|
The following is the real total of U.S. Expenses to truly "balance" the budget. Yes, that is 1 trillion, 309 billion, 700 million dollars a year.
TOTAL U.S. "REAL" EXPENSES
How do we pay for this on a more fair basis for every American versus the present tax system? Well here's one way.
First, let's take a look at revenues collected to see something interesting. These amounts were asbtracted from Internal Revenue Service reporting of actual income tax filings.
Total federal corporate income tax paid by U.S. Corporations was $188.4 billion dollars based on total receipts of $15 trillion, 572 billion dollars. This means corporations paid only a 1.21% Federal Income Tax on their earnings. Now keep that in mind, for that is going to change
Total Social Security taxes collected were $828.5 billion dollars in 1998. To compute the actual reported wages and earnings of individuals we need to divide this by (2), since this amount is employer matched to arrive at a computation of total earnings. This total would be $414.2 billion. Take $6 trillion, 736 million, 470 million dollars times 6.15% and you arrive at the $414.2 billion dollars collected in social security taxes. The present accounting system of the U.S. Govt. mingles these with the general funds of the Treasury. They should not be, they should be excluded.The following amounts in the table will show how tax revenues can be generated using a Flat Federal Income Tax and a Federal Sales Tax. The amounts listed to compute the collected revenues were abstracted from IRS tax statistics on reporting from tax returns.
This new method of taxing would eliminate all income tax filing except for Estate and Gift Taxes for consumers. There would be no income tax filing needed. The taxes would come straight off the top and paid in at that rate. Meaning, federal income tax on individuals would be 3.00%, collected and paid. No filing for individuals at end of year. Corporations would pay a straight 2.5% across the board instead of the measly 1.2% they are averaging paying. No filing of coporate returns except for a receipts monthly filing report, paying the straight 2.5% on all sales or receipts. Interest and dividends would be taxed straight across and paid as a tax as well as the other areas.
This would eliminate the 1,378 pages of the Internal Revenue Code and eliminate most of the approximately 738 million a year in IRS operating expenses. The IRS would only be auditing records for proper reporting and paying of the straight across the board taxes from sources that would be collecting and paying the taxes. The IRS would not be auditing individuals. If you believe that the present tax system is fair to everyone, single, married with no children, married with children...think again. The present tax system, singles and married couples without children are paying the brunt of taxes. This has got to stop! Single and married couples without children are literally paying married couples with children to have babies. Is this fair and just? See these tables to show the present taxing system concerning this showing the end results.
How to Really Balance the U.S. Expenses
|Expenses of U. S. Govt. 1998 Actual Figure||$1,309.7|
SOURCES OF TAX REVENUES
|From Federal Income Tax||$275.6||21.04%|
|From Federal Sales Tax||$511.8||39.08%|
|From Corporate, Excise, Estate,|
Gift, Customs and Misc. Taxes
This is how it would compute
Figures Expressed in Trillions/Billions/Millions
|Type of Tax Source||Receipts||Tax Rate||Taxes Collected|
The above is $15 trillion, 572 billion dollars and $389.3 billion in tax revenue. Corporations would pay a flat 2.5% on total gross receipts instead of the low 1.21% average corporations are paying now. This would eliminate those corporations that pay zero federal income taxes. It would also eliminate lobbying from special interests groups for special tax breaks. It would also eliminate corporate income tax filings except for paying the sales tax.
** tax = use present taxing system
|Excise Taxes||** tax||$57.6|
|Estate and Gift||** tax||$24.1|
|Miscellaneous Receipts||** tax||$33.0|
The above areas would eventually be switched to a flat tax across the board, no extensive income tax filings or forms to fill out yearly. Simple filing of one form reporting gross receipts.
TL Receipts These Areas
Other Areas Taxed - Expressed in Trillions/Billions
|Area||Receipts||Tax Rate||Tl Taxes|
The above is $6 trillion, 736.4 billion with
$202.1 billion in tax revenue collected at 3.00%
|Social Security Benefits||$445.0||1.5%||$6.7|
|State Income Tax Refunds||$12.8||10.00%||$1.3|
|Business & Professional Inc||$246.0||10.00%||$24.6|
|Foreign Income Earned||$12.0||10.00%||$1.2|
* State Income Tax Refunds would be taxed only on amounts over $1,000.00. This would have to remain until all states adopted a flat tax. This helps the middle income class. Those, who are more wealthy that receive large refunds would pay a tax.
* A flat tax on capital gains for the more wealthy would eliminate special interest groups from lobbying elected officals in Washington for special "breaks".
TL Receipts These Areas
Next we have the Federal Sales Tax. A different tax that taxes upon spending. Excluded from this new Federal Sales Tax would be the following: Automobiles, ( up to $25,000, over that would be taxed at 6%) Funeral Expenses, Home Purchase,( up to a $225,00 purchase, over that would be taxed at 6%) Housing Rentals, Hospital/Medical Costs, Presciption Medicines, Sales of Items from Wholesalers to Retailers. These would be the only excluded items from this tax. Total consumer spending excluding the above items was $8 trillion, 511 billion dollars in 1998. The Federal Sales Tax would be 6.00% to meet the balance of tax revenues needed to balance ALL expenses, ( including the debt and social security invested amounts) of the U.S. Govt. If you notice above, the middle income class would not be taxed on home purchases under $225,000 and automobiles under $25,000.
RECAP OF ALL AREAS OF TAX RECEIPTS
|Area of Revenues||Percent||Total|
|Corporation and Other||39.88%||$511.8|
|Wages and Other||22.44%||$293.9|
|Federal Sales Tax||38.99%||$510.7|
TL Receipts These Areas
TL U.S. Annual Expenses
WE NOW HAVE A BALANCED BUDGET
NOT WHAT YOU ARE BEING TOLD IN WASHINGTON
THRE IS NOT A SURPLUS BECAUSE
THE DEBT IS NOT BEING REPAID
I would like to point out the following facts by having such a simple accounting and taxing method. Any and all of these taxing percentages could be adjusted quite easily year to year instead of the yearly guessing of "what should the American taxpayer be paying in taxes" by politicians. Eventually, the few remaining areas that would be taxed using present taxing methods would change to flat taxes. In most instances, the percentages could probably be lowered slightly after the first year or two after applying "true" figures in a business like manner instead of the creative accounting the government uses now. Changing these areas is not only more just and fair that the present, but more accurate. It will do away with "pork barrel" projects that politicians attach to bills for projects in their areas. It will provide the means for Washington to truly be accountable in spending tax dollars. It will eliminate yearly IRS filings by most individuals. It will do away with most of the 1,378 pages of tax code and most of the operational expenses of the IRS, a savings of 737 milllion a year. By having a flat corporate tax, there will be no "special interests" working behind closed doors in Washington for corporate conglomorates. It would eliminate the middle class from being "screwed" by these "special interests." The truth of the matter is, the tax a corporation should pay should be a flat fixed expense just like any expense, without all the "special credits" that are acquired behind closed doors by lobbyists. Why should corporations get tax breaks when middle America doesn't?
Last, but not the least, the Government will finally be run like a business and not like a candy store at a loss. It will know exactly what is coming in and going out without on-budget, off-budget reports,( off budget means without social security funds added into the budget) and budgets for amounts to be placed in trust funds for government agencies. The latter, placing amounts in trust funds for agencies is just a way for politicians to hide tax dollars to spend later. It is no different than little Joey hiding pennies under his bed covers. The difference is we are not talking about pennies, we are talking about billions. Most importantly, the social security funds needs to be taken out of the general funds and managed separately. In case you haven't figured out, this is how those in Washington are able to tell lies concerning a so called surplus. The surplus is simply the amount of social security funds that should not be there in the first place. The social security funds were placed in the general funds in 1963 by President Johnson to finance the Viet Nam war. This was the only way the war could be financed without the government explaining a "huge" tax increase for Americans, which by the way we are still paying for. the funds should never have been placed in the general funds. Finally, changing the accounting and taxing methods will be simple enough for all Americans to understand. Every American needs to decide if they want to remain in "clouded states of confusion" created by politicians or do something to finally have clear direction in the matters that effect them most, their pocket book. It's up to you America!
If what you have read makes any sense to you, then I urge you do something about it. If you can say with honesty that is fair and just for a single American or a married couple without children to pay more in taxes, then we should just throw in the towel and call it quits for everyone. We can't lose what we believe in as morals, the difference between right and wrong. I want to pass this interesting tidbit I received in an email. It is from one of my readers, a S. Friedman in California. "Can you explain the following to me? How can a couple that lives next door to me with 2 children, both parents work and make around $32,000 a year, get foods stamps, be on Medicaid and purchase a used RV vehicle for $10,000? There is something terribly wrong in this country that allows this sort of thing to happen. My tax dollars are paying for their RV." That is a good question Mr. Friedman and a topic for another column.
Call, fax, email your elected representatives today and demand a change in our present tax system to a flat tax system. I've given you the facts, the true hard figures. The other reality is that as Americans, we must realize that we have let these politicians create a debt of nearly $6 trillion dollars that they are not going to pay off. We, the taxpayers will. Isn't is time we had a say in how? We also have to accept this debt and accept that in may cause an increase in some taxes. We have been borrwing from Peter to pay Paul for too long. The present method is broken, it must be fixed. You've been lied to and are being lied to by all of the politicians in Washington. Let me close with this simple thought. If I can manage to pull out the real true figures by digging for them, then why hasn't someone in Washington already done this? Why hasn't our elected officals in Washington said, "Hey...we have a broken system and this is how it needs to be fixed." I can tell you why...those that have wanted to keep you in the dark have kept you in the dark. Think hard on the reason why they have wanted to keep you in the dark. As I said, the middle class have become poorer and the rich have become richer. And who are the rich? It certainly isn't the middle class.
All of these figures and information can be found by digging in various government agencies. All of these figures are real and are the truth. All I can do is provide you the facts and truth. It is up to all of us to do something about it. I've done my biggest part by providing you with the truth...Now, what are you going to do with it?
One last favor may I ask of you. Email your friends about this column. The URL is http://www.dldewey.com/taxes99.htm. Pass the word, you'll be doing not only yourself a favor, but your children and future generations as well. I only hope there are enough Americans who care. - Thank you!
|You can have your voice heard by voting. Should the U.S. have a taxing system similar as illustrated in this column? Let your voice be heard!|
|Should We Have New Taxing System?|
~ David Lawrence Dewey ~
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