The Optimum Tax Plan

Our present tax maze is an absurd collection of laws, legal opinions and precedents accumulated over many years of muddled thinking about the purpose of taxation. The sole function of taxes should be to collect the funds needed by the government to provide those services utilized by, or available to, all of the people of the united states. It should not be to try to improve the behavior of the individual taxpayers, erase social barriers, or any of the myriad other intentions of the diverse members of congress, bureaucrats and enforcement officials.

While the present income tax system tend to punish productivity, initiative, frugality and foresight, and rewards lack of productivity, wasteful spending, and indebtedness, a reasonable taxation system should not penalize the positive activities which benefit society as a whole, and reward those who are unproductive, idle, and consume far more than they produce. Further, the present system is inherently dishonest in that it succeeds in concealing from the tax payer to the maximum extent possible the amount of the taxes being paid, by hiding them in a thousand different ways.

The tax codes are horrendously lengthy and written in obscure language by lawyers for lawyers, and incomprehensible in total for the average American. The Constitution was written by Farmers, and is intelligible to almost anyone with any literacy at all. The tax code should be no more complex and obscure.

I was able to write, what I think is a fair and equitable tax law in three pages of relatively plain language. It calls for replacing all federal taxes with a single sales tax. Note that it says all Federal taxes. Payroll, withholding, income tax, social security tax, Medicare tax,  excise tax import and export duties and all the other taxes that I haven't even heard of. All of them. This would immediately put some 30% or more in the average worker's pay check each week, but he or she would have to pay 23% more for whatever they buy for their own consumption. Likewise, the business man's profits would go up by the amount now required for corporate taxes (why tax an organization which is providing employment to others and producing goods the country needs). They could either pay very good dividends to their owners, or stockholders, or allow them to cut prices to meet competition.

Here is the bill, as it was submitted to Representative Rob Woodall, author of the Fair Tax proposal which has never made it out of committee. I believe Rob Woodall's bill is better than what we have now, but has many of the flaws of previous bills. So, I simply rewrote it and made it far simpler, easier to understand, and removed the parts which required the government to try to be fair to the poor by giving rich and poor alike a cash payout from the Federal Government annually.

My suggested bill got a form letter from Representative Woodall extolling the virtues of his 78 page plan as proposed.

Here is my version:

114th CONGRESS
1st Session

 

H. R. 25

 To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.


IN THE HOUSE OF REPRESENTATIVES

 

Mr. Woodall (for himself, Mr. Price of Georgia, Mr. King of Iowa, Mr. Bishop of Utah, Mr. Conaway, Mr. Kline, Mr. McCaul, Mr. Miller of Florida, Mr. Thornberry, Mr. Brady of Texas, Ms. Jenkins of Kansas, Mr. Marchant, Mr. Culberson, Mr. Bilirakis, Mr. Westmoreland, Mr. Graves of Georgia, Mr. Long, Mr. Massie, Mr. Posey, Mr. Yoder, Mr. DesJarlais, Mr. Meadows, Mr. Collins of Georgia, Mr. Huelskamp, Mr. Bridenstine, Ms. Foxx, Mr. Mica, Mr. McClintock, Mr. Salmon, Mr. Neugebauer, Mr. Stutzman, Mr. Roe of Tennessee, Mr. Graves of Missouri, Mr. Poe of Texas, Mr. Franks of Arizona, Mr. Crenshaw, Ms. Granger, Mr. Nugent, Mr. DeSantis, Mr. Pompeo, Mr. Flores, Mr. Duncan of Tennessee, Mr. Walberg, Mr. Farenthold, Mr. Olson, Mr. Harris, Mr. Yoho, Mr. Duncan of South Carolina, Mr. Rooney of Florida, Mr. Wittman, Mr. Lucas, Mr. Mullin, Mr. Chabot, Mr. Ribble, Mr. Brat, Mr. Loudermilk, Mr. Hice of Georgia, and Mr. Carter of Georgia) introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

 

To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

(From here on this is my wording, not that of the Sponsors of the pending bill)

Definition of the Fair Tax

The Fair Tax is a sales tax on the purchase of new goods or services for use or consumption by the purchaser. Such transactions are defined hereby as taxable transactions. The tax is to be paid by the purchaser to the seller. The seller shall report the date and amount of the sale, the tax received and remit the total of such tax receipts to the designated governmental agency weekly.

Definition of Taxable Transactions

The sale of all tangible goods and services are to be taxed only once, and subsequent re-sales are not taxable transactions. Charges made for the delivery and/or installation of tangible goods are taxable transactions, as are other services performed for the benefit of the user such as appraisals, design services, consulting services, etc. which are of intangible benefit to the purchaser. Entertainment in any form paid for by the person being entertained is such a service.

The purchase of intangibles, such as stocks, bonds, Insurance policies, and the like, research expenses, educational and training expenses, and the like are not taxable transactions under this Act. The purchase of labor, materials, machinery, real property and the like, for use in the production of taxable goods or services does not constitute taxable transactions. Receipts of insurance proceeds after proof of loss are not taxable transactions.

 The purchase of goods and services by the United States Government and the several states are taxable transaction.

 Replacement of all prior Taxes

This bill replaces all prior tax bills and rules and regulations derived thereunder without exception. The Internal Revenue Code of 1986, and all prior and subsequent tax bills, rules and regulations are hereby repealed without exception, effective on January 1, 2018. Past obligations for taxes accrued but not yet paid on that date shall remain as legal obligations by the taxpayer or the United States Treasurer.

 Taxation Rate

The rate of taxation of taxable transactions shall be 23% of the purchase price of the goods or services, exclusive of the tax. This rate may be modified by act of Congress on the recommendation of the Treasurer of the United States.

 Documentation

In every case, without exception, the purchaser shall be issued a receipt showing the purchase price of the goods and/or services, and separately, the amount of Federal Fair Tax, and of any state or local sales taxes charged. Such receipt is to be issued only on the actual transfer of funds or valid documentation of the amount of payment, and no credit will be given for tax rebates in the case of bad debts. In the case of partial payments, each partial payment shall have a receipt for that portion of the payment actually made, and the appropriate partial tax payment. Purchases made on credit shall be treated as taxable events when payment is made, rather than at the date of the purchase.

 Responsibility for Collection and Enforcement

The United States Treasury shall bear the responsibility of receiving and accounting for the sales tax receipts under the Fair Tax Act. The Treasurer may designate any state or territory desiring to act on behalf of the Federal government in collecting the Fair Tax, and transferring it to the United States Treasury with adequate substantiation of the amounts collated. Under such arrangements, the treasury may establish a fee which may be deducted by the state provided that this fee does not exceed 1/2 % of the tax amount collected, and that the fee is applicable to all states which are selected to process the returns. In other cases, the vendors must remit the funds and documentation thereon directly to the US treasury within five business days of receipt. In every case, the designating collection agency is responsible for reasonable enforcement of this act within the designated area, with oversight provided by the Department of the Treasury of the United States.

 Supplemental Rules, Regulations and Enforcement

The United States Treasurer may implement such supplemental rules and regulations as are required to carry out the objectives and intent of this Act. Penalties for willful or unintended failures in collection or reporting of tax revenues shall be established by the Treasurer of the United States shall apply equally to sellers of goods and services and to governmental officials.  The presumption of innocence shall be recognized in all actions brought by the government in reference to violations of this act and the subsequent rules.

Such rules shall be submitted to the House of Representatives prior to implementation, and shall be subject to review and may be vetoed, accepted or amended.

 Reporting

The Treasurer of the United States shall prepare, annually, a report to the Congress summarizing the effectiveness of the Fair Tax Act in generating adequate revenues for the operation of the government, and any recommendations for changes to improve upon the Fair Tax Act of 2017 and subsequent Federal tax legislation. The first such report shall be submitted on the effective date of this Act.

 Effective Date

 his bill shall become effective on the first day of January, 2018.

Abolition of the Internal Revenue Service

 s of the above date, the Internal Revenue Service shall limit its activities to the collection, adjudication and settlement of Federal Tax accounts involving 2017 and prior years which remain open. Such settlements are to be completed by December 31, 2017, and there will be no further activity by the Internal Revenue Service or its agents except as required by unsettled legal actions. Congress shall provide such minimal appropriation as required for this activity through December31, 2018, after which the Internal Revenue Service will transfer all open accounts to the Treasurer of the United States, and will cease to exist as an agency of the US Government.