North Star Writers Group - Syndicated Commentary: Opinion, Humor and Features

November 17, 2008

A Trade-Off To End Tax Insanity

Cue the Twilight Zone theme. Da-da DA-da, da-da DA-da.

Picture this: A 79-year-old man with Alzheimer’s and Parkinson’s, and his ex-wife, legally blind due to macular degeneration, receive a “notice” from a major consumer services group with a “proposed balance due” of $87,708 . . . even though the organization knows that the “bill” cannot be correct. The couple’s actual bill? $1,165. But it costs nearly $700 to prove it.

Picture this: The very same consumer services group routinely overcharges the average American household nearly $2,400 – or more than $250 billion in total – each and every year.

Picture this: The less you use of this service, the more they charge you. In fact, the group discriminates against consumers based on how much they make, how they earn it, where they live and how many kids they have. Just to pay their bills, they frequently have to fill out a half dozen forms, guided by 155 pages of instructions so complex that the service is frequently wrong in explaining them to consumers.

Picture this: This service has played a big-time role in luring consumers into overextension that has stoked the current housing and health care crises.

Call the consumer protection agencies! Alert the state attorneys general! Send in 60 Minutes! Get the show hearings going in Washington!

Wait. You say it is Washington?

You bet. The consumer service group in question is none other than our pals at the Internal Revenue Service.

The IRS is the friendly agency that sent my dad and his ex-wife that heart-stopping $88,000 bill – based on funds they had simply transferred from one broker to another. The notice assumed that all the securities moved had bases of zero. This, my friends, is – as a matter of law – impossible.

The $700, of course, was the accountant’s bill to demonstrate to the IRS what any freshman economics student could have explained to them.

The IRS is the crowd whom the average household overpaid $2,371 in 2007. It collects more than 60 percent of all taxes from the top 5 percent of earners (who benefit the least from its services), while more than 40 percent pay nothing at all.

The IRS is the “service” whose forms and record-keeping cost the average taxpayer $207 out-of-pocket – and America as a whole nearly $100 billion in lost time – in 2008.

And the IRS administers the deductions for mortgage interest and exclusions for health insurance that encourage Americans to overspend on housing and medical care. Fannie Mae studied the aftermath of Britain’s phase-out of its mortgage interest deduction and found that leverage – loan amounts as a percentage of home prices – fell around 30 percent. (A lot of people who are “under water” with their mortgages right now wish they were in that position.) Meanwhile, W’s ill-fated tax reform commission found that removing subsidies for employer-provided health insurance could ax up to 20 percent of private health care spending.

So humor me for a moment. Stop and clear the concept of “taxes” from your mind. (Chant your favorite anti-government mantra, if you would like.)

Think of government, as I have suggested, as a consumer service – which is exactly what it is when you take away all the red, white and blue bunting and windbag speeches. Think of the government like you would your local utility. Or your lawn service. Or your auto mechanic. (Except much more bureaucratic and less efficient.)

Now consider this statement: The way we pay for that service we call government (compared to the way we pay for other services we receive) is utterly insane. For no other product or service imaginable would we put up with so much trouble, inconvenience, expense, confusion, intrusion and economic distortion, simply to pay the bill.

OK, none of this – except the anecdote – is new. So why bring it up now? Simple. We have a president-elect who campaigned on the subject of “change.” I can’t conceive of a more compelling, valuable and timely change than taking the more than 7500 pages and 3.4 million words of the Internal Revenue Code, depositing them in a dumpster (super-sized) and starting over.

And because I so enjoy being outrageous, I want to suggest a starting point.

Jack Kemp once incisively observed, “If you want more of something, subsidize it. If you want less of something, tax it.” To pull us out of recession, we want more business and personal income, more work and investment, more success and more education. Not to mention less economic distortion, fear, intrusion into private lives and time spent figuring and avoiding taxes.

The enviro-crazies want less CO₂ production, and we all want less energy use.

So picture this: A grand tradeoff. We ditch the income tax, with all its costs, inconvenience and dislocation for everyday Americans, and replace it with a sales tax. And to keep that sales tax from coming in at an outrageous 30 percent, we hammer fossil fuels with a massive tax graduated according to carbon content.

How about it, President-elect O? We got a deal?

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