- The Washington Times - Monday, April 8, 2013

ANALYSIS/OPINION:

Time magazine reported recently that the estimated tax gap — the amount of money the Internal Revenue Service fails to collect due to misfiling or tax cheaters — is an estimated $600 billion. The fact that this money goes uncollected ultimately increases the tax rates and the amount of money honest taxpayers must fork over.

An article from the 2002 study by the Government Accountability Office showed that “56 percent of [tax] returns prepared by a paid preparer had errors in comparison to only 47 percent prepared by the taxpayer.” In short, more than 50 percent of tax returns being filed in the 2002 study were filed incorrectly, yet the U.S. Tax Code was a mere 53,280 pages long back then. Fast-forward to 2012, and the code has grown to more than 73,000 pages. That’s taxation without comprehension, and it is only expanding the tax gap.

Studies show that simplifying the code leads to better compliance. That makes sense, but what makes a lot more sense is throwing out the entire income tax code and switching to a national retail sales tax like that proposed by the FairTax Bill.

The FairTax is simply a different way to collect taxes: taxing consumption rather than income. Under the FairTax plan the government would collect the same amount of money without the complexities of the income tax. In fact, the FairTax bill is only 133 pages, double-spaced. The number of “filers” would be reduced from 150 million individual returns to simple sales reports from approximately 20 million businesses.

Yes, it’s possible to cheat a sales tax but unlike income tax where it takes only one person to cheat by not reporting or by underreporting income, a sales tax takes two people to cheat: the person selling and the person buying. In addition the bill specifically includes provisions to reward whistle-blowers, which makes it a little less likely people will cheat. Not to mention that more than 80 percent of retail sales occur through big chain stores like Wal-Mart and Target, and these stores are not going to risk their businesses by cheating the system. Used items are not taxed under the FairTax, so there’s no compliance issue there.

After 100 years of income taxes, and the code growing from 400 pages in 1913 to more than 73,000 pages last year, it’s time we do something that makes sense. Tweaking the code hasn’t worked. Let’s throw it out and switch to the FairTax.

JAMES R. DONNELL

Cameron Park, Calif.

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