Don’t Blame Polis For His Tax Bill (Or Lack Of It), Fix Broken Federal Income Tax – Greeley Tribune

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Much has been written recently in the Denver Post about Amazon billionaire Jeff Bezos not paying income tax in some years, billionaire philanthropist Philip Anschutz’s efforts to secure an $ 8 million tax refund, and the Governor Jared Polis having failed to pay income tax in some years despite a net worth of around a third of a billion dollars.

In all of these cases, the truth is that these wealthy individuals obeyed the law and sought to minimize their tax burden. They weren’t cheating or doing anything wrong. They were just trying to make sure they were using the rules and regulations currently in place. The difference between these very wealthy people and the rest of us is that they are entitled to certain tax benefits and can afford to hire the experts necessary to achieve their goals.

Rather than criticizing the wealthy for following the law, perhaps it is time to remove these benefits so that money and tax experts no longer give the elite such benefits. With a combined total of nearly 100,000 pages of federal regulations and case law in addition to the thousands of pages of tax regulations and laws imposed by each state, our tax system is an unfathomable quagmire open to exploitation by those who can afford it. make it possible to hire lobbyists and obtain benefits. at taxpayer expense.

The headline of the Post’s editorial, “Jared Polis Aggressively Avoided Income Tax and Tried to Hide It” was bizarre in that it was as if Polis was expected to seek out. actively ways to pay more income tax than required by law. Do any of us, regardless of our income level or financial situation, seek to maximize rather than minimize the taxes we pay? Don’t we all want the biggest refund or the lowest tax bill possible?

Worse was The Post’s assertion, “Polis may not have broken any law with his aggressive tax avoidance, but he certainly made some ethically questionable decisions.”

The Post’s examples are best used as arguments to support the simplification of our ridiculously complex and convoluted tax system. However, until that happens, we should expect anyone with wealth and expertise to likely seek to minimize the taxes they pay. After all, how many of us are trying to pay more taxes than we actually owe?

Various studies estimate the annual cost of complying with our tax laws to be between $ 150 billion and $ 950 billion, and that doesn’t even take into account the associated loss of creativity and productivity due to the time and resources spent complying with federal tax codes. and state. Time spent on compliance reduces the time available to increase the success of a business or nonprofit organization.

Too many businesses and individuals are devoting resources to developing tax strategies and making business decisions based on their tax implications rather than doing what may make more sense in a truly free market economy. This distorts the economic system in a way that can make it less productive.

The complexity of the tax system discourages innovation and creativity, as some would-be entrepreneurs are intimidated by the tsunami of regulations and paperwork they face when trying to start a business. Therefore, our tax system functions as a barrier to entry at a time when we all want to see more competition, not less. It is as if we are dumping molasses on the wheels of our economy.

One solution we should all embrace is a transition to a flat tax for individuals and businesses. Such a move could easily save half the unnecessary costs of compliance. It could also eliminate any special interest benefits that corporations and the wealthy receive that remain inaccessible to most Americans.

Today, the corporate tax rate is 21% of profits (reduced by Republicans in 2017 by a maximum rate of 35%). This generates around $ 250 billion a year for the country, significantly less than in previous years.

Considering the cost of complying with tax laws, many businesses spend more on compliance activities than the total income taxes they pay to the federal government.

A flat-rate corporate tax of just 4% of turnover would make life easier for the business world while generating around $ 600 billion in tax revenue per year. Essentially, the net cost to businesses could potentially be zero due to savings from reduced compliance spending, while the federal government would have an additional one-third of a trillion dollars per year at no additional cost to businesses. taxpayers.

Of course, businesses would still have to track their income and expenses, but they would finally be able to make sound financial, economic, and other decisions based on what would make their operations more successful rather than focusing on what they wanted. should or should not do in order to minimize their tax burden.

The same principle would apply to individuals. By exempting the first $ 25,000 of income for each person, then imposing a flat tax of just 20% on all income, regardless of where it comes from or what form it is in, Americans could fill out a card form. mailing in minutes and complete for the year.

Although our current system appears to be one of “progressive” taxation – high income citizens pay income taxes at a higher rate – the reality is that many high incomes pay no tax on the money they pay. ‘they receive apart from wages.

With such a simplified system – that is, no matter how you receive money, you would have to pay taxes on it – the Internal Revenue Service could focus its efforts on reporting accuracy. and get rid of its responsibilities related to many complexities of tax law.

Another benefit of a flat tax is that it would eliminate much of the participation of wealthy individuals and corporations in our government. Both groups spend hundreds of millions of dollars to pay lobbyists and support candidates and elected officials they wish to influence while seeking laws and regulations that are financially beneficial to them. A flat tax could remove the incentive for these wealthy individuals and businesses to influence lawmakers. Therefore, instituting a flat tax would help restore power to the people as commercial interests withdraw from Washington.

Some people argue that a 15% consumption tax would be a better alternative to federal income tax, especially if low-income people could get it refunded. Rich people consume more, and almost every other developed country has such a tax (eg, a value-added tax), so having one would make American businesses more competitive internationally.

The problem with a consumption tax, however, is that many Americans are not convinced that it would be used to replace income tax; rather, they fear that we end up with both forms of taxation. For this to work, approval of the elimination of income tax would have to accompany approval of the imposition of a fair consumption tax.

For now, the best course is to end the benefits enjoyed by businesses and the wealthy by replacing our current federal income tax system with a lump sum tax that exempts those with relatively little income. Let’s put an end to special interest laws and regulations so that everyone pays their fair share.

– Aaron Harber, host of “The Aaron Harber Show” (HarberTV.com/Info), was the first member of the public appointed by the Governor of Colorado to chair the board of the Attorney General’s collection agency. He was also the founder of the Colorado Accounting Service and the Colorado Tax Service and was a registered investment advisor with the United States Securities & Exchange Commission.

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