Under my bed is a cardboard box that is bulging at the seams. I contains my stock purchase/sales slips and my tax returns for the last 25 years or so. I keep these because my accountant advises me to keep my tax returns forever, just in case the tax man wants to see them. You would think he’d have a copy, along with hundreds of nefarious people who have broken into his database or intercepted my return out of the ether and stolen my information.
The sad thing is, there is no reason to live like this. We could fund the government without needing to keep all of these records to prove that we are following the tax laws. (Note also that a lot of people are cheating on their taxes anyway since there are only so many tax investigators to go around. Per usual, those of us who follow the laws are made to suffer because of others who don’t.) The way this could happen would be for us to enact the Fair Tax.
Details on the Fair Tax can be found here:
https://fairtax.org/about/how-fairtax-works
Read it now and forward the link to five of your closest friends, three acquaintances, and four people you really don’t like all that much.
In a nut shell, with the Fair Tax you would replace the income taxes, Social Security taxes, and the rest of those things with a sales tax that is paid on spending beyond what is needed for basic necessities. (Spending on necessities would be tax-free because you would receive a check from the government that covers any taxes you pay below a specified amount each year.) It would be collected when you buy things just as you pay sales taxes now.(Spending on necessities would be tax-free because you would receive a check from the government that covers any taxes you pay below a specified amount each year.)
Things that the Fair Tax would do:
1. Fund the government without anyone needing to file a tax return, keep a receipt, make a contribution to a tax deferred account, or lift a finger.
2. Reduce business tax compliance costs, which means prices would drop (probably by enough to cover the sales tax that would be created). You’d fund the government using the money you’re now paying for tax compliance.
3. Take away the power from the IRS to inflict fear in taxpayers. It would also eliminate the ability to use the IRS as a political weapon (are you reading this, Ms. Lehrner?).
4. Make drug dealers, pimps, the Russian Mafia, and everyone else pay taxes like everyone else.
5. Improve the economy as people focus on doing important work rather than going through machinations to save on taxes.
6. Reward people for saving and investing (good for you) and punish people for spending frivolously (bad for you).
So what’s wrong with the Fair Tax? Why isn’t everyone out there demanding that it be passed first thing next week? Do you like the IRS? Do you like filling out forms? Do you like the challenge of figuring out how to take advantage of the most deductions? Do you think that using TurboTax is more fun than playing Doom or World of Warcraft? Do you think that your accountant is cute and like spending a few hours with him/her every year even if it costs you a couple of hundred bucks? Anyone?
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
