Other Tax Reform Proposals
There are quite a few other proposals for tax reform and varying amounts of thought went into them and lots of study was done about them in preparation of law proposals submitted to Federal and State legislatures.
This web page will discuss the pros and cons of some of the more promoted tax reform proposals and compare each of them to this AutomaticTax proposal explained on this website.
THE FLAT TAX
The Flat tax reform proposal, for example, would simplify income tax preparation and mitigate the opportunity for cheating. Individuals and corporations will be taxed at the same rate. Savings and investments would be exempt from tax, eliminating double taxation and promoting savings and investments essential to economic growth. The preparation of tax returns will be simplified by allowing for only four types of personal deductions. Tax credits and other deductions will no longer be available – a benefit as this simplifies the calculation of net income and taxes considerably. Corporations will no longer be able to deduct interest payments on debt. This proposal may also result in an increase of collections from corporations. For individuals it will significantly reduce the tax rate for many, widening the tax base, encouraging more people to file, and discouraging cheating.
COMPARING FLAT TAX TO AutomaticTax
The flat tax may simplify the filing of a tax return, but it will still require record keeping, tax filing and being subjected to the occasional audit ordeal. The flat tax only affects the Federal Income Tax and all other taxes at lower levels of government would remain.The AutomaticTax eliminates all recordkeeping requirements, filing of tax forms and the the need for audits and replaces all other forms of taxation at lower levels of government.
THE NATIONAL SALES TAX
Another tax reform proposal is the National Sales Tax. This proposal eliminates federal income tax and the tax preparation that goes with it. With a national sales tax consumers pay when they make their make retail purchases. The proposed tax rate for this plan is 17% which is imposed not on what people earn, but on what people spend. This is done to encourage savings and investment. This proposal will significantly reduce tax lobbying, save costly expenses expended by the government in tax compliance, and should increase revenue from tax collections. It will, however, place a greater burden on businesses to collect and be liable for the taxes.
COMPARING NATIONAL SALES TAX TO UNIVERSALTAX
National sales tax would be added to sales State sales tax rates for the majority of States that already have their own sales tax. It has been projected that the National sales tax rate would have to be between 17% and 23% in order to raise enough revenue to be able to replace the income tax with it. On the positive side it would eliminate all record keeping requirement for the average taxpayer and it would add very little work for the merchants who will collect the tax together with State sales taxes where State sales taxes are already in existence. The big problem is that there is a very large incentive to try to circumvent the tax. If the average combined State and Federal sales taxes will amount to around 25% for example, then circumventing the tax will save $25 on a $100 purchase. Transactions for payment in cash will soar in a booming and growing cash economy. Only very large and hard penalties would curb the cash trend and that in turn would criminalize society additionally. I doubt that even a 23% National sales tax would properly fund the revenue needs of all jurisdictions with nexus to the tax. I believe that a rate of 35% would be more realistic and it would only aim to replace the Federal income tax leaving all other taxes as they are now with all their bureaucracies and administration. Auditing the businesses that will collect the tax will still have to do the record keeping and being subjected to audits. The UniversalTax eliminates all record keeping for individuals and businesses alike. At a 5% tax the UniversalTax is expected to easily exceed the revenue needs of all forms of taxation it will replace.
VALUE ADDED TAX
A proposal similar to the National Sales Tax is the Value Added Tax. The proposed rate of 5% is levied on each time a product is resold or when value has been added. For example, when a manufacturer sells a good to a wholesaler, the tax is paid. When the wholesaler sells it to a retailer, again the tax is paid. This proposal will ideally eliminate, or at least significantly reduce the IRS because individuals will no longer need to fill out tax returns or forms. These will likely result in higher priced goods as the cost of the tax will be passed on to the consumer.
COMPARING VALUE ADDED TAX TO AutomaticTax
Value Added Tax is a very cumbersome tax requiring very much record keeping by businesses. It only aims to replace the national income tax and all other taxes remain with all their record keeping and tax filing requirements. Audits will also be conducted on the businesses that will collect the VAT. In contrast the AutomaticTax eliminates all record keeping, tax filing and audit requirements. Value added tax has been adopted by a large number of countries, but it did not eliminate the income tax. It was just added as an extra form of taxation and it did not lighten the burden of paperwork on the taxpayer.