Dumping the Income Tax

By Stewart Truelsen

When the National Commission on Economic Growth and Tax Reform delivered its report on how to fix the nation's tax system, it made a very important and symbolic gesture. Chairman Jack Kemp picked up a huge stack of papers comprising all the regulations and forms of the federal tax code and dumped it in a wastebasket.

"We want the code to be repealed in its entirety and replaced with a single, simplified tax rate system," said Kemp, a former congressman. In his indictment of the current system, Kemp said, "It was designed helter-skelter with an eye not on creating wealth, but redistributing wealth and it hasn't done either."

As Kemp points out, the wealthy haven't been hurt by the tax system. In fact, they are the only ones able to take advantage of it, by finding loopholes and schemes that avoid taxes. The poor and the middle class are the losers. A new tax code in the commission s view should be simple and fair. It should have a low rate of taxation, enhance economic growth and be family oriented. American Farm Bureau President Dean Kleckner served as a member of the commission.

What the commission has accomplished with its report is to raise a number of important questions. Can we replace the income tax, reduce the scope of the IRS, and still collect the revenues needed to run the government? Can we do it in a way that is fair to all?

These are the questions we need to ask those running for political office in 1996. Where do they stand on tax reform? What proposals do they have to offer?

According to Dr. David Henderson, a fiscal expert with the Naval Post Graduate School, there are four proposals now receiving attention--a national sales tax, a value added tax or VAT, the flat tax and something called the USA tax. The USA tax is an acronym for unlimited saving allowance.

As different as these proposals may sound, Henderson says they all have one thing in common. "They all do a lot to get rid of the bias in this country against saving and investment. Saving and investment are typically taxed at least twice." All four proposals in Henderson's view are superior to the system we now have.

But dumping the current income tax seems like a bold move, particularly for a president and Congress that cannot agree on balancing a budget, and have shied away from similarly reforming other federal regulations. This is some consolation to the IRS which is targeted for major downsizing if a taxpayer-friendly system is adopted.

Jack Kemp's dumping of all the tax regs and forms at a news conference was purely symbolic. It will take the resolve of taxpayers and elected officials to make it a reality.