The Fair Tax. The Flat Tax. What do they have in common?
They're good tax reform plans that have stalled out legislatively because the corruptions of the current "progressive" tax code have proven more powerful and tempting than the valiant efforts of many.
The mantra that "49% of Americans do not pay federal income taxes" is dangerously misleading and shouldn't be used by Republicans in their effort to enact reform. It has the tendency to reinforce the notion that those who do not pay federal corporate or personal income taxes are unaffected by them.
The truth is that we all contribute to federal taxes, even those that are hidden from the electorate. Until all Americans realize they have "skin in the game," tax reform will not happen.
When I'm elected to Congress, I'll work with my colleagues to draft and introduce the Truth in Taxation Act. The Truth in Taxation Act will task a non-partisan agency (such as the Government Accounting Office) to calculate the entire federal tax burden that makes up the price of individual products. The legislation will then require that information to be printed upon the labels of those products or on sales receipts.
In exactly the same way that federal law now requires certain products to provide nutrition information, we should require those same products to be labeled with taxation information.
That way, taxpayers can see how much they pay in taxes every time they go to the store. It will make them mad. Every bill they receive - from utilities to carpet cleaning - will make them even madder.
So if the government raises taxes on business, the American people will instantly see where their costs on goods and services increase. No longer will progressives be able to cloak their tax increases on business from the ones who ultimately pay those taxes - the American consumer.
Anyone who understands basic economics should know that when taxes are levied on a business, those taxes are not really paid by the business. Businesses do not pay taxes, they collect taxes. The taxes are really paid by their customers through higher costs for goods and services. It is estimated that 22% of costs of all goods and services in America contain business federal income taxes passed on through the price. The Truth in Taxation Act would make these visible.
I understand and acknowledge the fact that this will be a burden on business to implement. I hope instead that businesses would see this cost as an investment. Once the act is in place for a few years, it would provide the American people the political will to remove the much larger legal, accounting and administrative fees caused by today’s progressive tax code.
The Truth in Taxation Act would also require full disclosure of the so called “Employer’s” Social Security, Medicare and Unemployment taxes for each employee. These are not really payroll taxes paid by the employer. These are income taxes paid by the employee but hidden from them by a deceitful tax code.
The American consumer should know exactly how much corporate and personal income taxes are costing them when they see their paycheck or purchase anything - from bread, to a piece of clothing, to a car. Yes, there will be many details to work out. Show the federal tax burden on the label? Automatically calculate the tax burden on each receipt? What sort of a financial burden will the act of calculating and labeling accrue, and to whom? These are all important details, and I intend to work them out with my fellow members of Congress in a methodical and detailed way.
But the most important point is this: there can be no meaningful tax reform until the American people know how much of their daily bread instead goes to the federal government.
I believe it is clear that, after several decades of attempts at tax form, The Truth in Taxation Act is essential if anything meaningful is to ever happen. Politicians are too comfortable with the power in the tax code and will not change unless forced by the American people. The Truth in Taxation Act gives the American people the visibility and information needed to demand a better tax code.
At this point, the American people will see the true cost of taxation and force Congress to enact tax reforms such as the Fair Tax. They will demand reform.
Until then, we will be Don Quixote, fighting a valiant battle against the tax code windmill, but with no chance to win. The Truth in Taxation Act would be a powerful weapon to finally vanquish that windmill.