Will the Tax Code be Overhauled anytime soon?

Erock Podbean Banner 12.28.2011

There has been a lot of talk over the years about scrapping the tax code and coming up with something new, and there certainly have been a ton of proposals. Unfortunately, much like the banking system being too big to fail, the tax code may actually be too big to overhaul completely.

The talk from the right is mainly about a consumption tax and or abolition of the state tax to replace the current income tax system. Under some radical regressive plans, income taxes, gift taxes, FICA taxes, corporate income tax, and even capital gains would be eliminated in favor of the consumption tax.

The pros of a consumption tax are that the tax rewards saving. If you don’t consume, you don’t pay the tax. Also, the cumbersome current tax code would be scrapped entirely, making many Americans happy they don’t have to stress over taxes every year.

But the cons far outweigh any system like this. First it’s entirely regressive and forces poor folks to ante up more to the table that they cannot afford to pay in the first place. Second, what’s the rate going to be for the consumption tax? There is talk of a rate in the 20% range and many feel that will not even be enough to cover the current tax collections. Also, imagine taxing home sales, medicine, or even food.

For now we will have to deal with the usual partisan bickering over taxes and who should pay what. The democrats want to force the 25+% of American corporations that pay zero tax to pay their fair share of tax. They also want the richest of the richest to pay even more in tax to get their % owed back to levels when there was American prosperity in the 90s. The Republicans want the tax code revamped by broadening the tax base and lowering rates, as well as closing loopholes, something they have said for years.

Click below to hear Win Damon and I review this topic live on WNBP, 106.1 FM Newburyport and wnbp.com. Listen every Tuesday morning at 8:30 for insightful tax and financial tips.

 

With more than 23 years of experience as a credentialed tax professional, Stu Steinberg brings a broad depth of knowledge to his work. Stu founded Erock Tax to help provide tax strategies to individuals, families and small businesses. He also uses his CPA expertise to help each client navigate their long-term debt and mortgage, gaining them the best deals and rates possible. Stu is passionate about empowering his clients through education about their tax health. He is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.

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