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Jewish World Review March 4, 2013/ 22 Adar 5773 We can no longer afford the tax system we have By Jack Kelly http://www.JewishWorldReview.com | The federal tax system should be replaced with a flat tax based on the biblical obligation to tithe, says famed surgeon Benjamin Carson. "You make $10 billion, you put in a billion. You make $10, you put in $1." His speech at the National Prayer Breakfast was a YouTube sensation, but even some conservatives are skeptical. Dr. Carson's argument for a flat tax was not persuasive, "given the complexities involved," said National Review editor Rich Lowry. "A flat tax would probably generate too little revenue, making budget deficits worse," said James Pethokoukis of the American Enterprise Institute. Complexities abound in the federal tax code. It uses nearly 3 million words (more than 9 million, if IRS regulations are included) to describe a plethora of taxes with a dizzying array of rates, exemptions, deductions and credits. There are 774,746 words in the Bible, 7,591 in the U.S. Constitution. There are so many taxes because politicians think if they take a nickel here, a dime there, we might not notice how many dollars it adds up to. There are so many deductions, exemptions and credits because politicians use the tax code to buy votes, reward friends and punish enemies. The trouble even with "loopholes" most of us like -- such as the deductions for charitable contributions and home mortgage interest -- is that when politicians manipulate the tax code for purposes other than raising revenue, the end result is the mess we have now. Americans spend about 6 billion hours each year preparing tax returns, estimates the IRS's Taxpayer Advocate Service. According to one estimate, in 2008 we spent $163 billion to comply with tax laws. That's a lot to waste because politicians want to camouflage the cost of government. The corporate tax boosts costs, which causes prices to rise; and reduces profits, which lowers dividends and wages. At 39 percent, ours is the highest in the world, which discourages investment here. It is so inefficient it raises little money compared to other taxes. But politicians love the corporate tax, because it hides from those who actually pay it -- consumers, shareholders, employees -- how much it costs them. Labor bears 70 percent of the burden, the Congressional Budget Office estimated in a 2006 paper. People who earn $113,700 or less pay a higher proportion of their income in payroll taxes than do those who make more. Workers earn less than shareholders, so the corporate tax is regressive too. Just 10 percent of working Americans pay 70 percent of the income tax. How can that be fair? "The fairest individual in the universe" said both rich and poor should tithe 10 percent of their income, so "there must be something inherently fair about proportionality," Dr. Carson said. Mr. Pethokoukis assumes the present structure of the income tax -- in which nearly half pay nothing -- essentially would be retained. That's not what Dr. Carson has in mind. He'd replace most federal taxes, not just the income tax, and get rid of nearly all exemptions. The simplicity, clarity and fairness of the flat tax can be maintained at a rate higher or lower than 10 percent, if it's applied uniformly. So there's no reason to suppose it would raise less revenue. A flat tax almost certainly would raise more, because it would free so many billions of man-hours for more productive pursuits. Dr. Carson would replace what is complex and opaque with what is simple and clear, but that doesn't mean what he proposes is simplistic, as Mr. Lowry implies. A "complexity" about which Mr. Lowry may fret is if we can file our returns on a postcard, lots of decent, hardworking people at H&R Block would lose their jobs. Corporate tax departments would empty out. At least half the people at the IRS would have nothing to do. We can't afford so sweeping a reform as Dr. Carson proposes, because innocents would suffer if the enormous distortions the tax system makes in the economy were removed, Mr. Lowry seems to say. I hope I'm reading him wrong, because that's nuts. Politicians created complexity in the tax code to camouflage costs and evade accountability. We shouldn't let them use the magnitude of the mess they've made as an excuse to block, delay, or water down reform. What we can afford no longer is the tax system we have. It can't be fixed with a nip here and a tuck there. Only radical surgery can heal the economy. Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here. Comment by clicking here. JWR contributor Jack Kelly, a former Marine and Green Beret, was a deputy assistant secretary of the Air Force in the Reagan administration. Jack Kelly Archives © 2013, Jack Kelly

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