It may be time to throw out the income tax in favor of a whole new approach to financing our government — a value-added tax, or VAT.
Not enough reform
The Trump tax reform didn’t reform enough — the old system of high marginal rates and voluminous deductions and credits largely continues. Although nearly 90% of individual filers take the new, larger standard deductions, we now have two parallel systems.
A VAT would make more transparent how much new government programs cost and let voters decide whether bumping up the rates are worth their benefits.
Many folks who itemized before keep the same records and enter the same information into tax software that determine whether they are better off itemizing or taking the $12,400 standard deduction for individuals or $24,800 for married couples.
Compiling and providing so much detail about our activities and expenses to the federal government and tax professionals is an unconscionable intrusion on privacy. And the system has been abused under several presidents for political purposes.
The whole system favors wealthy individuals and businesses, who can afford expensive accountants, lawyers and K Street lobbyists, to work the tax code’s insane details and obtain special treatment during the complex processes of perpetually rewriting the tax law and translating it into IRS rules.
Businesses are making decisions for reasons of tax avoidance, not sound economics. Democrats in Congress, and left-leaning think tanks assert U.S. businesses enjoy too many tax incentives to move activities offshore.