Increasing the Tax Base - Group 1

This first group is right under your nose. Pick up a newspaper, turn on the radio or TV and you’ll hear about this group. You may have had a close encounter with this group. I’m talking about the criminal element.

Very few criminals pay income tax. They don’t have traditional jobs. What are they going to put on a tax form for “employer”? The names of their victims? Too cumbersome and quite often, they have no idea of what their victim’s names are and, get this! They don’t care! Or if they sell drugs, maybe they should put the name of their supplier? Oh, that might be bad for business, not to mention their lives. And since criminal activities are illegal, it might not be a good idea to file taxes in the first place. Somebody might start asking questions.

The criminal who actually pays an income tax does so because they have an income that covers their illegal activity. Some criminals run an automotive business of some sort so that they can funnel stolen cars or car parts through the business (chop shops). They may pay taxes on the their income from the business, but not on the stolen cars or parts. Someone else might have a business where they sell property stolen by other people (fences). Maybe they have a business that covers their drug sales. I used to live next door to a beauty salon that had people coming and going at 1 and 2 in the morning. I knew something was going on, but had no personal knowledge of what was happening, but my first thought was drugs. Turned out I was right. Adult entertainment facilities (strip joints) are known for their drug sales. Do you think the owners claim the sale of drugs on their income tax forms?

Like the wage earner (you and me), the criminal element has to buy certain essential items like food and clothing. No matter whether upright citizen or criminal we also buy other things, furniture, electronics, entertainment such as CD’s, DVD’s, Playstations and games, jewelry, cars, vacations, and houses. The difference may only lie in the cost of the item. The criminal, unless his (or her) money is spent on drugs, always seems to have more “stuff” than I can afford. To be fair, there are an awful lot of criminals out there who don’t rob and steal for just the money, or for the thrill of it. They don’t steal so they can buy “stuff”. They steal for drug money.

The reason why they steal doesn’t really make a difference. They don’t file an income tax. They still have to buy clothing and food and the same things you and I buy. By instituting a consumption tax, they will pay the same taxes that you and I pay.

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Broadening the Tax Base

I think we all agree that the current tax system is burdensome. No one l know likes having to take the time to fill out their tax forms every year. Gathering the forms, waiting until your employer gives you your tax information, then trying to figure out what your tax liability is, what you’ve already paid in, filling in the forms, writing a check if necessary and finally actually filing. Do I mail it or send it electronically? Did I claim all the deductions I’m entitled to? Did I do something that will trigger (gasp!!) an audit?

I think we can all mostly agree that we hate paying taxes. Do you realize that paying an income tax is a relatively new concept? The 16th Amendment, Income Tax, was passed in 1913. That’s less than 100 years ago. We’re not talking about something that’s been around since the dawn of time. Taxpayers figured out how much they owed and wrote a check payable to the US Treasury. It wasn’t until WWII that the government started automatic withdrawals from our paychecks (the deduction on your pay stub called Federal Withholding). Again, a relatively new concept. It was to make it easier for taxpayers during the time of war. And then, it was only supposed to be until the end of the war. Uh huh. Congress got hold of this cash cow and wouldn’t let go.

In the 1930’s FDR started the Social Security program. It was designed to help the elderly and poor during the Depression. A noble concept that my liberal side agrees with. It was funded by money taken from the tax payer, the deduction on your pay stub called FICA-Regular, and put into a “Trust Fund” where funds were disbursed from to give to those eligible.

During the 1960’s, more social programs were enacted: Medicare being one. Again, a noble concept. But, in order to fund these programs, money had to come from somewhere. Congress decided that our payroll taxes could pay for it. And this is funded by the deduction on your pay stub called FICA-Medicare.The problem comes in when there are fewer taxpayers for each social welfare program recipient. That’s the problem we’re facing today. The Baby Boomer generation (1946-1964) is beginning to retire. And yes, I have a vested interest in this problem. I’m a Boomer, born right smack in the middle.

So, what do social welfare programs have to do with the Fair Tax Act? I’m so glad you asked! When the FTA is passed (I’m an optimist, I believe it will be passed when people understand what it can do for them), it will immediately broaden the tax base to include large groups of people who do not currently pay income taxes. By including these groups, the tax base will be broadened and all social programs can continue.

What? They don’t pay taxes? I have to pay taxes! Why don’t they? Well, let’s examine these groups and find out why they don’t pay taxes. What groups are we talking about? Well, come back for Part II and find out.

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