Republican presidential hopeful, Rand Paul, recently published his plan to "blow up" the tax code and levy a 14.5% flat tax on all U.S. individuals and businesses. He cited polls showing that "fairness" is a top goal for Americans in our tax system.
Paul got it wrong for two reasons. At Liberty Tax, we continually poll citizens about what they want from the tax system and the IRS. The answers are lower taxes, simplicity and fairness. Lower taxes! Paul missed the fact that the number one thing our citizens want is to pay less, not more, to the government.
Keep in mind that according to IRS numbers, more than 40% of lower income Americans paid no tax at all in 2014. Do you really think that nearly half of our citizens are going to vote for a 14.5% tax hike, when many of them have been paying no tax at all? Does Paul think these struggling citizens will raise their hands and say, "Yes, finally I get to pay my fair share! Please tax me."
The second reason Paul is wrong about the tax code is because you can't have both fair and simple. Our tax code will never be simple because for every rule, there is an exception. Anything that is the same for everyone is not fair.
Is it fair to tax a single mother of 3 children the same as a single person without kids?
Think about the victims of Hurricane Katrina in New Orleans. Is it fair to tax them at the same rate as the citizens of Chicago, who aren't battling hurricanes and floods? Should we forget about Americans who suddenly face high medical expenses or lose their home in a fire? As an entrepreneur, what if you face a personal loss and have no savings to draw upon? These factors would be ignored in Paul's simple 14.5% tax equation.
Simple isn't fair because we aren't just dealing with a system of numbers, we are dealing with human lives in an imperfect world.
Let me make this abundantly clear, I'm not defending the tax code. Clearly our tax system needs an overhaul and there is room for work and change. As I've mentioned in other articles, for the first time ever in our country's history, tax industry and government leaders are sitting down together to discuss best practices and protecting American citizens from fraud.
There is no question that we have our work cut out for us. Simple will never be fair. A 14.5% tax burden on our poorest citizens would not be fair. Remember, the American people have spoken. Rand Paul, our citizens want lower taxes, not an unfair tax hike that would truly break their banks.