Yet Another Damn Reason I Support the Fair Tax

[redneckgaijin]

So, today I went to Beaumont and played office tag to hunt up a blank W-2 so I could finish my business tax filing and begin my personal tax filing.

When I explained to the IRS woman (Fran) why I wanted the blank form, she said, "Sole proprietor? You can't do that."

She then explained to me that when their forms say, "You don't have to do this," what they really mean is, "You are expressly prohibited from doing this." In this case, sole proprietors cannot list themselves as an employee, cannot withhold unemployment, SS, Medicare, income tax, etc. from checks they cut to themselves, etc.

She does say, however, that so long as I don't use the W2, I can do a take-back on the withholding and unemployment paperwork I filed. I need to get copies of the cancelled checks- front and back- to show that yes, I did indeed pay what I claim to have paid. That'd be $540 back in pocket...

... and taking what I paid myself and the taxes off the books, WLP goes from in the hole to a substantial profit for 2007.

Which means I probably qualify for the Earned Income Credit.

Which means more fucking paperwork.

And there's still the threat of penalties.

Jesus Christ. All I wanted to do was (a) separate business from personal finances without incorporating, and (b) start paying into Social Security again.

The system is set up to actively discourage people from becoming entrepreneurs.

And to drive poor boys who don't read bureaucratese well absolutely NUTS.

Comments

[tohoscope.livejournal.com]

But if we had Fair Tax all those gubmint paper pushers whould be out of a job.

[redneckgaijin.livejournal.com]

The woman I dealt with at the IRS said, "Congress will never get rid of the IRS. We write their paychecks."

I don't agree with her self-assurance that her job is guaranteed forever, but there will be an IRS under the FairTax, no matter what its creators say. Someone has to push the paperwork to administer the tax to retailers and to send pre-bate checks out to the American people. You can change the name if you want to, but it'll be the same bureaucracy, probably with the same exact employees.

[tohoscope.livejournal.com]

I know you're right, but I'd like to dream of a more efficient smaller bureaucracy.

[notthebuddha.livejournal.com]

The system is set up to actively discourage people from becoming entrepreneurs.

You can deduct all kinds of expenses on the pretext of running a business that would otherwise be taxable, and you still have the option of forgoing some of them in order to hit the sweet spot on the EIC, meanwhile there is no particular out-of-pocket downside.

And to drive poor boys who don't read bureaucratese well absolutely NUTS.

It helps if you treat it as an arcane play-by-mail game with turns once a year, badly indexed supplements, and particularly harsh penalties.

[redneckgaijin.livejournal.com]

Itemized deductions require paperwork, and it's the paperwork far more than the money that discourages people from starting their own businesses. That's why I oppose tax credits as a matter of philosophy: you have to prove you deserve a tax credit to get it. With a tax cut, the question never arises.

As for it being a game... I would prefer not to play a game where even half the REFEREES don't know what the rules are...

[notthebuddha.livejournal.com]

The paperwork for deductions is much easier if you are tracking expenses the way you should already be doing for your own business purposes; Quicken and other programs make this pretty easy to do.

[starcat-jewel.livejournal.com]

If by "fair tax" you mean "flat tax", I beg to differ; that's just about the most UNFAIR proposal I've ever seen, designed specifically to beggar the poor while lining the pockets of the rich.

[redneckgaijin.livejournal.com]

No. The Fair Tax is the name of a proposal to replace all income taxation, including Medicare and SS withholding, with a national sales tax.

The points of the plan, in brief, are:

(1) All other taxes on income- income tax, corporate tax, capital gains tax, Medicare, SS, unemployment, and estate tax- are eliminated. (I personally would retain an estate tax on liquid assets only- money and negotiable stocks and bonds- at 50% for liquid assets above $1 million, inflation-adjusted.)

(2) National tax of 23% on all sales of new merchandise in the USA levied on the seller, NOT the buyer. Wholesale sales exempt. (There's a bit of voodoo in the proposal there, in that the writers call it 23% invisible in the price of goods. If you calculate it the way Texas sales tax is done- as a percentage levied on the pre-tax amount- it's about 30%. I'd rather do it the Texas way.

(3) Sales of used goods not taxed. (Unworkable, IMHO. I'd rather institute a level of sales below which the requirement of a merchant to pay in the tax is waived.)

(4) To make the sales tax progressive instead of regressive, a "pre-bate" check representing the sales tax paid on about twice the poverty line in purchases is sent to every man and woman in the USA every year. No requirement is made to prove that you spent it- you get the check no matter how much or how little you buy. (Absolutely the only way this could ever get passed, and even then it's problematic. Liberals say no amount of rebate, prebate or exemption could make a sales tax non-regressive, and conservatives say that the wealth redistribution involved would require a bureaucracy larger than the IRS. I deny both positions.)

(5) The IRS, as we know it, is abolished, leveled, flattened to the ground. (Impossible. Oh, you'll make enforcement easier by about an order of magnitude, and the much simpler regulation system will reduce expenses still further, but somebody still has to operate and enforce the Flat Tax, and even if you change the name, it'll still be a heartless, uncaring, uncooperative IRS to those who have to deal with it.)

There are a number of advantages cited for the plan- it makes our exports cheaper, since they aren't taxed; it cuts loopholes and corporate benefits, since you're taxed on what you spend, period; consumption is a more moral form of taxation than claiming a percentage of all citizens' labor. My personal favorite advantage, though, is that it gets rid of hours and hours of paperwork and gut-wrenching terror of making a mistake.

Of course, the tax preparer industry and the $4 billion per year they charge to prepare returns each year have a strong interest to prevent it going through...