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Issues & Insights

The Truth About ‘Tax Fairness’

April 15 is here. It’s tax day, in case you’d forgotten. The national “holiday” in which Americans have to submit their tax forms.

And if you’re still scrambling to get all the documents, forms and whatnot in order, that probably means you figure you owe money. And you’re putting it off to the last minute. And maybe you’re grumbling about the unfairness of it all. You know, because you’re getting hammered while the rich DON’T PAY THEIR FAIR SHARE OF TAXES.

A new Fox News poll found that this is the No. 1 gripe about taxes.

Yes, the tax code is unfair. 

But, despite what you’ve heard countless times, it’s not because the rich aren’t paying their quote-unquote fair share. If anything, they’re paying more than their fair share.

Consider this: the top 1% of people in the country pay 37% of all federal income taxes collected. The richest 3% pay more than half. That’s far more than their share of taxable income.  

Think about it this way: Four million people in this country — roughly the population of Los Angeles — pay 51% of all federal income taxes.

On the other hand, 40 million — roughly the entire population of the state of California — pay nothing in either income or payroll taxes, or they get a net tax refund from the federal government.

So, no, the tax code doesn’t let the rich off the hook.

But it is unfair.

Why? Because it’s so horrifyingly complicated. 

The tax code is so complicated that people spend $300 billion just to figure out how much they owe the government. That means we’re spending a dollar filing taxes for every 10 dollars the government collects! 

The tax code is so complicated that even low-income families have to hire experts to file their taxes, even though many of them won’t end up owing anything. 

Worse, the complexity of the tax code makes it easier to underpay taxes and harder to catch tax cheats. The IRS figures that more than $450 billion in taxes goes unpaid each year. 

That means honest taxpayers end up paying more while scofflaws get away with paying less.

There are also the myriad tax breaks, credits, and other gimmicks designed to benefit politically favored groups. As a result, two families that earn exactly the same amount of money can owe radically different amounts in taxes. 

Try to imagine a business operating this way. Say you want to buy a new car. The dealer won’t tell you the exact cost of the car up front and the only way to figure it out is to fill out dozens of forms. And if you get the price wrong, he can fine you or repossess your car. Heck, he can even throw you in jail. Who would stand for it?

If you want a fair tax, you’d be looking at a flat tax with no special tax breaks or gimmicks other than a generous standard deduction. 

Or you’d be talking about getting rid of the income tax entirely, and replacing it with a national sales tax. This would be far easier to administer, and would tax people only when they buy stuff, not when they earn money.

By the way, eight states have a flat tax and nine others have no state income tax. These aren’t just conservative red states, either.

Reliably blue Washington State has no income tax, for example.

Massachusetts has a flat income tax, as does Illinois, Colorado, Michigan and Pennsylvania.

Here’s the list of states with a flat income tax:

  • Colorado:
  • Illinois
  • Indiana
  • Massachusetts
  • Michigan
  • North Carolina
  • Pennsylvania
  • Utah

Here are the states with no income tax:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas 
  • Washington 
  • Wyoming

Under either a flat tax or a national sales tax, the rich would continue to pay far more in taxes than the rest of us. 

But the rest of us would be spared the unfair punishments meted out by the current Byzantine and hugely unfair tax code. 

John Merline

Veteran journalist John Merline was Deputy Editor of Commentary and Opinion at Investor's Business Daily. Before IBD, he launched and edited the Opinion section of AOL News, and was a member of the editorial board of USA Today, where he continues to be a regular contributor. He’s been published in the Washington Post, National Review, Detroit News, Cleveland Plain Dealer, Forbes, and numerous other publications. He is regular commentator on the One America News Network and on local talk radio. He got his start in journalism under the tutelage of M. Stanton Evans.

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