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Things that make you go: hmm...

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We cannot expect the Americans to jump from capitalism to Communism, but we can assist their elected leaders in giving Americans small doses of socialism until they suddenly away to find they have Com

What would happen if the income tax were abolished?

For those of you that don't know me personally, I have been a strong proponent that the federal income tax is illegal.  It is written in such a way so as to suggest it may even be voluntary.  Most people assume it applies to everyone and everyone has to pay.  They do not even consider that there may be a way to opt out.  They were taught that to not pay the tax would be "un-American" and "un-Patriotic".

I know there are many positions on this subject and that some may be strongly agains much of what I say here today.  Too bad, saying it anyway.

If the tax is Constitutionally illegal, then the patriotic American thing to do would be to not pay it.  However, if you take that strategy you may go to jail.  Most people consider themselves to be "free sovereign citizens".  If they were, they would not have to pay this tax.  This tax is applied because of the rules of uniform commercial code and maritime law.  This is how it gets legally applied to the people of the country.  The details of this are long and lengthy and not part of this article.  You may research them independantly, but you may not like what you find.

I should at least point point out that I file a return every year.  Due to the way the rules are written, I am no longer required to file a return and could just stop at this point.  Due to income levels, business write-offs, exemptions, and credits I have not "owed" a tax in over 15 years.  In fact, I have always received mor emoney back than I have ever paid in.  There are many other people in the same position, and many who are not.

Assuming that I actually produce a definable "income", and that I am under the correct jurisdiction to be taxed on that income, I would pay the tax if, or when the return calculations indicated that I needed to.  That time may be coming as my children grow up and I lose those credits and exemptions.  Although if I stopped filing due to the number of years that no tax was owed before that time, it appears there is no provision for requiring to file later after circumstances have changed (Although that loop hole may get amended).

My preference for taxation would actually be a spending or sales tax - flat rate.  Certain types of spending would be exempt: Personal primary housing, up to 2 cars per individual below $30K/ea, FOOD, rent, Utilities, investments (stocks, bonds, mutual funds).

With this taxation strategy, people are encouraged to invest.  They are not penalized for basic necessities of life.  However, if they want an LED big screen TV in every room of their house, and a barn full of collector's cars, boats, and other non-life essential toys - then they would be taxed on that.  This would tie the state of the economy directly to the the revenue the federal government brings in from the serfs, I mean people, it rules, I mean serves.

How would this affect me?  Well, I would have to start paying a tax, and I would not be getting a return at the end of the year.  I would propbably not pay much, because I am not prone to buying much beyond essentials, but I would end up paying.

If the Federal Income Tax as it is currently defined were to be ended with or without replacement by another system next year (as some have rumoured it will be), what would happen?  Who would benefit?  Who would be penalized?

These questions are quite simple.

1. Due to tax strategies and loop holes the very wealthy pay little to no tax relative to their income.  I have known people in this situation and the structuring of their businesses and assets into non-personal holdings is almost a science and requires a small staff to maintain.  For them, they could simplify their whole structure, release some now unneeded staff (Probably 500,000 accounting/legal jobs would be lost as a guess), and keep more money in their pocket to invest, spend, whatever.  Most often they never get a "return", as their accountants structure things to keep as much money in the ir pockets as possible rather than using the IRS as a non-interest bearing bank account.

2. Single people and those with no children that work at regular jobs would benefit.  They pay the highest percentage of tax.  They have few credits, few exemptions, and most are younger and do not know how to structure their businessed and investments to shelter them. Most do not have the income to create these structures and maintain them if they did.  Most often they don't see a return, and more often than not they have to pay in from failing to withold enough.

3. Parents - married or single - The family is the most negatively impacted.  Most families, especially large ones, pay little to no withholding tax.  Yet, they often receive sizable returns that far exceed anything they have paid in due to exemptions and credits. I have known families that have received as much as $8,000 in a single return. I 'm not sure how that happened, I have never been able to work the numbers to get that.  IF there is no more income tax, there is no more return of said tax.  Many of these people live hand to mouth and rely on the annual tax return as a sort of bonus check that they can use to replace or repair major items that they rely on - cars, appliances, home repair, major medical expenses, etc.

4. There is a huge industry and many small to large businesses based around the income tax.  From software manufactures and tax preparers to attorneys and specialized court systems along with their infrastructure support.  We are literally talking about millions of people and billions of dollars.  All gone.  The people will have to find new lines of work, which I am sure they would do.  The companies would close or be restructured into other avenues where possible.  Tax attorneys would need to re-specialize.

The economic impact on Americans would be greater than you may think.  The federal income tax was created for a purpose.  A purpose that has long since ended.  The income tax is not the primary source of income for the federal government and its operations.  It may not even be profitable after all the returns and support systems are payed for - although I've not seen any data to support this either way, it is pure speculation. 

Still would I like to see the income tax abolished?  Yes.  But it should probably be replaced with another system as outlined above.




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