ABQJOURNAL OPINION/GUEST_COLUMNS: A Proportional Tax Rate Would Be Fair

Monday, December 27, 2010

A Proportional Tax Rate Would Be Fair

By Francisco A. Figueroa
Retired Executive
          As a CPA and former small business tax practitioner, I've had a front row seat in the machinations of our U.S. income tax code. It's time for revamping the system completely.
        Here are some quick facts.
        Taxpayers spend $250 billion to calculate annual tax returns. That's money that could be used to hire 5 million teachers, police officers or fire department personnel. There are more tax preparers than there are sailors and Marines on active duty. Since 2001, there have been more than 3,000 changes to the tax code, one for every day of the year.
        It's gotten out of control.
        I propose a single proportional income tax rate along with the elimination of all deductions, exemptions and credits. In other words, construct a rate structure like our property taxes or sales taxes. This would be a single rate that can be understood by all, one that is simple to apply and that is fair.
        There are five fundamental benefits of this proposal.
        First, it is inherently fair.
        Everyone pays the same proportional rate. If you make a lot of money, you pay a lot of tax. If you make little, you pay little.
        There are no disproportionate winners or losers whether the tax rate goes up or down. There would be no special interest deductions, exemptions or credits to benefit some at the expense of others.
        Today, very wealthy people can hire a lot of attorneys and accountants to optimize their deductions and credits. As a result, many pay no tax at all or pay a disproportionately low amount.
        With a single proportional rate and no deductions, exemptions or credits, we would have no special interest lobbyists contributing to congressional representative political action committees to get their special tax break.
        Second, it is amazingly simple.
        With today's technology, everyone would be able to file their returns online without the need for a tax preparer or accountant. One of my clients, a neurosurgeon, told me one day he was frustrated coming to our appointment. When I asked why, he replied, "I'm a neurosurgeon. I work on people's brains. And I can't even calculate my own tax return!"
        My Junior Achievement fifth-graders could complete a tax return with this proposal in minutes.
        Third, it is beautifully transparent.
        The public can focus on a single tax rate, a known, well-advertised number. They can make plans and budget accordingly. Every American will know that number.
        Then, if our government wants to increase spending on social service or take military action in a foreign land, the single tax rate has to increase and every American will know the effect. There would be no more obfuscation by the dizzying array of deductions and allowances and there would be strict accountability by our representatives, because we would all know the single tax rate and see the effect of their positions and votes.
        Fourth, it is wonderfully participative.
        Every American would be subject to the single tax rate. This would promote active involvement by citizens in the workings of their government.
        Our democracy cannot be sustained when almost half of citizens pay no federal income tax. Where there is no effect on people's lives, apathy reigns. I firmly believe this also will have the additional effect of increasing voter turnout across the country.
        Finally, the time is right for this proposal.
        America has awakened to the severe financial crisis facing us now and which puts the livelihood of our children and grandchildren at great peril. We cannot be a world power if we are not an economic power. We cannot be the beacon of light and hope for the world if we do not get our national debt under control.
        To do this, we need to simplify our bureaucracy and focus in like a laser on the important decisions at hand. This proposal would allow us to do exactly that.
        There are a lot of details as to how a proposal like this would be structured and phased in. But the time to start is now.
        President Obama recently weighed in with instructions to his staff to look into a restructuring of the tax code. This is a good thing. I do worry that special interests and bureaucrats will just "perfume the pig" and make cosmetic changes.
        But where I come from, a perfumed pig is still a pig. And I prefer a solution that soars like an American eagle.
        Francisco A. Figueroa recently moved back to Albuquerque after retiring from Lockheed Martin with an assignment at the Hanford DOE site. He previously was vice president and CFO at Sandia National Laboratories and was involved with community activities, including Leadership New Mexico and the National Hispanic Cultural Center.

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