Can the Tax Code Be Less Taxing?

In 1913, United States Federal Income Tax laws filled four hundred pages. By 2013, they numbered 73,954, a sign of increasing complexity. At fault: numerous deductions, credits, exemptions, special interest loopholes, and tax laws that change almost daily.

Many agree that the tax code is a mess and needs fixing, even as far as completely scrapping the system for something simpler. The question also arises of how to make taxes more "fair," whether by making the rich pay the most, or by having everyone pay the same rate, for instance. The difficulty comes in agreeing on the best plan and finding enough support to implement a change so large, it would inevitably cross special interests no matter what the proposal.

U.S. income taxes date back to the Civil War. In order to pay expenses, the Lincoln administration imposed a graduated income tax: three percent on those making $600 to $10,000 and five percent for those making more than $10,000. The income tax fell out of favor after several years, with a brief reintroduction in 1894 before being declared unconstitutional in 1895. Until 1913, ninety percent of tax revenue came from alcohol and tobacco sales.

Enter Form 1040. The passage of the 16th Amendment in 1913 allowed the federal government to directly tax income without dividing revenue equally amongst the states or referencing population size. Rates were low, with one percent levied on earnings over $3,000 and a six percent surtax on earnings over $500,000. Later, the expenses of World War I spurred Congress to lay a progressive tax going up to seventy-seven percent. Still, the proportion of American income taxpayers was small.

The Revenue Act of 1942 broadened the scope of who was taxed and introduced medical and investment deductions. Due to needed revenue for World War II, the Current Tax Payment Act of 1943 forgave a portion of taxes from the previous year and made employers withhold income taxes to pay quarterly. This way, the federal government could collect revenue throughout the year rather than waiting. By 1945, over twelve times as many income tax returns were filed as five years earlier.

According to a past U.S. Department of the Treasury Facts Sheet, withholding "also greatly reduced the taxpayer's awareness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future." One reason for this, as some point out, is that paying smaller portions throughout the year and getting a refund is less painful than writing one big check at tax time. New York Fed chairman Beardsley Ruml had similar thoughts when he suggested his withholding plan during the war.

In the 1980s, President Ronald Reagan made a big push for tax reform, uniting Congress to pass the Tax Reform Act of 1986. This lowered the income tax and raised the capital gains tax so that both equaled twenty-eight percent. This attempt at fairness closed loopholes for the rich and eased taxes for lower income earners.

Rates have fluctuated since, with an overall drop in the percentage paid. At the same time, complexity has proliferated, and complaints continue about the richest not paying their fair share. For example, the Buffett Rule (so-named because Warren Buffett said he paid a lower tax rate than his secretary) targets top earners who lower their rates below the national average by hiring experts to find tax loopholes.

Aside from policy issues, simply reducing tax code complexity would save valuable resources and increase tax revenue. Yearly costs of income tax preparation have been estimated at $107 billion, or one percent of GDP, and time required for paperwork equal to 3.19 million full-time jobs. Cutting these administration costs would mean money to spend elsewhere in more productive activities than paperwork. It also appears that more people comply with a tax code that is less complex.

Perhaps the simplest proposal for change is an across-the-board flat tax. Robert Hall and Alvin Rabushka made the idea popular in their 1982 book, The Flat Tax. They proposed to replace the progressive income tax with a nineteen percent flat tax across all income levels except the poor's. There would be no loopholes or deductions, and a tax return could be filed on a postcard.

Such a tax removes the problem of double taxation and penalties on saving. Proponents believe incentives like these change economic behavior and encourage greater production. The flat tax also ends special-interest favoritism by taxing everyone at the same rate. However, this would mean a new pinch for close to half of Americans, who pay little or no income tax under a progressive tax system. It would also increase income inequality.

Eastern Europe became a testing ground for the flat tax in 1994, first with Estonia, followed by Latvia and Lithuania. Countries making these reforms had initially good results. Russia's low flat tax coincided with better compliance and significantly higher revenue, which led to a boom of other countries adopting the flat tax. However, some say it is hard to tell if European improvements resulted from the flat tax or other, simultaneous tax reforms.

As time went on, the excitement about the flat tax declined. Slovakia, a poster-child for low flat rates, replaced them with a progressive structure during its 2013 austerity measures. This was despite experiencing stable tax revenues, lower unemployment, and higher economic growth. The change signaled a push for income equality.

A national sales tax, or Fair Tax, is similar to a flat tax, but takes revenue from a different source—the point of purchase rather than of income. Therefore, those who buy more items pay more taxes; those who save money pay fewer. One popular proposal has been a twenty-three percent sales tax on the price of goods. These proposals typically include a "prebate" based on the poverty level to make allowance for buying food and necessities.

While some see a national sales tax as an interchangeable alternative to the flat tax, others believe it would result in tax evasion because of the high sticker price. Reformers also warn that, without first repealing the 16th Amendment, a national sales tax could easily turn into an additional tax on top of the current income tax. A national sales tax would force the government to pay taxes on the products it buys, as well, which can be seen as either a positive or negative.

The value-added tax, or VAT, is supposedly easier to collect than a sales tax. The VAT adds a percentage of tax along each stage of production rather than sticking a full tax on the final price. While some would say this hides the sticker shock of a one-lump sales tax, others point out that the tax goes into the final purchase price and costs the same as a sales tax in the end.

Because of its efficiency, the VAT encourages more government spending. In Europe, a VAT usually exists alongside the income tax, making it an extra tax. VAT and sales taxes are also criticized for their regressive nature. Because the rich can spend a smaller proportion of their income, they would theoretically pay a smaller percentage of their income than the poor in taxes.

An alternative to flat, sales, or VAT taxes is the semi-progressive but relatively simple and successful tax code of Hong Kong, which one researcher points to as a model poorly understood by Americans. Beginning in about 1955, the region employed a system of basic deductions and exemptions. It included four tax brackets based on wage level and a flat rate for corporate profits. The government kept filing down to a one-page online return while maintaining a healthy economy.

Despite discontent with the current tax code, garnering enough support for fundamental reform has proved challenging. However, proposals will likely continue to be made as taxpayers look for new solutions and reassert old ones.

This topic surveys the basic history and problems of the current tax code and explores some of the major proposals for reform.

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"The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements with the least impact on market behavior. The United States’ tax code has long failed to meet this aim: by severely distorting market decisions and the allocation of resources, it impedes both potential economic growth and potential tax revenue."

"Bloomberg Businessweek's Carol Matlack reports that several central and eastern European countries that adopted flat-rate income taxes over the last two decades are now abandoning them or considering doing so. The Czech Republic and Slovakia switched last year to progressive systems, where rates get higher as incomes rise. Now, Bulgaria is considering a similar move."

"As Washington scrambles to find the 'just right' package that will allow enough of Congress to vote for an increase in the debt ceiling, some leaders have asked those Americans who make more money to be willing to pay more taxes, calling for fairness to be reflected in the tax code. However, new research from Bruce Yandle finds that from 1979 to 2007 the individual income tax burden on the...

This article is Rabushka and Hall's original flat tax proposal. It emphasizes the simplicity of the tax by showing a tax return that would fit on the back of a postcard, an image that quickly became the symbol of the movement.

"With the April 17 deadline approaching, USA TODAY decided to test this theory by asking three veteran tax pros — two enrolled agents and one certified public accountant — to prepare a tax return for a hypothetical family, the Baileys."

"The federal tax system is 'totally broken,' says Tom Brown, a representative of Georgia for FairTax. Brown wants to replace the entire federal tax system with the 'fair tax,' a national sales tax. He spoke on the topic Tuesday at a meeting of the League of Women Voters of the Dalton Area. 'There would be no loopholes, no deductions, no exemptions. It would basically get rid of the Internal Revenue Service,' Brown said. He said a 23 percent national sales tax on new goods and services for personal consumption could replace all federal taxes — income, estate, Social Security, Medicare and all the rest. It would remain revenue neutral, meaning the federal government would take in as much as it does now from all of those various taxes."

Economist Alvin Rabushka helped develop one of the first flat tax system proposals. This interview explores the reasoning behind his ideas as well as the challenges associated with implementing his plan.

"The claim that the rich do not pay their fair share, and pay less in taxes than those at lower income levels, is completely inaccurate. In politics, perception often counts more than reality. As the late Democratic Sen. Daniel Patrick Moynihan famously stated: 'Everyone is entitled to his own opinion, but not his own facts.'"

"Russia flattened its personal income tax (PIT) schedule as part of a comprehensive tax reform in 2001. Tax revenues and compliance surged in the years following the reform, leading many to declare the reform a success. Since then, 28 countries have adopted the flat tax schedule and other countries continue to discuss the prospects, including the United States. This issue of Insights recaps the evidence on the performance of Russia's flat tax and provides a brief discussion of the proposed optional flat taxes in the U.S."

This piece focuses on the fact that, despite some naive views, a value-added tax does not result in lowering other taxes in a nation. The top marginal tax rate in Europe is higher than it is in the United States. This is true despite America not having any national value-added tax. Additionally, even after a low value-added tax is instigated, the tax rate commonly...

"What has come to the fore, however, is a healthy competition between two credible, if not complementary, alternatives to America's current tax system. That is, should we move to a Fair Tax or a Flat Tax?"

Alvin Rabushka, one of the economists responsible for encouraging the idea of flat tax in the U.S., reviews the status of flat tax policies in countries around the world, as of 2010.

"East-central Europe has embraced low, flat-rate taxes with enthusiasm over the past decade. Proponents argue this has played a central role in the region's economic success, although the evidence to support this is thin. Recently, the cause of flat-rate taxation has suffered setbacks [in] Slovakia and Slovenia. As east-central Europe becomes richer, will it fall into line with western Europe's preference for more progressive tax systems?"

"A wave of flat-tax legislation swept across Central and Eastern Europe after the fall of communism, as more than a dozen countries across the region adopted single income-tax rates—to the delight of free marketers who have long championed flat taxes as an economic stimulant."

"When it comes to designing a simple tax system that does the least damage to the economy, it would be difficult to find a better role model than Hong Kong. As The Economist wrote a few years ago, 'The territory's tradition of simple and low taxes … is widely seen as a main reason for its stunning rise to prosperity.' Many advantages of the Hong Kong tax system have been widely emulated in Asia, yet remain poorly understood in this country...."

"According to the CCH Standard Federal Tax Reporter, as of 2013, it now takes 73,954 regular 8-1/2" x 11" sheets of paper to explain the complexity of the U.S. federal tax code!"

"Here is a link to entire 1040 return, complete with instructions, when the income tax was first made permanent in this country, back in 1913. Fairly simple, wouldn't you say? Income from all sources minus deductions, exemption ($3,000 single; $4,000 married couple) and any withholding payments already made. And then, if you netted between $20,000 and $50,000, a 1 percent rate; between $50,000 and $75,000, 2 percent; and so on, all the way up to a top rate of 6 percent on net income over $500,000."

"As talk of tax reform caught Washington's attention on Tuesday, the comment by Ms. Schaeffer illustrated the central challenge of those eager to overhaul the tax code: Even those who favor eliminating tax breaks want to hang on to the breaks that benefit them."

"By early 1943, Congress had raised income taxes radically to finance the war and also imposed income tax on millions of Americans who had not paid it before. But polls showed that few Americans now subject to the tax for the first time were saving to make their payment."

"The policy world is abuzz with talk about whether a value-added tax should be part of the solution to our long-term fiscal problems. Most recently, Paul A. Volcker, head of President Obama's economic advisory board, said a VAT was 'not as toxic an idea' as it used to...

"It seems to me that the most productive and immediate step we can take toward holding government accountable is to end the federal government's ability to withhold income taxes from our paychecks."

"A flat tax implemented in the last decade in most regional countries did not significantly improve economic growth, foreign direct investment (FDI), employment or tax revenues, and some experts argue the region is better off scrapping it."

"Sen. Richard Shelby (R-AL) today introduced a bill to replace the tax code with a 17% flat tax that would reduce tax returns to 'the size of a postcard.' Shelby's Simplified, Manageable And Responsible Tax (SMART) Act establishes a flat tax rate of 17 percent on all income (personal and business)."

"It's tax time again, leaving many Americans asking why the process has to be so hard and some calling tax laws unfair to the poor and middle class. Flat tax proponents say it is both easy and fair. Opponents label it 'class warfare.' Is it time to change the system?"

"Slovakia has maintained a flat tax rate for nearly nine years. Originally introduced with the aim of stimulating investment and to show the world it had moved on from its former communist economy, it has now been abolished by the country's newly re-elected government. Andreas Peichl analyses the effects of the flat tax since 2004, and what the results of the government's move to a more progressive tax system might be. He also concludes that, despite the lack of data on its effectiveness, the remaining countries in Europe that still use a flat tax are unlikely to abolish it."

"The new tax credits, which will eventually cost the government more than $50 billion a year, are part of a growing array of federal benefits offered through the tax code. Known as 'tax expenditures' in budget jargon, such tax breaks were worth more than $1 trillion to recipients last year."

"As Washington grapples with the budget, it might be worth asking a simple question: What would Ronald Reagan do? He was the last president to preside over a significant tax reform, one that did exactly what both candidates in this year's presidential election said they want to do: lower tax rates and close loopholes."

"Fairness is a poor metric to evaluate tax policy. It is more important to focus on how much tax high-earning families and businesses already pay and if forcing them to pay more would in fact be fair to those who would bear the steep burden of the tax hikes."

Alvin Rabushka, one of the original proponents of the flat tax system, summarizes the progress of the flat tax throughout the world over the past 25 years.

"But it is Ruml's role as New Deal spinmeister that keeps him in our thoughts today. He devised the legislation that gave us withholding as we know it. Today Americans give up more money in federal taxes than at any time except when the country was at war: 20.7 percent of the economy. Without withholding, it would be difficult to envision this scale of taxation persisting in a land born of a tax revolt. Indeed, without withholding the outsized government we have today would be hard to imagine."

Mitchell offers a critique of the International Monetary Fund's recent study that harshly criticized the flat tax regimes that have been established in Eastern Europe. He argues that the study doesn't adequately determine the link between different tax regimes and economic growth and claims that the "authors attempt to mislead readers."

"The New Flat Tax ... would replace today’s convoluted tax system with a simple, neutral, and transparent tax system that would allow America to achieve its full economic potential."

"The contrasting comments underscore philosophical differences over the roles of the individual and society. But the most tangible disagreement is on taxing the rich."

Folsom argues against a progressive income tax, citing Constitutional precedent and historical examples. He mentions the "equal protection" clause of the Fourteenth Amendment and then details how progressive taxation, by violating the spirit of uniform application of law, has led to governmental corruption and sown seeds of discontent and class warfare.

"Many people think that the rich are able to weasel their way out of taxes, but they actually pay an overwhelming majority of the taxes in the United States. What's more, their share of the tax burden is increasing."

"The VAT is essentially a national sales tax, levied in proportion to the goods and services produced and sold. But its delightful concealment comes from the fact that the VAT is levied at each step of the way in the production process: on farmer, manufacturer, jobber and wholesaler, and only slightly on the retailer.


"The clock is ticking down on Capitol Hill as a congressional supercommittee has only until Thanksgiving to agree on a plan shrinking deficits by more than a trillion dollars. The entire Congress then has to pass it by Christmas Eve or face huge across-the-board spending cuts."

"According to a Washington Post report, the Obama administration and leaders on Capitol Hill are looking seriously at a value-added tax to pay for health care reform and reduce federal budget deficits. Predictably, Republicans reacted to the news with glee. They view the VAT as political poison that will destroy Obama and congressional Democrats if they...

"Question: What other taxes offer an opportunity to be progressive besides income and inheritance taxes? Paul Solman: Great question. I hope school is still in session. One alternative tax would be a progressive CONSUMPTION tax, as advocated by economist Robert Frank of Cornell, sometimes featured on this page."

"With America's Republican presidential candidates lining up to declare their fealty to a flat tax – a system of personal-income taxation that assesses a single rate for all – opponents have focused on why it is a bad idea to raise taxes on the poor in order to reduce them for the wealthy. But, if a flat tax is such a bad idea, why have so many countries embraced it? A careful study of these countries – mainly post-communist countries in Eastern Europe and a smattering of tiny micro-states worldwide – suggests that there are three main reasons. First, some countries are so relatively poor and lacking in domestic capital that they opt to drop rates in order to attract foreign investors. Other countries are so small and ineffective at collecting revenue that they cannot afford a progressive tax system. Finally, some countries are so corrupt that they have to offer the wealthy a huge rate cut to get them to pay any taxes at all."

"There are excellent reasons for wanting to place the tax on consumption rather than incomes or corporate profits. One of the largest being that all taxes have deadweight costs and consumption taxes have lower ones than income or corporate taxes. A deadweight cost being the amount of economic activity that doesn't happen because of the tax: lower deadweights mean we can have more economic growth for any level of taxation, or if you prefer, higher taxes for any level of economic growth."

Chart or Graph

"So Ruml devised a pay-as-you-go plan for taxpayers whereby employers would retain a percentage of taxes from every paycheck and forward it directly to Washington's war chest. Withholding, as we know it today, was born."

"Figure 1 shows the trend in average tax rates since 1960 for top- and middle-income earners."

"As shown in Table 1, we find that the FairTax saves $346.51 billion in administrative costs in 2005 when compared to the administrative costs of the taxes it replaces."

"According to the CCH Standard Federal Tax Reporter, as of 2013, it now takes 73,954 regular 8-1/2" x 11" sheets of paper to explain the complexity of the U.S. federal tax code!"

List of countries with flat tax.

The withholding tax was implemented in 1943 under the Current Tax Payment Act. This cartoon visualizes the easier process of collecting income tax through this "pay-as-you-go" plan rather than having citizens pay one lump sum.

"Compared to the current system, a flat tax is extremely simple. Households pay tax on their labor income using a 10-line individual postcard. (See Form 1 in Figure 1.) They do not need to worry about reporting dividends, interest, and other forms of business/capital income."

"As the Baby Boom generation prepares to retire, lawmakers should be aware of the distribution of taxes and government spending across age groups as well, especially when considering entitlement reform."

These charts show the tax rates per income level.

Figure 1 is a graphic illustration of the concept of the Laffer Curve--not the exact levels of taxation corresponding to specific levels of revenues.

"The New Flat Tax (NFT) replaces all income, payroll, and death taxes along with a slew of excises. It will improve economic growth and simplify the tax code. The NFT rate is comparable to or significantly below the typical rate facing an individual or family today."

Chart advocating simpler tax code reform.

"Yet the data show the highest-earning families and businesses already pay the lion's share of the federal income tax burden."

Chart shows past levels of VAT tax for various countries.

Graph depicts the Top U.S. Federal marginal income tax rate from 1913 to 2011.

"Chart 3 shows that VATs almost always have resulted in a larger aggregate tax burden."

In a 2005 survey of American attitudes on taxation, 77 percent of respondents said the federal tax system should be completely overhauled or needed major changes.

"If the tax complexity burden were reduced by 90 percent, the historical average annual growth rate of 3.2 percent would increase to between 4.02 percent and 4.13 percent. Over 10 years, the U.S. economy would become approximately $1.6 trillion to $1.8 trillion larger, see Figure 6...."

Analysis Report White Paper

There is widespread consensus that the current tax system is a complicated failure that hinders the nation's growth while allowing the politically well-connected to manipulate the system to get special breaks that are not available to average workers and businesses. This is stimulating a great deal of interest in shifting to a simple and fair flat tax.

"Like old age, tax complexity has been creeping up on us. We may not notice it one year at a time, but a review of past years' tax documents compared to today's forms and instructions reveals just how shockingly complicated taxes have become. And the situation may soon get even worse."

America is one of the few nations without a value-added tax (VAT), but there is growing pres­sure to impose the levy. In simple terms, a VAT is a type of national sales tax. However, instead of being collected at the cash register, it is imposed on the 'value added' at each stage of the production process.

"The current tax code of the United States is irreversibly broken and should be repealed. The tax laws undermine the country's prosperity by imposing needlessly harsh penalties on work, savings, and investment.

Under the FairTax, the federal government would raise almost all of its revenue by taxing consumer purchases at a 'tax-inclusive' rate of 23 percent.... The FairTax is progressive, as it provides for a rebate of taxes (called a 'prebate') to be paid to each household on its spending up to the poverty level."

"Survey respondents overwhelmingly report federal taxes are too high, too complex, and the value received from the federal government is poor. A majority favors tax reform and is willing to give up some deductions and exemptions if it leads to a simpler tax code."

"Tax reform is of congressional interest in the 111th Congress. This report examines three main categories of tax reform: fundamental tax reform, tax reform based on the elimination of the individual alternative minimum tax (AMT), and proposals for reforming the corporate income tax in the 111th Congress."

"This study creates a comprehensive estimate of the total administrative costs, time costs, and direct tax compliance costs created by the complex U.S. federal income tax code. This paper deals only with Segments B, C, D and E from Figure ES 1. One can only imagine what the full burden of government on the well-being of society might be.

"This paper will explore the creation and development of the flat tax idea both in the United States and abroad, and it will address the need for tax reform as a central issue in the current presidential campaign."

"Lawmakers have long used the tax code for purposes far beyond simply collecting revenue to fund the federal government. Through the insertion of specialized tax provisions, the tax code is used to achieve policy and political aims as well."

After recounting how the "Laffer Curve" allegedly came into being, Arthur Laffer explains his theory on how tax increases and tax reductions impact the economy. Laffer looks at three major tax cuts in American history (the Coolidge, Kennedy, and Reagan tax cuts) and effectively charts the causes and effects of these tax related decisions.

The current tax system discourages saving. It discourages investment. It discourages entrepreneurship. It causes decision makers to misallocate the nation's resources, limiting productivity gains, wage gains, and the nation's overall level of international competitiveness. And, it is far, far too complicated. The New Flat Tax is the remedy.

Buenker provides a detailed history of the circumstances that led to the passage of the federal income tax amendment. The economic dominance of the northeastern United States created an attitude of sectionalism and distrust in western and southern states, and in every state, wealth was concentrated in the hands of a few.

While one can debate the merits of a VAT in other countries, the tax is not a good fit for the United States. It taxes a base that has traditionally belonged to state governments, its introduction would bring with it intergenerational inequities, it has a cumbersome administrative structure that would impose large compliance and administrative costs, and it would slow economic growth.

Taxes have a tremendous influence on the American way of life. This booklet examines taxes from a variety of angles, often highlighting how dramatically different the state-local tax climate is around the country.


"Since January 2004, Slovakia has had a flat tax on income, consumption, and corporate profits. Most other taxes and tax exemptions were eliminated. Other formerly, communist countries, including Estonia, Georgia, Latvia, Lithuania, Romania, Russia, Serbia, and Ukraine, have also adopted flat tax rates. Unfortunately, in the United States, where the idea of a flat...

"Alvin Rabushka of Stanford University's Hoover Institution lays out the case for the flat tax, a reform of the current system that would replace the 66,000 page U.S. tax code with a single rate and no deductions other than personal exemptions. An individual tax return would fit on a simple postcard. Rabushka discusses the economic changes that would come with...

"In 2008, Bulgaria joined the group of countries in Central and Eastern Europe that adopted a flat tax. This was the result of a campaign led by the Institute for Market Economics and several other economists begun in 2004. The outcome exceeded expectations and proved that fears of the government were not justified. Bulgaria's economy is growing. Opportunities...

In the brief interview by Guy Raz in a D.C. hardware store with Bob Carroll, a tax expert at the American University, the two discuss the possibility of a value-added tax in America. After the mechanics of a value-added tax are explained, Guy Raz explains that at least in many European countries, the final price of a good is always the price that is advertised. In...

"There has been much discussion among policymakers and the media about the possibility of a value added tax, or VAT, in the United States -- either to help reduce the growing federal budget deficit or to offset other tax cuts. This week's podcast guest is Randall Holcombe, Ph.D., who has authored 'The Value Added Tax: Too Costly for the United States,' for the...

"This Center for Freedom and Prosperity Foundation video explains why a value-added tax would be a dangerous money machine for big government. The evidence from Europe also shows that VATs actually lead to higher income taxes."

This clip from the Chris Matthews Show features a moment of debate on the merit of the progressive income tax.

"The erosion of private property rights, a prodigious federal debt, and a nearly incomprehensible tax code are all part of an overweening administrative state that today threatens the liberty of all Americans.

The Second Constitution Town Hall on April 16, 2011, addressed these issues and took questions from a live audience. Congressman Mike Pence and Hillsdale College faculty and...

"The erosion of private property rights, a prodigious federal debt, and a nearly incomprehensible tax code are all part of an overweening administrative state that today threatens the liberty of all Americans. The Second Constitution Town Hall on April 16, 2011, addressed these issues and took questions from a live audience. Congressman Mike Pence and Hillsdale College faculty and leading...

Part Two of Three tax reform sessions provided to the public by the Mercatus Center. "Taxation has always been a major part of American politics and continues to be the focus for debate and discussion, especially when reform is desired. To understand this complex issue the Mercatus Center at George Mason University is pleased to present a three-day course on current tax policy and past reform movements."

Senator Arlen Specter introduces a bill amendment recommending that the Senate consider tax simplification and a flat tax.

"The guests debated whether the current federal income tax should be abolished in favor of a National Sales Tax, also known as the Fair Tax. The issue has been discussed in recent presidential candidates' debates. Daniel Mitchell is in favor of this change in tax policy. Bruce Bartlett is opposed to it and recently wrote an op-ed in the Wall Street Journal on the issue. They responded to telephone calls and electronic mail."

"The U.S. tax code gets more complex every year. It violates civil liberties and, left unchanged, will leave the United States at a powerful competitive disadvantage in years to come. Chris Edwards, Director of Tax Policy Studies, Senior Fellow Daniel J. Mitchell and Director of Information Policy Studies Jim Harper dissect the troubling aspects...

"This Center for Freedom and Prosperity Foundation video shows how the flat tax would benefit families and businesses, and also explains how this simple and fair system would boost economic growth and eliminate the special-interest corruption of the internal revenue code."

Donald Duck learns the importance of the federal income tax in this World War Two short propaganda film sponsored by the US government.

"The American tax system is 'a huge convoluted mess,' says Chris Edwards, who studies tax policy at the Cato Institute, a Libertarian think tank in Washington."

"Isabel Sawhill and Curtis Dubay talked about the use of a Value Added Tax (VAT) as a means to curb U.S. debt, and they responded to telephone calls and electronic communications. In an interview with CNBC, President Obama when asked about the use of the tax said it would be 'novel' for the U.S to incorporate one."

Primary Document

As the title suggests, this selection from the Federalist Papers describes Alexander Hamilton's views on the intricacies of taxation. Hamilton continued his treatise on taxation in the following six Federalist Papers: No. 31, No. 32,...

In a letter to president Barack Obama, many members of Congress expressed their disapproval of a national value-added tax for America. This letter comes after one of the president's economic advisors, Paul Volcker, suggested a value-added tax to reduce America's budget deficit. The signers of the letter believe that increased taxes would be too harmful to Americans...

"We favor an income tax as part of our revenue system, and we urge the submission of a constitutional amendment specifically authorizing Congress to levy and collect a tax upon individual and corporate incomes, to the end that wealth may bear its proportionate share of the burdens of the Federal Government."

"We congratulate the country upon the triumph of... important reforms demanded in the last national platform, namely, the amendment of the Federal Constitution authorizing an income tax... and we call upon the people of all the States to rally to the support of the pending...

"To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States." This is an example of a fair tax proposal, introduced to Congress in 2013.

"To amend the Internal Revenue Code of 1986 to provide taxpayers a flat tax alternative to the current income tax system."

In 1913, the United States ratified the 16th Amendment to the constitution. This amendment authorized Congress to place a direct federal income tax on individuals. The first Form 1040 came out the same year.

The IRS provides a timeline of the development of the IRS and tax code, starting with Lincoln's Civil War income tax of 1862 and going to the present.

"The federal, state, and local tax systems in the United States have been marked by significant changes over the years in response to changing circumstances and changes in the role of government. The types of taxes collected, their relative proportions, and the magnitudes of the revenues collected are all far different than they were 50 or 100 years ago. Some of these changes are traceable to specific historical events, such as a war or the passage of the 16th Amendment to the Constitution that granted the Congress the power to levy a tax on personal income. Other changes were more gradual, responding to changes in society, in our economy, and in the roles and responsibilities that government has taken unto itself."

"Clearly, the nation's increasingly dire economic and fiscal situation has increased the motivation—and the urgency—to reform the federal revenue system, along with the federal government's other unsustainable institutions and practices. But what would an 'ideal' tax code look like?"

"The most serious problem facing taxpayers – and the IRS – is the complexity of the Internal Revenue Code (the 'tax code')."

"No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar's worth of service rendered-not gambling in stocks, but service rendered. The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small...

"The Constitution gave the states the power to impose direct taxation. The federal government could impose direct taxes as well, but only if those taxes were apportioned among the states in proportion to their representation in Congress. In this case the Court examined a national income tax passed by Congress in 1894. This case was decided together with Hyde v. Continental Trust Company of the...

"So firmly has the opinion that progressive taxation is both innocuous and desirable been established that even those who were alarmed by some of its visible effects seem to feel that any critical examination of the principle as such would be a futile waste of effort and that anyone who undertook it would thereby mark himself as an unpractical doctrinaire. Quite lately, however, a change in this attitude is noticeable. After a long period in which there was practically no questioning of the principle as such and the discussions on the whole merely repeated the old arguments, there is a new critical attitude noticeable in the occasional references to the problem; and there have already appeared some notable major contributions to the discussion."

"1942 - The Revenue Act of 1942, hailed by President Roosevelt as 'the greatest tax bill in American history,' passed Congress. It increased taxes and the number of Americans subject to the income tax. It also created deductions for medical and investment expenses." - IRS

"In 2005, Americans will pay about $2.1 trillion in combined federal taxes, including income, payroll, and excise taxes, or about 16.8 percent of Gross Domestic Product (GDP). However, the amount of taxes paid does not reflect the total cost to taxpayers of the federal tax system. In addition to taxes paid, taxpayers also bear compliance costs and efficiency costs. Understanding the magnitude of these additional costs is important because every dollar spent on compliance and lost due to inefficiency represents a dollar that society could have spent for other purposes."

"Most agree that the U.S. tax system is in need of substantial reforms. The 113th Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge."

"The Buffett Rule is the basic principle that no household making over $1 million annually should pay a smaller share of their income in taxes than middle-class families pay. Warren Buffett has famously stated that he pays a lower tax rate than his secretary, but as this report documents this situation is not uncommon. This situation is the result of decades of the tax system being tilted in favor of high-income households at the expense of the middle class. Not only is this unfair, it can also be economically inefficient by providing opportunities for tax planning and distorting decisions. The President has proposed the Buffett Rule as a basic rule of tax fairness that should be met in tax reform. To achieve this principle, the President has proposed that no millionaire pay less than 30 percent of their income in taxes."

"The present volume was begun seventeen years ago. At the time of the discussion of the income tax which culminated in the law of 1894, when practically nothing had been written on the subject in this country, I undertook to make researches into the history of taxation in the American colonies and states which might throw light on the question. The results of some of these studies were...

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."




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Education history in America is important to know. ITO traces how education has changed from the colonial period to present day America.
At Intellectual Takeout, we think it's about time freedom went viral. Before our generation is the opportunity to embrace freedom, to unleash each individual's potential, and to have a prosperous future. And yet it seems that almost everyone running our cities, states, and federal government is intent on destroying freedom and burying us in debt to pay for it. If you, like us, believe that...
In the genre of documentaries revealing the problems with public education, "Kids Aren't Cars" focuses on helping us understand how schools are modeled after a factory system and what we need to do to change them. Understandably, treating kids as if they are a product to be manufactured has had detrimental effects on children going through the system and the overall level of education in America...
"Many parents and taxpayers feel helpless because the problems can seem so monumental. 'Kids Aren't Cars' director Kyle Olson reviews what he learned in the filmmaking process and the small things individuals can do that will add up to make a big difference." Here's Kyle being interviewed on a few things you can do and share with friends, family, and educators: Part 1Part 2
We all know Facebook is awesome for keeping up with friends, sharing about your life, and even distributing ideas. One great new way to get people thinking is to take advantage of the new banner profile with the help of Intellectual Takeout. Here's what one of our banners looks like loaded up on a Facebook profile: If you haven't changed your banner profile, than Facebook is likely ...
Tired of business getting a bum rap? We are, too. Here's your chance to share on Facebook the good news that business is good, beautiful, and makes life better.
While many documentaries on the education system focus on various examples of failure, "Flunked" takes a bit different tack. While certainly acknowledging and exposing the failures of the system, "Flunked" also seeks out individuals and approaches that ARE working in education. The hope is that these points of hope may serve as examples for others working in education.  Here's the trailer:...
Okay, so your friends and family keep telling you to jump on the social media bandwagon, but you have no idea what the fuzz is about. Here’s the deal: The Internet gives liberty-loving folk like us an opportunity we have never had before: to make the case for individual liberty, limited government and free market economics instantly and globally. But with the vast amounts of information...


Looking for an internship? If so, Intellectual Takeout has an opportunity for you. We have plenty of work to do as well as ideas to spread, and we need your help to get it done. If you're interested in an internship with Intellectual Takeout, you likely share our passion and you're excited about the possibility of working for a great cause. That said, you might have a few questions about what "...
The Association of American Educators (AAE) advances the teaching profession through personal growth, professional development, teacher advocacy and protection, as well as promoting excellence in education so that our members receive the respect, recognition and reward they deserve.
Are you concerned your child isn't getting the education necessary to compete in the global economy or even, perhaps, to carry on the lessons and learning of Western Civilization? If so, you have a number of choices. You could, of course, consider changing schools to a charter school, private school, or even homeschooling. If that's overwhelming for you right now, you can always supplement your...
Curiously, not a few individuals are realizing that their education (K-12 and even college) neglected to provide them with as much understanding of the world as they would like. At Intellectual Takeout, we believe that however you feel about your education, there is still much to be learned. To that end, we'd like to refer you to one book and a collection of "study guides" that serve as...
Sure, the idea of homeschooling is likely overwhelming. Indeed, homeschooling is a big commitment and a lot of work. That said, there's a reason why more and more parents are turning to homeschooling as the best option for their child(ren)'s education(s). Perhaps you are starting to realize that the public school system has changed a lot since you last attended it. Maybe you can't afford private...
Know your rights with Flex Your Rights guide to the "10 Rules for Dealing with Police."
In a highly regulated society such as ours, it's very easy to get yourself in trouble with the law. Learn more about how to protect yourself with the 5th Amendment and how to interact with the police.
Let's face it, most of us love to watch TV and movies. A wonderful way to spread ideas is to embrace our love of the cinema by hosting a movie night with friends and family.  There are numerous documentaries that do a fantastic job of sharing the ideas of liberty. You can pull a small group of friends together at your house or even consider asking a local restaurant or tavern to let you...
Watch "Waiting for Superman" to learn about the problems with the public education system.
Another movie that tells the story of the failing public school model in the United States is “The Lottery”. It takes its own unique look at the systems by focusing on the use of lotteries to choose which children will be plucked from failing public schools and put into more successful public charter schools. Here’s the trailer:  You can watch the whole movie right now with the help of Hulu...
While there are a variety of really good documentaries about the failing public school systems in America, "The Cartel" stands alone in its frontal assault on the teacher unions, particularly those in New Jersey. If you'd like to get an inside look into how some teacher unions operate and the effects they have on education, you'll want to watch "The Cartel."From the movie's website: "This movie...
How often do you hear conservatives being called a bunch of knuckle-dragging Neanderthals? Here's the reality: Conservatism, classical liberalism, and libertarianism have a rich, intellectual heritage reaching back many millennia. Our ideas are not just some historical relics from bygone eras; they are the very foundation of Western Civilization in general, amd the United States in particular....
Sadly (or happily for some), life goes on after college. So does the fight for freedom. Building friendships, networking, and growing the movement is critical after college. If our ideas are to be preserved and promoted, you need to stay involved. Plus, in a time when the individual seems to be ever more isolated and adrift, these groups can help plug you into social networks you can use....
Okay, so we don't expect you to drive a wooden stake into your flat screen. Plus, we're total hypocrites since we watch some TV. But here's the point: People waste a ton of time watching TV. If you're cool with government taking over your future, than keep watching Dancing with the Stars. If you consider yourself to be a free man or woman and want to live in a free society, then watch what you...
A great way to make a difference on your campus by spreading the ideas of individual rights, limited government, and free markets is to tutor. Plus, you can occasionally make a little bit of money. Depending on the subject matter, you will be discussing a variety of ideas, key thinkers, and theories. As anyone who has tutored knows, there are almost always opportunities to expand upon a topic....

On Campus

We've built Intellectual Takeout to provide you with quick, easy access to information. In time, we hope to become your one-stop-shop for the ideas of freedom. If your professor allows you to bring your laptop to class (if not, you can use an iPhone), we recommend keeping a tab open to Intellectual Takeout. As we continue to generate new content on the site, you will be able to fact check the...
When it comes to campus life injustices, student fees rank high on any list. On most campuses across the country a mandatory student fee is assessed to each student at the beginning of the year. A portion of this fee, which may be several hundred dollars, will go toward funding various political, religious, and interest groups.  A college requiring you to support groups espousing ideas which...
If you're not happy with the direction of the country and you want to take back your future, at some point you will have to do something. It's not enough to just know that we're going in the wrong direction. You actually have to step out and get involved. Most college campuses have conservative and libertarian student groups. Find one of them to join. Below is a list of some of the larger non-...
Now that you're at college and the initial excitement has worn off, maybe you're thinking that the course selection is a bit biased and you'd like some options. So how do you (the consumer) get the college (the business) to change up its offerings? It certainly won't be easy. Nevertheless it's something that should be done--particularly since you're footing the bill. A good, education in a free...
Whatever activism you choose to do on campus, you need to get your story out. A popular tactic used by the Left is to isolate and intimidate freedom-loving students. You're not alone and there are a lot of people in your city, state, and country that can probably support your efforts. They just need to know what is happening. Whenever you can, record in-class bias, discrimination against...
The reality is that most students (and people for that matter) won't speak out. It's called human nature and it was recognized in the Declaration of Independence: "...all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed." While you might feel alone when debating a teacher,...
In the land of the free and the home of the brave, speech codes are a particularly odious example of politically correct repression on many a college campus. In some ways, college campuses are the least free places for thinking and speech in America. Your best friend for fighting your school's repressive speech codes is the Foundation for Individual Rights in Education (FIRE). Here's a short clip...
Running for office isn't easy, even in college. Not everyone is cut out for it, either. For those of you who are, this completely non-partisan section is for you. If you are inclined to pursue student government, we're not going to spend time on telling you how to get elected. A good place to go for ideas and training is Rather, we want to help you in office, as a believer in...