Market Talk

The Mad Hedge Fund Trader has an idea:

I have a very simple solution to the country’s budget deficit problem. Hit the reset button. Eliminate the Internal Revenue Code. Just set it on fire. Keep the existing progressive, hockey stick tax rates on income, but eliminate all deductions. And I mean everything; deductions for dependents, home mortgage interest, medical expenses, the works. There are no sacred cows. My revised Form 1040 would have only three lines on it:

Income
Tax Rate
Tax Due

The budget deficit would disappear overnight. Government spending would shrink dramatically, because you could ditch most of the 100,000 who work for the IRS. Some 1.3 million auditors and CPA’s would have to hit the road in search of new work too. The amount of money that is wasted on tax collection in this country is truly staggering. This is not some pie in the sky concept. This is how taxation already works in most countries, and they seem to get along just fine.

In fact, the whole scheme might even pay for itself.

It reminds me of what David Cay Johnston said on the John Batchelor show when I co-hosted back in November: that there’s $1 trillion worth of tax-breaks given out every year to corporations. Reforming the tax code in some form or other should actually be a major focus of any reform movement; it was included in the President’s deficit committee plan that never made it out of the committee, but hey, it was there.

It’s not really a new idea; remember Jerry Brown back in 1992? But it never seems to get much traction, this notion of flattening out the rates and throwing out the deductions and loopholes, mainly because the people most threatened by it have the most “input” into Congress; think the oil industry, for example. But scrapping and reforming the tax code should be a major plank of any efforts to fix the government’s books.

I’ll tell you, though, you’ll be like one of those sad sacks in Waiting for Godot hanging on for that one.

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