Taxes

The Purpose of Taxation........is to provide the necessary funds for government to function.

Questions which need to be answered.

1. What should government do?

2. How much money is needed?

3. What is the most efficient and least expensive way to bring in this money?

National government should be limited; only providing the services which states

cannot do.  Much of what the Federal government does rightly should be the 

responsibility of states with minimal involvement from Washington.

The states should decide which services it will provide, which will lead us to the amount

the Federal government will require to support whatever states do not provide.

There are two choices, continue to use the current system, or use one of several alternatives.

Problems with the current system:

a. Too complicated  (2000 tax forms, 175 instruction booklet, 66,000 page tax code)

b. Too costly to comply (Almost $400 billion per year)

c. Too expensive to administer. (Over 100,000 IRS employees)

d. Too intrusive on individuals and businesses  decisions (use of credits and exemptions to modify behavior) 

The current system is complicated and requires more than a third of the taxes collected to get

businesses and individuals to comply.


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.

On July 12, 1909, the resolution proposing the Sixteenth Amendment was passed by the Sixty-first Congress and submitted to the state legislatures. Support for the income tax was strongest in the western states and opposition was strongest in the northeastern states.^[20] New York Governor Charles Evans Hughes, who a few years later became a Supreme Court justice, opposed the income tax amendment. He believed "from whatever source derived" implied that the federal government would then have the power to tax state and municipal bonds, thus excessively centralize government power, and "would make it impossible for the state to keep any property".^[21]

WYDEN: The big challenge is getting the leadership in both parties willing to take on the interest groups. I think we have a good chance, for example, with the deficit commission this summer. Senator Gregg is a member of it and I'm on the budget committee.

When they look at the options this summer given the fact that right now the spending far exceeds revenue, Senator Gregg and I can say there aren't many appealing alternatives out there. This is one you ought to like.

GREGG: Two things are going to give this a lift. Number one it makes sense. This is taking the tax laws, making them simpler, fairer, and much more pro growth so are we are more competitive in the world, so companies will expand here rather than go some place like Ireland where they get a tax break. This is a jobs' bill, that's the first thing.

Tax Year 2009 Tax Forms (Start Jan. 1 - End Dec. 31, 2010)

• Form 433-D - Installment Agreement
• Form 433-F - Collection Information Statement
• Form 656 - Offer in Compromise
• Form 656-B - Offer in Compromise Booklet
• Form 656-L - Offer in Compromise (Doubt as to Liability)
• Form 709 - United States Gift (and Generation-Skipping Transfer) Tax Return
• Form 886-H-FTHBC - First-Time Homebuyer Credit Supporting Documents
• Form 945 - Annual Return of Withheld Federal Income Tax
• Form 1040 - Standard Individual Income Tax Return
• Form 1040-A - Individual Income Tax Return
• Form 1040 (Schedule A) - Itemized Deductions
• Form 1040 (Schedule B) - Interest and Ordinary Dividends
• Form 1040 (Schedule C) - Profit or Loss from Business (Sole Proprietorship)
• Form 1040 (Schedule C-EZ) - Net Profit from Business (Sole Proprietorship)
• Form 1040 (Schedule D) - Capital Gains and Losses
• Form 1040 (Schedule D-1) - Continuation Sheet for Schedule D
• Form 1040 (Schedule E) - Supplemental Income and Loss
• Form 1040 (Schedule EIC) - Earned Income Credit
• Form 1040 (Schedule H) - Household Employment Taxes
• Form 1040 (Schedule J) - Income Averaging for Farmers and Fishermen
• Form 1040 (Schedule L) - Standard Deduction for Certain Filers
• Form 1040 (Schedule M) - Making Work Pay and Government Retiree Credits
• Form 1040 (Schedule R) - Credit for the Elderly or the Disabled
• Form 1040 (Schedule SE) - Self-Employment Tax
• Form 1040-EZ - Income Tax Return for Single and Joint Filers with No Dependents
• Form 1040-NR - US Nonresident Alien Income Tax Return
• Form 1040-NR-EZ - U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents
• Form 1040-V - Payment Voucher
• Form 1040-X - Amended US Individual Income Tax Return
• Form 1042 - Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
• Form 1116 - Foreign Tax Credit 
• Form 2106 - Employee Business Expenses
• Form 2106-EZ - Unreimbursed Employee Business Expenses
• Form 2159 - Payroll Deduction Agreement
• Form 2350 - Application for Extension of Time to File US Income Tax Return
• Form 2441 - Child and Dependent Care Expenses
• Form 2555 - Foreign Earned Income 
• Form 2555-EZ - Foreign Earned Income Exclusion
• Form 3468 - Investment Credit 
• Form 3800 - General Business Credit
• Form 3903 - Moving Expenses
• Form 4506 - Request for Copy of Tax Return
• Form 4506-T - Request for Transcript of Tax Return
• Form 4506-T-EZ - Short Form Request for Individual Tax Return Transcript
• Form 4562 - Depreciation and Amortization
• Form 4684 - Casualties and Thefts
• Form 4868 - Application for Automatic Extension of Time To File 
• Form 4970 - Tax on Accumulation Distribution of Trusts
• Form 5405 - First-Time Homebuyer Credit and Repayment of the Credit
• Form 5695 - Residential Energy Credits
• Form 6251 - Alternative Minimum Tax 
• Form 6252 - Installment Sale Income
• Form 8396 - Mortgage Interest Credit
• Form 8453 - US Individual Income Tax Transmittal for an IRS e-file Return
• Form 8606 - Nondeductible IRAs
• Form 8801 - Credit for Prior Year Minimum Tax 
• Form 8802 - Application for United States Residency Certification
• Form 8812 - Additional Child Tax Credit
• Form 8814 - Parents' Election To Report Child's Interest and Dividends
• Form 8822 - Change of Address
• Form 8829 - Expenses for Business Use of Your Home
• Form 8834 - Qualified Electric and Plug-In Electric Vehicle Credit
• Form 8839 - Qualified Adoption Expenses
• Form 8859 - District of Columbia First-Time Homebuyer Credit
• Form 8862 - Information to Claim Earned Income Credit After Disallowance
• Form 8863 - Education Credits (American Opportunity, Hope, and Lifetime Learning Credits)
• Form 8865 - Return of U.S. Persons with Respect to Certain Foreign Partnerships
• Form 8879 - IRS e-file Signature Authorization
• Form 8880 - Credit for Qualified Retirement Savings Contributions
• Form 8885 - Health Coverage Tax Credit
• Form 8888 - Direct Deposit of Refund to More Than One Account
• Form 8889 - Health Savings Accounts (HSAs) 
• Form 8903 - Domestic Production Activities Deduction
• Form 8908 - Energy Efficient Home Credit
• Form 8909 - Energy Efficient Appliance Credit
• Form 8910 - Alternative Motor Vehicle Credit
• Form 8911 - Alternative Fuel Vehicle Refueling Property Credit
• Form 8915 - Qualified Hurricane Retirement Plan Distributions and Repayments
• Form 8917 - Tuition and Fees Deduction 
• Form 8930 - Disaster Recovery Assistance Retirement Plan Distributions and Repayments
• Form 8936 - Qualified Plug-in Electric Drive Motor Vehicle Credit
• Form 9423 - Collection Appeal Request
• Form 9465 - Installment Agreement Request
• Form 12203 - Request for Appeals Review
• Form 14309 - Identity Theft Affidavit
• Form W-2 - Documenting Employed Income
• Form W-2G - Certain Gambling Winnings
• Form W-4 - Employee's Withholding Allowance Certificate
• Form W-7 - Application for IRS Individual Taxpayer Identification Number
• Form W-10 - Dependent Care Provider's Identification and Certification

Tax collection statistics

Summary of Collections before Refunds by Type of Return, Fiscal Year 2007^[15]

Type of Return	Number of Returns	Gross Collections to the nearest million US$
Individual Income Tax	138,893,908	1,366,241,000,000
Employment Taxes	30,740,592	849,733,000,000
Corporate Income Tax	2,507,728	395,536,000,000
Excise Taxes	989,165	53,050,000,000
Estate Tax	55,924	24,558,000,000
Gift Tax	286,522	2,420,000,000
Total	173,351,839	2,691,538,000,000

During Fiscal Year (FY) 2006, the IRS collected more than $2.2 trillion in tax net of refunds, about 44 percent of which was attributable to the individual income tax. This is partially due to the nature of the individual income tax category, containing taxes collected from working class, small business, self employed, and capital gains. Of the Individual Income Tax, the top 5% of income earners pay 60% of this amount.^[16][17]

Recently, the IRS has altered its policies. The current Service plus Enforcement equals Compliance motto mirrors its recent increase in investigations of abusive tax schemes.

As of 2007, the agency estimates it is owed $354 billion more than it collects.^[18]

This proposal would achieve several worthwhile goals; simplify the tax code, stimulate the economy

by lowering business and government administrative costs and provide immediate tax relief to the people who needs it most, low and middle income workers and retirees.

Shifting the funding of Social Security and Medicare to the existing tax rate schedule will provide the 

fuel to energize our economy, keep more money in the pockets of all American workers, reduce the 

cost to businesses and eliminate the advantage of hiring undocumented workers.

The  $700 billion (2008) these two taxes provide would be generated with a slight increase in income

tax rates that would be at a minimum "revenue neutral", much less then the combined tax rate of 7.5%

(Note: The amount received could be much higher...see below.....undocumented workers)

Additionally, with the elimination of  the payroll tax, the Earned Income Credit,  created to offset this tax on low income wage earners, and cost  $40 billion (2004) could be reduced  or even eliminated. 

I also suggest the elimination of all income taxes on Social Security benefits which equaled approx. $20 billion (2007). As a "trade off" seniors will no longer receive the extra exemptions but would still be a net gain for them (cannot find the cost for this exemption)

These simple changes would be well-received by all citizens and businesses and show the American the "bait and switch" tax policies of credits and exemptions, based on behavior is one step closer to

being a thing of the past and on there way out.

The party and all of Congress should embrace these suggestions of this type, as the tax code should stop being a partisan issue, not used to drive the American people's behavior based on the desires of those elected to represent them.

Proposed list of tax code changes:

Eliminate Payroll (FICA), 6% and Medicare, 1.5%, taxes on individual income and businesses.

Increase tax rate code by 1% or amount which would bring in needed revenue to pay benefits.