Cain Is Right About Repealing Income Tax

Monday, 13 Jun 2011 08:03 AM

By Denis Kleinfeld

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Presidential candidate Herman Cain is right on target advocating the revocation of the income tax law, repealing the 16th Amendment, and substituting for it a tax on consumption. All the other candidates and President Barack Obama talk about "raising taxes" or "reforming" the tax law. Neither is possible.

There have been an endless amount of tax-reforming legislation passed into law going back for decades. All that happens is the opposite. More tax law, more special-interest group provisions, more pork, more lobbyists, more regulation, more penalties, more destruction of the U.S. trade relations, more incentive for business to move jobs or the company itself out of America, more loss of liberties of the taxpayers, and more corruption of the Congress and the President. That's just the short list.

Remember the Tax Reform Act of 1986, which the Republicans hailed as a great success? Right afterward the entire real estate industry went south and the Savings and Loan industry disappeared.

Our presidents since Eisenhower and through President Obama have never met a spending opportunity they didn't like. The income tax system allows the Congress and the administration virtually unrestricted access to all of your money. If you protest too much, then they have self-righteously given themselves the ability to levy onerous penalties or destroy your business, or rather easily put you in prison.

The result is that the income tax system has facilitated our public servants — Congress and the administration — to become unaccountable mandarins, ruling the United States rather than serving the people.

The argument that everyone should pay their "fair share" is the antithesis of the founding principle of the United States. That is, all men are equal.

Each according to his need, and each according to his ability to pay is the fundamental tenet of Karl Marx. That sort of system has always failed throughout history, and it has failed here. Income tax was even tried by the pharaohs and it failed then. It is a system which has always been enormously expensive for the government to administer, and enormously expensive for the taxpayers to try and comply.

Do you accept the fact that the current income tax system is a failure? If so, then obviously trying to reform the unreformable is an exercise in failure.

The only alternative is to determine what system needs to replace the income tax system.

What would that need to look like?

What is readily observable is that the government needs to be paid in cash and spends in cash. So, the system needed will of necessity be on the cash basis. Income tax is based on something called "income" and not on cash flow. Income is a made-up concept like "profits." It is always subjective and depends on how you look at things and what assumptions you make. Cash in and cash out represents a method which is capable of mathematical certitude.

What tax system would be inexpensive to administer and easily complied with by the taxpayers? What system would, by its very nature, tax everyone equally? What system eliminates class warfare? Clearly, only private industry creates wealth. The economy grows by private productivity as opposed to government spending, which diminishes the economy.

Government, under an income tax system, takes wealth by forced appropriation, sucks capital from those who create the economy, and spends money without creating productivity. What would be a truly voluntary tax system that encourages the behaviors of spending, saving and investing, and directly relates the productivity of the economy to governmental policies so that our public servants are actually accountable to the people?

Whether it is an income tax system or some other tax system, taxes can only come out of the gross domestic product of the economy.

What would the tax system look like if it must meet the above requirements? It would look like this: You walk into a fast-food hamburger restaurant and order a burger. A soda of some kind and fries. The total comes to say $3.10 with tax. You give the cashier $3.10, one minute and 12 seconds later you get your order and are eating.

What just happened? The restaurant got paid, the government got its taxes, and you got what you wanted in exchange for your money. No tax accountants, tax lawyers, tax forms, or tax authority threatening an audit with the possibility that you have the jail cloud hanging over your head.

Everyone is treated equally. People with more money will, of course, go to more expensive restaurants, spend more money and pay more tax. And all this is absolutely voluntary.

This is the "Fair Tax" which is pending in Congress right now. It's a consumption tax. Just like our founding fathers expected to pay for a limited federal government without the creation of political fiefdoms.

Herman Cain so far is the only candidate to understand that the United States hasn’t only hit the wall with governmentally created debt, it will not survive as a productive economy as long as the huge mistake of 1913 isn’t corrected.

Herman Cain is right that the income tax system must be replaced by a consumption tax system. Our ability to remain a free people with a republic form of government depends on it.

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