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65 IRET Policy Bulletin 1 (1995)

handle is hein.taxfoundation/iretpbul0024 and id is 1 raw text is: December 15, 1995 No. 65 0* RESTRUCTURING THE FEDERAL TAX SYSTEM Introduction A growing consensus in the tax policy community is that the existing federal income taxes must be drastically overhauled, if not, indeed, entirely discarded. Numerous proposals to replace these taxes have surfaced in the last two years; although differing in important respects, all of these proposals seek the same objective: to achieve a tax system that less impedes economic growth, that is fairer, and that is far less complex, less costly to comply with and to enforce than the existing income taxes. The existing federal tax system fails to perform the basic function of taxation for a free society: to tell the public what they must payfor the services they ask government to provide. This objective is certainly appropriate, but in itself offers little guidance for the design of a new tax structure. To this end, federal policy makers need to spell out and to be guided by the basic tax principles and criteria on which tax restructuring efforts should be based. These principles and criteria are those that have been developed to meet the requirements of a free society whose economic activities are directed primarily by the operations of free market system. The ad hoc approach that has characterized most past tax reform efforts is virtually certain to fail to provide much improvement over the existing tax structure. Deficiencies of the Existing Tax System Hiding the cost of government The existing federal tax system fails every test of an acceptable tax system for a free society. For one thing, it fails to perform the basic function of taxation for a free society: to tell the public what Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the market economy. 1730 K Street, N.W., Suite 910 * Washington, D.C. 20006 (202) 463-1400 * Fax (202) 463-6199 * Internet www.iret.org

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