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Tax Reform
Should Be Job One
By Kate Burch
New this year is a quiz that targeted taxpayers in Ohio must take
before they may receive a state income tax refund. This new
program was developed to address what is said to be a dramatic increase
in filing of false tax returns by individuals using stolen identity
information to obtain illegitimate tax refunds.
Data analysis of information on tax returns identifies suspicious
returns: those that are believed to possibly be falsely filed.
The individuals thus identified are contacted by letter and required to
take a quiz online or over the phone to verify their identity.
Questions include such things as former addresses, names and birthdates
of relatives, make of car driven, etc. The information is said to
be obtained from public sources and taxpayers are assured that the
information will not be shared. Four questions are asked, and if
a taxpayer answers fewer than three correctly, there is an opportunity
to retake the test. A second failure prompts a conversation with
the Ohio Department of Taxation.
Many people who receive the letter are alarmed, thinking that it,
itself, is an attempted scam. People are complaining about the
questions, considering them intrusive or bizarre. People who have
had to interact with the Department by phone complain about long waits
for service. Clearly, tax refunds will likely be delayed for
those identified for testing.
Really, isn’t the deeper problem a system of taxation that allows this
problem to exist? I’m talking about automatic withholding of
taxes and, even more basically, the income tax itself.
Automatic withholding was initiated during World War II to make the job
of collecting the income tax easier. It is also acknowledged by
the Department of the Treasury that automatic withholding, by reducing
transparency, makes it easier to increase taxes. Many people have
no idea how much they are paying in income tax. How many times
have you heard someone say that they are “not paying any tax this
year...I’m getting a refund!” These people, sadly, do not realize
that the government has been using their money all year, whereas if the
taxpayer had the money he or she could have been using it or earning
interest on it. You can bet that if we all had to write a check
to the Department of the Treasury on April 15 there would be a great
outrage and overwhelming demand for tax reform.
The income tax itself is morally suspect and wasteful. Our
Founders, most notably Thomas Jefferson, opposed the idea of taking
from persons the fruits of their labor. It is well known that
taxing anything leads to less of it being produced. Taxing
consumption, therefore, rather than taxing productivity would not only
be more morally defensible, but would lend to greater economic health
and productivity.
The best plan, backed by voluminous research, for meaningful tax reform
is the FairTax (H.R. 25). This proposed legislation would
eliminate the income tax and instead fund the government by means of a
national retail sales tax. Look it up at
www.fairtax.org.
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