With the Republicans unable to agree amongst themselves with regards repealing and replacing Obamacare, the American Health Care Act otherwise known as Trumpcare didn't even get a reading in the House Of Representatives much less a vote. Speaker of the House Paul Ryan resigned himself and the nation to the fact that Obamacare remains "the law of the land" and President Donald Trump appears to have moved on. The next thing that seems to be on the agenda for this administration looks like it shall be an equally thorny problem - taxation. This issue as far as Republicans are concerned wasn't helped by their failure to secure $880bn in savings over the forward estimates.
Speaking as a lowly accountant in an entirely different country, who knows next few nothing about the ins and outs of American taxation law, I feel that because I know virtually nothing that I am perfectly positioned to throw an ill-conceived and half-baked opinion into the debate. Yes, I know nothing about American taxation law but given the amount of experience of civics which are currently on display within the Trump cabinet, if anything that might make me overqualified.
The United States currently has one of the, if not the most, disunited sets of taxation laws in the world. If you want to take a survey of all of the exemptions and allowances within the American taxation code, then what is revealed are lists and lists of concessions and incentives which have come about because of decades of pandering to lobby groups? There are whole industries which live inside fiddles and some of the consequences which have been spawned as a result of the taxation code are ridiculous. The one that springs to mind for me (because it is relevant to my interests) is the "Chicken Tax" which allows goods to be landed in the United States provided that they have been elaborately transformed in the United States; this results in Ford Transit vans being imported into the United States as passenger vehicles, then having the seats removed and glass panels replaced, with the seats and the glass panels being shipped back across the Atlantic Ocean just to be put into another new Transit van, only to be removed again. I have no idea who this helps in practice, save for a few workers on the docks, who have a make work job just to comply with taxation law.
American taxation law is comprehensively systemically idiotic in so many ways. A lot of the reason for this stems from the fact that the US Constitution doesn't really know what to do with supremacy clauses. The fifty states which have "a republican form of government", whatever the heck that means, mostly impose their own income taxes in addition to the federal income tax. There are also state sales taxes, payroll taxes, land taxes, state royalties as well as a bunch of concessions and incentives within state taxation codes; clearly this is a stupid entangled mess.
If I was Grand Poohbah and Lord High Everything Else, the single biggest sweeping simplification of United States' taxation law that I'd introduce would be the wholesale removal of all state income tax, sales tax and company tax. It would be the bravest and most courageous policy to be introduced to the Congress and boy, there would be seven different kinds of brimstone raining down and hell to pay. You'd find bipartisan support to stop such a bill and that there explains one of the reasons why the American taxation system is so unbelievably mangled. Let’s look at just these three things.
A single set of income taxes would be identical across state lines, which would mean that business wouldn't have anywhere near the same amount of compliance costs to deal with them. It would also mean the end of having to fill out two tax returns. You'd get a single 1040 and that world be that. There would be no reporting state taxation to the federal government because there would be no state income tax.
A single set of sales taxes would be predictable across state lines and as far as the consumer is concerned, they'd never have to worry about finding weird amounts of money to pay the sales tax again. If there was a single headline rate of sales tax across the United States (say 15%) then the amount payable by the consumer could be easily calculable and prices could always be posted with sales tax inclusive. If something was listed on the shelf as $1.38, then the actual price would be $1.20 and the sales tax 18¢ but the transaction wouldn't come with a sting in the tail. A weekly shop of $84.67 would be rung up as $84.67 without having to find that extra annoying sales tax amount which nobody in the world likes.
Computers are already equipped to deal with this sort of thing and accountants up and down the country would all breathe a collective sigh of relief because their jobs would be made simpler.
A single set of company taxes payable to the federal government would be as welcome as income tax and sales tax. The rate should be also simplified to a single headline rate of tax as well. The whole invention of the corporation is a legal fiction, albeit a very useful one, and the fact is that the vast majority of companies are either holding companies who own assets and do not trade at all (and therefore have no tax liability) or they are small businesses where the company exists to provide legal protection for the owners and they will pay out either wages or dividends depending on what is the most advantageous.
If there was a single headline rate of company tax across the country and that rate happened to synchronise with the most common rate of personal income tax and there was a proper system of imputation credits for company tax, then the majority of people would receive dividends with no net effect on their personal taxation and those people who get dividends as the bulk of their income (which is generally older people who have their retirement savings placed in the stock market) are going to receive refunds where the rate of company tax exceeds their marginal rates of personal income tax.
The thing is that I didn't come up with any of these three ideas. This is already the law of the land in Australia. The states voluntarily gave up their right to impose income tax in 1942, during the height of the Second World War. Company Tax in Australia happens to lie within the realm of the Income Tax Assessment Act and isn't some separate piece of legislation here. Sales tax, or rather the Goods and Services Tax (GST) is also a federal tax here and doesn't vary from state to state. Of course this all does mean that every year there is a great bunfight over who gets what in taxation revenues but at least that's happening in annual negotiations after the tax has been collected, instead of forcing the general public to wear the economic consequences of compliance. Having government do the job of government seems more efficient to me than making the public do their work for them.
Of course none of this is remotely likely because unless the so-called nuclear option is revoked, it takes 60 votes in the Senate just to order a sandwich and Kansas will opt-out and New Mexico will demand that they are exempt from paying for cheese. If Congress can’t even get the American Health Care Act of 2017 to pass, even though the Republicans control all of the levers of government, then getting the states to agree to what I’d propose would be impossible and Satan himself would be ice-skating to work before such a thing was passed.