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Morici: How to Make Taxes Fairer and Abolish the IRS

Businesses and institutions would then pay to Treasury the taxes they collected less sales taxes they paid on purchases of materials and equipment, rent and the like. This subtraction would avoid the double taxation of materials and equipment businesses purchase and create a value added tax so often proposed by advocates of tax reform.

A VAT would favor no activity over another, and by taxing goods and services at the point of sale, it would end the problem of U.S. firms parking profits abroad to avoid taxes.

Businesses and institutions would file a three line return, how much tax they collected, how much they paid and the difference. Individuals would file no tax return at all!

Temptations would abound to exclude or exempt all kinds of activities but that is the kind of thinking that gave us the current mess -- and inequities, slow growth and exceeding complex tax returns.

If Congress wants to spend more, it could raise the rate. That would make transparent to all the cost of spending more on government activities. If conservatives on Capitol Hill want to cut programs, they could explain to voters how much those cuts would lower the rate.

Elegant, egalitarian and efficient, such a value-added tax without exemptions would give Americans the tax reforms they want but privileged rich folks and big businesses spend a fortune forestalling.

The economy would grow more and Americans will live better and in less fear. And Mr. Durbin, that is what America is supposed to be all about.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
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