# Cover Page

Response to request for comments by the Federal Tax Reform Panel on Feb.
16, 2005

Submitter's Name: Martin Shapiro

Submitter's Address: 312 Feather Tree Dr., Clearwater, Florida

Date of Submission: 2/26/05

Category of Submitter: Individual

I am a self-employed individual. I have been dealing in collectibles as
my full time work for over fifteen years. The current tax system is
burdensome to me in several ways.

Each year I purchase many collections of vintage picture postcards for
resale to my worldwide clientele. The collections consist of hundreds to
thousands of individual, unique pieces. The collections are broken up
and the pieces sold individually directly to clients through the mail,
through online auctions or through my web site. Sometimes they sell and
sometimes they don't. An individual piece might be offered to ten
different people before it is sold. Or it may languish and be sold years
later as part of a wholesale lot. Although required by the tax code, it
is nearly impossible to accurately track the cost of goods sold on my
inventory. This is an extremely burdensome and time-consuming task.

Another example of the burden of our income tax system occurred about
ten years ago. My business was expanding by leaps and bounds due to my
hard work and extensive promotions. At that point, I faced a decision:
whether to hire additional personnel and continue to expand. On the one
hand, I was earning enough income to meet and exceed my immediate needs
and wants. On the other hand, I knew that my business and income had the
potential to become much larger in scope. In the end, my final decision
was swayed by the income tax implications: if I were to expand and hire,
it would require much greater income tax reporting burdens, and greater
income tax liability risks. If not for these potential headaches and
complexities, I would have hired and expanded, creating new jobs and
more business activity in the economy.

Another burden of the current income tax system is the complexity of
starting a new business endeavor. Over the years, I have entertained
many ideas of new business ventures with friends. For instance, for the
past few years I have been considering doing some real estate investing
-- buying one-family homes for investment and rental. My strength is in
the area of financial planning, market evaluation and financing. I have
some friends who have been interested, who are strong in doing the
footwork, the fix-up and maintenance work, etc. However, the sticking
point on putting the plans into action has been the complexity and
burdens of the income tax requirements. To enter such an endeavor would
require a formalization of the relationship, i.e. as a partnership,
corporation of such tax structure. In other words, I can't just go to my
friend and say, "Let's try this and see where it goes," and start in.
The tax system requires us to figure out the nuances of the potential
business before we can know. I would estimate that there were at least
five such new business ventures that I might have tried over the years
if not for the income tax considerations.

Our income tax system is a great burden to the individual entrepreneurs
of our country. The headaches of reporting and the burdens of the
complexities and potential consequences of errors dampen or destroy our
creative impulses. Add to that the simple and obvious fact that the
system punishes production -- the more you earn, the greater the
percentage of your income is taxed away -- and you have a formula for a
high rate of new business failure, either before it gets off to a start
or shortly after.

I believe the Panel should be looking for a new system of federal
taxation which rewards production and savings, eliminates the headaches
and burdens of reporting and provides individuals the opportunity to
enter into business ventures without concern for complexities and
pitfalls of our tax system.