Mike Wacker

2676 Fair St.

Chico, CA 95926

June 8, 2005

The President\'s Advisory Panel on Federal Tax Reform\
1440 New York Avenue NW\
Suite 2100\
Washington, DC 20220

(eMailed to: <comments@taxreformpanel.gov> )

Dear Panel Members:

I have been dealing with our income tax system for over 40 years as an
independent businessman, farmer and Realtor. The United States prides
itself on being a free country. The income tax is a horrible abuse of
our freedom and privacy and is a large drag on the America's economy.
Not only is it unbelievably unfair, complex and inconsistent, but the
cost to U.S. citizens in time and money of trying to comply with it is
outrageous. The problem is compounded by the IRS when it's unrestrained
"examiners" have carte blanche to dig into every part of our financial
and private lives when they "audit" and penalize us. They are
inconsistent and arrogant and often use threats and intimidation.
(examples available on request.) The only way to greatly increase the
freedom and productivity of American citizens is to **[completely
eliminate the income tax]{.underline}** and replace it with a national
sales tax like the FairTax in HR25 and SB25.

**[The effect of the income tax on real estate and small business is
very bad]{.underline}**. As both a Realtor and real estate investor, I
have seen how it affects my clients and me. It distorts reason and
causes people to make bad decisions on how they handle the buying and
selling of their homes and other real estate. It is very unfair because
many times, when a person sells real estate, they have to pay tax on a
"gain" that they never really had. Because of inflation in the U.S.,
many times a property is not worth any more than what he paid for it
years ago in real (uninflated) dollars . However, the seller owes the
Capital Gain tax on all or part of "the profit" when the property is
sold. This can be very large when a person has held a property for 10,
20 or 30 years. And the percentage of tax on this gain is not just the
"low" capital gains rate, but often is 34 percent or more. (25% because
of recapture rules plus 9 or more percent state income tax). There are
many times when a person has actually lost money in real, uninflated,
dollars on a property and still owed tax on the sale. Many times we have
seen people make bad decisions about buying or selling real estate
because of the income tax consequences.

As a small businessman and Realtor, conforming to the IRS record keeping
requirements is very burdensome. Every day we have keep records on where
we go, who we see, keep track of car mileages, where we eat and with
whom and on and on. It's a real nightmare to try to keep things
straight. We try to conform by having business and personal checking
accounts, business and personal credit cards, business and personal
phones, business and personal cars, etc.

The requirements of reporting on having a office in our home is another
example of how onerous the present system is. We are forced to keep
track of all the many costs of maintenance, utilities, repairs, etc.
etc. Then we must come up with the percent of our home that is
"strictly" used for business and prorate those costs. Then we must
figure out which of these costs we can or cannot deduct depending on the
profitability of our business activity in that year.

When we do business with other small businesses or people, we must
report what we pay each of them on 1099s or face the threat of fines.

The current tax code is so huge and complicated, that, even though I
hire good (and expensive) accountants to advise me and prepare my taxes,
I'm sure that errors could be made and I could be subject to punishment.

The elimination of the income tax would remove so much hateful hassle
from our lives and would definitely help us to be more productive. I
have owned retail stores for many years in the past. I know that
collecting and reporting sales taxes are much, much easier dealing with
all the income based taxes. I hope you realize that eliminating the
income tax would vastly improve the attitude of America's citizens and
businessmen towards the government and our elected representatives.

It would be a vast improvement if we just had to pay a national sales
tax on new good and services as the FairTax proposes. For instance, on
the day the FairTax goes into effect, I would gladly pledge to reduce my
commissions by the proposed 23%. My client would end up paying the same
fee, or less after including the FairTax. I know that if I no longer had
to pay income taxes, payroll taxes, and all the compliance costs, I
would come out the same or even better. It may seem surprising to some
to include a 23% tax in the price of a new home, but I am completely
convinced that builders would be able to reduce their costs by at least
that much because of all they would save by not having to pay and comply
with income based taxes that are now built into the cost of a new home.

I implore you to help restore some of our freedoms by working to
eliminate the onerous and economically stifling income tax. It should
definitely be "across the board" on **[all]{.underline}** new goods and
services, with no exceptions. We who are in the real estate and small
business will gladly give up our special exemptions, etc. to have a
vastly improved, fairer system for our country. The only way it can work
is to totally replace income based taxes. Otherwise, how can we be sure
that the income tax won't reappear first as a tax on the "very rich" and
spread and spread as it did after the 16^th^ Amendment was passed?

Thank you for the efforts you are making to help our country. Please do
some real reforms of which you can be proud.

Yours truly,

Mike Wacker, Realtor, CFIC