It is understandable why everyone is complaining about the length and complexity of the tax code, but how to simplify the tax code does not have an easy answer. The newest suggestion to simplify the tax code and generate greater revenue has come from Congress. They propose the Fair Tax, a tax system based on consumption, which can be the possible answer to the many problems the U.S. economy is facing today.

As taxes will be charged on the purchase of goods and services, it will simplify the entire process of taxation because it eliminates the requirement to file income taxes annually. Taxpayers will instead pay an additional tax of 23 percent on the commodities they purchase. Each state will collect taxes from the retailers.

Even though the Fair Tax seems that it may simplify the tax code, it has its limitations. History has taught us that such a tax system may begin competition between states, which may become unhealthy and damaging for the economy. Apart from that, the implementation of a tax system based on consumption is difficult because of the availability of the large number of goods and services.

A proposal for a complete overhaul of the tax system at such a delicate time when the economy is slowly on its way to recovery may be difficult but the Fair Tax remains an option that may provide a framework to change the bloated U.S. tax code.