Issue 272 Whose left to tax February 14, 2014

Now that you have dealt with me and my two weeks worth of saying not to tax all these different people, your wondering who is left to tax? Who is going to pay the federal governments (and the State and local governments’ bills)? Well these exceptions leave only two groups left.

The progressive income tax: If you remember from Issue 267 Don't tax the poor, people making under $30,000 will not be taxed. Those making between $30,000 to $40,000 will be taxed a flat rate of $2,000 and those who make $40,000 to $50,000 will pay a flat tax of $4,000. Everyone else will abide by a traditional progressive income tax after that. In this case $50,000 to $100,000 will be taxed at ten percent rate. At $100,000 to $200,000 they will be taxed at 15% and anyone beyond $200,000 will be taxed at 20%. This is what it would look like at least at the federal level of taxation. Since the majority of the income tax is paid to the federal government by the top ten percent of income earners (80% of the money taken in from the income tax is from them) we should be well off there. Especially as cost cutting measures will still need to take place regardless at the federal level. State level wise, the States should abolish their income taxes all together. One of the most punitive forms of taxation is the income tax (no matter its form) and thus is the biggest inhibitor of business. There is a reason why the States like Texas and Florida recovered first after the great recession, it was because they had no State income tax. To make this work, there will be no deductions for things like charity or anything save loans that must be paid off. The poor will no longer need such things under this system as many people will no longer need such exceptions. This also insures that all the subsidies and exceptions that usually benefit the rich (70% of deductions usually help the rich rather than their intended target, the poor). Let us also not forget that paying the taxes (hiring an accountant) is costly with American citizens paying millions of dollars a year just to get their money in order. So there is plenty of additional savings to be had by simply not taxing these people and simplifying the tax in the first place.

Retail: With all those producers and individuals no longer being taxed, both the Federal government and the States must find an alternative. In this case it is a sales tax exclusively at the retail level. Yes, you are probably screaming at me saying, wtf to higher costs of groceries and other items you buy at retail stores, but here is what you are forgetting. You are forgetting that you will be keeping much more of your money as you are probably in one of those individuals that cannot be taxed. In addition, prices will already be lowered based upon how much cheaper goods become when the producers of those goods no longer have to deal with the taxes they used to pay. So overall, the prices "should" balance out with certain exceptions (those that do not follow supply and demand and those goods and services that are affected by other government regulations/bad businesses). In this case, the sales tax will be small in the realm of five to ten percent as the income tax will still exist. At the State and local level, the tax will probably increase as certain properties like those of seniors and of various institutions become nontaxable. But the benefit is that sales taxes on goods and services are not as troublesome to deal with. You can still use coupons to cut costs, and sales of the week will still happen. Also, there are more goods and services being bought and sold in the United States than we have as a population. As such, with the combination of this altered progressive income tax and this retail tax (all other business taxes should disappear) will more than make up for the lost revenue.

Imports and exports: Since the country began, imports and exports along with fees on the sales of foreign goods have been subject to taxation. We should continue this only on imports. If we want more money for businesses to expand, create jobs and thus by default generate more tax revenue, we need them to be able to sell any and all goods and services that they see fit. So we do not tax goods and services leaving the United States. All other countries do not tax exports as they know it will hurt businesses and thus they do not. This is one of the few times I say we should copy other countries. Imports and additional sales taxes on imported goods will make a lot of revenue (especially on cheap knock off products from other countries) and thus make up for any trade imbalances.

Land Sales: The final form of taxation that is left is land sales. Just as you are thinking it is a sales tax on someone buying a home. When the United States was first founded the federal government made a lot of money this way and only really fell short during the civil war. So taxing land sales in the same way you would at retail would be most beneficial.

Conclusion: As you know, I am a libertarian. You also know that I hate the income tax as a whole. However, I try to be a realist when I can. We cannot get rid of one form of taxation without replacing it with another. Also, we can all agree that the federal government (States and local too) need to trim themselves down. As such, I put forth the aforementioned in combination with my tax exceptions from Issues 263 to 271. My goal is to make it so that at some point we can eventually be rid of the income tax completely at the business level (which this idea almost accomplishes) and we cut down on the income tax as well by making it more regressive for the people on the lower end of the economic ladder and somewhat more manageable for those at the higher levels. Of course this will only work with a lot of budget cuts and reforms at all levels of government (most of governments functions can already be done by the private sector). Yes, we can make reforms and we can succeed in making a better more manageable tax code. By doing all this we can get the government monkey off our backs.