Monday, April 21, 2008

A fair tax system.

Everyone's opining so I might as well, too.

There is one fair tax system: A per capita tax. A head tax. A poll tax.

Here's my plan:

Step 1: Eliminate all forms of taxations other than the direct tax.

Step 2: Tax each person a fraction of the total amount of monies desired. The fraction is 1/nth of the total budget, with n being the number of taxable persons in the country.

First, why eliminate all forms of taxation? Because this is how they getcha: by hiding taxation at every turn. You know that they take X dollars off your paycheck, probably. You see that every payday. But you don't see the Y dollars that your employer pays. And while you see the Z dollars that you pay in sales tax, you don't see the A, B & C that constitutes all the taxation on all the parts of everything you buy.

It's the hidden parts that lead to corruption. And it's all a big fat lie, anyway: Whenever the government says it's going to tax corporations, imports, etc., that money is always and irrevocably going to come from thee and me.

Even if thee doesn't think thou art paying any taxes.

That's what leads me to believe the per capita tax is the best. No deductions, no reductions, no cost-of-living--nothing. Everyone pays.

Children might be an exception. The problem with taxing children directly is that it discourages reproduction, and we seem to need more of that in first world countries. So children might not be liable, and they might even be exempt between 18-21. This could be acceptable because it wouldn't cause the shenanigans that come with the loopholes the current system creates. Yes, children would be exempt, but there would be no benefit to transferring funds to them, or engaging in any of the shenanigans the current system encourages.

Where would that put us? Well, each adult would have a tax burden of $10-$15K. Let's say $12K, with no deficit spending. (It could be dropped to under $10K just by eliminating Social Security. Remember, under this plan, we're not collecting social security which is, after all, just a tax masquerading as an investment.)

Because I'm ornery, I'd encourage this amount to be levied on tourists, as well, divided by the length of stay. Tourists burden the infrastructure as much as anyone else. They'd be charged about $30/day tax for being here. That's probably a wash.

Now, I'm sure you're thinking, "But, Blake, what about the poor? Some people don't even make $12K/year." My response? "Jeez, people, get a real job!" Or, more seriously, "That doesn't keep the current governments from taking out SSI, sales tax, and otherwise jacking up the price on everything they buy." In other words, there are obvious problems with this system, but they're less than those of other systems.

What's more, with this system, they're beholding to no one. They contribute exactly the same as every other citizen. Even on welfare, they're putting back into the system. (This makes a lot more sense if the welfare comes from private organizations, but the government already does dopey things like giving people money that ends up back in their coffers.)

Remember, everything made beyond the tax is pure profit. And each dollar will buy more, with no sales tax and no production tax--which is what the effect of income tax on items manufactured in the USA ultimately is.

Everyone would be strongly stimulated to produce more. The fruits of that production would all go to the citizens. And when the government wanted more money, it would be instantly apparent what the bottom line would be. Need a new war? Well, that's gonna be a $1,000 each. Feel like previous, gray-haired generations should get a stipend for setting up a bad, mandatory Ponzi scheme? That'll be $2000, please.

Stimulus package for the economy? Ha. They'd have to send it to everyone--and then they'd have to collect it right back, which is sorta what they do now.

Pork? That pork-laden bill is going to personally cost you $10.

The craziest part of this idea? People are appalled at the notion that every citizen should shoulder the same financial burden for the government. We're so conditioned to believe in "fairness", that we'll cheat ourselves to death to try to achieve it.

I sat in a seminar this weekend where the speaker explained concepts of generating--and keeping--wealth. Probably half the discussion was how to avoid taxation. The very wealthy--families like the Kennedeys, the Carnegies, the Rockefellers--set up trusts to avoid all the taxation. That's not something poor or middle-class people do very often. (Some upper middle class people do it, though.)

I couldn't help but think that this was all a huge waste of productivity.

Now, Great American Experiment-wise, the Federal Government shouldn't be collecting taxes from anyone, and we'd have to pass an amendment to make this possible, presumably one that repealed the previous taxation amendment.

Or the Federal government could apportion taxes to the states based on their population, and leave it to the states to collect from the citizens. But then, very few would have the wisdom to actually impose a head tax. And we need more states anyway.... (I think Arnold Kling suggests 250, but I think 300 would be better....)


  1. Blake - you may be onto something.
    Too bad it will never happen of course. Because right now the federal budget costs each American "resident" about $10,000 per year.

    I always thought every govt spending plan or proposed bill should be required to include a price tag on it stated as a cost per person. Looks like you had the same idea but actually put it writing in this blog post.

  2. No, I don't have any illusions that it might pass. Most people are appalled at the notion, even though it would give absolute clarity to what we were doing.

    I mean, you can still have welfare and other social progams, but it's obvious what you're doing. You're paying $5K a year ($10K for couples) to support people who don't work. Or $1K per year to fight a war. Or...

    But the big mistake we have now, I think, is that the government can tax anything for any imaginable reason, and pretend they're not actually taxing you.


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