Proposals for a Nation gone off--Tax system

Tax system

The most galling aspect of the last 30 years since the Reagan revolution is the persistent absolute growth in government.  One could point out that the percentage of the economy controlled by the federal government remains about 18 percent, but this ignores the fact that the economy has grown x-fold in this same period and therefore so has the government.  Such an arrangement would be irrational unless someone can prove a priori that every percentage of economic growth creates an equivalent increase in the need for more government.  No one ever will.  The problem we set before us here is how to de-couple economic growth from government revenue.  

Instead of today's multiple federal taxes for social security, medicare and general withholding, let us pool all government revenue derived from individuals through income tax into two pots, one for the military and one for everything else.  Now we propose two flat taxes -- the same percentage for every level of income.  Three percent of every dollar earned will go to the military budget.  For everything else, a second tax -- a percentage to be determined to cover current non-military expenses (debt, social programs, roads, etc), let’s say 15 percent for a total of 18 percent for starters.  

As the years follow, the military will receive its steady percentage of every dollar earned which will hopefully go towards improved pay as well as improved technology.  The general fund however will be strictly indexed to inflation and as the economy grows, the percentage of that economy dedicated to this general fund will shrink -- the amount adjusted for inflation will stay the same, the percentage as of the economy will decrease as will its importance and glamour.  The “surplus” this index will realize year in, year out,  

as the economy grows should be returned to the people by way of yearly cuts in the general pool tax rate -- this is not a tax cut per se since year over year each will pay an equivalent amount in taxes adjusted for inflation but the percentage of one’s income that goes to government will decline and it will result in the individual enjoying the full benefit of their participation in our economic growth.  If we start with a 3 percent military tax and a 15 percent general fund tax in the first year, after ten years of 3 percent annual economic growth, the tax rate will remain 3 percent for the military and for the general fund that flat rate will have shrunk to roughly 10.5 percent.

The government is as fully funded as it was in the beginning:  after all if Washington cannot address the nation’s collective problems with 3 trillion dollars then those politicians are massively incompetent or massively corrupt, probably both.  Incidentally, it is our view that the present arrangement of growth harnessed tax rates are the primary cause of economic downturns -- instead of giving the economy the rightful benefit of its growth, the government insists on an ever larger sum and, when the business cycle circles around, it is monetary policy that is used to right the ship instead of cutting back the ill gotten gains of government.  Government will have the same amount of money as it started with under this plan, the rest of us will have much more.  The downward pressure this plan will place on government revenues will force a scale back in personnel.  If bureaucrats want raises they must be efficient enough to displace some of their colleagues and feed from that surplus.   Let, “Demobilization of the Bureaucracy” be our daily rallying cry.

What of the great dual messes of social security and medicare?  First the pressure on government revenue will as it does everywhere create opportunities for innovative thinking.  Second, the ending of specific taxes for these programs will demystify them in the public mind and perhaps allow for less emotional thinking:  if I'm not paying into “my fund,” I may be more receptive to its diminishment over time.  Thirdly, through this diminishment, without the prestige of a Great Program, we can slowly move away from social security, first with means testing and then with needs testing.  After fifty years of economic growth unbarnacled by further government growth, the opportunities should be manifold for each individual to attend to their own needs throughout their lives.  

What of emergencies?  First let it be spoken aloud that most government crises are not national crises.  The constant shrieking from Washington may be a national headache but we can just rename that city Xanthippe and attend to our own business.  But in the unlikely event that 3 trillion dollars will not make do, let the guilty Congress obtain permission from the American people to increase spending and taxation (everyone’s taxation) in a ballot initiative.  If their initiative can garner not a majority of voters but a majority of all eligible voters whether they bothered to vote that day for or against that particular measure, then Congress can have its candy.  Any successful politics must eventually be allied to inertia and the monumental hurdle presented here will have several very healthy effects.  One, the difficulty of duping the American people into giving it more money will reduce the likelihood that Congress will concoct crises or do much to bring any real ones about.  Also, there will be little incentive to increase by fraudulent means the number of eligible voters by those forces in favor of more and more and more government spending since they would only be raising the bar to the fulfillment of their shoddy dreams.  

The important thing however is to put gradualism to work for liberty.  Order, balance and liberty should be the watchwords for the decline and dissolution of these noxious government programs.  A battleship at sea can take 50 miles of ocean to turn around.  Likewise we are suggesting small changes that will reverse course from the last generation.  Not one dollar less is proposed in spending. In one way everything remains the same, in another everything has changed.  We will no longer be headed in the same direction.  

Righting the ship and re-setting its bearing is the critical thing.  It is axiomatic with us that prosperity is prospective.  This is sometimes referred to as “animal spirits.”  A poor country where the future is bright is more attractive and dynamic than a rich country in a state of decay.  The later, despite its temporary wealth is not prosperous.  Prosperity refers to future ability.

Let us also turn to corporate taxation.  Many have written as to the deleterious effects of corporate taxation with respect to the economy and also government revenue, let us here address the more pernicious effects on our political culture.

Corporate taxation for us ultimately becomes a question of good government.  If government is to be good we need to have accountable government and that means accountable to the voter/taxpayer.  Since corporations should not have the franchise (Should they?  No!), they should not be taxed.  Too often, companies are emotionalized and seen as moral agents instead of what they are, efficiency processes.  Individuals should pay taxes and the government should be accountable to individuals.  

When one taxes an otherwise “voteless” entity to shift the tax burden away from those who do have the vote, two things happen; one, that voteless entity finds a way to influence politics to its liking and given the stakes involved has every incentive to do so.  And frankly, if they are providing a good deal of “our” government revenue, who are we to object?  The result being that political corruption associated with lobbyists, etc.  Secondly, those who are ultimately responsible for the soundness of our domestic affairs, the individual citizens, tend to get comfortable with someone else paying for government when in reality it is a responsibility rightly shared by those enfranchised to effect that government.  

Every citizen needs to pay taxes and understand directly the costs of government. To shift costs to the politically palatable is both immoral and leads us upon a road paved by incomprehension and irreality.  Everyone pays and everyone pays at the same rate -- that is sunlight.

Every citizen needs to pay their taxes -- we mean by this also that the present day expedience of having taxes deducted from one’s salary and passed directly to the government, instead of passing through one’s own hands first, is an affront to the individual and an invitation to a government a little too comfortable with handling people’s substance.  The individual in this present arrangement is little more than a tax serf.  He creates the wealth which his employer and government dispose of in a transaction out of his keeping.  Good government and good citizenship require that the individual be paid his full wages and then pay his own taxes with his own hand and not otherwise.  Our proposal for the double flat tax and modern payments methods should make this a useful and civic minded inconvenience.  If this makes possible tax rebellions, so be it.  Better to live in reality than block it off.   

Here we recommend the feint of making corporations list in the employees’ pay voucher a pro rated amount paid in corporate taxes, then as those taxes are eliminated there will result a higher take home pay for the employee.  It is often enough said that corporate taxes come from two sources:  lower salaries and higher prices.  When eliminating corporate taxes it should be done in a way to make sure that the beneficiary is the wage earner.  That would help minimize hardships created by the transition from corporate taxation to the taxation of citizens only.

As a further example of the twisted corruption and emotionalism that takes place with respect to taxation, what are “child tax credits” but the subsidizing of those companies who pay poor wages?  If it is true that corporate taxes are paid out of lowering wages and raising prices, the role of the child credit can also be abolished along with corporate taxes.

Incidentally, this pamphlet stands opposed to “sin” taxes for much the same reason as it opposes corporate taxation.  What is the sin tax but the setting up of some behavior or group of people who are seen as undesirable and then making sure the government profits from them?  (!)  Not only that but the sin tax puts government in the position of profiting off human misery.  Alcoholics, people who have squandered their family's fortune at the roulette wheel -- and just wait till drugs are legalized -- these wretched people are for some reason looked upon as a golden opportunity by the government to increase its revenue.  Truly, such a government can only hope to make itself despicable.  In our view, any activity which is legal should not be taxed any more or less than any other activity.  We only favor the legalization of gambling, recreational drugs, alcohol, etc., if it generates no additional tax revenue.  As a matter of fact, the dangers are so great in the exploitation of drug addicts that recreational or narcotic drugs should be legalized or “decriminalized” if no revenue is realized whatsoever from its use or importation.   Human dignity demands a much, even the dignity of a broken down addict not to subvent a great power.

There's little point in discussing the noxious phenomena of lotteries.  The lottery is a tax on stupid people.  We favor neither stupidity nor the taxing thereof.

Honesty is also our watchword.   The goal here can be reduced to reforming the tax system in a way that brings the government back to its proper relation towards the citizens who pay for it.  Honesty, clearly seeing what the government is doing, will also help inhibit the exploitation of those who live in the realm of private free exchange, the realm of persuasion, from those who live in the world of public compulsion.