Real Tax Reform

(Oct 13th) Right now, the average Joe and Jill in this country work almost half of their lives for the Government. Tax freedom day is April 17 i.e. the work you put in at your job (where, let's face it, you don't necessarily want to be, right?) goes toward paying off the government rather than paying you. Factor in (sometimes needless) government regulation, and you're right up there at the half a year mark to support your government. Not to take anything away from those in our country's past who really endured slavery, but working half a year for someone else because you have to seems to me dangerously close to the definition of slavery itself.

OK, you want real tax reform?

We should have four and only four taxes: Federal, State, County, and City consumption taxes. Concurrent with that we must outlaw all other taxes. These other taxes include all fees and hidden taxes that show up on everything from stock transactions to power bills to automobile transactions. Indeed, the average person might be shocked if he/she saw just how many of these little fees there were, and just what they cost. If we don't outlaw all other taxes, they'll show up again in addition to the four consumption taxes. It will start "only on the rich" as we are told by politicians. But, "only on the rich" inevitably means "coming your way, soon" for everyone else.

See, with just four taxes, everyone knows exactly what his or her government costs. States would be free to compete with each other with tax rates. For example, if Texas had a state consumption rate of 8.25%, and California's was at 15%, then citizens (customers?) deciding where to live between the two would have something very real to think about in addition to all of the usual considerations. Of course, we can say that now, but the actual taxation from state to state is almost impossible to compare, with all of the millions and millions (OK, not really...) of levies and taxes and fees that are charged from state to state. The same is true for counties and cities.

I'm talking ultimately about honesty in taxation, which we in the US do not have right now, in effect if not technically. Again, the average person has no idea what he's really paying.

Would this change mean that we can get rid of the IRS ? Sadly, no. Consumption taxes might be quite easy to get around for the tax scofflaw. Ultimately, we'd need an IRS to ensure, among other things, that Donald Trump still pays tax even when he buys his Gulfstream in Switzerland. We'd also have real decisions to make about exemptions for certain products and taxation of the internet and the secondary market.

But this type of taxation is at least a giant step in the right direction, because it increases the aforementioned honesty tenfold and (and this is hugely important) because it dismantles a tremendous amount of the political class' power. Sadly, this last fact is more than anything else what dooms a simple consumption tax.