Eric Harrington – PLATFORM FOR FAIR TAXATION
Eric Harrington – PLATFORM FOR FAIR TAXATION
It seems strange to me, that in a country founded on personal liberty, the method of enforcing taxation is exercised through the use of threats of seizure of property, or imprisonment. Also, thses things are done in direct violation of the Bill of Rights, with a presumption of guilt and the burden of proof of innocence placed upon the citizen.
It is easy to see that the most equitable and efficient manner of taxation would be one which did not require active participation by the taxpayer. In this system, the taxpayer would not be responsible for reporting income or calculating taxes, for the taxes would be collected as involuntarily on all transactions. This process would eliminate any opportunity for ones personal liberty or property to be compromised for errors in accounting or judgment.
The problem with this idea unfortunately lies in a deceptive and false interpretation of tax laws themselves. The fact is, that to date, the U.S. tax law still only allows for voluntary taxation of citizens. Non-payment of taxes is not illegal, only presenting fraudulent information to the government in this supposedly voluntary process. Only aliens and government employees are subject to mandatory tax under a literal interpretation of the 16th amendment, which was technically never ratified into law and railroaded through in an “emergency” session on Congress. The wording of the law is quite clear.
Yet the mechanics surrounding the law and collection of taxes have provided great power of intimidation to the IRS, and allow them to virtually act outside the constraints of the legal system.
It can be argued that the government could possibly operate without personal income tax at all. It did so for over 200 years with no debt whatsoever. But it would be difficult to sustain the level of military spending currently the norm without some kind of taxation on the populace.
Even if we declared the highly publicized, and misrepresented national debt to the Federal Reserve illegal, some personal income tax would still be necessary, at least until major changes in government policy and organization were instituted. The priorities for government spending in the minds of the general population vary greatly, however, there is one thing everyone can agree on; no one should have to pay for something that they don’t use, and peoples liberties should not be threatened in the pursuit of taxation.
Amidst the sea of apparent complexities encountered when examining the taxation process, I will attempt to present a simplified approach to taxation; one that collects taxes in a fair and ample proportion, and yet eliminates the possibility of evasion or fraud.
Federal Transaction Tax
Because taxation was (and is) voluntary, the entire tax system is built around the taxpayer having to account for, and report his income, and either pay his taxes in increments, or all at once at the end of the year. This system unfortunately ignores a basic nature of human beings; that given the chance, they will always fudge a little. Our personal lives are always more important than a nebulous duty to country and thus most taxpayers lie about something on their returns every year.
Confucius once said, that it was foolish to attempt to socialize human beings through the use of laws, since such an approach simply reduced what should be a moral decision to a weighing process; i.e. what do I get if I get caught, and what do I get if I get away with it. In the same light, requiring people to account for they’re earnings and report them simply enters them into the same weighing process.
It seems to me, that it would be much simpler to charge the tax when ever money changes hands, like a sales tax. Whenever a person is paid wages, 10% would be charged, no negotiation, no refund. The money is gone from the beginning, and there is no chance for errors in accounting or judgment.
Whenever a company sells a product in the U.S. or abroad, whether it is a manufacturer, wholesaler, or retailer, 10% would be charged of the sell price. No negotiation, no refund.
There is a trick called creative pricing, used by many foreign companies to escape U.S. business taxes. It works as follows:
A foreign company named X Corp. manufactures a car in their home country which charges taxes. They however, sell the car for no profit to they’re subsidiary located in Taiwan. Now Taiwan provides a moratorium on taxation for 15 years to encourage new business in Taiwan. X Corp. Taiwan now sells the car to X Corp. U.S. for the full sticker price, and X Corp. U.S. sells the car “below sticker” for no profit. In this fashion, X Corp. shows now profit in their home country, thus paying no taxes, shows all the profit in Taiwan, where there are no taxes, and then sells the car for a loss in the U.S. thus paying no taxes again.
Considering it is estimated that Japanese companies alone escape over 50-100 billion dollars in taxes each year by means of creative pricing, this would provide substantial revenues escaping us now.
In addition, when our country was founded, most of the government income was due to tariffs. Tariffs have been used until recently, to provide U.S. companies with price assistance in the U.S. market when competing with countries who have extremely low labor costs, many times approaching slave labor. Although such slave labor conditions still exist, most equalizing tariffs have been abolished to encourage trade with the U.S.
This is however, a smokescreen, which has only benefitted the international banks that have investments on both sides. With the tremendous imbalance of trade between the U.S. and countries like Japan and Korea, Such tariffs should be reintroduced, for such countries cannot afford to not do business in the U.S. and yet buy very little from us already.
Whenever a product is imported into this country, said national sales tax or tariff should be charged at the docks, regardless of where the profits are earned, as opposed to at the end of the year, where enforcement and investigation can be difficult or impossible. This again eliminates the opportunity for errors of accounting, judgment or ethics.
I am sure, that if it were carefully analyzed, such a program would result in greater tax revenues, while providing substantial relief to the already over taxed middle and lower class.
With the recent stock market crash and credit crisis, such a system would have great benefit. By taxing all stock transactions, this system would discourage speculation and day trading and encourage long term investing and market stability. Market volatility on serves those who day trade and make the US economy more of a Casino than a business environment. Stocks were created originally to generate capital for production and government programs, not traders making money off of leveraged to the hilt money.
Finally, with transaction based taxes, purchases, not income would be taxed. Thus it would be a better financial decision to save money, instead of buying things. Now the free-marketeers will cry out, “But that will suppress the economy! We need consumers to CONSUME,” and this is true in one respect. But a major problem with America’s economy is the trade deficit. We buy most of our good today from other countries. Not only would such a system allow for fair tariffs to help American businesses be competitive with goods made with slave labor in China, but the financial pressure to buy “better” goods that last longer would again drive consumers towards buying higher quality goods made in America. Over time even the high tech manufacturing that has become the almost exclusive province of Asia would begin to come home.
Sounds like a LOT of taxes doesn’t it? I can hear the Conservatives sounding off about another “Tax and Spend Liberal”. Strangely, it is not more taxes. It would in fact generate the same income to the Government as does the present system with a significant reduction in taxes paid. How can that be? Something for nothing? Not at all.. It simply eliminates maybe 80% of everything the IRS does. Now there is one company I would LIKE to see lose some jobs! With taxes paid at the point of transaction the cost is passed down and there is not enough advantage to fudge, to make it worth while. And it is small bits over time instead of a big chunk and once it’s gone it’s gone. While some oversight and enforcement would be necessary it would be infinitely less than required now.
Many states already charge sales taxes and enforcement of the collection of these taxes is just a fraction of that necessary for income tax. This system would all but eliminate tax related court cases, fees for tax preparations, and get the IRS out of our lives forever. I for one would pay MORE for that luxury. But the IRS consumes a significant portion of the tax dollars it collects (some estimates put the total cost of tax collection including personal accounting at around 50%!) with its own internal operating costs, most of which would be gone, as well as the costs of tax accountants and personal time spent in Quicken. And all those savings go into OUR pockets.
But Best of all, you would never have to worry about the IRS taking away your home, or throwing you in jail, ever again. The IRS has the power to treat you as though you are guilty before being proven so, and that IS unconstitutional. I am certain, if the founding fathers had a choice they would prefer this system which truly preserves civil liberty and simply charges a toll on financial transactions for the use of US infrastructure and security.
The simple concept of paying for what you use when you use it could be applied to other areas of American life. Everyday someone somewhere gets hit by a driver that has no insurance. This creates an inherent inequity in the system. Because it is voluntary, people can chuff their responsibility and it is the law abiding citizen who pays.
The concept of a transaction tax could be applied here in the form of a national gasoline tax and accompanying no-fault insurance program. I have never understood why things like insurance, which provide no real value, cause hardship, and are simply a function of aggregating losses over large numbers, couldn’t be done better by the government. Again the Conservatives chime in “The government doesn’t do anything as well as the free market!” But this is simply not true. Medicare COSTS 8% to operate. Most Insurance companies make at least 20-30% in profit ON TOP of their costs! There is simply no comparison as to which system is more efficient. But the savings are not a reflection of greater efficiency, just less PAPERWORK. When there is no question if something will or will not be covered or what devices, drugs, or operations should be performed, a HUGE chunk of bureaucracy is removed. A nationally provided baseline safety-net of healthcare coverage akin to the cheapest plan provided by Kaiser could be delivered for less money than in the private sector. Remember, insurance companies bring no value to the table, and only amortize costs of many people. And in the end, when a major calamity strikes, who actually ends up covering the expense? The GOVERNMENT of course. I don’t see insurance companies paying the big losses, it always falls back to the government, so why not just let it be there period.
All “mandatory types of insurances, i.e., health, home and car insurance could be more efficiently handled in a national no fault, no denial system. Sounds a lot like socialism doesn’t it? No more than we have now, for in the end it is still the government who covers the difference, i.e. the ones who don’t have insurance, the losses that are too big, etc. etc.. Let them run it all, and throw out the paperwork. And this system would not preclude consumers from purchasing additional private insurance to cover elective operations, or allow them to go to the doctor of their choice, unlike the socialistic systems in other countries. The national plan would just be a minimum safety net.
Getting back to the car insurance question I started with, Car insurance also should be nationalized, minimum coverage only, with the opportunity to “buy” additional coverage privately. The cost of this insurance should be paid for with a national gas tax of roughly $.50 per gallon. Sounds like a lot doesn’t it? But it adds up to approximately $500 for 15,000 miles per year. People who drive more pay more, and rightly so because nothing increases you risk of an accident more than the number of miles you drive. It is the law of averages. Even the best drivers, can get caught in a confluence of bad luck, and the chances are higher the more you drive. Such a plan would have to be national as otherwise people would simply drive to another state to fill up. But in this way everyone would have insurance, all the time. They would buy it with every fill up. No-fault, no questions asked insurance. “But how would that discourage bad drivers etc…” you ask? The function of penalizing a driver for accidents or dangerous driving is already in place. You simply take away their license after a certain amount of misdeeds. Simple, clean, efficient government- run systems. Vendors are FAR less likely to try to avoid paying taxes as they simply pass the costs down.
Best of all, it would strongly encourage people to change over to more efficient cars and ultimately electric ones. It is estimated that a simple mandate of all cars getting a minimum of 35-40mpg would eliminate ALL of our need for middle east supplied oil. Such a system of gas taxes would expedite that mandate without a law even being necessary. For those who drive excessive miles or commercial drivers, there would be a rebate at the end of each quarter. Or maybe a code on a gas card that charges a different price for commercial drivers. There would have to be adjustments for those who have to drive excessively for work. Finally, it would also promote the use of mass transit, a necessary transition in the coming decades.
So a large portion of government services could be changed over to a system of use taxes charged at the point of transaction or use, far too many to go over in this forum, but suffice to say, it would be a major portion of those services we now pay for indirectly, with the caveat that the government can often use the money intended for services like schools (a common bait for taxes bonds) for other things they know we would not voluntarily pay for.
I strongly believe this system will dramatically change the lives of every American for the better, and get us back to the kind of free life the founding fathers intended us to have. Many will call it socialism, but the fact is we already HAVE socialism, but it only kicks in during a crisis, and often skips the little guy. No where can this be more obvious than the recent credit crisis.
Socialism isn’t appropriate for everything, but for amortizing costs of unexpected losses, it is the perfect system, because the government is already in the end still on the hook, the free market only plays the game when it works for them. The minute they loose, they cry “Crisis” or “thousands of lost jobs!” and look for a handout.
But whether you are talking about insurances, or taxes, all of these necessities, should be charged at the point of use or transaction and save a WORLD of Overhead, risk of personal freedom, and crime.