The American Tax system, with all of its hidden taxes in addition to its wage tax, has created a “boiling frog” syndrome, where the taxes increase slowly in many, virtually undetectable, ways, until we are unknowingly crushed under their burden.
Take an example of earning $100, we subtract 20% for income tax. Then, when the remaining balance of $80 is spent, it is further reduced by a 5.5% sales tax, or a %20 sin tax, or utility taxes, corporate taxes, or other taxes passed on to consumers. Or yearly property taxes… When we reach the end of this long parade of living expenses what do we have left to save toward our personal “Rainy Day” financial security or retirement? Diddly-squat.
The danger of the increasing levels of bureaucracy in our system is that it has become impossible to quantify its aspects. Ten different economists can generate ten completely different and contradictory mathematical products of our system. When we cannot quantify, we cannot debate. America’s current system is too complex to debate rationally.
Everyone has their own numbers to argue with depending on what they want the public to think. Politicians distract us with the plight of wealthy and poor special interest groups to prevent anything from changing. Now consider a system that is honest about its socialist needs and charges us 20%-35% upfront. That’s it, no hidden costs, only every American citizen and corporation contributing the same exact percentage into the collective pot, a completely equal tax system.
For this reason, I support a flat-tax system, devoid of exemptions and all the other variables that make our current system so impossible to gauge. All citizens, wealthy and poverty-level, would have to contribute the same percentage of their total income to the Federal Government. The tax-rate would be determined by the President and Congress at the beginning of each fiscal year. If the government needs more money, the rate might go up a fraction of a percentage point, and the public could all argue over one common number. The debate would shift from tax-payer burdens to focus on how our government spends the money.
Our government would face an agonizing process of checks and balances to raise it a fraction of a percentage, it would be like interest rates. Debates would rage, economists would speculate, investors would cringe or cheer, and some of the macro would be taken out of macroeconomics.
Everyone, no matter how poor or how rich would contribute. This way, everyone pays into the system and everyone can rightly feel that they have a stake in it. By having a low-income cut-off point for paying taxes, we create an “income hump” that people have to get past climbing the economic ladder. If everyone pays, then no hump.
Another major advantage of the Flat Tax is the elimination of bureaucracy. No more IRS, volumes of tax codes, audits, thousands of Federal Jobs eliminated, and every one of them becomes another working, tax-paying citizen.
Of course we can continue to have tax shelters. These will be reservations, completely undeveloped, that are not part of America. The wealthy can go there and not pay taxes, but their American tax money will also be valueless, except for kindling. Poor people seeking relief from the tax burden can go live there without roads, libraries, public schools, and all the services America provides them. Of course, the laborers will be at an advantage in such a system and will eat the rich for food.
Yes, I’m simplifying things. shifting to such a system would be incredibly complex and would have dramatic ramifications on the government spending on Unemployment, Corporate Bailouts, Bankrupcy, welfare, etc. etc… There’s a reason our Federal Budget requires several phone-book sized ledgers to convey it. Our Government would also lose one of its most powerful social controls, tax-breaks as rewards for behaviors society condones and taxes on behaviors that hurt society. Charitable contributions would vanish unless citizens were able to allocate a percentage of their taxes to them. This is nowhere near as simple and ideal as it sounds.
Regardless, this proposal is also completely unfeasible because of the way politicians phrase the debate. A person who made $1000 will pay $150 in taxes, and a person who made $1 Billion will pay $150 Million. Liberals will cry foul a system that takes $150, which could pay for heat and food for the impoverished member of society. Conservatives will complain about a system which forces one individual to pay $150 Million in taxes, while others only have to pay $150, and claim that people will stop wanting to be rich under such a system.
So as long as I’m fantasizing, I’d also like to propose legislation to have politicians who engage in excessive roguish tomfoolery be publicly flogged. Our system will grow more complex, the budget will continue to grow, and Americans will find a way to manage as we always have.
Note: This is a “Random Thought” not a “Theory” of mine, and it’s tongue-in-cheek. I love the idea of a flat tax system for the reasons cited above, but I know, for the doubts I have expressed, that it is not pragmatic. Still… thinking in this direction might help us all come to an ideal mean on the issue.