BY FRANK HILL
Reprinted from Telemachus.com
Support the move to replace our corporate and personal income tax code with a national consumption-based tax.
Why?
Because it will be far simpler than the current sclerotic byzantine income-based tax structure that has been in place since 1913. It will return the United States to the preferred tax revenue-generation method favored by our Founders who thought a tax on someone’s income could be capricious and ruinous to a person’s freedom and productivity.
They were right on the ‘capricious’ part.
Most of all, it would be a far better measure of someone’s use of all the freedoms and accoutrements of our publicly-supported infrastructure and telecommunications networks in America. The more someone consumes, the more they need a solid defense and homeland security to protect their ability to do so, correct?
We are not that concerned about ‘the rich’ not paying ‘their fair share’ simply because the facts of the matter show quite clearly that they already are paying a huge share of federal income taxes each year. The top 1% pay 42%+ of all income taxes as it is today; the top 5% pay 59%%; the top 10% pay 71%.
That is enough for us. What should the top 1% pay, 100% of all taxes so the rest of us don’t pay a dime to live in this free country?
When you think about it, the very wealthy and rich do a lot of business and transactions every single day. They buy and sell businesses before most of us wake up in the morning. They buy a new mansion every year it seems if you pay any attention to People magazine. Throw in a few hundred thousand stock trades and 10 new Mazeratis each year on top of the jewelry and bling-bling they seem to sport on themselves, well, you have got a virtual cash machine if you plop a consumption.transaction tax on each and every purchase.
‘What do you mean?’ you might be thinking. ‘Are you saying that the federal government should get a 15% upfront tax on every home that is sold each year in America?’
Precisely. We are saying that those who purchase a lot of things, which would include the afore-mentioned ‘rich’, would pay a 15% transaction tax on every single thing they purchase each year. As a result, they would pay far, far more in tax than someone who doesn’t make a lot of transactions.
Think about it. How many stock trades does a poor person make each year? 45% of all Americans don’t own any stock at all. They will not ever pay any consumption tax on any stock trade, leveraged buyout, credit default swap, derivative or any other financial vehicle that has caused the economy such grief over the past 4 years.
How many homes do moderate-income folks buy? 1 in a lifetime if they are fortunate.
How many cars? Maybe one every 10 years and most likely a used one at that. Let the rich guy pay the 15% tax on the full price of a $40,000 car in year 1. The moderate-income person can then buy it used for $19,000 several years later and pay the tax again on his/her purchase.
‘What about food and the essentials of life, fella?’ some of the more socially-conscious folk might have churning in their brains right about now.
How about them? Why not exempt the mere basics of life for everyone, namely fresh food from the grocery store, prescription drugs and perhaps a few other necessities in life that everyone uses and can agree upon?
However, not the food purchased in restaurants and fast-food joints. Super-Gulps and Whoppers surely need to be taxed since they are so unhealthy for people and have contributed mightily to the Obesitification of America over the last 40 years. They are most definitely not ‘necessities’ of life no matter how much we might like them.
We tried to ask the Census Bureau and the Bureau of Economic Analysis in Washington for some information detailing the consumption patterns of Americans by income quintile. The analyst from the BEA got back to us in a matter of minutes (so there is a case of an enterprising federal public servant) and said that there was no such data available from the federal government.
Perhaps there is some private sector data that can be found to ascertain just how much economic activity is conducted by the rich people on down the economic totem pole. It stands to reason that wealthier people buy more stuff each and every year, doesn’t it? If they don’t want to pay the tax, then they can save their money and invest it in a new technology or enterprise that will hire the rest of us and provide more jobs with more income and benefits (if there will be any in the post-Obamacare apocalyptic world, that is).
We might be getting a real-live petri dish experiment of whether this will work or not in the good Old North State of North Carolina. About 1 week from now, newly-elected Republican Governor Pat McCrory and super-majorities for the Republicans in both sides of the state legislature in Raleigh will be sworn into office.
They will be considering replacing the state corporate and personal income tax with a stepped-up excise tax. If passed, North Carolina would become an income tax-free zone for new business and enterprise to pop up or move here from a high tax state such as California which is apparently a real basket-case on the order of Greece today.
If passed, North Carolina will join only 2 other states without corporate or personal income taxes, Wyoming and Nevada. North Carolina will even exceed the statutes of states such as Florida and Texas in terms of tax freedom, both of which have long been considered havens of tax free investment and entrepreneurial activity.
North Carolina might become the bellweather state in terms of showing how and if a new steamlined tax system can help generate vibrant new economic activity. With a 9.4 unemployment rate, 4th highest in the nation, why not try something different to get out of these economic doldrums?
Taxing transactions rather than income makes a whole lot of sense. Rich people might even pay more in taxes, not less.
Editor’s Note: Frank Hill is the Director of the Institute for the Public Trust in Charlotte, NC. He is former chief of staff to Congressman Alex McMillan of NC and also served on the staffs of former U.S. Senator Elizabeth Dole and the House Budget Committee.