I’ve touched on some tax issues in the past. You know that I prefer the Government gets its take out of user fees and consumption rather than production. Taxing income at any rate is repressive and the current system has the top earners paying most of the freight while the lowest percentile seems to merely bitch about how the other guys get ahead. So, let’s just even it out for everybody. Then, nobody can say they aren’t paying their fair share.
The result of switching to my tax plan will be higher unemployment … for IRS and other government workers, lobbyists, tax attorneys and accountants. But, there will be a greater number of Americans employed in the jobs created by companies that will choose to produce here instead of offshore. Additionally, this will stimulate domestic energy production because I’m going to make it much cheaper to get oil and natural gas at home than to import it.
I’ve read all the plans out there. Among the best are that by Herman Cain and the one by Steve Forbes. Another very interesting idea comes from FairTax.org and it is getting lots of traction. As to those that just take a few bites out of the current Tax Code … they don’t help. So, let’s get down to something that will be fair and simple. This one really is fair. Everybody pays the same rate. No minimums, no maximums, no deductions (except charitable donations) and no exceptions other than medical and at-home food. It is also very simple. Nothing to file for the average person because the businesses who sell the items you consume collect the tax from you at the final point of purchase and your employer withholds from your check. Oh, yeah … no payroll taxes, no death tax, no taxes on dividends, interest, pensions, social security, capital gains or corporations.
Until the War of Northern Aggression (schools teach you it was the Civil War … nothing “Civil” about it … the Union violated the 10th Amendment) about half of the federal budget was supplied by import duties and tariffs. Well, now we’ve got the Harmonized Tariff Schedule consisting of hundreds of pages delineating costs associated to import various products from outside our borders. Rates are as varied as the number of countries of origin and type of goods listed. When you drill down into it, you’ll find that it smacks of cronyism. It will really make your blood boil when you see some of the places that get special rates while still receiving foreign aid from us. There are lots of reasons for the variance. Some for “National Security”, some in the name of “Free Trade” and countless others. Problem is, to replace those revenues the burden is placed on the backs of Americans. Enough!
I’m a “Free Market” guy, so let’s make this really simple; we’ll assess the same duties and tariffs on products from you as you apply to our products sold in your country. Further, in no case will that amount be less than 25% of the stated value of said products entering our borders. There … we just cut the law by several hundred pages!
According to the US International Trade Commission, $1,898,610,000,000 of products were imported into the US in 2010. Applying a flat 25% to that number, government revenue from imports would have been $474,652,500,000. Want to really make a dent? How about we charge 50% for imported energy, chemical and related products? That’s $556,204,000,000 of offshore products … backing that out of the total imports ($1,898,610,000,000 – $556,204,000,000 = $1,342,406,000,000) and applying the new rates we would net ($335,601,500,000 + $278,102,000,000) $613,703,500,000. If you want to discourage something, tax it. There’s that incentive for making stuff here and for domestic exploration and production of fossil fuels!
According to the US Federal Reserve Database the Total Compensation of Employees = $7,934,500,000,000 and we’re going to hit that for 20%; 10% from the Employee, 10% from the Employer. That’s another $1,259,125,805,000. It doesn’t matter if you make $25,000 or $250,000. Uncle Sam gets 20%. If you’re self-employed … 20%. Since you’re both Employee and Employer, you’re doing the paperwork. But, another part of my plan is that all expenditures are 100% deductible, so hire somebody to do it for you or invest money back into your business before you get your take. I can’t find a good number for the total production from self-employment, but it is safely in the range of a Trillion bucks, so let’s add another $200,000,000,000 to our coffers. By the way, the biggest cheats in the current tax system are those working for themselves. Perhaps making it simpler will discourage some of that.
The U.S. GDP = $14,582,000,000,000 which is 67% consumer driven, so that’s $9,769,940,000,000. Since we aren’t going to tax in home food and health care, which is 14.1% of that ($1,377,561,540,000) we are left with $8,392,378,460,000. Placing a 15% Consumption Tax on that number, we’ll generate another $1,258,856,769,000. Now, here’s one of the most beautiful parts of the plan: Everybody pays, including those in the underground cash economy. That means drug dealers, hookers and thieves who aren’t paying anything other than the portion of embedded taxes now have to contribute. Buy the bling, hear my cash register ring!
The current US Federal Budget is $3,457,500,000,000 and we’ve raised $3,331,686,074,000! I’m sure we can wipe out a few useless or wasteful programs, slash some excess, stop some war expenditures and save a few more bucks with the decrease in federal employee payrolls because they won’t be needed with our streamlined plan. Additionally, new jobs will be created with the stimulative effect of lower taxation and consumption will increase with lower prices on finished goods. These will all add to our bottom line.
Now, everybody pays something and every bit of wages and consumption, except food and health care, is taxed. How do you folks who aren’t paying income tax like me now? Actually, you should be showing me lots of love. We all pay the same rate … if your income is only from wages and salary, you’re only paying 10% and your employer pays the matching 10%. Most of the peeps under $25k/year would be paying less in actual taxes.
First, there are no hidden taxes. Corporate income tax is hidden within the products you buy and you have no idea how much of your hard-earned went to the government. Right now, the bottom 20 percentile group is paying only about 4% in income taxes, but over 21% in other payroll taxes, nearly 6.5% more in corporate tax buried in everything they buy and when you add all the other hidden taxes, it comes to about 39% of their income is going to federal taxes. You guys in the top 20% are going to love me, too. You’re paying about 36% in income tax, over 22% in payroll taxes and with all the other hidden stuff, it comes to about 70% of your income.
Prices will drop, especially for domestically produced products. We say we don’t have a Value Added Tax (VAT) but, we really do because we impose taxes on business at every step of production. Some imported items will be taxed at a higher rate, but that only applies to the original importer.
If you buy something other than food or medical, you pay the same amount of tax as your rich neighbor. Don’t want to pay taxes, don’t buy it. I’ll bet this stops the class warfare. Nothing left to fight about.
Since we’re all in the same boat, let’s each grab an oar and row in the same direction.