Thursday, August 30, 2007

Request For Comments - Taxes

This Request for Comments or RFC is my play on the old RFC's which were used to solicite ideas and critism in developing the way computers communicate, finally culminating in the internet we have today. I am requesting comments on some ideas I have regarding taxation.

Debates on taxation are nothing new, recently we have two specific ideas emerging the Flat Tax and the Fair Tax.

First, we will visit the ideas of a Flat Tax. Steve Forbes is a leading advocate of the Flat Tax and under the Forbes' Flat Tax plan there would be one 17% tax - with "generous and refundable exemptions for adults and children". Uh... so basically, it's not really a Flat Tax for everyone. Inevitably, the poor will not pay ANY tax and possibly even get more money than they paid in, and the middle class and wealthy will end up picking up the tab. Don't get me wrong, I'm not advocating that the poor people pay any more taxes than anyone else, but what I am saying is that Robin Hood was a crook. I don't want anyone to starve, but maybe federal taxation isn't the most moral or efficient way to go about taking care of the needy. Laurence Vance has a pretty good analysis in his article Flat Tax Folly.

Next we have the Fair Tax. The idea is being spear-headed by Neal Boortz and John Linder in "The Fair Tax Book". Again Laurence M. Vance disects the in's-and-out's of the Fair Tax argument in his article There is No Such Thing as A Fair Tax. In a nutshell, the Fair Tax would get rid of the income tax, FICA, Medicare, Estate Tax, Capital Gains tax...etc.... Hooyah!... Sounds good right? Well, it makes up for all this with a 23% National Sales Tax on goods and services. Ouch. Interesting idea, and i'm all for dismantling the IRS, but I think that we should look at the entire plan and know what we are getting ourselves into first.

Either way, advocates of both the Flat Tax and the Fair Tax are selling it as a great step forward in the idea of taxation. I don't really see it that way, although the Fair Tax is a departure from the idea of an income tax, which is awesome. However, neither proposals address the underlying issue of federal spending, which is the real culprit. Both taxes still enable the Federal Government to continue their binge spending. Is there an option that would still give the public what they need, without the inefficiency of federal redistribution? I think so. Here is where my Request for comments applies.

For fear of stating the obvious, I believe the problem stems from the public paying the U.S. Treasury directly. Why not restructure the tax system from a top down structure to a bottom up structure. Let me explain. When we pay our taxes directly to the Treasury through either an income tax or a national sales tax, congress takes the money and deals it out to various departments, programs etc... If we are lucky we might see the money again if we happen to use one of the services of government, but we lose the power to determine what those dollars are spent on. Classical redistribution of wealth. What if we paid a flat tax to our local county government instead. Say, a maximum 10% income tax? No exemptions save one. Education. Not a credit, but an adjustment to income. In this type of structure the county would have considerable money, and the people would have power in determining how the money was spent. What about the State and National government? After collecting tax revenue at the county level, each county would pay a percent of their gross revenue to the State government say 10 -15%? The State government would use that revenue to pay for highways, bridges, State Parks, National Guard etc... Finally, the Federal Government would collect a 10 - 20% tax from the State's gross income. However, whatever the Federal government collects, it must be the same rate nationwide. Congress could now fund the DoD, State Department, and whatever else we determine it should spend it's very limited budget on.

I think this approach seems to be the most efficient way of using taxpayer money. It also has the benefit of increasing the number of new ideas and solutions to problems. Right now when the Congress passes a law or implements a new program, it applies to everyone. If counties are free to fund pilot programs in response to a local problem, everyone will have the benefit of learning what others are doing in response to different problems.

That's pretty much it. Again, I invite any ideas, suggestions for improval.


The Declaration of Independence

"When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security..."

The Declaration of Independence continues on to list the indictment against King George III, which I encourage everyone to read in full.

As you read the list of grievances the American colonists had against the British Monarchy it's nearly impossible to NOT draw parrallel indictments to our current Federal government. Now, I don't want to give the impression that I'm an advocate for anarchy or that overthrowing our goverment is even desirable, but I think that this blog is a great forum to put my ideas down in black and white, and with any luck solicite some constructive debate.