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Tax system proposal.

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CrazyCoot Posted: Thu, Feb 23 2012 4:32 AM

Let's assume for the sake of argument that taxes are here to stay.   What are folks' thoughts on the following system?   This would be based on the US

1)  annual $100 head tax for everyone.  $70 would go to the state and $30 to the federal government.

 2) Flat 10% tariff on all imports.

 3)  Leasing out of federal and state land.

 

 

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Wheylous replied on Thu, Feb 23 2012 8:46 AM

I think Rothbard was a proponent of a head tax because it could bring in minimal revenue - it was constant for everyone, so it couldn't be too high, else the poor couldn't pay it.

On the tariffs - I'm not well-versed in this subject, but to me it seems that tariffs are one of the most regressive taxes ever, because they hurt not only your nation but also developing nations wordwide. You're messing with comparative advantages, and 10% is a pretty high rate, given that trade has been libertalizing since 2000.

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I guess the least harmful tax is a head tax, then a poll tax, then a low fee to bring goods into and/or out of the country.

Income tax isn't as bad as a wealth tax.  A sales tax is about the same as income tax.

Real estate tax is the worst because it could raise the most revenue and because value is subjective.

That said, I've never understood why liberals continue to suggest to increasing marginal income tax rates rather than a high real estate tax rate with a large exemption.  They could also be more progressive if they advocated an IQ tax with a large exemption.  It's a good thing they haven't though.

If tax policy exists though, then it needs to be really decentralized.

Also, the Federal government shouldn't rent its resources out.  It should outright sell them.

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John James replied on Thu, Feb 23 2012 10:39 AM

CrazyCoot:

Let's assume for the sake of argument that taxes are here to stay.   What are folks' thoughts on the following system?   This would be based on the US

1)  annual $100 head tax for everyone.  $70 would go to the state and $30 to the federal government.

 2) Flat 10% tariff on all imports.

 3)  Leasing out of federal and state land.

Peter Schiff had this discussion with Robert Wenzel (of EconomicPolicyJournal.com) a while back.  We basically had a thread on it starting here.

Wenzel eventually ended up endorsing a capitation tax like you suggest, but as Schiff brought up, it would have to be apportioned according the the Constitution, or the Constitution would have to be amended.

I don't think anyone who understood anything about economics would endorse any sort of tariff.  Virtually every modern economist (even mainstream...certainly neoclassical) admits tariffs are the wrong way to go.  As usual, Friedman drives this home with incredible articulateness.

As for leasing of federal land, I think this is already largely done to the extent that the market would bear it.  (I could be way off on this, but it's an uneducated guess just based on my limited knowledge of federal lands and what the market interest in them is.)  I think it would be much more advantageous (and probably feasible) to auction most of it off.

 

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I've still never gotten a satisfactory answer to the question of why income should be taxed in the first place. People incredulously ask "wait, you think if my mom pays $10,000 a year in income tax, Donald Trump should pay the same?" The answer is yes, except $10,000 sounds way too high. Alas, this has even been with libertarian-types, who still think there is something natural about taxing income according to percentage.

My question, which I think is straight from Rothbard, is always something like "do you pay for other services according to the same principle? Does the gas station take a look at your income statement before they determine your price for a gallon of gas? So why should government services be any different?" To the extent that we 'need' the govt to provide roads, utilities etc, we all should pay the same dollar amount, unless somebody can somehow non-arbitrarily show that millionaires use these services more than the rest of us. It is completely obvious to me that the only guiding principle behind the income tax is going after deep pockets aka "from each according to ability..."

 

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John James replied on Thu, Feb 23 2012 11:31 AM

Stephen Adkins:
I've still never gotten a satisfactory answer to the question of why income should be taxed in the first place.

Who the heck said anything about that?

 

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Implied in a plan that includes only a head tax, tariffs, and the leasing of government land is the ending of the income tax, which would be awesome. I know it's slightly offtopic from OP since he was asking for specific feedback on the merits of that plan, but I just yesterday had a conversation with somebody about the income tax. As I say, I still have yet to get a satisfactory response from a proponent of the income tax. 

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John James replied on Thu, Feb 23 2012 12:04 PM

Stephen Adkins:
Implied in a plan that includes only a head tax, tariffs, and the leasing of government land is the ending of the income tax,

Um.  Not exactly.  What if I have no income?  "Taxing my income" is not implied in a capitation tax.  I have a head.  I pay $100.  Period.  It doesn't matter whether my income is a $1 million or $0 (i.e., I don't have an income).

Taxing my income is not implied in taxing other people to export their products to the US.  Again, what if I have no income?

Charging someone or some company money for use of federal land does not imply taxing my income.

When someone talks about "taxing income"...or "income tax", they literally mean a tax levied on income.  Otherwise, what the hell is the point of saying "income"?  If any tax that is imposed can be considered "income tax", why the heck don't you just call it "tax"?

 

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You may have misunderstood me? 

I said: Implied in a plan that includes only a head tax, tariffs, and the leasing of government land is the ending of the income tax.

I am in favor of ending the income tax. My post was slightly off topic, i know, because the thread deals with a specific government funding scheme that doesn't include an income tax, which is great; I was just bringing up my more general thoughts on the bald redistributionism that is the taxation of income. 

As to the OP, as others have said, I'm not a fan of tariffs. It's perhaps the central feature of mercantilism and it comes from economic fallacy. I'm alright with a head tax, which is in a way the opposite of the income tax since it is uniform for everybody, and low. Also as somebody else said, leasing is good, but selling is better. 

 

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John James replied on Thu, Feb 23 2012 12:28 PM

Understood.  Mea culpa.

 

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No biggie.

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CrazyCoot replied on Thu, Feb 23 2012 1:23 PM

The reason why I thought of a tariff is political viability, not economic sanity.  I understand that the people will end up having to pay an indirect tax due to the increased price of goods, but  I think that a tariff would be easier to sell than another revenue-raising measure.  And yes, maybe 10% is too high.  A 5% flat tariff is worse than no taxes and better than the current system.  

 

  Remember, this system is supposed to be a half-way point between our current system and a no tax ideal.  A goal that a presidential candidate or someone running for office could put forth, because we're going to have politicians for the foreseeable future.

Yes,  the ending of the income tax and other taxes (capital gains etc) as well is implied.

 

How about selling government land to buy gold reserves?

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CrazyCoot:
I understand that the people will end up having to pay an indirect tax due to the increased price of goods, but  I think that a tariff would be easier to sell than another revenue-raising measure.

You're forgetting the part Friedman mentions in the link above, about the people who end up unemployed because of the increased cost of input products.

Ultimately the bottom line is the spending.  Spending has to be continously reduced.  As the demand for government revenue goes down, taxes will be reduced.

Obviously the more visible the taxing is (i.e. the more the individual feels the sting), the better off we'll be, as people will be more inclined to keep taxation under control.  This is one reason why a sales tax is attractive.  I'm not completely familiar with all the details, but just based on the amount of history, research, resources and voter support, I'd say the FairTax plan is probably the best overall in terms of pass-ability (in legislative terms) and the overall harm.

 

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Wheylous replied on Thu, Feb 23 2012 5:08 PM

Does the gas station take a look at your income statement before they determine your price for a gallon of gas?

That's because they don't know your demand curve. If they did, they might try to match it. Although I suppose the competition would then come in and drive prices back towards MR=MC (but not reaching that level, likely)

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Marko replied on Thu, Feb 23 2012 5:28 PM

A head tax sounds like a good idea from the point of view that it would be so difficult to collect.

It is the thing where the more obviously horrendous a thing is philosophically the less damage it is going to do when married to a state.

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Clayton replied on Thu, Feb 23 2012 6:45 PM

Any kind of radical tax reform proposal is hopelessly idealistic. Things are the way they are precisely because the public will bear it.

Rather than worrying about official tax policy, I think we need to think more about unofficial tax policy - how can we structure/package tax policies that make it easier to evade taxes, particularly for the poor/middle-class who are hardest hit by compliance? This is the Greek system. Sure, they have high taxes and massive entitlements, and so on, but tax evasion is rampant and the law is structured and enforced in such a way that tax evasion is going to be rampant.

Also, I think rolling back a lot of financial regs allowing the government to peek into and seize bank accounts on a whim, the whole concept of "financial crimes" (cf FinCEN), "tax havens", Know-Your-Customer rules, and so on will have a lot more concrete effect on the tax burden which the government can manage to impose.

If you're going to try to repeal taxes, you have start on the periphery: gift taxes, taxes on tips and gratuities, and anything which can be sold as "double-taxation", e.g. death/estate taxes, multi-jurisdictional taxes, capital gains taxes (on investments purchased with post-tax income), and so on. This is the CATO strategy. While it will never result in any major reduction in the effective tax burden, it can start the ball rolling in the right direction.

In the long-run, tax-freedom will be won as grudgingly as the end of chattel slavery was won. There will be blood spilled, social upheaval and the only real solution will be complete abolition of all taxation. You can't have "a little bit of slavery", you either banish slavery completely or you have slavery. The same goes for taxation. The minute the government can lawfully seize even one penny of your wealth, it has the toe-hold from which to seize more and more every year until it has grown into the economy-swallowing Leviathan consuming 60+% of GDP along with ballooning debt as far as the eye can see.

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Malachi replied on Thu, Feb 23 2012 8:13 PM
Gift tax in the US is ridiculous. I heard the percentage was 55%, so before I posted I spent 5 minutes looking at a gift tax return. No idea, and no thanks. Its pretty wild that they have created an entire industry based on this crap.
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That's because they don't know your demand curve.

Nobody,  not even me, knows my demand curve. Demand curves are only discernible through action. I could try to map out my own, or take surveys of certain participants of how they might act in hypothetical situations, but obviously that is of little help in predicting real action. That's not to say of course that there isn't some speculation on the part of entrepreneurs in trying to anticipate the demand curves of various people, but that's the whole point: they only make money if my actions prove that they have anticipated my demand. The government, of course, doesn't need to worry about my demand curve since they have access to taxation.

Anyway, in your opinion is this the rationale (even ex post facto) given by proponents of the income tax? That the wealthy have a higher demand curve for various goods and services offered by the government (eg. police, fire, military, roads) and that therefore they should have to contribute a higher dollar amount than those with lower incomes? I am truly interested in hearing a principled justification for the income tax that doesn't amount to something about "the rich paying their fair share". 

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 "You can't have "a little bit of slavery", you either banish slavery completely or you have slavery."

I agree with you. But wouldn't you say that, especially in view of for example Nozick's "Tale of the Slave" that taxation is just another form of slavery? So have we ended slavery at all or just changed its form?

 

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Clayton replied on Thu, Feb 23 2012 11:32 PM

I agree with you. But wouldn't you say that, especially in view of for example Nozick's "Tale of the Slave" that taxation is just another form of slavery? So have we ended slavery at all or just changed its form?

Well, I think that the abolition of chattel slavery is an unqualifiedly good thing. Bear in mind that it still does exist in de facto form in some of the more backward parts of the world, e.g. North Korea.

That said, I think that the essential ill of slavery is that it is a form of parasitism. So, we've abolished chattel slavery which is certainly a blow against parasitism but we've not yet abolished parasitism itself or even really identified parasitism as a social ill.

I've written elsewhere on the very serious nature of the supposedly harmless redistribution of wealth:

The cuckold is a bird that lays its eggs in the nests of other birds - they are parasitic on the host bird species which inadvertently raise cuckold offspring. The term cuckoldry in humans refers to the surreptitious impregnation of a woman who is receiving material wealth from another man (usually her husband).

In redistributing wealth (primarily to itself), the State is the cuckold par excellence. The genetic lines of net tax recipients are promoted at the expense of the genetic lines of net tax victims. This expresses itself in two ways. First, within each generation, the reproductive success of the parasites as a group is greater than it otherwise would have been. Taken individually, this increased reproductive success can take the form of illegitimate children, multiple families and so on. Second, between generations, the genetic lines of the parasites are better preserved. The queen of England can easily trace her genetic line back over 1,000 years. I suspect (but don't know of any studies on this) that most men alive 1,000 years ago did not pass on their genes to the present day.

For whatever reason, the masses don't seem to think this is a big deal but it is a big deal. The evolutionary principle is in operation at all times so that human nature itself is being changed by the present social order. It may take generations for these changes to become apparent but they are real and they are baked into the cake at this point. The Establishment constantly fantasizes in fiction and movies about the creation of a future docile, servile human race. But the fact is that the present social order can only create the exact opposite - a human being who is merciless, avaricious, hostile, self-seeking, status-oriented and uninterested in social cooperation. How do I know this? Because these are the kind of people who are running the world and pillaging entire populations of the majority of the fruits of their labor. Their genetic lines are being promoted at the expense of all others. The genetic consequences are obvious: the docile, servile, meek, cooperative and peaceful will be bred out.

The era of redistributive society must come to a close. The era of threat-based social order must also come to a close. In their place, we need private property society based on mutual cooperation and peaceful productivity. This is not about building a Utopia, it's about changing attitudes and social mores. When people understand that redistribution is evil for the same reasons that slavery is evil (both are forms of parasitism), redistribution will come to an end in the same way that slavery came to an end.

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Very interesting stuff. I love the cuckold analogy. Extremely apropos. 

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For a minarchist State, courts could be financed purely with user-fees. But to fund a military, I'd favor a universal capitation tax. The advantage of a capitation tax is that it's extremely regressive, which means that in a society with a republican form of government, it would be extremely difficult politically to raise the capitation tax (not to mention that at some point it would become uncollectible if too high), and so it would tend to remain minimal: the opposite tendency of a progressive income tax. For example, if we suppose there would be 200 million American citizens paying a capitation tax of $500, that would raise $100 billion annually, enough to finance a purely defensive military.

EDIT: Another wonderful advantage of a capitation tax is that it requires minimal intrusion into the private lives of citizens, compared to other kinds of taxes. The government doesn't need to track your income, conduct audits, or keep an army of spies to make sure everyone is paying what they should. They also don't need to monitor the border for tax contraband, or spy on merchants and track their sales. All the government needs is a list of eligible people (e.g. all citizens over the age of 18), which they compare to the incoming checks. Whoever doesn't pay gets a phone-call. Simple. And it follows that a capitation tax should have the lowest adminstrative costs as well.

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The reason why I thought of a tariff is political viability, not economic sanity.  I understand that the people will end up having to pay an indirect tax due to the increased price of goods, but  I think that a tariff would be easier to sell than another revenue-raising measure.

If there must be taxes, they should not be "easy to sell." They should be maximally visible and offensive. This why inflation is the most insidious of all taxes, because it's hidden - people don't make connection between more government spending and inflation, so they don't object as much as they would otherwise to more government spending. The cost of government should be made as visible as possible. These current wars of the U.S. would be much less popular I'm sure if the money required to wage them was extracted from the people through direct taxes, rather than borrowed and printed.

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