19 THREE TAXES
I have been writing and speaking about what is wrong with taxing income for many decades. The very concept is contrary to reason. Our income is a what society pays us for what we produce. One could consider tax on income to be a penalty for producing, would it not be better to penalize for consuming. For another thing, in order to try to make a tax on income less unfair, and less detrimental to our economy, the determination of taxable income has become beyond the ability of almost all taxpayers. If all those tax accessors, accountants and lawyers were to apply their abilities to productive use, a great deal of wealth would be created in our society.
I propose the replacement of a tax on income with three taxes, (1) a graduated tax rate on standard of living, (2) a fixed tax rate on wealth and (3) a fixed tax rate at point of sale.
The amount of “standard of living” is the total that we spend in a year. This amount is the total cash we receive in a year from any source, less the amount we still have at the end of the year. All transactions are necessarily recorded for income tax purposes and would be equally available for any tax scheme. There is also records of all the money and property that has been saved or invested at the end of each year. Two simple questions that a taxpayer must answer: (1) how much did you receive during the year and (2) how much of that do you still have at the end of the year. None of the complications of income determination required by income tax would be required. Having accepted the concept that people with higher income should pay a higher tax rate, it is equally valid that a graduated rate on consumption should apply to consumption.
Since the services provided by Government are of greater value to those with the higher standard of living, and with more wealth to protect, the tax base of consumption should provide recovery of the costs of Government, without deficit financing, on an annual basis.
The second tax would be a tax on wealth. It is wealth that determines the standard of living of a country. Any country with little wealth has a lower standard of living, in spite of all the labour it might have. The public infrastructure of a country plus the aggregate wealth of its citizens is the wealth of the country. There has to be some balancing of both to support an economy. Private wealth that does not produce more wealth is of no economic use to a society. When income tax was first introduced, it was conceived as a tax on wealth. A low fixed rate of tax on private wealth should be levied to be used only to pay the direct costs of adding to public infrastructure.