Tuesday, May 03, 2005
Taxes and US
As a child I remember hearing the old adage that "Nothing is certain in this life except death and taxes." Such a simple adage but seemingly so true. Even if someone managed to avoid taxes during his/her lifetime, he would certainly be caught at death by the massive inheritance tax on his estate. Lately the estate tax has been shrinking and is due to disappear completely, but only for one year. Then it is slated to make its' return in full force. The government prospers in life and death.
But the estate tax is only one form of taxation that we must endure. The most pervasive of taxes is the income tax. It is also the most perverse of the taxes. Originally the Federal Income Tax was sold to the American public as a means to get revenue from the stinking rich people to fund government operations. Originally it was levied at 2 1/2 percent of income and only on the highest incomes. My how times changed in the 20th century. Politicians realized what a gold mine they had and they took full advantage of it. By the 1960s the highest tax rate was around 90%! Ninety Percent! Talk about destroying incentive to produce!
No one wants to pay taxes. Of any kind. But most everyone agrees that some form of revenue is necessary to fund government operations. So if the income tax rate were still at a modest 2 1/2 percent, I doubt that there would be any uproar at all over paying it. I certainly wouldn't object to that. What has happened, however, is the government, and by that I mean the Federal government has become so widespread and involved in so many aspects of our daily lives that they continue to need more and more revenue to operate.
The Founding Fathers had an idea that in peaceful times, the Federal Government would account for roughly 5-10% of total government and the majority, 90-95% of government operations would be state and local. During war times the scenario would be much different with Federal Government accounting for the bulk of government but most of the day-to-day government functions would be decided locally, funded locally and managed locally. The Federal Income Tax changed that equation. We now look at the Feds as the all-encompassing, all-seeing, all-knowing protectors of our country. And since they are all-everything to us these days, they obviously need much more money than ever before to fund the many and massive programs they have put together for the benefit of us all.
Horse-shit! They are creating and maintaining programs not for the benefit of us all, but for the benefit of a few groups, lobbyists, politicians and other self-sustaining interests. Government has become not a protector of individual rights, but a protector of group rights at the expense of all of us. It is not a government function to help the needy people in this country. Never has been. Churches, religious institutions and charities take up the task to provide for needy people. Or what is wrong with an individual simply helping someone as he/she so chooses. We don't need no more stinking government programs to suck up our money and garner votes for politicians!
Income tax as a source of government revenue is a lousy idea to begin with. Especially the progressive tax system that we have now. Earn more and pay a higher rate. That simply stifles productivity, causes smart, innovative, resourceful people to try a little bit less to be more productive. When you reward a behavior, you get more of that behavior. When you punish a behavior, you get less. Higher, progressive taxes on income is a negative deterrent to higher productivity. Make more money and have even more taxes levied so that you end up with even less money than if you had actually made far less. It's a certain disincentive to making more. We need more productivity not less. Quit taxing exceptional performance!
A much evener method of collecting revenue for government operations is a sales tax. A National Retail Sales Tax. The Fair Tax even. For all the details on this incredibly well-thought out plan, a plan which has been in the works for over a decade, check out http://www.fairtax.org
I'm just a regular guy writing a self-indulgent blog so I'm not going into any details about how the Fair Tax works, but it is a superior method of taxation. A method which actually allows every person to decide how much they will be paying to the Federal Government in taxes by what and how they purchase things. Taxation on the demand side, buying stuff, is much more equitable than taxation on supply side, producing stuff.
I have read all the details about the Fair Tax plan and I have heard most of the arguments against it. I cannot see a downside to this plan. This economy would explode if this system were implemented. The United States would become a haven for businesses world-wide. Our Federal Government would have as much revenue as they have today without stifling productivity. Every economist I have heard discussing this plan agrees that it would be a huge boon for our nation and our businesses and our quality of life.
What I hear most often, however, is the nay-sayers expressing every reason under the sun why this Fair Tax Plan will not work. Or why we cannot possibly change our current tax system because it is too ingrained in our way of life. And often I hear someone reporting the facts of the Fair Tax Plan incorrectly, whether knowingly or not. It does no good to criticize something without understanding completely what you are criticizing. Negativity everwhere! I am positive we can change the tax system.
How about some help here? Let's find a way to make it work. Let's try to change people's misguided perceptions about the plan and show some confidence that we can actually change something as huge and pervasive as the Federal Tax Code that is broken and does not work well at all, and replace it with a simple, elegant plan that actually does what it says it will and works.
The simplest solution is always the best solution. The Fair Tax Plan is the simplest solution. If I were king, the current system would be reaplaced with the Fair Tax tomorrow. And I would cut back the size of the Federal Government to about 1/10 of its' present size. I still believe he governs best, who governs least.
OH
But the estate tax is only one form of taxation that we must endure. The most pervasive of taxes is the income tax. It is also the most perverse of the taxes. Originally the Federal Income Tax was sold to the American public as a means to get revenue from the stinking rich people to fund government operations. Originally it was levied at 2 1/2 percent of income and only on the highest incomes. My how times changed in the 20th century. Politicians realized what a gold mine they had and they took full advantage of it. By the 1960s the highest tax rate was around 90%! Ninety Percent! Talk about destroying incentive to produce!
No one wants to pay taxes. Of any kind. But most everyone agrees that some form of revenue is necessary to fund government operations. So if the income tax rate were still at a modest 2 1/2 percent, I doubt that there would be any uproar at all over paying it. I certainly wouldn't object to that. What has happened, however, is the government, and by that I mean the Federal government has become so widespread and involved in so many aspects of our daily lives that they continue to need more and more revenue to operate.
The Founding Fathers had an idea that in peaceful times, the Federal Government would account for roughly 5-10% of total government and the majority, 90-95% of government operations would be state and local. During war times the scenario would be much different with Federal Government accounting for the bulk of government but most of the day-to-day government functions would be decided locally, funded locally and managed locally. The Federal Income Tax changed that equation. We now look at the Feds as the all-encompassing, all-seeing, all-knowing protectors of our country. And since they are all-everything to us these days, they obviously need much more money than ever before to fund the many and massive programs they have put together for the benefit of us all.
Horse-shit! They are creating and maintaining programs not for the benefit of us all, but for the benefit of a few groups, lobbyists, politicians and other self-sustaining interests. Government has become not a protector of individual rights, but a protector of group rights at the expense of all of us. It is not a government function to help the needy people in this country. Never has been. Churches, religious institutions and charities take up the task to provide for needy people. Or what is wrong with an individual simply helping someone as he/she so chooses. We don't need no more stinking government programs to suck up our money and garner votes for politicians!
Income tax as a source of government revenue is a lousy idea to begin with. Especially the progressive tax system that we have now. Earn more and pay a higher rate. That simply stifles productivity, causes smart, innovative, resourceful people to try a little bit less to be more productive. When you reward a behavior, you get more of that behavior. When you punish a behavior, you get less. Higher, progressive taxes on income is a negative deterrent to higher productivity. Make more money and have even more taxes levied so that you end up with even less money than if you had actually made far less. It's a certain disincentive to making more. We need more productivity not less. Quit taxing exceptional performance!
A much evener method of collecting revenue for government operations is a sales tax. A National Retail Sales Tax. The Fair Tax even. For all the details on this incredibly well-thought out plan, a plan which has been in the works for over a decade, check out http://www.fairtax.org
I'm just a regular guy writing a self-indulgent blog so I'm not going into any details about how the Fair Tax works, but it is a superior method of taxation. A method which actually allows every person to decide how much they will be paying to the Federal Government in taxes by what and how they purchase things. Taxation on the demand side, buying stuff, is much more equitable than taxation on supply side, producing stuff.
I have read all the details about the Fair Tax plan and I have heard most of the arguments against it. I cannot see a downside to this plan. This economy would explode if this system were implemented. The United States would become a haven for businesses world-wide. Our Federal Government would have as much revenue as they have today without stifling productivity. Every economist I have heard discussing this plan agrees that it would be a huge boon for our nation and our businesses and our quality of life.
What I hear most often, however, is the nay-sayers expressing every reason under the sun why this Fair Tax Plan will not work. Or why we cannot possibly change our current tax system because it is too ingrained in our way of life. And often I hear someone reporting the facts of the Fair Tax Plan incorrectly, whether knowingly or not. It does no good to criticize something without understanding completely what you are criticizing. Negativity everwhere! I am positive we can change the tax system.
How about some help here? Let's find a way to make it work. Let's try to change people's misguided perceptions about the plan and show some confidence that we can actually change something as huge and pervasive as the Federal Tax Code that is broken and does not work well at all, and replace it with a simple, elegant plan that actually does what it says it will and works.
The simplest solution is always the best solution. The Fair Tax Plan is the simplest solution. If I were king, the current system would be reaplaced with the Fair Tax tomorrow. And I would cut back the size of the Federal Government to about 1/10 of its' present size. I still believe he governs best, who governs least.
OH
# posted by OH @ 8:42 AM 
