A Proposed Method of Eliminating All Taxes
While most people don’t mind paying for goods and services in the private sector, very few if any like paying taxes — for good reason. When buying goods and services in the private sector, payment is voluntary and the payer is the recipient of the product or service purchased, the value of which is generally commensurate with the price. By contrast, the payment of taxes is compulsory and not related to the receipt of any government services.
While all taxes are undesirable, the most odious of them is the federal income tax. There are a number of reasons for this. First, there is the fact that this tax constitutes the largest withholding from the salaries of most employees. Next, there is the time required to gather and maintain all of the records necessary to substantiate the deductions claimed, as well as the time required to prepare the taxes, or, if prepared professionally, the money to pay the tax preparer. In addition, there is the invasion of privacy resulting from the fact that the taxpayer is required to bare his financial soul in order to justify all of the deductions to which he is entitled. Let’s not forget the anxiety caused by the fear of being audited. Selective auditing and prosecuting people that those in the government consider to be a problem (e.g., political dissidents) has been done in the past and has the potential to occur in the future.
The income tax is one component of our Marxist (“from each according to his ability, to each according to his needs”) income redistribution system (the other component being social programs), wherein money is collected from people based on their ability to pay and redistributed to individuals based need, thus forcing the productive members of society to bear the burden of taking care of the nonproductive individuals, a system that is clearly unfair unless you subscribe to the Marxist model of resource allocation. In addition to being unfair, our income redistribution system is counterproductive in that it reduces the motivation of those who are being taken care of by the social safety net to seek productive employment, as well as the motivation of the productive members of society to maintain or increase their productivity, due to the progressive nature of the income tax.
Another problem with the income tax is its sheer complexity. The tax code is not rocket science — it’s far more complicated than that! Imagine trying to launch a rocket into space if the laws of physics were as complex as the tax code. The weight of the vehicle would not be simply the sum of the weights of its components, but some nonlinear function thereof, which would vary over time. The specific impulse of the rocket would depend on the contents of the rocket, and it too would vary over time.
In addition to its complexity, the tax code is riddled with inconsistencies. For example, the standard mileage rate, which is presumably designed to cover the cost of operating a privately-owned motor vehicle, varies depending on whether the vehicle is used for charitable purposes, medical travel, or business. While business travel is generally tax-deductible, commuting to and from your place of employment is not. Finally, while you can depreciate the value of assets when computing profit, depreciating the value of the currency you possess due to inflation is not permitted.
Over the years, there have been proposals to reform the tax code, usually accompanied by promises that such reforms would result in tax simplification, promises that never seem to materialize. Some have suggested that we go to a flat tax, while others have advocated replacing the income tax with a federal sales tax. A value-added tax, which is common in Europe, has never gained traction in our country. Fortunately, there is a simple solution to dealing with undesirable taxes.
Eliminate All Taxes
My proposal to eliminate all taxes raises the obvious question, namely, if we do away with all taxes, how are we going to fund essential government services? Here’s how.
For convenience, we can divide government services into three categories. The first category consists of those government services that can be privatized. My plan: Privatize them. Taxpayer-financed public schools can be readily replaced by private schools funded by tuition. Public libraries can be eliminated in favor of private libraries supported by media rental fees. As recommended in my article Dealing With Entitlement Cost Escalation, government-provided social programs, including subsidies, can be phased out, with the services that they provide taken over by private businesses and charities. The Affordable Care Act, along with its associated mandates and subsidies, should be repealed, with healthcare services restored to the free market and, while we’re at it, let’s eliminate the requirement that hospitals provide emergency treatment to those who are unable to pay for it. Those people dependent upon public assistance and unable to support themselves in its absence could seek help from friends, family, or charities, or if those resources are insufficient to meet their needs, check into a euthanasia clinic for a quick painless death. As an alternative to paying a fee for the service, those who are destitute could sign over the rights to use their organs to sell to hospitals for transplant purposes. Their flesh could be sold as meat to those who are able to overcome their culturally-conditioned aversion to cannibalism.
The second category of government services to be considered here are those that cannot be feasibly privatized, but for which the costs can be allocated to individual users based on usage. These services could be supported by user fees. An example would be a fee charged to drive on the public roads, which could be incorporated into the vehicle registration fee or license fee. While most museums could be privatized, those housing national treasures could remain under government control and, like private museums, be supported by admission fees. In order to fund prisons, criminals could be required to pay for their own incarceration and liquidated if they are unable to do so, as discussed in my article Dealing With the Crime Problem.
The final category of government services is those that cannot be feasibly privatized and for which the costs cannot be allocated to individual users based on usage. An example is national defense. You cannot choose whether or not to be protected by the military; you are protected by virtue of living in this country. To fund these types of government services, we can use the condominium as a business model and require each citizen to pay a national condominium fee (NCF), analogous to the condominium fee used to maintain the common areas of a condominium. Since estimated taxes are paid quarterly, the NCF could likewise be paid quarterly, although there is no reason why it couldn’t be paid more or less frequently. The NCF would be the same for all citizens, independent of their income. Those unable to pay the NCF would be given the choice of leaving the country or checking into a euthanasia clinic.
While the preceding discussion has been focused primarily on the federal government and the services that it provides, it can be applied, mutatis mutandis, to state and local governments as well.