Proposal To End All Taxes

[modit]

What do you think about Government not collecting any tax? Revenue would come from natural resources companies that would be turned into Crown Corporations (http://en.wikipedia.org/wiki/Crown_corporation#Commonwealth) (only Canada might pull this off as we have one of the World's most abundant resources).

Business profits and would rise and US and other international companies would set up shop here. Roads, courts, ect would be paid for and we would avoid the Baby Boomer dilemma by increasing productivity and innovation VIA economic immigration.

Here's an everyday example:

GASOLINE TAX - 33% in combined taxes on average on the price of fuel in Canada, and Americans pay about 11%.

With Tax (Last Month Average)

$1.21 per liter (~40 cents to Gov't)

No Tax

81¢ (~81 cents to Gov't)

Can you accept the logic that resources can fund services? :D

Again, this is just a proposal so please throw in your 2 cents (not taxed of course :p).

[jav6454]

Been there, corruption won't let it fly this easily.

Back in Honduras the state owns both the only Electric and Telephone (Landline) companies.

Albeit now their are minor landline companies now, but nothing on a large scale.

Point is, the country is still in distress even though both Government-owned companies generate massive profits. Might I add that every year tariffs keep going up on the phone side and twice a year for electric.

[modit]

I added a poll for interest's sake :cool:

[Eraserhead]

Sounds like a terrible idea, I highly doubt it has ever been seriously attempted.

[modit]

Sounds like a terrible idea, I highly doubt it has ever been seriously attempted.

Help break it apart so that it can be improved :D

[Ugg]

Won't work.

Few countries have enough resources to provide a tax base. Taxes are most efficient when spread across broad swaths of the population and businesses. By limiting taxes to a handful of items, the government would be forced to extract those resources come hell or high water. There would probably be little regard for environmental safety.

[iStudentUK]

Just can't make enough money out of it.

Here in the UK about 75% of government income comes from- income tax, national insurance (which is also deducted from people's pay checks), VAT, council tax, alcohol duties, tobacco duties. Fuel duties account for around 5%. How can selling natural resources make up the difference?

[citizenzen]

... the government would be forced to extract those resources come hell or high water. There would probably be little regard for environmental safety.

That would be my concern as well.

Plus these natural resources are finite. Human endeavor is far less so.

Why build your tax base on a resource that will run out?

Then what?

[SuperCachetes]

I don't think this would work in the USA, where people seem to have a distrust and low opinion of most of our governent-run businesses.

That said, looking the Wiki link in the OP, there's a chart called "Government corporations by field and by country" towards the end of the article. Of the countries who have more state-run companies than the U.S., I have to say that most of them are very respectable and to my knowledge have a very high standard of living; i.e. Sweden, Finland, etc. Go figure.

[chrmjenkins]

A resource tax would ultimately be regressive in nature as the poor have some minimum threshold of resources that they need while the rich would not see their resource needs rise proportionally with their income. Couple this with the rich having means to circumvent need for such resources (say purchasing an electric vehicle to not buy gas) and you have a system where the rich keep winning and the poor keep losing.

[SactoGuy18]

I think at least here in the USA, the better solution is to NOT tax the process of earning money (taxes on all forms of income, especially earned income from a business, wages, bank account interest, capital gains and stock dividend payments) but tax the process of consumption (buying new-production goods and services)

This is why I am a big fan of FairTax (H.R. 25/S. 13). FairTax works like this:

1. It eliminates all taxation as defined by the Internal Revenue Code (Title 26).
2. Instead, we tax consumption (the buying of new goods and services) at a singular 23% rate.
3. Used goods sales, business-to-business sales and college tuition are NOT subject to this tax.
4. To ensure the progressive nature of this tax, every legal resident of the USA (citizens, resident aliens, aliens with valid student visas, and aliens with valid work permits) will get a monthly "prebate" payment to cover the cost of the 23% tax up to the Federally-defined poverty level.

Under this system, we gain the following advantages:

1. No more spending hundreds of billions of US dollars per year in income tax compliance costs (some estimate that the savings could be as much as US$270 BILLION per year!).
2. No more having to "hide" net worth by either participating in the cash-only underground economy or funneling liquid assets to offshore financial center bank. Some economists estimate something like well over US$10 TRILLION in American-owned liquid assets are "hidden" this way--an amount that if returned to the US financial system would solve a LOT of serious financial problems now plaguing the USA.
3. It would actually end up saving both Social Security and Medicare, since with no more taxation of bank account interest, capital gains and stock dividend payments, people can create their own monetary "nest eggs" completely tax-free for retirement and/or future medical needs, reducing the need for Social Security and Medicare.
4. It would encourage American businesses to keep as many jobs, factories and even corporate headquarters in the USA, entice foreign companies to expand US operations, and could even make the USA the world's largest "flag of convenience" for commercial shipping.

So what are we waiting for?

[Digital Skunk]

I don't mind paying taxes, even high ones "GASP" :eek:

Just as long as my hard earned cash can be put where I'd want to see it go. The thousands of dollars I put into Maryland and US government shouldn't be spent on wars that benefit the rich. Or R&D for a war machine that's decades ahead of the pack. Or for bailing out companies ran into the ground by rich CEOs.

I want my money to go to my neighborhood, where children are dying every day because no one in Baltimore can understand the concept of a community center to keep kids off the street.

In other words . . . One M1A1 Abrams tank costs $4.3 million (http://en.wikipedia.org/wiki/M1_Abrams). We had about 9000 of them. Can we just keep 8990 and use the 40 million to invest in our kids?

[entatlrg]

Taxes aren't a problem. It's what's done with the money once collected that's the problem.

Denmark for example has among the highest taxes in the world, coincidentally study after study, year after year they're known to have the happiest citizens in the world too.

That country is a model for tax money spent right ... EVERY child gets a paid for education through University, elderly completely looked after, housing, food, medical, dental. The examples can fill a book.

Taxes are necessary to run a Country, ending taxes is far from addressing the problem.

The public needs to get rid of their ignorance, pay attention to who's getting into office, eliminate the corruption ... it's too far gone to be fixed because the rich and powerful have their controls in place...

[mcrain]

Taxes are a necessary component of a civilized society that chooses to have a government.

FYI, the fair tax is anything but fair. It is highly regressive in nature.

[SactoGuy18]

Taxes are a necessary component of a civilized society that chooses to have a government.

FYI, the fair tax is anything but fair. It is highly regressive in nature.

Why do you think this is part of the FairTax proposal:

4. To ensure the progressive nature of this tax, every legal resident of the USA (citizens, resident aliens, aliens with valid student visas, and aliens with valid work permits) will get a monthly "prebate" payment to cover the cost of the 23% tax up to the Federally-defined poverty level.

I'd recommend reading this PDF file that explains how FairTax works and why it is a great idea to help revive the US economy:

http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf

[mcrain]

Why do you think this is part of the FairTax proposal:

4. To ensure the progressive nature of this tax, every legal resident of the USA (citizens, resident aliens, aliens with valid student visas, and aliens with valid work permits) will get a monthly "prebate" payment to cover the cost of the 23% tax up to the Federally-defined poverty level.

I'd recommend reading this PDF file that explains how FairTax works and why it is a great idea to help revive the US economy:

http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf

Seriously, if you are going to buy the PDF from the fairtax website as neutral analysis, I hope you are not in procurement. (edit - removed the snide comment. This is a serious issue, and deserves serious response. My apologies.)

The fair tax is regressive because, even with the prebate, lower income individuals will pay a far smaller larger (oops) percentage of their income in taxes than those who make more. That's the definition of regressive.

Here's an analysis Fairtax doesn't like and has spent a lot of time trying to deal with. Factcheck.org vs. Fairtax (http://www.factcheck.org/taxes/unspinning_the_fairtax.html)

[Mousse]

Help break it apart so that it can be improved :D

http://www.twcenter.net/forums/images/smilies/emoticons/thumbs_up.gifThe Government is violation of the Sherman Act. We need to break apart the Federal Government so that the smaller governments will have to compete for our taxes.:D

[Sydde]

I think at least here in the USA, the better solution is to NOT tax the process of earning money (taxes on all forms of income, especially earned income from a business, wages, bank account interest, capital gains and stock dividend payments) but tax the process of consumption (buying new-production goods and services)

Good idea. The best way to implement a consumption tax is via a national property tax. If you buy a thing, you own it, hence you should be taxed on it. What could be more progressive?

[AP_piano295]

Seriously, if you are going to buy the PDF from the fairtax website as neutral analysis, I hope you are not in procurement. (edit - removed the snide comment. This is a serious issue, and deserves serious response. My apologies.)

The fair tax is regressive because, even with the prebate, lower income individuals will pay a far smaller percentage of their income in taxes than those who make more. That's the definition of regressive.

Here's an analysis Fairtax doesn't like and has spent a lot of time trying to deal with. Factcheck.org vs. Fairtax (http://www.factcheck.org/taxes/unspinning_the_fairtax.html)

You mean a far larger percentage of their income than those who make more?

[CalBoy]

This is why I am a big fan of FairTax (H.R. 25/S. 13).

A consumption tax on its own can never be sufficient to stabilize wealth distribution or help people out of poverty.

Even with a prebate program, poorer people would be taxed at a much higher rate (in percentage terms) compared to wealthy individuals.

Wealthy individuals tend not to purchase a great deal; most of their income goes towards reinvestment, which I presume would be immune from a consumption tax? If we were to allow this tax structure to run for several decades, we would eventually come to a distribution of wealth where almost all of the capital wealth in the country would be held by the very few and they would continue to hold a greater percentage of the wealth as each year passed.

The only way this could hypothetically work is if investments are counted as consumption (you are "buying" a certificate, bond, or real property). The rate would have to be much higher than 23% for this to work, however. In order to prevent extreme wealth concentration, the rate for investment would have to exceed 50%.

As for the question in this thread, a resource tax wouldn't work either. Even if we could extract a steady amount of resources forever (which we can't), as time went on our need for raw materials would approach an asymptote while our use of these resources would become more efficient. More and more of the economy would become independent of raw materials and the government would have to provide the same services while seeing a flat-lining tax base.

[Sydde]

Wealthy individuals tend not to purchase a great deal; most of their income goes towards reinvestment, which I presume would be immune from a consumption tax? If we were to allow this tax structure to run for several decades, we would eventually come to a distribution of wealth where almost all of the capital wealth in the country would be held by the very few and they would continue to hold a greater percentage of the wealth as each year passed.

The only way this could hypothetically work is if investments are counted as consumption (you are "buying" a certificate, bond, or real property). The rate would have to be much higher than 23% for this to work, however. In order to prevent extreme wealth concentration, the rate for investment would have to exceed 50%.
There have been various recent proposals to tax stock trading in order to encourage long-term investment over speculation. Britain right now, if I understand correctly, taxes trading at 0.25%. I believe the estimates suggest that $150 billion a year could be harvested from this kind of tax, mostly on the large investment houses who run on computers that trade issues at millisecond speed.

[samiwas]

There have been various recent proposals to tax stock trading in order to encourage long-term investment over speculation. Britain right now, if I understand correctly, taxes trading at 0.25%. I believe the estimates suggest that $150 billion a year could be harvested from this kind of tax, mostly on the large investment houses who run on computers that trade issues at millisecond speed.

I think I could get behind that plan. But watch the "conservative" folks tell you how this will destroy the economy and hurt jobs.

[blueroom]

Naa, I don't want to live in a cave without electricity.

[Apple OC]

Taxes are never going away ... pure fantasy logic :cool:

[Pachang]

Op wants the government to run natural resources companies. The guys who can't deliver mail.

[Sydde]

Op wants the government to run natural resources companies. The guys who can't deliver mail.

A government that cannot construct a massive interstate highway system the gets millions if people quickly and safely from one place to another every day? A government that cannot keep thousands of airplanes from crashing into each other every day? A government that cannot put a dozen satellites in low orbit that you can connect to with a handheld device that will locate your position within a few feet?

Which government were we discussing? When was the last time you experienced a failure on the part of the P.O.?

[SuperCachetes]

Op wants the government to run natural resources companies. The guys who can't deliver mail.

Wow. Of course, I thought I was correct in my statement, but I never thought I'd have a living example delivered right to me within a dozen or so posts. ;)

I don't think this would work in the USA, where people seem to have a distrust and low opinion of most of our governent-run businesses.

[Love]

I've lived in Canada all my life, and, with no offence intended to Americans, I believe our tax dollars go towards things that are more important to average citizens. Instead of spending our tax dollars on wars, we spend them on healthcare to make sure our citizens are healthy, and we use it to subsidize education. 'course, our beloved Stephen Harper is also using it to buy fighter jets, prisons, and other billion-dollar stuffies we don't need, but still - our tax dollars do good work. I don't think getting rid of them and transitioning to a FairTax or a no-tax, all crown corporation sort of situation would work, or be good for citizens of any country.

[SactoGuy18]

I think it all comes down to this: we're so used to the current income tax system that anything radical that could overhaul it or even replace it seems really alien.

Yet, the idea of a consumption tax instead of an income tax is NOT a new one: Alexander Hamilton, the first Secretary of the Treasury in the United States, favored a consumption tax because it would have the least impact on economic activity.

By the way, according to this PDF:

http://www.fairtax.org/PDF/2010PrebateExplained.pdf

The current prebate payment for a family of four (a couple plus two children) would be US$559 per month or US$6,702 per year.

An lesser, but still WAY better, alternative to the current income tax system is what Steve Forbes proposed in 2005. That plans goes like this:

1. There is a generous earned income exemption, up to around US$42,000 per year for a family of four.
2. All earned income above that is taxed at a 17.5% rate.
3. Income from bank account interest, capital gains and stock dividend payments are not added to the earned income count.
4. All other deductions, credits and exemptions are discontinued.

The result would be an income tax filing so simple that you could probably put it on a post card! :D It would drastically cut income tax compliance costs by 70% or more since almost everyone's income tax filing will be so simple.

As such, the current income tax system used around the world is a terrible idea because of its complexity, steep tax rate progressivity and the fact it encourages way too much activity to "hide" income for tax avoidance reasons (e.g., all those "banks" in various Caribbean island nations). The whole world should adopt a tax system at minimum to what Forbes proposes, since it would end the incentive for "tax havens" in many cases and drastically slow down (if not stop) the "offshoring" of jobs, factories, corporate headquarters and liquid assets for tax avoidance reasons.

[Pachang]

A government that cannot construct a massive interstate highway system the gets millions if people quickly and safely from one place to another every day? A government that cannot keep thousands of airplanes from crashing into each other every day? A government that cannot put a dozen satellites in low orbit that you can connect to with a handheld device that will locate your position within a few feet?

Which government were we discussing? When was the last time you experienced a failure on the part of the P.O.?

Ooops yeah your right. I forgot about the satellites. Sorry.

I have completely changed my opinion. I mostly agree with OP now except for one thing...why stop as resources companies?
I mean why not nationalise Apple. The government can launch satellites right so they could easily make consumer electronics.

[zioxide]

What do you think about Government not collecting any tax? Revenue would come from natural resources companies that would be turned into Crown Corporations (http://en.wikipedia.org/wiki/Crown_corporation#Commonwealth) (only Canada might pull this off as we have one of the World's most abundant resources).

Business profits and would rise and US and other international companies would set up shop here. Roads, courts, ect would be paid for and we would avoid the Baby Boomer dilemma by increasing productivity and innovation VIA economic immigration.

Here's an everyday example:

GASOLINE TAX - 33% in combined taxes on average on the price of fuel in Canada, and Americans pay about 11%.

With Tax (Last Month Average)

$1.21 per liter (~40 cents to Gov't)

No Tax

81¢ (~81 cents to Gov't)

Cheap gas is useless when you don't have any roads or bridges to drive on.


Seriously, I can't even tell if this thread is a joke or not. There's no way in hell this would ever work.

[CalBoy]

There have been various recent proposals to tax stock trading in order to encourage long-term investment over speculation. Britain right now, if I understand correctly, taxes trading at 0.25%. I believe the estimates suggest that $150 billion a year could be harvested from this kind of tax, mostly on the large investment houses who run on computers that trade issues at millisecond speed.

While I am certain in favor of such a tax because of the benefits you mention, I still feel that it would have to be in addition to a much higher capital gains rate as well. Investing for the long term is one of the many things we need to work on, but a severe concentration of wealth at the very top is really the biggest obstacle we face as a society right now IMO. Taxing capital gains on a progressive scale (maxing out at say 90% for gains above $100 million in a calendar year) would be one of the quickest ways to achieve a more sensible wealth distribution in the country.

Op wants the government to run natural resources companies. The guys who can't deliver mail.

When was the last time the USPS couldn't deliver mail? Do you realize how remarkable it is that for under 50 cents (the cheapest in the first world) you can send one ounce of paper across an entire continent within 3 days?

I can't figure out what part of the postal service gets under your bonnet. Is it the low prices, the fast delivery, or the convenience of being able to send something doorstep to doorstep?

I think it all comes down to this: we're so used to the current income tax system that anything radical that could overhaul it or even replace it seems really alien.

No, it isn't this at all. Many people are able to see through the charade of Bill Forbes and see that the consumption tax is really a trickle-up tax scheme. After enough time, those with the ability to consume less relative to their incomes will be much better off while those who must consume most of their incomes will fall behind. The only way to avoid this is if the prebate was several times the poverty level such that at least the bottom four quintiles of the population payed no consumption taxes. At that rate, the tax rate would have to exceed 100% of the purchase price in order to maintain any semblance of a budget, and it would introduce other problems like a giant underground economy and artificial deflation of prices on luxury goods.

2. All earned income above that is taxed at a 17.5% rate.

And here we fall into that oft trotted out fallacy, that all income should be taxed at the same rate because that's "fair."

The problem is that it isn't fair to tax all income the same. Someone who earns a lot more (and thus has more assets) makes use of the government's services to a much higher degree.

Take military spending for example. This is a protective service of the government, at least ostensibly. We pay for a standing military to protect our borders from invasion. On a purely economic basis, someone who earns the national average and has the average level of assets gets a roughly proportional level of benefit out of the military as the next person with an average income and level of assets. On the other hand, a very wealthy person (let's say Warren Buffet or Bill Gates) has billions in assets that are being protected by the military at all times. A recent study showed that the richest 400 Americans have as much wealth as the bottom 150 million. That means that those 400 richest are getting 375,000 times more protection from the military per person than the bottom 150 million. Since they're getting the benefit, it's only fair that they pay for it, right?

The same is true for every other major government service out there with the exception of Social Security and Medicare (which are much more evenly distributed). Who uses the SEC more? Who uses the Federal Reserve more? Who uses the court system more? The wealthier get far more benefits from government programs because they need more assistance to protect their wealth (and the mechanisms of their wealth creation).


3. Income from bank account interest, capital gains and stock dividend payments are not added to the earned income count.

Would they be taxed at all, or does that just make the already large loophole even larger? As Warren Buffet pointed out to CBS News, he only pays about 15% per year on his net income to the government because almost all of it is in the form of capital gains. Do you really think Warren Buffet (or any other billionaire) is going to be spending the bulk of his income so it can be taxed via the consumption tax?


4. All other deductions, credits and exemptions are discontinued.

I can get behind this. There are too many things to claim these days and that's what adds all of the expense to compliance and enforcement.

As such, the current income tax system used around the world is a terrible idea because of its complexity, steep tax rate progressivity and the fact it encourages way too much activity to "hide" income for tax avoidance reasons (e.g., all those "banks" in various Caribbean island nations). The whole world should adopt a tax system at minimum to what Forbes proposes, since it would end the incentive for "tax havens" in many cases and drastically slow down (if not stop) the "offshoring" of jobs, factories, corporate headquarters and liquid assets for tax avoidance reasons.

Other countries have much more simplistic tax forms and they manage to maintain both VAT and income taxes. The problem isn't the method of taxation, it's all the exemptions, credits, and deductions we give for doing certain things over others. Eliminate those, and you can still have a very simple income tax with no need to switch to a highly regressive consumption tax.