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Brief History | The Challenge | The Objective | The Answer | Criteria Compliance | PDF Version | Contact | Financial Security
The
Objective:
To
develop a tax plan that replaced the Federal Income
portion of Federal revenue. This does not alter the
collection of various payroll taxes as I believe
they conform to the requirements below.
The
Guidelines:
The following are the guidelines I
developed in evaluating an alternative taxation
program:
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Efficient – The current system is incredible
inefficient costing tax payers and corporations
huge sums of money just to ensure compliance.
Other overhead expenses include IRS enforcement
costs. Plus there is lost tax revenue due to
non-compliance and lack of funds in the IRS to
adequately enforce tax collection. The impact on
our national economy is huge and felt by
everyone. Efficiency means a greater percentage
of the total cost (tax along with compliance
costs) going towards government usage.
-
Behaviorally Neutral – The current tax system
along with both notable alternatives fail rather
badly in this regard. The resulted changes in
behavior of tax payers really falls into two
categories, intended by the author of the tax
code and unintended behavioral changes. The
Federal government has long attempted to
‘regulate’ behavior both in the private sector
and within corporations through the use of tax
code. Some attempts have been successful while
others have failed. Tax breaks for home owners
has encourage home ownership but most have
either failed or had serious negative unexpected
behavioral changes. The ‘luxury tax’ assumed
that rich people didn’t mind getting hit with a
large tax on boats. They did and modified their
behavior resulting in the large boat business
almost going out of business. However, the
Federal government certainly has the right to
author code with the intent of modifying
behavior. I tend to believe that more direct
legislation is more appropriate. This is true
for both cultural changes and business changes.
The Chrysler bailout was a positive example
where federal action resulted in mostly
guaranteed loans and not tax breaks aimed at an
entire industry. Congress passed a specific
piece of legislation that aided Chrysler as
opposed to some tax breaks that would have
affected others in the industry or possible in
other industries. Plus tax code tends to never
go away resulting in unexpected consequences
down the road.
An even bigger issue is unintended
behavior changes. Changing ones behavior to avoid
taxes is a simple example. Most people will do the
right thing given it is easy and seems reasonable to
them. Later I will discuss the huge flaw in the
national sales tax proposal that would result in
massive, permanent and tragic changes in how we as a
society deal with the Federal income tax. On the
corporate side, as the tax code has become more
difficult and costly to comply with, more
corporations have moved off-shore. Tax collection
from Corporations has been is a steady state of
decline for many years as a percentage of income tax
collected forcing that burden to be picked-up by
individual tax payers. Any new tax system needs to
minimize behavioral changes.
3. Fair - This one is tough and must be viewed
from a human nature perspective. Logical
dissertations have been presented showing the
fairness of a variety of tax plans. Each makes
good points but my point is that logic doesn’t
matter! The fact is that any new tax plan must
feel fair to the citizens and what feels fair
isn’t always the same as logically fair or even
factually fair. There must be the perception of
fairness as well. Having said that, where there
is smoke there is usually fire. I believe that
behind the lack of a feeling of fairness, the
current system along with the alternatives
aren’t fair as I will discuss later.
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