Fair Taxes?

Taxes are a necessary evil. We must fund things in society like defense, infrastructure, justice and more. While I think we can all agree that our government at all levels wastes far too much money on things we don't need or want, we often get wrapped up in tax structure.

If we put more focus on spending, the tax collection issue wouldn't be so important but that's a different discussion.

So on to collection of taxes in a fair society.

There are three primary methods that we tend to use in society for tax collection. Income tax. Sales tax. Property tax. While there are certainly other methods, these are the three we use most often in western society.

Income Tax

Income tax is levied on your income before you ever see a dime. While this is the most stable form of taxes to a government, it's also the form of taxation that gives the citizen the least control over their money.

The Good: The income tax gives the government a steady supply of cash that's directly tied to the economy. The better the economy does, the more income the government brings in. The government has every incentive to assist job creation as it directly impacts the amount of money they have available.

The Bad: With this taxation comes the natural reduction in cash flow during a recession. While this can be argued good as well as bad, it's my opinion that it's more negative as recessions not only lead to pain in the private economy, they lead to pain due to higher deficits in the government.

The Ugly: The 4th Amendment is completely overruled by the 16th Amendment. With the passage of the 16th, the right of the federal government to demand your complete financial records came with it. How can they collect income taxes without knowing everything about your finances? You now have to provide how much you make, where you live, how many dependents you have, investments, and the list goes on. The level of infringement is severe. It steps on the 4th Amendment by removing your right to keep your papers from government without a warrant and it steps on the 5th Amendment by taking private property for public use without just compensation. Unfortunately, they passed the 16th Amendment so neither of those apply to the income tax now, making it perfectly legal. It is still a major infringement on those two rights though.
 

Sales Tax

The sales tax is tax applied at the point of sale. This can also be a very stable form of taxation to the government but it also gives the citizen some say in how much they pay.

The Good: This gives a fair amount of control to the tax payer. If things are tight and they aren't buying much, they aren't paying the tax bill. In contrast with income, this is a little more linked on your ability to pay. When we apply the sales tax, it's typical to exempt used goods, medicine and unprepared food. That exempts the poor from paying a lot of tax. This also makes taxation very visible to the consumer as they pay it every time they buy something.

The Bad: As with any tax, the sales tax drives up the cost of products but this one is direct. If the rate goes from 15% to 20%, there will be a direct impact on consumption, directly impacting the economy. It can be argued that this impact is more severe than the impact of an income tax because working people don't leave the work force to avoid taxes, whereas they could avoid consumption to avoid taxation. While it gives the citizen more control, it can be harmful to the economy.


 

Property Tax

While the property tax isn't used by the federal government, it's a major source of revenue to the states. By taxing your property, they collect taxes based on what you own, thus those with less possession pay the least.

The Good: Again, the stability of taxation on property means a stable source of revenue to the government. This allows for planning and the revenue scales with property value without having to adjust the tax rates.

The Bad: Again, this infringes on your 4th Amendment rights. You have to disclose everything about your property, it's all public record and it's not based on your ability to pay, rather it's based on what you own.

The Ugly: This completely removes private property rights. If I own a home and a piece of property, there should be no reason for the government to kick me off of that property because I didn't pay them their rent. In addition, it raises the amount of rent a tenant has to pay, meaning it's really harmful to the people that can least afford it.

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The method we should use in my opinion:

The citizen funds the state through sales taxes. The state funds the federal government and the local government from this pool. No state spending is transferred from the federal government. It's our money, not federal money. We should not be begging for our own money back, having to jump through the hoops the feds define for us.

One tax on one source that doesn't mandate the collection of private citizen information. Doesn't result in the eviction of a citizen from property he/she owns. Doesn't result in penalizing a person for having a job. Doesn't reward people that work off of the books to avoid taxes. Doesn't reward illegals. Keeps the federal government dependent on the states rather than the states dependent on the feds.

My Preferred Structure
Current Simplified Structure