Once and for all, let’s all come to grips with reality: our success in the next era will require that we do away with income tax and move to a system that uses a consumption tax only. And no, a consumption tax is not regressive, and yes income tax actually is regressive. The opposite is a fallacy fed to you by people who will benefit from maintenance of the status quo, or regurgitated by well-meaning souls who just haven’t thought it through. So for just a second, wipe the dogma from your mind:
- We have to have taxes to run the government.
- How we collect those taxes should be easy to administer, difficult to avoid or cheat, and should be as transparent as possible to individuals with lower resources (ie, progressive… but think about what you are really trying to do: make it easier to live with less).
- By definition, two different systems is more complex than one (income or sales, pick one, not both).
- Because we have assumed responsibility for all citizens, regardless of their ability or desire to contribute to society, we need to promote good choices and discourage bad choices (look at Australia’s tax on cigarettes). This is a reality we have not yet fully accepted, and it is quite literally killing us. This can be done with a consumption tax, but cannot be done with an income tax. (We don’t tell people how to spend their money).
- Consumption tax is far easier to administer, and much harder to avoid.
- Income tax is actually regressive, because the system itself has far greater impact on those with lesser means than those with more. When everything you make goes to necessities of life, any reduction is tremendous. When all of your time is devoted to making ends meet, you have no time for the complexities and hassles of jumping through hoops; and the less your means, the higher those hoops. For some, a $300 rebate could literally mean life or death. For others, the difference between 35% and 60% income tax has absolutely no impact on basic needs.
- Consumption tax can be made incredibly progressive, without any additional complexity (it’s computed at the register, after all). Example: in today’s society, a cell phone is no longer a luxury. That being said, the latest iPhone is a luxury, especially if you have to have it right now. What does a basic cell phone cost? $20? Ok, no tax on the first $20 of a cell phone. Want the latest iPhone? That’s $500, and $480 is taxed. Want it NOW? For the first 2 weeks, the tax is higher. Basic electric stove? Necessity, $150, no tax. Viking range? Not necessity, $3000, $2850 of which is taxed. See what I mean? You can do this with anything: unprocessed food: no tax. 12 pack of beer? Tax. Used Honda, no tax. New Lamborghini? First $10,000, no tax. 10-50k, taxed at a certain rate. 50-80k, higher. Over 80k… if you have to ask…$$$ Now the tax is not only progressive, it can be used to encourage good behavior (financially or physically). Because we are all taking care of each other, no matter what.
- Income tax can only be adjusted yearly. A consumption tax can be adjusted – just like interest rates – at any time.
The reality is that there is absolutely no advantage in terms of government revenue or societal justice of income tax, it’s just that we have all been raised to believe there is. Yet with our new order of society – a world where we take care of everyone – there are many reasons it needs to go. It’s only “progressive” on paper. And the only ones who benefit are those who utilize its nuances for an advantage in business or politics. I, for one, am sick of other people screwing the rest of us by manipulating the system. We need policies that benefit us all, not a select group. So move over income tax, and make way for true progress.