My biggest gripe about taxes is not the amount that I pay (though that is second), rather, that there are so many different taxes.  There is income tax, sales tax, utilities are taxed, "vice taxes" on items that offend someone else's personal values like alcohol and tobacco, gift tax, inheritance tax, you pay all these taxes with money that was already taxed at least once.  Also consider that the money you earned probably came from a business that was also taxed.  You are taxed when you buy something, and taxed when you don't (savings interest is considered income).  You are even taxed for just keeping what you already have (property taxes).  Additionally, each level of government levies its own taxes: federal, state, county, and municipal.  All these different taxes serve to camouflage how much tax you actually pay.

In an effort to DO MORE, our governments are constantly creating new taxes.  Every new program requires new financing.  Since public sentiment is generally against raising taxes, the creative politicians invent NEW taxes.  However, it seems clear to me that each different tax carries a cost with the collection of the tax.

Today it is estimated that about 50% of our earned money is paid in one form another to a tax.  Around 1900 when federal income tax was created, the total tax paid by citizens was between 2-3%.

You would think that all these taxes could sustain all our government agencies and services, but not so.  You pay per-use fees and licenses of all kinds: driver's licenses, license plates and tabs, hunting and fishing permits, toll roads, postage, building permits, and recreation facilities like community pools and metro parks.  Also, many businesses need to be licensed, and most paperwork you file has a fee attached.

My last gripe about taxes in this country involve the inefficiency of the agencies that collect them.  The IRS itself is very expensive to run. There are hundreds of lawyers involved, lots of paperwork, lots of end-user appeals. And the constant changes causes some well-meaning citizens to unwittingly become criminals.  Add the cost of an infrastructure, that is, a building, electricity, heat, water, paper, computers, etc.  The result is that it costs a lot of money to collect your taxes.

The Story of a Dollar

Once upon a time, there was a man who had a family and a job and was living the American dream.  His paycheck arrived and he marveled that even though his employer told him he would earn a dollar, his paycheck was much less.  There were many deductions listed.  28 cents were deducted for federal income tax, another 6 cents for Social Security, 2 cents for FICA, 4 cents for state income tax, and 2 cents for Detroit City income tax.  Isn't it bad enough I have to work here, they make me pay to work here also?  He is left with 58 cents.  He stops on his way home from work and fills his car with gas.  Of the $2 per gallon he pays, 35 cents goes to the State of Michigan (4th highest rate in the country) and 18 cents goes to the federal government.  Quickly he realizes that 27% of the fuel cost is tax; his 58 cents is down to 31 cents.  Oh, then he pays 6% sales tax and he is down to 25 cents left of his original dollar.  His next stop on his way home is to pay his property taxes on his house, he spends 3 cents of his dollar and is left with 22 cents.  He also remembers it is time to renew his auto insurance, because it is mandated by law.  Luckily this is only a penny; he is left with 21 cents.  He also remembers it is time to pay his utilities.  He pays his phone bill which is taxed 6%; he is left with 15 cents.  He pays his electric bill which is taxed at only 2%; he counts his 13 cents.  He pays his cable TV bill which is taxed 8% and he is left with 5 cents.  He pays his natural gas bill which is taxes at 5% and he discovers he's left with nothing.  When his wife asks for money for groceries he shows her his empty wallet.  She then beats him with a rolling pin because she knows he got paid today.

How can we make it better?

One proposal that seems logical to me is to abolish ALL existing taxes and replace them with an easy to collect sales tax.  This can be done for all levels of government.  The implementation would be simple.  Calculate how much money is needed to perform government function and tax at that rate.  With this system, people would have a much better understanding of just how much our governments are BIG BUSINESS.  The public then, would be able to set the balance between taxes and services by vote, not necessarily by line item, but by electing officials that share the same outlook on that balance.  In times when taxes are too high, low-priority programs would be cut.  In times of need taxes would be increased to support necessary programs (note, this author does not believe imperialistic war efforts are necessary).  Citizens could easily track how much of their money is going to government agencies.  No longer would the governments find sneaky ways to squeeze even more money from the people.

A major benefit of this system is that since all (business-sale) transactions are taxed, even those who obtain their money illegally would be contributors to the tax base.  For example, if a person steals $100,000 they would not claim it on today's income tax form.  Under this plan, however, they would pay the same sales tax as the person who came by their money honestly.

Sales tax would only be collected on transactions that involved a business.  Private transaction should not be taxed.  That is, if Joe sells his old baseball cards to Pete, no tax should be levied, but if Pete buys those same cards from Joe's Card Store, a tax would be imposed.

One detail that may need addressing is what to do in case of transactions that cross jurisdictional borders.  I recommend we apply the tax laws in regard to the seller.  That is, for phone and Internet purchases, it will be the location of the seller that determines the tax paid.  It wouldn't matter where the consumer is actually located, by use of technology they are "virtually" traveling to the point of sale.

A government agency should not charge per-use fee on anything.  If there is something that makes sense to be charged per use, it should be privatized.  For example, a community pool.  This seems to be strictly a commercial endeavor in municipal disguise.  I would even go so far as to say the Post Office should be privatized.  That is NOT to say privacy and responsibility laws should be weakened, just that if the system is already run as an independent business, then be real and MAKE it an independent business.
 

One problem would arise from this simplification, we would lose the progressive tax structure that is currently in place which is intended for the more-wealthy to pay a higher percentage of tax.  Instead of messing with the sales tax concept, I propose we leave it as a straight up flat tax -- easy to implement.  Rather, we should reform our social programs that aim to assist people in need.  Please read my essay entitled Reform Social Programs.

Relevant Quotes:

“I am proud to be paying taxes in the United States.  The only thing is – I could be just as proud for half the money.”
          -Arthur Godfrey, entertainer

“People who complain about taxes can be divided into two classes: men and women.”
          -Unknown

“Where there is an income tax, the honest man will pay more and the dishonest man less on the same amount of income.”
          -Plato, philosopher

The opinions expressed here are mine alone.  Care to comment?  Click HERE

back to Essay Index