Friday, October 24, 2008

The Conservative Case for a Consumption Tax

The first rule for efficient government is simple government. I just watched the umpteenth ObaMarx apologist tell me how for 95% of American Families, their taxes would go down.



If I save my money this way or that and own a home and put my kids through college using their plan, etc, etc, etc and so forth. Or something similar to that.

I'm a busy guy. I shouldn't be burdened with sitting at a table long into the night with my wife planning how to invest my income (which is highly volatile in terms of amount) in such a way as to take advantage of some micro managing tax policy. That's like the cell phone rebate I never got because the procedure was two steps too complicated and I kept putting it off. Just like income taxes and income tax planning.

A consumption tax, as unfair as it can be from time to time is dispassionately and consistently applied. It would probably be a quarter of the value of everything we buy. Keep in mind it probably will take about 20% of our income to run our Federal Government and then the state needs something. A quarter. Maybe as much as 30%.

Too much you say? You're paying it now chump. You just don't see it so it's like having a pair of Zaphod's Joo Janta 200 Super-Chromatic Peril Sensitive Sunglasses or being a child covering their eyes claiming you can't see them in hide and seek. Remember that corporations and the rich NEVER pay taxes, they pass them along to you. It could even be argued that you pay MORE than you ought to simply because the most in demand products in the consumer world generate the most profit and thus generate the most corporate income tax and thus pass the greatest burden of taxation along to you.

Even if it distributed the tax burden inequitably as it most certainly would, there are other arguments to make. One is that it is impossible to make a perfectly equitable tax system so it is a fool's errand. Next, the bureaucracy devoted to this vain pursuit is a burden itself. A consumption tax is a percentage of a transaction, collected through a smaller number of retail outlets when a product or service passes on to its end user. Less people to tax, easy rules to administer. I daresay less people could be employed performing easily understood tasks and pursuing tax cheats more successfully than they do now.

The political argument over class envy is diminished. The rich in fact can be argued to pay greater taxation because they consume more. If they are the thrifty rich, and do not consume, they invest, creating jobs. This is an efficient and instant benefit to all of us.

The Government is tied to a vested interest in our prosperity. We consume when we have excess, not when we are without it. If more revenue is wanted, our prosperity must be encouraged. Taxation always has a damping effect on activity so the Government is motivated to place taxation at the point where their revenue is maximized.

You see your bill every time you get a receipt. Of late I have been asking the question of persons I do business with, "Did you see the government anywhere during this transaction? They got $4.36!" I add that judging by the amount and frequency of the transactions there should be a government official full time, on the premises. No one can see such an official though. Imagine if the government was shown to be getting $30.00 every time you spend a hundred. They do now, you just don't see all of it or any of it. Your taxes can never be increased without you knowing they have been, immediately.

The government can also relieve taxation pressure quickly. If they perceive economic burden due to recession, they can relieve pressure IMMEDIATELY by lowering taxes 1 or 2 percent. It is to their benefit as well because if activity drops, so do revenues. If they lower the percentage and transactions revive, they'll get more money.

The sooner this is done, the more efficient and accountable the government is.

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