The NO Tax System
We are conditioned
to accept that there must be taxes to pay for the Federal Government. Complete,
with arguments like, how will you pay for a proposed tax cut? And who will get
a tax cut? However, I say, let us drop the arguments about what is the proper
level of taxation, and look at a system where there is no Federal Income Tax at
all.
If there was no
Federal Income Tax, then whatever money congress authorizes to spend above what
is collected from use fees, penalties, and duties would be printed. This, in turn
would dilute the monetary supply that already exists, and in theory would
inflate the currency at the percentage of the newly printed currency compared
to the existing monetary supply. This would cause an erosion of the dollar. This
is the bad side of the equation. Which could be a 6% increase based on 4
trillion dollars of spending, and zero revenue on 66 trillion of GDP (Gross
Domestic Product). This assumption is based on a static market place, and the GDP
is a 2012 number.
However, on the
good side of the equation, is the release of money from the private sector that
would normally go to the Federal Government. This money, and the added expense
to comply with existing taxes, would instead flow back into the private sector
and raise the GPD, and expand goods and services, Increasing the market demand
on the monetary supply and offset the inflation rate. If this rise in GDP
exceeds the percentage of new currency issued, by the government, then then
increase in currency would be offset by demand. And since the tax and
compliance cost would fall off the price of finished goods, it would create
deflationary pressure in a healthy free market system. This also depends on
Congress printing new currency, instead of monetizing the spending by issuing
new bonds, which would increase the downstream liability of this spending, by
adding interest onto the debt. It is only debt if structure it that way,
otherwise it is just dollars.
However, the
function of the Tax Code is not about the maximization of revenue, otherwise
the discussion on capitol hill would be about the Laffer Curve, and what
strategies you would use to maximize revenue. Instead, the debate is about who
pays and how much. Therefore, the tax structure is not designed to maximize
revenue while limiting economic damage, it is about using the tax code to shape
the economic patterns of the citizen, by rewarding or punishing behavior.
Manly, it is an attempt to convince people that the government can micro manage
a large and dynamic economy.
In the brief 103
years of the Income Tax code, the government has had to deficit spend in 86 of
those years, and only had surpluses in 22years, with 11 of the surplus years
happening within the first 20 years of implementation. That means that money was created to pay for added
spending. Therefore, the government has a history of overspending 86 out of the
last 103 years. And the overall average of the past 103 years of collecting 87%
of revenue to actual spending (without including Social Security and off budget
programs) funded by all taxes. All numbers come from https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/hist01z1.xls.
All of this is predicated
on the concept that income taxes do not contribute to inflation. Which is a
false premise, based on the illusion that the tax only applies to excessive
income. Which may be true of a select few individuals, however, most income
taxes are collected from someone else’s productivity, with no tangible value
added. Any loss in productivity always adds to the inflation of prices. Even
losses in profit. Whereas a Use Tax, like the Fuel Tax does at least give you reasonable
infrastructure for the money collected.
Therefore, the
question becomes, would inflation be higher without the Income Tax Code, or
could it be lower, without the Income Tax Code. To answer this, let us look at
the downside. First of all, the Income Tax does not provide any productive
gains to society, other than the dubious form of wealth redistribution, and it
does it at a premium, which I estimate at 3% of GDP, this would be the security
detail, that businesses[JS1] ’
employ to protect them from the tax (i.e. CPA’s and Tax Lawyers), in order to
lessen its effect on the bottom line. Second, it prohibits a company from
bringing back profits made from oversea sales, (without an Income Tax
Structure, companies could bring home any money made overseas to invest in
their infrastructure without added penalty). And on the individual level, it
places the individual in an adversarial relationship with its own government. A
relationship which forces the individual to justify each dollar, they receive or
spend, and removes 15% or more from their disposable income. And finally, the
Income tax offers diminishing returns, with the Ultra rich and politicians,
creating Tax Free charitable foundations, which may spend a small percentage on
charitable works, but mostly serve as Tax havens to build and maintain wealth
and power, and pay themselves lucrative salaries, and use of the foundations
assets.
Therefore, I would
accept the risk of a supposed 6% inflation rate per year, if I was able to keep
15% or more of my gross income. Even if we risk hyperinflation, because if the
government does not live within the constraints of it economy, hyper-inflation
will inevitably happen even with a Income Tax System.
