Taxed Into Perdition
Let’s tick off some of the reasons why a consumption tax would address the concerns listed above:
1. Everyone would pay the same form of tax.
2. No one would be able to escape it with a tax loophole, deduction or exemption.
3. Class warfare would end because people could not be singled out for targeted tax treatment, as is the case now.
4. It is simple: One consumption tax collected at the point of sale would very clearly show people what they are paying for the benefits of living in the American democratic republic.
5. Lobbyists and PACs and all the other things that drive people crazy about the current tax system and campaign finance would be reduced to next-to-nothingness because there would be no loopholes to get or defend.
6. Rich people would pay more in taxes because they consume more each year. If they choose to buy 10 luxury homes and yachts after hitting it big in business, all those purchases would generate consumption tax payment after consumption tax payment.
7. People would be encouraged to save and invest because interest, dividends and capital gains would no longer be taxed. The stock market might quintuple for all we know.
There are two things that need to be explored further by economic experts, although since hardly any economics expert saw this tidal wave of recession coming along even as late as summer 2008, I’m not sure I put a lot of credence in their opinions anymore. The first would be the level of taxation that would be necessary to generate 19% of GDP, which seems to be the fixed level of federal taxes people are willing to part with since 1970. The other would be protecting low-income people from adverse effects of the consumption tax since they are really the ones who need government assistance, not higher-income folks.
It seems that the current price levels of everything we buy have all the income, corporate, payroll, excise and death taxes already baked in them because those are included in the costs of goods sold in the first place. If they are all eliminated, wouldn’t prices then fall flat as a pancake? And then wouldn’t the new consumption tax start pushing up prices from this much lower, compressed level, not a higher one?
I’m not sure that price levels might not stay just the same under a well-constructed consumption tax as they are under the current system. And maybe with tax revenue that gets picked up in the black market, perhaps we might even increase tax revenue collections without massive hit squads sent out by the IRS each year.
We have asked some very important people in Washington (ok, a senior Congressman) to come up with some numbers, projections and analysis as to what level of consumption tax would be necessary to completely replace the current miasma of federal taxes. And when they do, we will forward it on to you as quickly as possible so you can decide for yourself if shifting to a broad-based consumption tax would be better than sticking with the devil we know, the current US federal tax code.
‘Cause the current tax code sure looks to be the work of the Devil himself, even a funny one portrayed by SNL’s Jon Lovitz, don’t you agree?
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