Whether you are progressive, liberal, conservative, libertarian, or green, there is a tax plan that everyone can get behind, at least in principle. It also happens to be the kind of tax that economists will agree is the least damaging to the economy. Has your curiosity been triggered? Read on to find out.
Consumption is the Key
Amazingly, people of different ideologies agree on a critical metric for the success of their policies: Consumption. Environmentalists point out that the more we consume, the more we pollute and destroy natural habitats. National populists want to curb consumption from China and other countries that disregard the rules, while social liberals wish to minimize material inequalities. At the same time, some conservatives want to reduce certain vices, such as the use of alcohol or cigarettes.
Fortunately, economists know that the least damaging of all taxes is the consumption tax. Economists strongly discourage tax on capital, the workhorse of the economy. The more taxation can be delayed, the less damage it does.
Consumer Tax with Rebates
In effect, the ordinary consumer tax is flat. Everyone pays the same percentage, which is perhaps the most significant objection for those who demand that the rich pay a larger proportion than the poor.
This problem can be fixed with an individual tax rebate. Imagine every person in America having a consumer tax rebate account. Every month, a rebate of, say, $1,000 is added to your account. It allows you to spend this amount tax-free. Since every person with social security numbers would get such a rebate, a family of four would be able to spend up to $4,000 tax-free every month.
If you don’t spend your rebate, you can save it up for something more expensive, such as a car.
From the individual’s perspective, the main advantage of this model is that you decide how much you want to pay in taxes. If you have a high income, you can keep your taxes low by living more frugally.
From a societal perspective, a massive benefit of this model is transparency. When you buy a product, you instantly see how much you pay in taxes. You can then immediately know how much other people pay in taxes by observing how much they spend.
It allows people to understand the difference between capital and money for consumption. Suppose businesspeople do not cash out profits for personal consumption. In that case, they do not get the benefits of wealth such as cars, houses, holidays, and other things people associate with prosperity.
If taxes are delayed until consumption, everyone knows that the rich person who owns a mansion and three Teslas paid the tax on them.
Transparency is also probably why the Swamp will never allow this simple tax plan to be implemented. Swamp creatures in both parties and the bureaucracy live in the shadows and detest transparency.
A simple plan that everyone can understand and appreciate would kill hundreds of thousands of well-paying government red tape jobs. It would ruin the business plans of thousands of non-governmental organizations, lobbyists, and pressure groups.
Voters rarely stand a chance against such powerful interests. Nevertheless, it is interesting to note that honest actors from all sides of the political spectrum could, in principle, agree on the concept, even when they have different and often conflicting goals.
Read more from Onar Åm.
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