Friday, October 10, 2008

Revising the tax code - Kill Federal Income Tax

For the next edition in my 'Change Series', I consider the tax code. As I mentioned before, I believe in States rights. I think States should have more power to control local issues and be different from other states. Federal spending leads to more waste - not efficiency, and it leads to less accountability. Further, we live in a Republic, where we are represented federally by elected individuals. We have a certain number of representatives based on our relative population distribution. So California gets dramatically more influence on federal issues, because they are big. The voting system, House and Senate was setup to balance this out. I'm going to suggest that federal tax paying should follow this same model. Last, Presidents get on the stump and promise to change the tax code to 'buy' votes. These promises are usually not kept and have lead to the disaster of a tax code we have now.

We should do away with Federal Income tax, permanently and modify the constitution to make sure it never comes back. When a person completes their annual tax returns they complete a state tax return and federal tax return. Then we need twice as many people because we are checking them twice, processing them twice, prosecuting them twice, etc. A total waste that only the government could think was a good idea.

So what should we do?

At the end of the year, we split the bill according to electoral votes. So if a budget is passed for $1 Trillion, and you are CA with 55 votes and there are 538 total in the pool, than CA gets their portion of the bill ~10%. That state then collects enough money from its people to pay that bill with whatever mechanism they see fit for their economy. Now we are talking fair and simple.

The impact is a dramatic reduction in federal spending. It also means less power for the federal government to control our lives. The power is what the federal politicians really want at this time. This plan pushes accountability closer to the people and holds representatives responsible for their votes near the time when the money was spent. That doesn't happen today because no one actually gets a bill. Federally we get debt, and some other generation could get a bill (Eventually will). This will help control spending once the current representative is liable to pay their fair share and not pass off the problem to the next guy.

Last I propose a marginal, lets call it 2-3% federal sales tax. This sales tax will expressly be used to pay down the federal debt and expire when such debt reaches 0. A federal sales tax is better than an income tax for several reasons. The first being that it is fair. If you spend money, you pay the tax. If you want to save money, you don't pay the tax. It doesn't matter how you earned the money, if you spend it, you pay. You don't need complicated deductions and different rates for the different ways you earned the money. Who cares, how you got the money, if you spend it, you pay. The next positive is that everyone pays it, which includes illegal immigrants, people working under the table, teenagers, rich people with big deductions, foreign visitors, etc. I understand this will require some federal over site, so before you fire all the people currently supporting the federal income tax, lets keep a few people to do this. The result is still smaller federal government when you net it out. Business are already used to collecting and filing sales tax and the number of entities to track and audit is considerably smaller.

This plan puts accountability on the people who vote for the budgets when they spend the money, which they get out of now. This accountability is crucial to ensure better spending of our money. This plan will reduce overall government spending and waste. It reduces the power of the federal government. Its a fair plan where CA, can't pass their bills off on NH. Where drug dealers contribute to reducing the national debt. This plan will return this country to fiscal responsibility by making budgets and spending a key element of every election. These are all things your representatives desperately don't want, but as Americans we desperately need.

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