A tax conversation

Let’s go on a mental journey. Join me won’t you?

Imagine two men in the United States. The men are not too different from each other. Let us discuss the taxes that these two men pay.

First, let us take a look at why we, and our two heroes, pay taxes. Taxes are to pay for the services that “we all use” such as the three branches of government, military protection, FBI and many other “services” (whether or not we asked for or needed them). There are countless organizations, corporations, and miscellaneous money pits that suck the Treasury dry each year.

Our two heroes live in the same country, state, county, and city. Their kids would be in the same school district, except for one of them sends his kids to a private school. They use the same gas station, although one may purchase more gas than the other. They both refrain from calling on public services unless in an emergency. These men, in any natural sense, are equal.

When it comes to federal services, their usage is absolutely identical. Neither of them uses any more or less military protection than the other, neither uses more or less congressmen, senators, supreme court justices, or FBI agents than the other, and neither makes more or less use of the president than the other. Neither of them has ever, nor will ever, draw from the Welfare program. For all intents and purposes, these two Americans use an identical amount of federal government.

So my question to you is this: Why do these government services cost one of the men more money than they cost the other man?

The answer, as you may have guessed, is that we have a very poorly thought-out and poorly executed tax structure in this country. It is called a “progressive” tax structure, but don’t be fooled. It does not symbolize progress.

Picture the spectrum of tax rates. As your income (the erroneous measure of a man or woman in this country) goes up, your tax rate “progresses” up the scale, and you are charged more for being an American. That’s what “progressive” means: as your income goes up, so does your tax rate.

Now let us think about this logically. Does someone with a higher income use more of the government? No, they do not, in general. Do they get to use the fact that they pay a higher tax rate to their advantage in any legal way? No, they do not.

They pay a higher tax rate because legislators have convinced the general public that “the rich can afford to pay more.” This is assuming that one person can rightly decide what another can and cannot afford.

Let’s look at it this way: When you get your carpets cleaned professionally, do you pay less per square foot than someone with twice the square footage? When the carpet cleaner goes to a “rich” person’s house, do they tell the “rich” person, “I’m charging you more than I charge other people because I know that you make more money and you can afford to pay more for the same service.”? Of course they do not. It makes no business sense to charge one person or household more for the exact same type and exact same amount of service.

Some people who have to try hard each month to make ends meet feel that the “rich” have some kind of obligation to pick up the slack. This, of course, depends on one’s definition of “rich.” For most people, “rich” just means any income which is significantly higher than their own. For some, “rich” means someone who does not have to work anymore and can still live comfortably (this group may not be the income tax payers, since their income is from investments which many times have already been taxed).
Yet for some other people, “rich” just means somebody who does not have to clip coupons in order to afford groceries for the week, or somebody who gets a paycheck twice per month. This latter group also falls into the first group, thinking that anyone with a higher income than their own is “rich.”

Now that you’ve defined “rich” in your own mind, ask yourself a question. Does someone out there consider you rich? Do you deserve to pay more than they do for the exact same services that they use? Or should two equal human beings and Americans pay the same as each other, if anything, for the same services used (or not used)?

Being “progressive” is just one of many aspects that make the current taxing structure unfair and beyond reason. Why tax income? All it does it punish Americans for trying to be more productive. The more productive you are, the more income you reap, and the more taxes you pay. It rewards those who have chosen not to have an income, or to have a very low income.

So, what shall we do about this completely illogical and unfair taxing system? The reason it is in place as it is, is because it started out simple and over the years grew more and more complicated and unfair, bit by bit. What we need is a new tax system. Not a tax reform plan, but throw out the old system and bring in a new one.

Unfortunately, people cannot agree on a new system that will please everyone and seem logical to everyone. The flat tax doesn’t work for me because it is still an income tax, and as I’ve said, it punishes productivity.

The FairTax plan involves removing the productivity punishment and instead punishing people for spending their money on services and new items. This new punishment is theoretically taken away again by the prebate system which provides a check to government-approve households, presumably to make up for the tax that they will pay on essential items and services during the month. It looks great on the surface, but with the prebate, it revives the progressiveness of the current system. The math would work out the same if the plan did away with the prebate in lieu of a lower tax rate. Or it could completely do away with the tax on “essential items.” Not to mention that the FairTax bill, as written, does not guarantee that the income tax will not rear its ugly head again, possibly within days of passing the bill. Then we would have not just a new tax system, but an additional tax system.

What I am looking for is somewhere between all these unfair and too-fair ideas, something that will encourage productivity, but not at the expense of favoring a class over another class.

What are your thoughts?