The “Penny on a Dollar Tax” that replaces all other taxes!

Our present day taxes are not really very “fair” in a lot of ways.  For example, the payroll tax is regressive in that it taxes people from “dollar one”, and only taxes people on wages and salaries while capital gains earners escape it completely.  It also collects the same amount of money from employers as it does from employees, something not everyone realizes.  The federal income tax starts at 10% after personal deductions, and rises with income up to a peak of 39.6%.  While if you earn the same amount in capital gains, the highest rate you will pay will be 15%.  It is argued that the money that went into the purchase of the stocks and bonds and other financial instruments was taxed at a higher rate, but the wage and salary earner who saved his or her money or invested it in their IRA or 401k usually still get taxed at the standard rates later on when they withdraw the money.  There are exceptions to this, but the issue becomes more complex as Congress changes the tax code every year, thus making the federal tax laws so complex that the actual tax laws themselves are larger than a full set of encyclopedia would be!

What we need is a tax system that is fair, simple, one that is so “automatic” in its functions that there is no longer any need for filling out 1040’s, calculating deductions, or anything else.  A simple, very straight forward system that is completely automated to the point that only a small number of people tending a super-main frame computer would be needed.  The saving from this itself would run into the tens of billions of dollars!  When you consider everything involved, the cost of hiring people to study the tax code, find the best ways of avoiding paying more taxes than you really owe, the total cost is likely to be closer to the hundred billion dollar range!  This means we’re wasting a hundred billion dollars a year before the checks start arriving at the IRS.  And the IRS itself costs billions of dollars to run.  The entire system, replaced by the “Penny on a Dollar” tax would thus save Americans about $300 each on a per capita basis just on the savings alone from switching tax systems.  It would save most of us even more because we would no longer have to collect records, consider the tax consequences of what we now do.  Life would become much more simple for us all…  April 15th is just another day.

The “Penny on a Dollar” tax is an “automated payment financial transaction tax” that applies to every financial transaction made without exception, period.  Earn a $100, you pay $1 in taxes.  Buy a $100 item with that money, you pay $1 in taxes.  Every financial transaction you do, the tax is a penny on the dollar.  There are no exceptions, exemptions, or deductions.  Every dollar in a financial transaction has a penny of tax collected on it.  That is all.  There will be no income tax, no payroll tax, no capital gains tax, no federal tax of any kind.  So where does the money come from to replace all of these taxes?  Obviously most people won’t generate enough financial transactions to generate the amount of money needed.  But the “Penny on a Dollar” tax applies to all financial transactions, not just those made by consumers, wage and salary earners.  We simply don’t make that many financial transactions, at least not in the “amounts” that most people would consider needed to replace “ALL” federal taxes.  However, we should consider that most major financial transactions are made by businesses, banks, the trade of stocks and bonds, imports and exports, etc.  If we count the value of every financial transaction made by Americans, the total figure runs into the hundreds of trillions of dollars a year!  There are estimates that this figure is as high as one thousand trillion dollars a year, but I believe the actual figure is probably about a third of that, which at a “Penny on the Dollar” would result in a total revenue flow of over three trillion dollars a year…  More right now than what we collect from the income tax, the payroll tax, and all the other taxes that the federal government collects.  Whether or not we really “need” to collect three trillion dollars worth of taxes a year is another matter…  Much that the federal government now does could be done as well if not better by the states, and it would be a simple matter to do revenue sharing on a per capita basis with the states.  Which would allow them to drop their income taxes, sales taxes, and so forth here too!

We would also have to have international agreements between the developed countries of the world, but as the financial transaction tax actually would tend to “stabilize” national economies, it is likely that a consensus could be obtained as to establish international regulation.  The idea is in any case well worth considering as it offers a solution to the problems we are seeing today with “hot money” and “off shore banking” along with various criminal activities (drug cartels and other criminal enterprises) who take advantage of things.

 

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About muskegonlibertarian

77 year old retired owner of a security guard agency. Member of the Libertarian Party.
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