"When there is an income tax, the just man will pay more and the unjust less on the same amount of income." ~Plato (427 BC - 347 BC), The Republic
The United States government is primarily funded by a tax upon the income of all individuals, businesses and corporations. It is a crime to evade the payment of lawful taxes, random audits are used to keep us honest, and the tax is automatically deducted from most of our paychecks; however, the federal income tax primarily depends upon voluntary compliance with the law, particularly self reporting.
Most of us want to believe that the income tax system is fair and equitable; otherwise we would not tolerate it. Once we lose faith in the fairness of the system, widespread cheating becomes the norm, and once our tax system becomes entirely confiscatory for working taxpayers, violent revolution cannot be far behind.
The Present System of Taxation is Unfair To The Average American. When Eisenhower was president, corporations paid approximately a quarter of all federal taxes. Now they only pay about 10 percent.
In 1995, 275 corporations having assets of over $250 million avoided all taxes. Between 1996 and 1998, 50 of our largest corporations received over $55 billion in tax breaks and paid no federal taxes, presumably because they had no "income."
In the 2004 "corporate tax reform bill," 275 large companies and special interest groups were given $140 billion in tax breaks, instead of having their tax loop holes closed.
During five of the six years that Dick Cheney was its CEO, the Haliburton Corporation did not pay any federal income taxes, even though it received more than $2.3 billion in government contracts. Haliburton rewarded Cheney with $36 million in salary, bonuses, and stock options during his last year on its payroll.
The Congressional Budget Office recently concluded that, while tax rates for middle-income earners are going up, rates for those at the very top continues to come down. The rates of those with an average income of $1.25 million dropped 5% between 2000 and 2004, saving them an average of almost $58,000. Those earning more than $10 million saved an average of $500,000 in taxes on their investments.
There's no telling how much the rich really owe. Those earning more than $100,000 have only one chance in 208 of getting a visit from the tax man, while those poor people applying for the Earned Income Tax Credit have a one-in-47 chance of being audited.
A More Equitable Tax. Wouldn't it be more sensible and much fairer to simply tax the movement of money in our economy? Not a sales tax, not a value added tax, not a flat income tax, but rather a simple toll on every financial transaction that occurs within our economic system. Not just every time you buy a pack of chewing gum, but every time stocks and bonds are bought and sold, every time currencies are traded, and every time Haliburton invests in a new oil rig.
Since the working-, middle- and small-business-classes have far fewer and much smaller financial transactions, the wealthy and the multinational corporations, who always have to spend a lot of money to avoid having any "taxable income," would have to share proportionally in paying the toll for their traffic on our economic highway and their use of our courts and institutions to enforce their contracts and to facilitate their profits. Why should so many of our largest corporations completely escape the payment of any taxes?
The Gross Domestic Product (GDP) of the United States in 2005 was almost $12.5 trillion. GDP figures are not available for 2006; however in FY 2006, The government took in $1.2 trillion in estimated receipts and sustained an estimated deficit of $390 billion. 44/4% of the revenues came from individual income taxes, 37.6% from Social Security and other payroll taxes, 10.1% from corporate income taxes, 3.5% from excise taxes, 1.2% from estate and gift taxes, 1.3% from customs duties, and 1.9% from other sources.
GDP is defined as the output of goods and services produced by labor and property located in the United States. However, GDP does not include the value of all financial transactions in our economy, not by a long shot. Based upon our 12.5-trillion-dollar annual economy, it is likely that the federal government could operate on the revenues produced by a simple transaction tax of much less than ten percent on the movement of money. In addition, the payment of taxes would shift from individuals to the corporations that most benefit from the services of our government.
Envision the effect of a slight touch every time money moves, a tiny ka-ching in the U.S. Treasury's cash register, which in the aggregate would add up to trillions of dollars each year. Imagine the debate in Congress as to whether the tax rate should be 6.25 or 6.27 percent for the next year. The difference could produce billions.
Imagine that most of us might only have to pay an annual tax rate of perhaps 6.25 percent on our spending (income). Granted that the transaction tax would result in an increase in the overall cost of the goods and services we purchase; however, the toll would apply to all financial transactions, including the purchase of limousines and spas by the wealthy, who rely on every imaginable scheme to avoid having any "income" upon which to pay taxes. Those who enjoy luxuries would pay more for them, and those who gamble in the money markets would have to pay for their visit to our economic casino.
A tax on all financial transactions would be far more equitable than a "flat" income tax, which would eliminate the progressive tax rates that require a greater contribution from those who most profit from our economy. A flat income tax would further shift the burden of taxation from corporations and the wealthy, who hide their money, to the rest of us who have our taxes withheld from our salaries.
William John Cox authored the Policy Manual of the Los Angeles Police Department and the Role of the Police in America for a National Advisory Commission during the Nixon administration. As a public interest, pro bono, attorney, he filed a class (more...)
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A great idea - I really think it could work. The technology is available to make it work. It would certainly go a long way towards forcing corporate investment in society.
Problem is, it would have to clear the corporate hurdle first, and that is simply not going to happen while corporate interests enjoy the political power they do.
Perhaps the way to tackle it is via commercial banking - banks may see their own interests clearly enough to support it.
A recent article pointing out the disparity between corporate and individual interests: click here Jane Smiley - "The fatal difference between corporations and people is that corporations are necessarily irresponsible. It's in the charter. They have to profit, while people have to weigh monetary profit against other forms of relationship and interaction."
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cam (0 articles, 0 quicklinks, 0 diaries, 55 comments) on Wednesday, Jan 24, 2007 at 2:28:29 PM
BTW - The taxes might discourage the flow of capital. You would probably need to implement something like Henry George's tax on land value to discourage corporate wealth from becoming landlord wealth.
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cam (0 articles, 0 quicklinks, 0 diaries, 55 comments) on Wednesday, Jan 24, 2007 at 2:53:35 PM
I understand your concept but have some problems with it.
First is your admiration for a corporate tax. Corporations do not pay taxes, even under your plan. To a corporation taxes are a part of the cost of doing business and those costs are passed along to their customers through the price of the product. So who are you taxing? The consumer. The difference is that you have "hidden" that tax by burying it in the price of the products or services.
Second is your lack of concern about taxing the same merchadise multiple times. It seems to me that taxing the same merchandise multiple times is regressive. Yes, it allows you to lower the tax rate, but it inflates prices unnecessarily.
I am a supporter of the FairTax (HR 25) and, although the rate is higher, does a better job of accomplishing the goal of funding the operations of our government in a fair and transparent manner.
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Dewey715 (0 articles, 0 quicklinks, 0 diaries, 12 comments) on Saturday, May 5, 2007 at 6:33:54 PM
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