By Tom Maloy
As last week’s column reported, the 16th Amendment and the increasingly oppressing income tax that it spawned have been stifling our economy for nearly 100 years now. In fact, they will reach the century mark in 2013.
Most conservative thinkers would agree that the best way to celebrate such an abhorrent occasion would be to scrap the insidious tax and repeal the amendment.
The fact is that even the most limited government requires revenue to perform its constitutional duties, so where would revenue come from if the income tax was no longer an option?
Well, the United States functioned fine and experienced unprecedented growth in the 130 years prior to establishment of the income tax. Of course, then it was more in tune with the “limited government” premise spelled out in the Constitution than it is now.
We didn’t have government intrusion into every facet of our lives, and free people were allowed to do what free people do: be innovative, grow and prosper. And those required little government spending.
The income tax hampers innovation, makes growth more difficult, and allows the government to choose who prospers. It is used to manipulate the activities of citizens, and it keeps the country from being competitive in international markets.
The huge Internal Revenue Service bureaucracy kills incentive and casts a pall of fear and intimidation that rivals the Gestapo. There is nothing good that can be said about the income tax, and that applies to both the state and federal governments.
Here’s a novel idea: Rather than killing productivity by taxing it—as the income tax does—let’s tax spending. By doing so, hard-working people will have a choice in how they want to use their own money before the government can take it away from them. They might even save some.
It’s called a consumption tax, and it works like this: Whatever you make, you keep. You can spend it or save it. If you spend it, you pay a sales tax. If you save it, you don’t.
The consumption tax eliminates individual, corporate and other income-based taxes. There would be no tax filing on April 15, no estimated quarterly taxes, and the IRS would be all but eliminated. Hoooray!
The elimination of the 30 to 40 percent corporate tax (the highest in the world) would make U.S. companies globally competitive, and businesses would move back here to take advantage of it. Employment would surge, and we would experience the hottest economic boom in our nation’s history.
OK, that’s great for corporations, but what about the average Powder Springs couple earning a taxable income of about $50,000? Well, after federal and state income taxes, you would only have $39,500 left. But a consumption tax would let you keep all of the $50,000 to spend or save.
“Sure,” you might say, “but now everything I buy will cost more because I have to pay a bigger sales tax.”
Not so. Currently, the cost just to comply with the 67,000-page tax code has reached nearly half a trillion dollars per year. That, plus the 30 to 40 percent corporate income tax, is built into the price of everything you buy.
A consumption tax would eliminate all that cost, which, because of competition in a free market, would be passed along to the consumer, offsetting the effects of the higher sales tax.
Bottom line: You will have more discretionary money to spend or save, base prices of the things you buy will go down, IRS intimidation and tax filing hassles will disappear, the economy will boom, jobs will be abundant, and politicians won’t be able to use your money to buy votes. What’s not to like?
This is not a pipe dream. Several organizations are working on real tax reform. The Georgia Tea Party is one of them, and you will be hearing more about it in the relatively near future. Stay tuned.
Tom Maloy, a retired businessman and 30-year Powder Springs resident, is a board member of the Georgia Tea Party. Contact him at email@example.com. Read his previous columns by clicking here.