All Our National Problems Solved

The tax regs book is about the size of the Oxford English Dictionary. TR Reid’s excellent book, A Fine Mess, explains why and how this disaster came about. Expanding on what he says, I here complete the task of fixing this mess and a number of others while I’m at it. Please thank me before I die.

The first thing we must do is to discard the OED-sized tax regs. All of them. We should be able to restructure most of the mess into ten pages or fewer.

BBLR is the way to do it. Broad Based, Low Rates. Who wouldn’t approve of low tax rates? The very rich, that’s who, because they have devoted much energy, lobbying efforts, and huge amounts of cash to purchasing Congress so that they could assure themselves of unfairly low taxation.

The idea behind BBLR is to spread out taxation so that no one escapes paying taxes—except the extremely poor, who don’t have enough to pay anyway—and everyone pays taxes that are fair, that they can afford. New Zealand comes closest to making this happen. A number of ideas unfamiliar to most US Americans are the best way to accomplish it.

Probably the most startling change is that tax deductions—all of them—would vanish. That would include everyone’s favorite, mortgage interest. But in fact, deductible mortgage interest is not the world norm. It’s just something we cooked up to encourage home ownership. It’s demise doesn’t mean we’ll pay more tax. Not at all. There are thousands of other exemptions, mostly that the rich have paid to have made into law. None of them are needed. None.

I think the best tax structure is the simplest fair structure. So schemes like the flat tax are out because they are inherently unfair because taxes should be based on ability to pay. I believe that people whose income is at the lowest level should pay no income tax at all, because any tax at all would be brutally punitive, and I believe every single person deserves a decent life free of misery. At the opposite end, the highest rate should apply to the very richest because no matter how much they pay it cannot actually harm them. There are two arguments against that: the rich deserve breaks because they work so hard; progressive tax is unfair. Both arguments are pure nonsense.

The difficulty comes when we try to define how many steps there should be in the progression, and where the cutoff points should be. Since I have defined two, the highest and the lowest, I suggest two in between, three at the most.

To make these determinations and all others more palatable, all tax changes must take place at least five years after they are signed into law. I also propose that any further changes to them also take place five years after signing into law. This delay makes it harder to construct the sort of Byzantine system of unfair exceptions and favoritism we have now. It encourages laws based on rationality rather than personal benefit at the time.

So. Everyone with any income at all is taxed at a fair rate.

Now let’s make a few observations about how our society is evolving. First let us realize that innovation has created a condition that allows us far more leisure time with the same level of economic effort. Nearly a century ago, JM Keynes calculated that by this time improvements in efficiency would allow us to work only some 20 hours a week, yet enjoy all the benefits that innovation brings. But somehow we’re still working 40 hours, and the number of permanently unemployed is way too high, and too many are brutally poor and ill.

The working week gradually came down from 72 hours to 40 back in the day, so movement is possible. But we seem to be stuck there. There are several things we could do about that. The most obvious is to begin reducing the work week, perhaps over a decade or more, until it reaches 20 hours or so. To bring it about, make hours beyond the defined work week payable at 150% or more, with no exceptions. A number of nations do it with great success.

Automation is the reason we need a shorter work week. We simply don’t need 40 hours. A shorter work week has the effect of requiring additional workers, which means greater numbers of employed workers, or lower unemployment. The national economy benefits in several ways.

It is also the reason we need a guaranteed minimum income and national health care. Hardly any business has escaped its effect, and large numbers of workers have found that the occupations they planned to last a lifetime have evaporated before their eyes. Some have found new work; some have not. The latter must be protected from abject poverty by a guaranteed minimum income and national health care at the very least. A guaranteed minimum income means that recipients are able to survive, not that they get enough that it becomes a desirable way of life. National health care is a moral necessity, as I have argued in previous posts. Denying life-saving treatment to someone who lacks insurance is, simply, murder.

OK, those are some thoughts about personal income, but there is also business income, up next.

Corporate taxes are every bit as Byzantine as individual taxes, probably moreso, and just as unfair. The problem is that there is no global norm, and corporations play off the laws of one nation against another. Corporations spend hundreds of millions of dollars building shadow corporations with no employees for the sole purpose of shuttling billions of dollars around to avoid taxes—which of course makes their own country and its people worse off. At minimum they open an office in someplace like Ireland, which has low corporate taxes, so they can claim they don’t owe US tax because they paid in Ireland. All perfectly legal, of course. And all perfectly maddening simply because it’s not fair no matter how legal it is.

To begin with, the US should reduce the maximum corporate tax rate, which now stands at almost 39%. But nobody pays that much. Something in the range of 20% is reasonable, but government economists must be the ones to determine that. But there must be no exceptions, and here is where we run into difficulty. Ya gotta pay your fair share.

Right now numerous large corporations devote many millions for the sole purpose of avoiding payment of their fair share. They call it something else, but it’s really tax evasion in my opinion, no matter the legal definition. Perhaps if the maximum tax rate were reduced corporations wouldn’t feel compelled to waste so much money avoiding payment.

As a first step, I propose that any corporation that claims they are not a US company be treated as a foreign corporation, and required to pay import fees for any of their products sold in the US. No exceptions.

See! All our major problems, solved at last. You may thank me now.

Published in: on 2017/08/07 at 7:00 pm  Leave a Comment  

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