A Tenth, I Say Unto You, A Tenth!
He will take the tenth of your corn, and of the revenues of your vineyards, to give to his eunuchs and servants. Your servants also, and handmaids, and your goodliest young men, and your asses, he will take away, and put them to his work. Your flocks also he will tithe, and you shall be his servants. And you shall cry out in that day from the face of the king, whom you have chosen to yourselves: and the Lord will not hear you in that day, because you desired unto yourselves a king. – 1 Samuel 8:15-18.
Today is tax day, which, like spring, doth turn young men’s fancy to tax reform. Here is one proposal:
I don’t think it’s a healthy situation for the electorate when a large majority is voting for spending that costs them nothing. To the minds of someone who pays no income tax, there’s no cost/benefit analysis to be made; they’re getting stuff for free. Even something of trivial benefit to them is thus better than not raising taxes. So we end up spending money on a lot of crap, because most of the voters don’t care — it’s not their money.
On the other hand, liberals have a point about fairness. It isn’t fair to say that some guy who brings home $20K should pay the same quarter of his income as Warren Buffett. The decrease in Joe Schmoe’s standard of living represented by that 25% is much greater than the decrease in Warren Buffett’s SOL from taking a quarter of his loot.
A negative income tax increases fairness, removes perverse incentives from the current benefit system, and makes sure that everyone has to think about whether they really want that new spending they’re voting for — enough to give up some of their cash.
Replacing the current income tax with a progressive consumption tax is the only way to cover our current revenue shortfall without demanding painful sacrifices from voters. Such a tax, which has been proposed both by conservative economists like Milton Friedman and liberal economists like Edward Gramlich, would be simple to implement. Families would report their incomes and their annual savings to the IRS, just as many now do with 401(k) and other similar retirement savings accounts. Their taxable consumption would then be calculated as income minus savings minus a large standard deduction–say, $30,000 for a family of four. For example, a family that earned $50,000 and saved $5,000 during a given tax year would have taxable consumption of $50,000—$5,000—$30,000, or $15,000 total. Tax rates on taxable consumption would start off low–say, 10 percent for the first $30,000 of taxable consumption. Under the consumption tax, this family would owe $1,500, about half of what it would pay under the current income tax.
Here’s a third:
Republicans tend to describe any tax relief as “pro-family,” but the term should be understood in a specific sense. That the tax code penalizes investment is something that the commissioners understand. But they do not seem to understand that the tax code punishes investment in children. In previous generations, the tax code made more allowance for the costs of raising children. But decades of inflation have eroded those provisions. Federal policies let childless people free-ride on the financial sacrifices of parents, who raise the children who will one day pay for everybody’s Medicare and Social Security. A pro-family tax cut would address that problem, too.
And if your one of those people for whom April 15 is the day you file your first extension (the first two are free!), you might consider attaching a copy of this letter by St. Basil of Caesarea:
Your excellency knows better than any one else the difficulty of getting together the gold furnished by contribution. We have no better witness to our poverty than yourself, for with your great kindness you have felt for us, and, up to the present time, so far as has lain within your power, have borne with us, never departing from your own natural forbearance from any alarm caused by superior authority. Now of the whole sum there is still something wanting, and that must be got in from the contribution which we have recommended to all the town. What I ask is, that you will grant us a little delay, that a reminder may be sent to dwellers in the country, and most of our magistrates are in the country. If it is possible for it to be sent in short of as many pounds as those in which we are stillbehind-hand, I should be glad if you would so arrange, and the amount shall be sent later. If, however, it is absolutely necessary that the whole sum should be sent in at once, then I repeat my first request that we may be allowed a longer time of grace.
St. Basil of Caesarea, pray for us!
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