No personal income tax

Proposal:

Eliminate the personal income tax.

Intent:

Increase national productivity by relieving the hundreds of millions of adult citizens and residents, most of whom are busy and not making much money, of having to fill out a form every year or pay someone to do it. Increase national productivity by eliminating all the associated employment forms and tax withholding procedures.

Discussion:

This proposal is intended to be implemented together with the other related tax proposals.

Here are some of the problems with an income tax:

– An income tax applies strictly to working people who receive wages from an employer, but is avoidable for wealthier people who own companies or assets because they can avoid taking a large taxable income while still controlling and benefitting from their assets. This results in the wealthiest of people paying a lower effective tax rate than the people who work in their companies.

– It forces the poor and the middle class to send money to the government every year, and they have to send just the right amount because if they send too much they won’t get it back until they can file a “tax return” form once a year and the government won’t pay them interest on any amount they overpay, but if they pay too little they may be subject to penalties. It puts a lot of stress on people.

– When the government tries to help people by creating separate tax brackets for single or married people, or giving tax credits for child care and education, it’s also making the tax computation and filing process more and more complicated. This complication translates to additional cost in time or money for every working person who has to file the forms.

– To collect the tax more reliably, laws were passed requiring employers to collect income tax on behalf of the government and deduct it from employee paychecks. This translates to additional cost to employers and additional liability for doing it incorrectly. This increases the barrier to entry to every market by making it harder or more expensive for someone to start a business that involves employees.

– An income tax is only collected from employees and through employers who declare the employment to the government. If a person is working “under the table” they don’t pay income taxes but they still benefit from a variety of services the government provides to the public. This is unfair.

– There are many more people than there are businesses. It’s more practical to have businesses collect taxes on the government’s behalf than to contact every person individually, and the government has demonstrated that by collecting income taxes via employers, yet it still takes the expense of processing income taxes for each person individually and following up with individual people if they overpay or underpay. This translates to additional expense for the government in collecting taxes that are overdue or sending refunds.

– Due to the haphazard way in which the government has levied taxes or provided exceptions to certain activities, the tax code continues to grow and grow and wealthier individuals can take advantage of this by paying lawyers and accountants to find the exceptions they can leverage, or to structure their assets or activities in ways that are harder for the government to track, or to simply raise the expense of the government’s pursuit of them to pay their taxes and this has resulted in the government focusing more on the easier cases which are the middle and lower class with their simpler finances and giving up on larger revenues from wealthier people. This is unfair.

By eliminating the personal income tax and replacing it with a more comprehensive and organized sales tax system, the government will have far less work to do in processing taxes due because there are many more people than there are businesses. It will eliminate the inequities because everyone will be paying for what they buy regardless of their wealth. It won’t matter whether it’s a person or a company or a trust buying a car or a house or a boat, because there will be sales tax to pay on the purchase and that sales tax will depend on the product or service being purchased, not on who is buying it.

Eliminating the personal income tax will encourage people to save, invest, or donate money.

Related topics:

* Taxes
* Sales tax
* Corporate income tax