I Want to be Taxed! That’s Right…Tax Me!

I really don’t like personal income tax. I think it punishes success and encourages people to cheat and be deceitful. But I also realize that our government needs revenue, and as such a tax is needed. But what is a fair way to do that?

I think consideration should be given to abolishing federal and state income taxes and replacing them with a combination of sales, sin, and value added taxes.

Now I would exclude food items that are considered staples. Items such as candy, desserts, and chocolate milk could be assessed a value added tax (VAT). But all other goods, furniture, clothing, etc.,would be subject to sales taxes, and items such as tobacco products and alcohol could be assessed a sin tax. If I could keep all of my earned income I would still purchase items but my purchases would be based on my capacity to pay. In essence we are all treated fairly and equitably.

Some might say this is punishing the poor but I disagree. I have driven through many neighborhoods where I saw less than stellar living conditions with a luxury vehicle in the driveway and a large flatscreen television mounted on the wall. If food is not taxed then the lower wage earners would have to purchase clothes, furniture, and electronics that are within their means. While many might view this as being harsh I view it as an incentive to work harder and try and earn more. If you are a waiter you keep your salary and 100% of your tips. You now have to budget and save. The cost of food is lower unless you are buying non-essential food items.

I realize that all of this is more complex than I am letting on and there is no way the government would abolish income tax overnight. But if it was phased in slowly I think you would see economic activity on a grand scale. Fatter paychecks will result in more money being spent. The fact that electronics and furniture carry higher taxes won’t stop people from buying those items.

Getting back to lower wage earners another way to assist them is to exempt non-profits from charging sales taxes. For example If you purchased clothing and furniture through Goodwill or the Salvation Army those purchases would be exempt from sales tax.

In essence each individual would have the ability to control how much tax they pay every year. But by keeping 100% of your pay most people will spend and save at higher levels, even with increased taxes on purchases.

I don’t think a distinction should be made as it relates to foreign or domestic goods. The fact is we are now a flat earth with a global economy and many foreign companies have American plants and factories, along with American shareholders. Free trade agreements would allow for more competition and more choices, giving the “tax payer” more options on how much tax they pay.

This would not excuse our government’s accountability on how they spend and our elected officials have to curtail the kind of pork barrel spending that has created this monumental deficit. But that will take time as well. When inflation comes, and trust me it is coming,  people are going to hunker down and our situation will probably get worse. They already have VAT taxes in Europe so we may yet see that as well here in America. But higher sales taxes combined with income taxes won’t spur the economy, it will slow it down.

I believe if you let people essentially tax themselves many will choose to pay more taxes by spending more. The only difference is that they will possibly feel patriotic about it. It would make “Buy American” take on a whole new meaning!

About Merrill Wautlet

I am a finance professional and volunteer coach. I have also served in a leadership role for numerous non-profit and civic organizations. For a complete profile feel free to check me out on Linkedin.
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