Energize and Expand the Tax Base!
In many recent elections, we have heard political pundits and analysts wax eloquently on how important it is for any candidate to "energy their base". In a nutshell, it means that politicians, while reaching out across the aisle to those they often disagree with, must also energize and motivate the voters they agree with the most.
Now we have an economic meltdown occurring and both sides (and the middle) blaming everyone that disagrees with them. Is there an answer we can work toward? Is there a solution? Do we have to keep hearing the politicians play blame games while we scrape away a living?
First, let's not discuss how government does, or should spend money. I think that issue is well-addressed in many, many places.
Instead, let's take about how the government "gets" money, and make that work better? Why? Well, liberals like giving the government many responsibilities, which means, they should look for ways that actually bring money in so that those policies can be carried out. Conservatives want to reduce the deficit and cut spending, while making sure that core policies are well funded.
Again, let's not talk about spending it, but about hauling the money in! That's what the title is about, "Energizing the Tax Base!"
Who is the tax base? Well, that depends on how you want to collect the money, and from whom.
With an income tax, the tax base is legally-working, in-country citizens. I carefully picked those two words, because non-workers, Americans who spend over 6 months of the years overseas, drug dealers and those not registered in this country, do not pay taxes. They are not part of the tax base for an income tax. In fact, according to 2006 statistics published by the GAO, people making over 36,000 a year paid 97% of the money collected by income taxes.
So, if you are a fan of the income tax, you are a fan of legally-working, in-country citizens. In fact, you want these people not just to earn documented money in country, you want them to do very well. You want them to earn larger and larger paychecks, because the more they make, they more our current graduated income tax system takes from them. In fact, the top 10% of money earners in 2006, from the same GAO report, took in only 47% of all income, yet paid 71% of all income taxes.
With an income tax, well-paid, legally-working, in-country citizens are your tax base! Anything you do to hurt them economically, or to de-motivate them from earning money, or motivating them (or their employer!) to go overseas, hurts the tax base.
You may or may not like these people, but if you are a fan of income taxes, you NEED them! Not only do you need them, you need them to stay motivated, hard-working, legal and in-country!
Who else is the tax base?
With a corporate income tax, the tax base is corporations that are head-quartered in America, and have facilities here. Companies that are based in foreign countries are subject to the taxes of their home country. In the same way as with workers, the tax base for corporate income taxes are legally-compliant, in-country corporations. If these corporations freely move overseas, because it's better for them, then we lose the taxes they would owe us if they stayed. Because we do not live in a dictatorship, we can not force those corporations to stay. Also, if those corporations are not profitable, like say, GM or Chrysler, then they don't pay taxes, instead, because we have politicians that like big business, those corporations actually take more government money than they pay out.
With a corporate income tax, we need profitable corporations that have not only their headquarters in-country, but also their facilities.
Actually, what's really nice about corporations being in-country, is that we also get to tax their employees! It's a twofer! (Two for the price of one! We tax the corporation, and the employees!) Every time we pass laws that motivate corporations to trust another government more than ours, and to move overseas, we lose twice. We lose both sets of taxes, and our tax base is shrunk.
Oh, that tax base also shrinks every time a politician gets a special change to the IRS tax code to help out a donor. You think that doesn't happen? I don't want to go into how many loop holes are in the tax code to help specific people, but let me tell you this. The government subsidizers farmers growing tobacco, and also pays farm land owners to not grow tobacco. So whichever one you do, you reduce the size of the tax base. There are thousands of such examples.
Have you got the thread in this conversation? There are people government depends on, and must keep motivated and active in the economy. Whenever a well-paid worker goes on retirement, taxes go down. If they move overseas, taxes go down. If they go underground, earning their money in less-documented ways, the tax base goes down. If their employer goes overseas, the tax base really, really goes down.
Hm. So relying on personal income taxes and corporate income taxes means we need well-paid, in-country workers and corporations. What if we don't want to rely on them? What if we realize that in a down economy, we have less of both? What if the percentage of Americans who are making good money in-country is not increasing? What do we do?
Well, there are other taxes that can be collected, but let's remember that every time Parliament imposed extra taxes on Americans, back in the 1760's it started a trend that has lasted almost 250 years: Americans don't like extra taxes!
So, what do we do.
Well, if we expanded the tax base, that may help us be less reliant on a smaller and smaller section of the economy.
Who else would we want to pay taxes to fuel our government and our government programs? Well, how about those drug dealers? How do we get them? Tourists? Canadians using our heath care system?
Believe it or not, there is a way to tax every single one of them, without raising taxes on those that carry the burden of the income tax system. After all, if you raise taxes on the "tax base", you reduce that base, so why not have a system that has the current "tax base" pay the same amount it does now, AND adds these other people to the base?
Wouldn't it be nice if the drug dealer, who buys themselves a great new luxury car, or a diamond necklace for their lover, or hires a fancy lawyer to keep themselves out of jail, would pay taxes on that money? About the same percent as the tax base now pays?
There a way to do that, but before we say what it is, let's talk about others, who are tax-free in America and really, should not be. Again, this is not a liberal versus conservative, or a Democrat versus Republican issue. This is a money-raising issue for a government in a tight economy, or in any economy for that matter.
What about those Canadians that come to America and use our health care system? They should also pay taxes on their purchase. Tourists that visit museums, use hotels, rent cars, buy goods and travel this country should also pay taxes on what they see, use and enjoy.
How about all those corporations that are overseas? How about motivating them to come back to America, so that we'll have a much larger and richer tax base to draw on?
How do we do this without losing the tax base that pays the income taxes? It's not easy, but it's simple.
It's changing from an income tax-based system, to a sales tax-based system. Tax all retail sales of new goods and services, instead of taxing income.
So when anyone throw a huge party, inviting hundreds of people, they pay taxes on all their expenses.
When any family buys food for their children, they pay none.
When a drug dealer spends their ill-earned cash, they pay taxes.
So does the tourist visiting from another country.
Want to learn more? Visit www.fairtax.org
It's not a Democratic or Republican thing, it's an Economic thing we can all support.
Thanks for reading, and learning more about it.