Every government requires funds to perform it's functions.
I propose a vastly simplified, but radical departure to the system, which for ease of reference I call TaxOnce: It is a once-per-year-only, fixed-amount tax for all electors (ie those eligible to vote), with a mercy clause for those unable to afford it.
Annual Fixed Tax
- Each elector (barring the mercy qualifiers) pays the exactly same dollar amount.
- There are no tax deductions, exemptions or rebates.
- No business activity is taxed.
- Your TaxOnce replaces all other federal taxes including income tax, GST, import and export taxes, Medicare levy, company taxes, petrol taxes 1 etc
- under current spending (which probably should be reduced) each elector would pay approximately $6,000 each (see "Questions about TaxOnce" below)
Mercy Clause
This applies if paying the tax would mean an elector would forfeit the basic necessities of life.
- Unpaid taxes accumulate, though the mercy clause may apply to some electors for their entire life.
- Tax debt cannot be transfered to other electors or posterity, though it may voluntarily be paid on an elector's behalf by a charity, relative or friend.
- Assets left upon the death of an elector would be used for any tax debt
What are the advantages to "TaxOnce" 
- Simple - there are virtually no loop holes to be exploited by dishonest people or crafty accountants. Your tax return could be done in 10 mins.
- Fair - every one uses the services of defence, courts, police, roads and every equally pays
- Incentive - once your annual tax is paid there is no penalty for working harder and earning more. Every extra dollar is 100% tax free.
- Cheap - The ATO would be dramatically reduced in size. Administration costs that are currently paid by Australians would be saved by Australians
- Accountable - because the tax is greatly simplified it will give the public an amount to latch onto. Come election time you are going to want to know how much tax candidates propose, and it will be obvious if that promise is not kept.
Questions on TaxOnce:
What about single income families?
Both parents would be liable for tax, though the mercy clause would consider the fact of dependants on a single source income. You might consider that this would disadvantage young families as they have the extra burden of children, yet also consider that those without children will need to save for their retirement (as they will not have children to support them in their old age).
What is the tax used for?
Since I oppose government welfare (vs private charity), the tax would be used only on the basics (including - defence, national roads, education of minors, police and courts). Let the citizens keep their money and decide which causes they will support themselves. The main focus is keep government small so you can keep the tax as low as possible.
No businesses tax? Won't this advantage big business?
Make no mistake - businesses pass on all costs to the end consumer, hence, all taxes that businesses pay are ultimately passed onto the consumer (who are taxpayers). If the market is free and open, industries that are making high returns will always attract competition, so extended profiteering is unlikely. (see Free Market Essentials)
Both parents would be liable for tax, though the mercy clause would consider the fact of dependants on a single source income. You might consider that this would disadvantage young families as they have the extra burden of children, yet also consider that those without children will need to save for their retirement (as they will not have children to support them in their old age).
What is the tax used for?
Since I oppose government welfare (vs private charity), the tax would be used only on the basics (including - defence, national roads, education of minors, police and courts). Let the citizens keep their money and decide which causes they will support themselves. The main focus is keep government small so you can keep the tax as low as possible.
No businesses tax? Won't this advantage big business?Make no mistake - businesses pass on all costs to the end consumer, hence, all taxes that businesses pay are ultimately passed onto the consumer (who are taxpayers). If the market is free and open, industries that are making high returns will always attract competition, so extended profiteering is unlikely. (see Free Market Essentials)
How much would TaxOnce likely be?
I use this simple formula:
Services divided by Taxpayers (= Electors minus Mercy Clause Electors)
Though I am not an economist, this gives me approximately $6,000 each. (See Footnote 2)
Basic Government Services: $42,693,000,000 (footnote 2)
Population of Australia: 20,743,371
Approximate Electors: 10,000,000
Probable Taxpayers: 7,000,000
A likely trend is that most young families will be exempt under the mercy clause early in life, while many people later in thier careers will be paying the annual tax plus older debt.
I use this simple formula:
Services divided by Taxpayers (= Electors minus Mercy Clause Electors)
Though I am not an economist, this gives me approximately $6,000 each. (See Footnote 2)
Basic Government Services: $42,693,000,000 (footnote 2)
Population of Australia: 20,743,371
Approximate Electors: 10,000,000
Probable Taxpayers: 7,000,000
A likely trend is that most young families will be exempt under the mercy clause early in life, while many people later in thier careers will be paying the annual tax plus older debt.
.
Why not tax those below 18?
To quote the mantra "no taxation without representation". It is unfair to tax youth when they cannot help choose the government who tax them. This grace period will also give minors some opportunity to study, save, travel etc.
To quote the mantra "no taxation without representation". It is unfair to tax youth when they cannot help choose the government who tax them. This grace period will also give minors some opportunity to study, save, travel etc.
see also: Price Linking
Related Keys: 02-EQU, 15-LIM, 17-PRO, 20-TRN
Footnotes:
1. Events or products that are damaging to others, if they cannot be immediately disbanded, should be taxed to make amends for their damages. See Price Linking
2. Referencing the 2005/6 Part 1: Australian Government Budget Outcomes Table 3 and including: Legislative and Executive Affairs, General Services, Government Superannuation Benefits, Defence, Public Order and Safety, Education, Agriculture Forestry and Fishing, Transport and Communication
1. Events or products that are damaging to others, if they cannot be immediately disbanded, should be taxed to make amends for their damages. See Price Linking
2. Referencing the 2005/6 Part 1: Australian Government Budget Outcomes Table 3 and including: Legislative and Executive Affairs, General Services, Government Superannuation Benefits, Defence, Public Order and Safety, Education, Agriculture Forestry and Fishing, Transport and Communication
9 comments:
My first thought when reading this proposal was that you'd never get nearly enough money to pay for bare-bones government services. Looking at the detail:
1. you've chosen budget expenses that total $42bn, but total budgeted expenses were $206bn. I know you'd like to cut back government spending, but surely cutting it back that much is a lot to ask?
2. what about all the money state govt spends? There'd be billions there as well, for hospitals, schools, roads etc.
I do like the idea, and part of the reason there is resistance is because there are so many people with a vested interest (accountants, lawyers, bureaucrats). But it just seems to me that any tax system remotely flat will not be feasible - it just won't pay for government services.
Hey Echo:
A1. A bare-bones government is my first preference, but unless you have a majority, mostly legislation has some compromise in it.
Rather than the focusing on the figures I think TaxOnce system is best because of how it collects tax. Particularly I like it because it doesn't tax activity - but is more inclined toward a user pays system.
A2. I realise that state governments require thier own tax revenue, as do councils. I would like them to use a similiar system to TaxOnce.
I believe a large portion of states revenue comes from the federal government from GST. I think a spending based tax is to be prefered to an income based tax.
The tax system is far too complex - and the more complex you make it the more loop hole you create. Ironically, this will often favour rich or unscrupulous citizens who can afford to find the loop holes or get special dispensations for thier industry etc.
A flat tax is feasible, but it is important to note that TaxOnce is unique to the 30% income flat tax - it is actually a set amount ie $6000 each.
I made another comment, but it seems to have disappeared.
Are you aware that such a system would constitute a massive redistribution of wealth from the poor to the rich? It would be the biggest such redistribution ever in the modern world. Wealthy people get literally hundreds of thousands of dollars per year extra. Meanwhile, poor families will be massively hit up.
Even if you could cut govt spending by 80%, TaxOnce would still need to be around $9000 per person to include funding for state governments.
A family on $40-50k with a couple of kids pay virtually no tax in net terms, since their income tax is offset by family tax benefits. But under TaxOnce they'd have to find an extra $18000 per year.
Do you really think that such a system is feasible?
I didn't see any other comment from you. You can repost if you like.
Several points.
1. The notion that everyone needs to be similar in wealth to make a good society (and it's individuals happy), I believe is fundamentally flawed.
If I live in a neighbourhood of millionaires, and my family already has enough for a comfortable living, does this mean I should be dissatisfied?
I really believe that money doesn't buy happiness (on the condition that you have adequate food, shelter, rest etc).
Under the principles of liberty I promote, I believe there would most likely be a large increase in the middle class.
However, even if this was not the case, just so long as the poorer classes have enough to provide for thier basic needs, I don't care how rich the rich get.
more to follow Monday...
Where did I ever promote equality? If anything, I suggested I was merely happy with the current system, but that has plenty of income inequality! Instead, you want to see it dramatically increased.
I find the suggestion that this policy will result in an increase in the middle class just fanciful. All you need to do is look at who is receiving the largest tax breaks. Middle income people would receive very little. Even if, somehow, you could cut govt spending by 80%, the middle class is still up for $18,000 of tax each year. If you do the sums (the ATO has an online tax calculator), you'll see that people with an income of around $50,000 (which is average annual earnings) don't even pay that much tax.
In contrast, people with income in the six figures pay a lot more than $18,000 tax. TaxOnce will help the rich, do little for the middle class, and absolutely clobber the poor.
I really think you need to honestly evaluate the likely effects of this policy, rather than try to sell me on it with platitudes like 'it will be simpler', 'people have more freedom' etc.
Sorry, when you objected to so called "massive redistribution" you were for the equalising effect that comes with the progressive tax we have.
On this topic I posted an analogy:
http://stewartglass.blogspot.com/2007/02/profound-explanation-on-tax-in.html
I admit that TaxOnce as a sole policy would probably not result in the increase of the middle class. However, my tax policy is only one of the policies affecting economics. The free market in time will bring much more prosperity.
I think the deeper question here is "why are some people by comparison astronomically wealthy"?
Regarding the poor being clobbered - the mercy clause specifically indicates that people with insufficient means pay $0 tax. You can't pay less than $0.
And if it means that someone with an income of $50K only has enough to live on, then they too would be excluded under the mercy clause. What this means is that the tax burden shared by the wealthier classes.
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