Public Policy: Reforms to the Tax Code


Yesterday my blog on Public Policy attempted to describe the way our current tax system works by using a narrative.  Today I will address some of the more popular reforms people have suggested for our tax code.

Flat Tax.  The flat tax would be a tax rate that everyone regardless of income level would have to pay.  Everyone in the country would pay the same percentage regardless if you earned $10,000 or $100,000,000 a year.  This would simply the tax code and make filing each year simple.  A set percentage would be take out of your check each week.  Any other earnings could also possibly be taxed and recorded through statements, like the ones I get from my bank at the end of the year with the amount of interest I receive in savings or checking accounts.  You could file your taxes on a single sheet of paper.  If you paid more taxes this year than was required than the government would send you a check.  If you paid too little you would send a check.  Simple and easy

Fair Tax.  This tax has several different names.  I have heard one person call it a transaction tax.  It could be called also a consumption tax.  In essence, it is a sales tax.  The government would set a certain rate to tax items that a person buys.  One key item I would try to add to this would be to tax exemptions for specific things:  like food, housing, utilities, and clothes.  These are essentials to life that no one can live without.  Just as the lords of old could not tax the serfs before they were clothed, fed and housed so the tax would apply to us.  You also choose when you are taxed in this system.  If you don’t like what the government is doing then you do without some wants for a while to send them a message: a boycott.  It makes sense that the founding fathers restricted direct taxes on individuals when they wrote the Constitution.  You cannot boycott an income tax without breaking the law.

State Collection.  This is the original method used by the federal government to collect taxes.  If you look at the Constitution in Article I, Section 2, Clause 3.  It shows that taxes from the federal government would be apportioned to the states based on their population.  So a less populace state like Alaska would pay less taxes than California.  The state would then use whatever methods they saw fit to raise said taxes to pay to the federal government.

No matter what system we use it needs to be applied equally to all people in the United States.  Also, the government needs to know how to stay within its limits.  No tax system will work effectively if the government continually spends more money than it brings in through taxes.  We could take a lesson from the Bible and the story of Joseph and the famine in Egypt.  When the government runs a surplus we must put that money aside for the future, so that when we run into rough times we can draw upon that surplus.

That’s all I have for today.  I welcome all comments, suggestions and questions.

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