This proposal is a basic rethinking of the Libertarian position on taxation designed to bring about a living wage for families and for the transfer of most functions from the government to private hands.

by Michael Bindner

Posted July 01, 2007

Issues:

The current tax system is too intrusive to the average family. It turns everyone into a potential criminal should they file their tax returns incorrectly - not for actually getting the math wrong but by perjuring themselves about the accuracy of their returns.

While using tax cuts to starve the beast have been tried numerous times, the result has often been greater debt to either the wealthy or to foreign powers who are not necessarily either democratic or free. The actual tax reform must be useful in changing the provision of service from public to private hands. As such, tax rates should not be set artificially low, to provide an incentive for private parties to perform those functions which are now performed by the government.

The tax system can be a useful tool in discouraging abortion and decreasing the aging crisis. Social Security cannot be saved by private accounts alone. Unless there are workers who can produce the profit to pay dividends on stocks held in private accounts, or pay taxes to Social Security, there is no improvement in the situation.

Principles:

The average citizen should not be made a potential criminal for not becoming an expert in tax law.

When government services are required, taxes should be collected in a way that is both vertically and horizontaly equitable and cheap to administer.

As long as there is a national debt held by the wealthy or by foreign governments whose industries undercut American jobs, taxes must be levied on higher income individuals in the strata receiving interest payments, as well as on imports.

Taxes should be tied to the greatest extent possible to the activity being advanced, preferably a private sector provider.

Solutions:

Replace personal income taxes for all but the wealthiest individuals by shifting the tax burden to the employer. To do this, end the deductability of wages and salaries for employers and the direct taxation of investment income for all but the wealthiest citizens. Enact a uniform business income tax, replacing the separate corporate income tax and income taxes on partnerships and sole proprietors.

The business income tax shall include a tax credit for family size to be paid to the employees as part of their salary, with a minumum wage in addition to this credit so that employers cannot transfer their entire salary structure to the credit.

Replace all Social Insurance taxes with this tax and allow employers to reduce their tax burdens by providing equal or more generous health benefits to all its retirees and any former worker now retired through the last employer and by providing disability and survivors insurance to all current and former workers. Allow employers to provide voting stock and 401(k) contributions to employees in lieu of taxes for Social Security retirement, provided that all former employees must be made whole under this plan for the maximum exclusion to be taken.

Retain a capped mortgage deduction to be passed onto the employee, unless the employer provides the home loan directly at no interest. Retain deductions for the provision of health care or insurance with some limitation on the level of benefits directly provided (encouraging Medical Savings Accounts and Medical Lines of Credit to make up the difference).

Introduce a tax credit for contribution to religious and private secular providers of elementary and secondary education services, mental health care services (including services provided in lieu of corrections) as designated by employees, as well as literacy services for disadvantaged employees and applicants (replacing welfare), higher education and technical education to new employees or employees who require retraining (replacing education and workforce development).

Tax all value added to the product by the firm. Set the tax rate high enough so that employers will undertake to provide the services now provided by the government or to adequately fund those services if private interests fail to do so. Retain a minimum tax, regardless of deductions, to pay for defense costs (excepting the current contingent liability for military retirement, which should be paid through the income surtax on the wealthy). This surtax will be charged as an additional excise tax visible to the customer.

Retain a 6% to 15% surtax on income over $100,000 per individual (not family) to encompass all wages, inheritance income liquidated and dividend income and capital gains not reinvested. Exempt inherited property from taxation until it is liquidated or if it is liquidated to a qualified Employee Stock Ownership Plan. Suspend this tax after the entire Federal Debt, including that held by the public, government trust funds, especially Social Security, and the Federal Reserve, is repaid and any transition costs associated with establishing Social Security Private Accounts and military retirement Private Accounts are paid. Prohibit peacetime borrowing and only resurrect the tax to repay obligations resulting from a declared war.

Direct property tax payments to neighborhood services, including fire protection, police protection, streets, sanitation and health and safety inspection. Direct these services using neighborhood councils rather than metropolitan governments.

Retain tarrifs to pay for the costs of Homeland Security and retirement of the public debt held by overseas governments.

Adjust fees for usage of national parks, drug research and licensing, aviation travel, gasoline taxes, patents, fines for civil rights violations and worker health and safety violations and pollution fines requiring direct cleanup in order to make these activities self-supporting without general revenue. Return land held in trust to Indian tribes to them so that they can deal with energy companies and grazers directly. Return other public lands to the states or sell them to energy companies or timber interests for the full value of the asset to the public.

Benefits:

These proposals direct tax liability to the beneficiaries of services. Wealthy individuals who benefit from government borrowing will pay for retiring this debt, which some wealthy individuals hold and some do not. Retiring the debt in this way will not decrease consumption by the middle class and the poor and will encourage the quick repayment of this debt to end future tax liability. Services to families will be paid by families through their employers, who may also be the employees under our proposals to private Social Security using employee voting stock. Employers will benefit from larger family sizes as these will be potential workers and customers, as well as from services that they fund to future workers in terms of education and workforce development. Providing for defense will be made explicit, turning every taxpayer into a peace advocate. Finally, these proposals set the stage for the closure of governmental provision of welfare, workforce development, education, social insurance, and health care, including mental health and corrections. It provides for the quick repayment of the national debt and the sunsetting of the income tax set aside to do so and encourages the public to support defense cuts. Those services which are best provided by current federal entities will remain so, provided they can be self-supporting. This proposal retains many of the deductions found in the tax code, albeit in different form. As such, it stands a better chance of passage than either the flat tax or the FAIR Tax.

Author's Comments

This is a more complete proposal than simply cutting taxes and hoping spending follows. It allows the Party to shed its image of tax-selfishness while offering the attractive option of never filing taxes again to most filers. It is an improvement on the FAIR tax, which is oversold because it includes in its rates taxation of government services (which cannot occur) and because it does not force people to file for their rebate. It is likely that any rebate application will include the same perjury warning as the current tax forms, making every citizen a potential criminal all over again. With this plan, no filing is required.

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