Thursday, March 3, 2011

Dare The Citizens Create A New Tax Order?

I started to prepare my taxes yesterday. Yes, I do it myself. No professionally-paid third-party preparer for me. There are many reasons why I prefer to do my own taxes, though for the most part it's because I don't make that much, so I cannot afford to spend hundreds of dollars to have somebody else crunch the numbers. Also, since I don't make much, it's not extremely complicated, and I did work as the accountant for my late-uncle's last Chiropractic business back in 1998, so I am a qualified (if not certified) accountant.

Doing my taxes always brings up some interesting ideas, the sort of concepts people are executed for espousing in other countries. By this, I mean thoughts of the relative unfairness of the tax system, and how much the government is bleeding from us all. As a self-employed laborer, I get to see every last cent the Feds suck out of me each year, and as I was filling out my 1040 this year, I came to a funny revelation. Why should I have to do this? No, I'm not saying we shouldn't pay taxes, and the government doesn't provide legitimate services with that money (in addition to a lot of other things). However, why are we forced to waste our valuable time (or pay someone else for their time) to figure out what we owe the government?

Think of it; who else in the world would tell you "hey, you owe us money," and then make you fill out the bill. Then, if they suspect you may not have filled out the bill to their satisfaction, they then send goons to your house and threaten to steal whatever you own if you don't cough up the difference.

Imagine going into a grocery store and placing items in your cart. When you get to the register, the guy or girl at the register hands you a book and tells you to calculate how much you have to pay. After spending hours standing in line holding a 5-pound book, you calculate the base cost of the merchandise, add 22.2589% for the owner's mark-up, deduct 1.773666% because you have a child, then tack on an added 15.259% for social security "savings," and then you come to the value of your purchases. Confused yet?

Better yet, later in the day the grocery store goes over your calculations and they discover that you made an accounting error.  You actually owe them an additional 25 cents! They send over a pair of "agents" that threaten to freeze your assets and confiscate your home if you don't cough up $2.00 immediately (.25 for the actual amount owed, +1.75 for interest and fines for making the error).

Do you think that people would stand for such behavior? I don't think so, and this comparison is not much of a stretch. It is applying government standards to a private business. The fact that it might seem absurd should make you realize how truly outrageous our current system of taxation is.

When someone gives you a bill, it is incumbent upon them, not you, to calculate the charges. How is it logical or fair that we are forced to expend our time and/or money to figure out how much we need to give the IRS? That should be their job! If they're going to make us calculate our own taxes, or pay someone to calculate them for us, they should be paying for it! Additionally, if they audit someone, and the investigation turns up nothing, the citizen should be financially compensated for the time and effort they were forced to expend to prove their innocence.

Here's where things get a little tricky. How can the Federal Government possibly afford to cover such a venture? How could their tax agents calculate hundreds of millions of tax returns each year? The simple answer is they can't. Not with the corrupt, convoluted, and unfair tax system they have spent the last hundred years formulating. In order make things reasonable, we'd have to totally rework the tax structure.

The way the IRS system works today, it's more like the Mafia. "Pay up, or we'll break your legs, foget abawt it!" That analogy probably isn't fair to the Mafia, but you get the point, and it's perfectly valid. The IRS rules through terror, and it's time we made things more accountable to the people.

There are plenty of "popular" propositions to simplify the tax system.  Flat taxes, national sales taxes, and a whole lot of good ideas that are generally ignored.  Leaving the nuts and bolts of the taxation amounts to another day and another blog, I'd like to explore a different concept that I haven't heard anyone suggest before.

Under this new system, each State would be assessed an overall tax burden, based on population, land mass, and the gross income of the populace. Depending on how large a state is and how much money its people make will determine how much they need to contribute to keep the Federal Government running. This will also give the States a larger stake in Federal spending, as the more the Federal Government spends, the more the States would have to provide. States would therefore put higher pressures on Washington to spend more responsibly.

Each State would be free to determine how they collect the needed money to pay the Federal Government every year. Most likely, they would raise income taxes for this purpose (in addition to whatever they're collecting already). Therefore, we would be shifting the tax system from one big centralized bureaucracy in Washington into 50 smaller, more local, accountable tax agencies. This way, citizens would not be paying income taxes to the Federal government. They would be paying their State (which is really a more Constitutional form of taxation) and the State would then pay a "membership fee" for being in the Union.

How could we do this? Would we need a Constitutional Amendment to alter the current tax system in such a drastic manner? Well, I suppose so, though the 16th Amendment, which gave the Federal Government the authority to tax incomes, was never legally ratified in the first place. After a few State Legislatures approved the Amendment, Woodrow Wilson's administration just said, "Meh, close enough," and deemed it passed, but they never got ¾ of State Legislatures to legally ratify the Amendment (which is required under Article V of the Constitution). This has been a bone of contention with Constitutionalists for over 90 years, though there's really nothing anyone can do about it now. The system is in place, however it was imposed, and now to change it we would require a new Amendment.

Would enacting this new system be hard to do? Of course it would, but isn't it necessary? I dare say something will have to be done eventually. The current system is growing untenable, and when things become too burdensome to tolerate, the people will look to create a new tax order, one that will be both fair and just for all citizens. Whether this radical proposal I have just suggested will be used or not is anyone's guess, but I doubt the present system will still be in use when I am an old man. Change is coming, and we must be prepared to shape it positively, or face the unpleasant consequences.


  1. I appreciate your efforts, and logic, but playing devil's advocate, it would seem that your system would encourage a nomadic lifestyle, with people constantly moving to the states with the lowest tax burdens, thus raising THAT state's burden, causing another exodus, it would be chaos.

    Personally, i embrace the idea of taxes by accepting that while I may not directly benefit from my 20%, others do, and ultimately, i get to enjoy the fruits of my labor while letting the government do the dirty work of tending to my garden. I know it's not perfect, but it's okay with me

  2. True, we would have some people moving around to find the "right" State for tax purposes, though I'm not convinced it would cause a mass exodus, as we already have examples of disproportionate taxation now.

    All States already have pre-existing internal taxes, be they excise tax, property tax, sales tax, income tax, etc... There are some States with much higher personal taxation than others, but there is not always a major population impact. There are still millions of people living in California and New York, even though the cost of living there is proportionally higher when compared to states like Texas or Florida. Yes, there is an effect, but hardly a drastic one.

    I can't say I am completely enamored with this alternative tax system myself, though it is an interesting option which has yet to be explored. It is entertaining to consider, and would probably be fun to write about in a work of fiction.

    Also, be assured that taxation would not be reduced by this sort of restructuring. It would merely place the collection responsibility on the States, rather than the Federal Government.