Income Tax or Flat Tax, Sin Tax, Luxury Tax

January 6, 2015 in Economics, Government, Home

Taxes are more than just a way for a government to raise revenue; they are also a deterrent, like fines. We tax labor, heavily. Labor should never be discouraged, especially as jobs continue to be lost to more efficient mechanical or computer processes. We need to make human labor more appealing to companies. Yet, our government is stuck in the classic debate between political parties: tax cuts vs redistribution/government jobs… all blaming each other for the unemployment problems, while neglecting the real reason for these economic recessions. Few people consider that the natural course is a jobless society. What we choose to do with our jobless people is the debate we should be having.

Currently, employment/labor supplies the largest portion of our tax revenue, but the last thing a nation needs is to discourage employment. My ideal tax policy would have no income tax; instead, a flat tax on non-food items, but that wouldn’t be enough revenue and it would burden the middle class too much. Without a middle class with money to spend there will not be enough jobs and chaos will ensue. In addition to a flat tax, I would also recommend a  “harm to health” tax on junk food and other addictive substances to pay for Medicare. Also, it should include a luxury tax. Let me define a luxury tax, it is on items whose cost is far greater than the domestic labor needed to produce it. This luxury tax will not solve, but will lesson many of our society’s economic and social issues. It would take almost no cost and effort to produce the profit/labor statistics. It is much easier to collect and observe sales taxes than the current IRS process of monitoring the income of every individual in the US. Plus, it is easier for people to cheat income tax than sales tax. Many countries have already begun increasing sales taxes for these reasons, no one has done away with their labor taxes yet.

This will address the three biggest problems our nation faces:

  1. Jobs: Any good businessman knows the way to make the most money is with machines and computers, not human labor. We’ve know this since the Great Depression. Social programs help, but the current system won’t be able to support the next wave of job loss… lost to innovation and improved mechanical/technical efficiency. We govern in denial of technological unemployment and we aren’t preparing for the coming mass unemployment. Unlike the Great Depression, this time we have the means to survive in greater numbers, but only if we accept that we are becoming a jobless society. Removing the labor tax will help.
  2. Health: We live on processed foods, which were created to survive nuclear war or Armageddon. Now, they are common because of their cheap cost. This has left us with a severally unhealthy nation. We all share the cost of those heart attacks and cancers. The abuse of health insurance through personal neglect is far far more expensive than welfare abuse. Our health insurance and medical industry are not sustainable as long as we are ignorant about our health. When we take better care there will be less need for insurance and more jobs in natural preventative, hands on, health. A junk food tax will help.
  3. Poverty: The primary way to minimize poverty in developed countries is to reduce each lower class person’s superficial desires, fueled by our society’s obsession with materialism and luxury goods. Instead of living in the shadow of luxury, more people need to learn to live like a proud minimalist. Everyone should promote/support this frugal choice of life for those people who don’t, or can’t, aspire for capital success… and people need to stop flaunting their own excessive accumulation of goods and money so that other people without the capacity won’t be so tempted. As Adam Smith said, “The chief enjoyment of riches consists in the parade of riches.” He also knew how this flaw can divide and conquer a society. A luxury tax will help people see the difference between needs, practical wants, and luxuries.

I realize these tax policies seem radically different. A future without them seems radical to me. Without change, as jobs continue to be lost to automation, we will see a severally separated class system with massive starvation and as some people resort to desperate acts of violence, military action will be taken against the poverty class as a whole. This isn’t sci-fi, it’s the most realistic social economic outcome if we stay on this wrong course. The natural course of the free market does not produce the best results for the greatest number, or even ensure the survival of our species. Instead, it will bring the end of human labor and the beginning of a machine run would in the hands of a few elites.

“There was a type of employee at the beginning of the industrial Revolution whose job and livelihood vanished…… the horse…… the arrival of the internal combustion engine rapidly displaced these workers. There was always a wage at which all these horses could have remained employed. But the wage was so low that it did not pay for their feed.” From a Farewell to Alms.