Liberal Democracy

Liberal Democracy
The Free State

Tuesday, June 5, 2012

American Enterprise Institute: Alan Viard- Income Tax's Penalty on Savings

Source: AEI-Alan Viard-
Source: American Enterprise Institute: Alan Viard- Income Tax's Penalty on Savings

In the United Sates, you can get taxed for basically anything that you do, including not spending money from one jurisdiction or another. You get taxed more making money, unless you live in Florida, where they don't have a state income tax, but you have to pay the Federal income tax. Plus whatever local income taxes you may have to pay, city or county. You get taxed for spending money, sales taxes across the country. Uncle Sam taxes tobacco as well, you get taxed for inheriting money, you get taxed for making money through investments, called capital gains, or selling property, business's get taxed for making money. It's not just Income Taxes that people have to pay, but we also have to pay taxes, incase in the future we are unemployed, don't have an adequate pension, can't afford health insurance as seniors. We get taxed just for being alive and living in a home. Yes America's tax rates are low compared, basically with the rest of the developed world. Which I believe is one reason why we didn't get hit as hard by the global recession, even though we did get very hard, but we pay taxes on basically everything we do.

And one of the reasons why I believe we have so many tax loopholes, including a lot of them just pure Welfare, for people who don't need it is because we have so many taxes. Fewer taxes than perhaps Britain, which isn't really saying anything. It's hard to find a developed nation with more taxes. We eliminate some of these taxes or at least lower the rates, we can eliminate a lot of the tax loopholes, expect  people to do more on their own, take less from them and not expect a big check from Uncle Sam every year. I'm not going to say we need tax reform in America, because that would be like saying we need air to breathe, but what I am going to do, is to lay out a plan, that would reform our tax code. That's based on not what people make or produce for society, but instead tax people or better yet bill them for what they take from society. Which would encourage people to be productive and smarter with their money, instead of penalizing them for it.

I'm for what I call a Progressive Consumption Tax. It's progressive and doesn't hit low-income people as hard. Because it would have lower rates on basic goods that people need in life to survive. Groceries, clothing, non-luxury housing, non-luxury transportation, to use as examples. And tax luxury items higher. Luxury cars, yachts, fancy meals, parties, sporting events, alcohol and tobacco, to use as examples. Eliminate the savings tax up to your first 10% of income so people are still encouraged to spend to drive economic growth. And even match lower-income people's savings up to a certain income level. So we can approve on our very low savings rate, instead of taxing people for producing, we would tax them for what they consume. Replace the income tax with a Progressive Consumption Tax, but not scrap the other taxes, at least not with this plan.