Why income taxes are a barbaric relic

I have read Armstrong Economics for a long time. And one thing that is mentioned often is economics precedes politics. 2016 looks to be an exciting year in the USA, where we throw out the old entrenched politicians and bring in those willing to serve the people, not their wallets. 

One thing I would like the new political class to do is abolish the income tax. The income tax system around the world is a barbaric relic. It was necessary in times where money was based on cattle, salt, silver, or anything physical. In an age of electronic money, where the government can create money worth trillions of dollars in a few seconds electronically why do we need an income tax? 

Let’s go over the reasons to eliminate personal income, payroll, and corporate income taxes. 

  1. Income taxes penalize you for improving your lot in life.
  2. The income tax code is Byzantine in length and complexity, full of loopholes. These loopholes lead to capital and people misallocations that bust eventually since they are not based on organic demand and supply. 
  3. Enormous amount of energy and time is wasted filling out income tax forms every year.
  4. The income tax is unfair. A hedge fund manager using carried interest has a lower tax rate than most middle class families.
  5. The IRS. The same IRS that lost millions of taxpayer records due to inadequate security.
  6. Income taxes cause capital to be misallocated to sectors that reduce taxes, not provide the best return to society. 
  7. Income taxes reduce the freedom and privacy of the people. It came to light income tax penalties were used to target people specifically for their political views. 
  8. The USA is one of the few countries in the world to tax income earned overseas, even if as a citizen you have not set foot in the USA since birth.
  9. Income taxes are changed often, making it difficult for companies to plan for long life capital expenditures with any certainty. 
  10. Income taxes are ineffective at getting tax monies from those that are not US citizens. 
  11. Payroll taxes are the most regressive tax in existence.
  12. Those that need the money the most have the money taken directly taken out of their paycheck. 
  13. The poor that need their funds will be lucky to get them back 30-40 years in the future. 
  14. Governments then take funds and reimburse the poor to buy votes.
  15. Payroll taxes force companies to behave in ways regarding benefits that they wouldn’t otherwise. 
  16. Corporate income taxes are passed through to consumers, who ultimately pay the tax. 
  17. High corporate income taxes reduces the amount of people that can be employed.
  18. High corporate taxes prevent companies from returning money earned and taxes paid from earnings overseas. 
  19. Capital gains and dividends are actually taxed thrice. First, after tax money is used to purchase investments.  Then the business pays income tax. Then you pay tax again on the gains. 
  20. People and Companies have an interest tax shelter, which encourages people and companies to leverage and go into debt. 
  21. Ultimately, all these taxes serve to drain the wealth of the people and support a vampire class of bureaucrats. 

The ideal solution is quite simple given the income tax touches so many aspects of economic life. Implementation will be difficult due to many vested interests of the status quo. A good crisis is necessary to shake up the populace and put them in a position to demand reforms.

  • Eliminate the income tax and payroll tax. Repeal the 14th amendment. 
  • Have the government print the money it needs. The amount printed would be set on auto pilot and would be equal to the population increase expected for the next year. 
  • Eliminate the national debt. The government should do a debt for equity swap for the entire national debt. The treasury would print coupons that would be redeemable to invest in the stock market. The large source of funds available would unleash an entrepreneurial boom for small and midsized companies. Capital would rush in from all over the world to take advantage. 
  • Prevent the government from going into debt ever again. Debt is what has caused our issues. Much of the national debt is due to interest on old debt, not new commitments. 
  • Privatize and downsize the government as much as possible to core functions. Other political changes would be necessary (a separate post) to ensure these changes are not rolled back. 

These changes would launch an economic boom that would lift the entire nation. Something so audacious has never been attempted on such a large scale. The benefits to freedom, posterity, and liberty would be profound. We would have learned from our mistakes as a species and moved forward to our next phase of evolution and collaboration. The time to get informed is now. Of course, this is an ideal solution, the practical solution will be much different. 

Join the debate! How would you feel if the country had no debt and no income tax?

Vijay @ smilingdad

    Published by smilingdad

    My story is one of tragedy and redemption. We've made many mistakes along the way regarding our money. Our goal here is to show you how to take care of your money life long, and as much as we can, help the Earth along the way. I call it sustainable personal finance and ethical capitalism. Currently, I am a part time writer for Cleantechnica and part-time licensed financial professional, along with being a full-time dad.

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