Income should be taxed in a progressive manner – Taxing income is counterproductive to the economy. Spending fuels production, services, and investment. Progressive taxation is a noble idea, however applying this to transactions is counterproductive.
It is not fair to only target assets in manner described above – It is not a matter of fairness since the asset carries the tax. However to make an argument of fairness, the Sustainable Tax could be argued as fair since The Sustainable Tax is voluntary. The taxable assets under the Sustainable Tax have public character. Those who use resources and the infrastructure to move goods and services pay the bill. The power to set the price of goods and services pays the tax. It is in the best interest of companies producing goods and services to have a viable infrastructure. Paying for the health and welfare of employees is also in the interest of companies. Targeting assets that every human in society benefits from is fair and more efficient. One should pay for the opportunity to use resources and employ people. Why should we care about taxing private property (estates, motor homes and luxury yachts). We certainly shouldn’t care about taxing money since re-circulation of money is what drives our economy. Besides, money is a debt instrument. The Sustainable Tax demonstrates that you do not have to tax everyone and a much lower tax rate is required to fund government. Taxes incurred by the asset will be passed on in the price of goods and services in same manner as our current economic system, albeit in a more just manner.
The Sustainable Tax formula cannot fund government – It funds it precisely in relation to what it spends in the current fiscal year and deficit spending from the prior year. The federal government also cannot accurately estimate revenue when taxing income (always estimated). The value of assets is a known factor that allows a more accurate prediction to calculate the Sustainable Tax rate. What makes this formula profound is when the government spends money, the people in power are now paying to operate the economy. This question is indicative of the lack of understanding of our current system. 45% of households and 14% of corporation do not pay income taxes respectively. 30% of households (low income) actually get money back at the end of the year (more than they paid in taxes).
Who will pay the taxes under the Sustainable Tax system – Taxes will be paid by those who are legally obligated to pay the Sustainable Tax just as those who are legally obligated to pay the current federal income tax (which by the way is not everyone!). About 45% of households do not pay taxes. 20% of profitable large companies pay zero corporate taxes. The tax burden is placed on those who cannot navigate the current tax system to an effective tax rate of 0%! Under the Sustainable Tax system, the willing party that owns a taxable asset pays the tax.
Does not address the current deficit – This is fundamentally an issue of budgetary policy. Note that the tax proposal does address deficit spending with what may be the only provision required in the Sustainable Tax code. The deficit is simply added to the spending parameter of the equation (numerator) and the tax rate increases accordingly for the following fiscal year (unless the value of assets increases). This is a built-in mechanism to preclude government from imposing hidden taxes on the populace via deficits.
This provision would also eliminate inflation baring other government tampering with the economy. Paying off the current federal debt is a budget issue and the period to pay the loan off and the interest incurred would require additional analysis to determine the ideal period that would minimize accrued interest and keep the Sustainable Tax low.
Inequitable since the poor (and middle-class today) have a 100% propensity to spend – In fact it’s greater than 100%. Only the rich do not spend all they made. The Sustainable Tax is the most equitable tax system proposed since it does not tax transactions. The poor currently pay no federal & state income tax but pay transaction taxes and would pay none under the Sustainable Tax system. Transaction taxes are regressive in nature and penalize the poor disproportionately. The middle class are big winners since they would pay no income taxes, capital gains, estate taxes, etc. This system is on the contrary, very equitable since it taxes those who are willing to own taxable assets. The Sustainable Tax puts more money in the pockets of the poor and middle class which in turn infuse more money into the economy via spending, savings, and other investments.
Churches would now get taxed – The faith sector is essentially a businesses that uses public resources and should be allowed no exemption. Tax payers in our current income tax system are subsidizing the faith sector. Take for instance the Mormon Church requires 10% of income requirement from the followers, the church makes income from other investments too. It is estimated that the Mormon Church is worth $40 billion collecting approximately $8 billion in tithing and investments. A 2.5% Sustainable Tax on $40 billion (assuming taxable assets) is $1.0 billion with a net $7.0 billion profit. Look at the faith sector as a whole and it is estimated that it is worth $1.2 trillion that includes the fair market value of goods and services.
According to former White House senior policy analyst Jeff Schweitzer, US churches own $300–$500 billion in untaxed property alone. Add the value of these assets to the Sustainable Tax formula and the 2.5% rate would be further reduced. The Sustainable Tax would also include other nonprofits. Everybody wins since the Sustainable Tax rate is minimized as more taxable assets are added to the US balance sheet.
503c’s would also be impacted by the Sustainable Tax. Did you know the NFL is a 503c tax exempt organization? The Sustainable Tax would simply change the model for nonprofits and current tax exempt organizations which by the way, who’s philosophies and mission statements you might well disagree with.
Citizens would no longer have an incentive to be charitable – People who are charitable will always have an incentive the needy. Besides the Sustainable Tax puts more money in the hands of citizens providing more spending power. In summary, charitable cash donations would be a smaller % income and an increase in charity would be expected.
The family business will no longer afford to pay owed taxes under the Sustainable Tax – Any business that cannot generate more than 2.5% – 5.0% revenue/profit probably cannot afford to stay in business under any tax system. This is a good point and would require further analysis.
Gasoline would cost more – The price at the pump would be much higher, however the real cost of gasoline is hidden in the form of subsidies, environmental degradation, and military spending to secure oil regions around the world. Everyone is paying to keep the price down including those who don’t drive! We have seen price hikes before and people quickly adapt by purchasing more fuel efficient vehicles, carpooling, public transportation, telecommuting, or living where they work. The Sustainable Tax puts more money in the pockets of those who would be burdened by higher fuel prices. There would be a net savings. Consider a household income of $50,000/yr with an effective income tax rate of 20% leaving this household with an income tax liability of $10,000. The current $4 per gallon of fuel could double and the household has a net savings of $4,800/yr under the Sustainable Tax. The energy sector could compete more effectively since the real cost of energy would be exposed.
We would pay more for groceries, cars, and other goods – Subsidies (hidden taxes) and transaction taxes are being applied on top of the corporate income tax for all companies that sell goods and services. The Sustainable Tax rate is much lower than the current income tax rates (39% marginal corporate tax rate) therefor it would expected that many goods and services to be less expensive.
Note that the companies that such as Chevron that would pay more taxes. This is a result of the subsidies received to keep tax liabilities down. Under the Sustainability Tax, companies like Chevron would pass the cost along to consumers. New business models would also emerge. For example, companies may get leaner in assets or find other efficiencies to reduce the quantity of assets to accomplish the same work.
Why would anyone own assets when they would not have to pay taxes – The same reasons that the Elon Musk’s, Bill Gates’s, and the Rockerfellas’s of the world own anything: to build wealth and power, follow dreams, and do what they love doing while making a ‘bucket full of money’. The Sustainable Tax taxes at a lower rate therefor allows tax payers a higher net income.
Increased Spending will cause inflation – The Sustainable Tax will put more money into citizen’s hands to spend more. While this may be true for some goods and services, overall inflation should stay low or be eliminated since the government would no longer be able to deficit spend. When the government prints more money to lend or buy goods and services, inflation will result. Moreover, there would no longer be subsidies for companies to artificially produce goods that would not normally be produced in a free market devoid of the economic distortions our current system imposes (e.g. the 2008 corn ethanol subsidies that inflated the food prices). The amount of currency in circulation would be more balanced with the supply of goods and services. There will however, always be some form of inflation due to factors such as natural disasters or depletion of a natural resource, but less and most likely very temporary.
People who do not pay taxes may not be as politically engaged – On the contrary, if the Sustainable Tax has merit, then it will be implemented. This effort is a grass roots effort that would demonstrate people have the power to make substantial change. Our history is full of examples. Besides, the host of social issues mankind deals with on a daily basis and crop up every election cycle would most likely keep citizens as engaged.
It is not voluntary since one cannot choose whether to own a taxable asset – I don’t know of any business owners who have a gun held to their head to own any asset. Owned assets are a business decision. If the net profits make that business attractive then the owner continues to operate that business. When the net profits no longer exceed the operating cost, the business is no longer attractive and is sold off.
Disadvantages:
The only perceived disadvantage of this proposal is the change itself. This is a monumental paradigm shift in taxation that will require the will of the people to demand government to change. While the apparent loss of jobs in the tax business sector seems like a downside, it just means a shift in this sector focusing on business record keeping and not private record keeping that all citizens are required to perform under the current system. Somebody always loses in any system since a change in tax structure always has some effect on rate payers, The Sustainable Tax minimizes this inequity. If The Sustainable Tax has merit, those in power will take notice, implement the Sustainable tax, and reap the benefits.