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Chapter 15
How should the burden of the personal income
tax be distributed, that is, how should the tax rate be scaled?
This demos issue would require the same kind of
display on its page and response from the voter as the previous issue, the
corporate and business tax. The issue would be presented as a line graph. As
with the line graph discussed in the previous chapter, the vertical axis would
express percentage rates. The horizontal axis would express annual income
amounts. As before, the voter would color various portions of the tax rate line green,
yellow, and red to indicate where the tax rate should be increased, kept at the
current amount, and decreased. The line could approach the horizontal forming
nearly a flat tax or ascend more steeply forming a progressive tax.
The demos’ control over personal income tax rates
would give it control over the net size of personal incomes after taxes. This is similar to what we do today. The only difference is that instead of the rich, plutocratic few setting the tax rates for themselves and for everyone else in the nation,
“we the people” would set the tax rates on ourselves.
Which approach to
governance is more legitimate in your mind? Power concentrated in the hands of
the privileged few who have endlessly proven themselves to be immoral, corrupt,
and greedy when setting the tax rates over themselves and over everyone else or
the system described in this work in which the entire electorate is empowered to
set its tax rates?
Just as with the previous issue, the personal income tax could not allow any exemptions of any kind for anyone. People in need
would need to knock on the door of The Glass House, the part of
government that handles entitlements and handouts. It may be the case that the government
would assist in certain situations. But it should be done with total visibility under the public eye.
There would be another immense benefit to handling
personal and business entitlements outside of the tax system and within The Glass
House. Government would focus its magnifying glass on only those seeking
entitlements, not on everyone simply filing their tax forms. That would save
enormous resources and free government to place its focus and resources where
they are really needed.
When the corporate and business, personal income, and
inheritance tax times rolled around in their due order, it would be a much less
painful experience for everyone. Because there would be no exemptions for
anyone, the calculation of taxes due would be easy. A corporation or business
would simply sum its gross revenue or an individual would sum all of his or her
income for the year from every source or note the amount of an inheritance, look up that amount in a tax table—the
rates of which would have been set by the demos—and pay the tax. (The method
by which the amount of each taxpayer’s tax liability would be calculated is
discussed in Appendix 2.) Since the
federal government would be smaller and more efficient, the tax burden would be
significantly smaller than during pre-demos times.
However, during the first year or two after instituting a
demos within government, there would definitely be a tax sticker shock. Since
most of the many taxes that we now pay to the federal government are
hidden in the prices of the products and services that we buy or are paid in a
large number of tiny chunks, people do not now realize how large a percentage of
their total revenue and income they now pay in taxes.
Just for the sake of this discussion we will say that when all
of the visible and invisible taxes that the federal government levies are added
together a
certain taxpayer has been paying around 35% of his or her annual income. Now
let’s say that a demos has been created, all of the
hidden taxes have been removed—except one because corporations and businesses
would add the cost of their single tax to the price of their products and
services—and we are now paying only a single tax. A taxpayer might exclaim,
“Yikes, 15%! But under the pre-demos system my income tax was only 12% of my
annual income!” No, the person’s tax was 12% plus the many hidden and other taxes that
were paid when purchasing private or public sector products and services and
paying fees and levies. Under the demos system, the
price of products and services will have decreased by the amount that they once
included to pay the many hidden taxes. The taxpayer’s current 15% tax rate
(plus some small percentage amount still hidden in the price of products and
services since corporations and businesses still have to pay a single tax)
cannot be rightly compared with the previous 12% income tax rate alone. It must
be compared with the 35% overall rate that the taxpayer was really paying under
the pre-demos system.
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