Thursday, August 13, 2009

On taxation: fixing the heart of the problem

There's been a lot of talk recently about big changes in the US. We are running the largest deficit in history, increasing at a record rate which is around 4x higher than the previous administration (which was ridiculed for their enormous deficit spending by the people in the current administration). Our economy is in tatters, still losing jobs as debt-fueled personal consumption is not recovering, no new bubble is appearing, and our production base has been all but destroyed. Our public education system is horribly inefficient and ineffectual, our more liberal states are struggling to correct years of over-spending, and our de-facto global economic leadership is being questioned.

In response to this, our government under President Obama has taken bold measures. We have increased deficit spending, giving out Trillions of dollars to the banks which helped caused the reckless gambling economic meltdown. We have virtually nationalized our automobile industry, helping to ensure they will never again be competitive, or even solvent without government subsidization. We have stepped up efforts to tax industries and business owners, to accelerate the destruction of harmful and polluting employment. The administration is pushing to nationalize our health care industry, to ensure that the cost rises to match the level of frustration people have getting effective insured medical care. Next year the administration will push plans to impose enormous crippling new energy taxes, to insure our industry will never be able to recover. The Obamanation hopes publicly, without logical basis, that one or more of these bold initiatives will magically restart our economy, while privately delighting in the opportunity this crisis have given them to push the Socialist agenda more than any other period in nearly the last century.

At this point, you might be asking yourself: why is the government doing everything they can to make the problems worse? Well, the answer is two-fold: first, the government generally makes problems worse when they act, regardless of their nominal intentions, and second, in this case the Obamanation is not trying to fix the problems, they are trying to use the problems as an excuse to instigate a Socialist government, and in that respect they are succeeding. More depressingly, even if the citizens manage to defeat this brazen attempt at a government takeover, there's nothing to prevent the next attempt (promised already in the form of Tax and Cap), or subsequent attempts. What we, the people, really need is something which goes to the heart of the problem, and seeks to cripple the government's ability to do damage like this not just now, but in the future as well.

One of the big, underlying problems which is a common thread in the recent actions of the Obamanation is the relentless expansion of government, and aggressive pursuit of social manipulation through monetary, and primarily tax, policy. Now, most people (from all political ideologies) don't have a problem with the government spending money to "help" the people in general; the primary source of disagreement stems from how much money to spend, and on what things. When the income tax was instantiated in the US, the purpose was to fund a war effort, and the enormous burden placed upon the taxpayers was a staggering 2% of income. With the nature of politicians, this naturally grew from there, reaching nominal rates above 90% in some cases. This carte blanche to expand and manipulate the tax base gives license to the government to pursue spending and wealth redistribution programs of various forms, with no obvious check or limit, and it's getting worse. This is the problem which I would propose to solve, as a stepping stone to addressing many of the other problems.

Now, many people would argue (myself included) that the only legitimate purpose for taxation is to fund the government's operations. This obviously conflicts with the current usage of taxation, which is as much about dictating and manipulating social policy as funding operations. Moreover, the operation themselves are often social policy based, rather than what could be considered legitimate fundamental government operations. My proposal does not address this problem, however it would, I think, provide some incentive for people to fix this problem, and a platform for the people to exert leverage against problems like this in the future.

I would propose a Constitutional amendment to limit the total amount of taxation each individual in the US is subject to, per year, based on income. To wit:


The government shall not, though all direct taxation, collect more than 25% of any person's income per tax period.

Furthermore, the government shall not collect more than 20% of any person's income during a tax period without declaring a state of fiscal emergency at the beginning of the tax period, and stating the maximum percentage of income which it will collect during that tax period (not to exceed 25%).

What this would do, and not do:

Obviously, this would impose an upper bound on income collected by the government through direct taxation (income, property, other). It does not limit indirect taxation (sales, tariffs, etc.), so the tax rates could, and probably would, still be ridiculous. It also, notably, does not dictate that the tax rates need be uniform, or the collection not have favored activities (eg: deductions), or that the money need be used only to fund essential government operations; all of these are noble goals, but all are beyond the scope of what I think is essential to have in our Constitution, at least at this point.

What the first part does is impose a hard limit on the government's ability to drain money from its people, which would necessarily impose a limit on the expansion of government, and wealth-redistribution programs. This ignores devaluation of the currency, of course, which is an ongoing problem I hope the government will eventually solve, but is beyond the scope of this effort. Is would be, however, a good first step, and would be sure to cause some consternation in the halls of special-interest payouts and corrupt favor mongering.

The second part forces the government to acknowledge, publicly, that they are doing a bad job, fiscally-speaking. While I don't think that will dissuade anyone or cause any immediate change, it does set the stage for further initiatives, which could be tied to the state declaration. For example, you could limit the scope of additional spending while in that state, or not pay the members of Congress, or limit terms to one while the government is in that state; all of these would just serve to re-enforce the concept that it's "bad". Note that I would prefer a number more like 10% as the "soft-limit", but I realize that with the current state of our enormous government services set, that's unrealistic. This, however, would be a good start.

BTW, I need to acknowledge that this post was somewhat inspired by Penn & Teller's BS episode about taxes, which is highly recommended. There might be a followup later about the other excellent point they raised: the complexity of laws, tax code included, serves the interest of the police state, and true freedom means eliminating all the ways you ambiguously "might" be guilty of something from the laws; but that's for another time.

Anyway, thanks for reading; feel free to add your thoughts. I have no idea how anyone could/would go about starting a process to get a change like this done, and I certainly don't have enough time/effort to do so, but in the spirit of making a more perfect union, this is something I would do.


  1. Brilliant, simply brilliant. You have been missed in your blogging absence. Hopefully your absence-excuse is of a productive nature, (filling the 50% + coffers,state and fed), and not of a valiant or vacationary nature.

    I support your amendment, when are you running?

  2. I love the post. Is the amendment just Federal or local, state and fed all at once? I think you'd get infighting amongst them. Fed would have unfunded mandates to states and more unfunded mandates to local government. They'd also be fighting for the right to tax more than the other.

    Those are a little specific though and your idea was broad.

  3. Cgen - I vote that the amendment takes precedence over all levels of government, great point on the unfunded mandates.....

  4. You basically are proposing a salary cap for the government. I like this idea A LOT, and let me tell you why. The NFL in my opinion is the best run professional sports league because of the salray cap. It ensures that no team can spend excessive amount over one player which creates financial disadvantages over less affluent teams. It is the fairest way to ensure that big market teams like NY, Dallas, and Miami cannot push the market to unbearable terms for other teams.

    Your proposal does just that. It ensures the government does notover extend its power to tax the people into the poor house. It also forces the gov't to exercise restraint. In time, I think such a bill would really cause the government to become more efficient.

    The irony is I think many Americans would love this plan, but it will be the politicians who would fight it. However, I would fully support such a bill, and applaud you for this great idea.

  5. Wow... unexpectedly cool... support from both sides of the political spectrum. You know it must be a good idea if... :)

    As for the federal/state/both, I was thinking federal only, and I'll explain why. First, it would be a Constitutional and political mess to try to do a "both" limit, which would probably make the proposal a non-starter. Second, although I'd be in favor of a more broad limit which would keep all levels of government in check, I think my proposal might be limited enough that you could actually get enough support to actually pass it, rather than it getting stymied mired in negotiations and politics. It's not the best overall solution I can envision, but it's simple and uncontroversial enough (at least from the taxpayers' perspective) that if it were to get voted on, it might have a chance of getting enacted.

    That's exactly the idea, TL. I specifically stayed away from including anything dictating what the government was allowed to spend money on, with the hope that a simple spending limit would encourage the government to decide which programs are really important, and try to become more efficient. At the end of the day I don't know if it would work, but at least it would be a step in the right direction, and a first step at reclaiming the land of the free.

  6. I support this plan being phased in over the course of a decade. It would be difficult for US to continue being a superpower with a weapons industry and bases all over the world, to maintain the welfare state, to maintain a drug-war police state, or start a new healthcare program. We could do these things, but not all of them. We would have the same debates, but there would be an upper limit on the expenses.

    BTW, the stuff implying President Obama’s policies are not aimed at solving problems and will destroy life in America as we know it is silly. You just disagree with the policies.

  7. Obama, by printing trillions of dollars and keeping in the banks, has taxed us all and nobody sees it. THink about it, a dollar has a given amount of worth. When you print trillions of extras and give them to your friends and out them in the banks, your money is worth less because more money exists. The people have het to figure it out. but Obama has taxes us everytime he has spent money and added it the defect you realize that the stimulus, porkulus, Cash4clunkers, GM and Chrysler and now healthcare are all takes. We just do not see them coming out of our checks or bank accounts, ye that paycheck you get is likely worth 2/3rds of what it was a year ago. Obama has taxed this entire country to death and no one has figured it out!!!!!

    REMEMBER: Obama said you would not see your taxes go up. I did not say they would not.

  8. We at KOOK's manifesto are asking our fellow bloggers whether you have been to our blog or not to give us ideas for our protest signage that we will be using in DC. We are making the trip and trying to represent our bloggers as well. We ask as the organizers have that the ideas be as close to 5 words as possible to make them TV friendly. Other than that we don't want personal attacks against one person but real ideas on real issues that matter to all of us. Many of you are familiar with one or both of us, some aren't. All are invited to throw your idea in the ring and maybe it will be on a sign in the DC protest on 9/12.