My opinions about taxes
1) Only tax what you want to deter.
2) A tax should not be regressive.
3) A tax should be simple to understand and easy to collect.
4) A tax should have a low cost of compliance.
5) Remember that all tax in the end is paid by the consumer.
6) Subsidizing good is never as effective as taxing bad.
7) In any redistribution of wealth, there is cost of government monitoring. This cost should be minimized.
OK, now imagine that you are starting a government from scratch. You currently have zero government spending, zero taxes and zero subsidies.
Obviously you want to build a government structure that helps your citizens, but where do you start?
Well you are going to need some income, so you need to come up with the fairest tax that you can find.
The best solution that I can come up with is a VAT on consumption of everything not needed for survival. I would exempt groceries, shelter, utilities, health care and gasoline. I am open to add more to keep this from becoming a regressive tax if anyone else can think of anything. I picked a VAT over a sales tax because it's easier to collect.
What would I spend it on first? Believe it or not, a redistribution of wealth. I would determine the VAT that I needed to collect to give everyone a weekly check that keeps them above the poverty line. This will be my only entitlement program and everyone gets it. Also everyone would be given a card that identifies their purchases at point of sale. They will also get 3% of the tax that they paid on those purchases. The reason why I do this is that it gives me a greater chance to collect the VAT as I can identify the end consumer in the VAT process and they have an incentive to tell me to get the money back.
In one step I have assured that everyone at least has the basics for survival. Those things will be cheaper because they are not taxed. I eliminated the big government of setting up a bunch of different entitlement programs. I didn't take away the incentive to work because any income a person makes is added to what the government gives them.
What other taxes would I have? Not much else. The only other taxes I would have are the double dividend taxes, provided they are not regressive. These taxes must be defined as special purpose taxes and designed to solve a problem. Such a tax would be like taxing smoking to pay for the related health care costs.
Would I tax Corporations? Sure, if they are the end user of a product.
Would I tax imports? Most definitely! VAT taxes would occur at the point of import.
Would I tax exports? Most definitely not! Supplier VATs would be refunded at export to keep our goods more competitive globally.
What are some other benefits?
1) The tax is voluntary since it comes out of your descretionary income.
2) It encourages productivity and discourages consumption.
3) It gives us a trade advantage with imports vs exports. A big trade advantage.
4) It encourages saving discretionary income.
5) It provides for a more equal division of labor.
I could give you more, but you get the point.
Would I have any other government spending other than entitlements? Sure, but all other government spending would be itemized as a percentage of VAT. Every citizen could see what percentage of VAT spending was for military for example.
What about subsidies? I don't believe in them,They aren't as good at spurring good as taxes are at destroying bad.
2 problems that I'm working on here and maybe someone else can help.
1) non-renewable fuels. Taxing those would be regressive and you know how I feel about subsidies. The only thing that I can think of is sort of an x-prize for coming up with cost effective alternatives.
2) The states would be fine with their own VAT, but I can't figure out a tax for localities. Property tax is how most do it now and it's regressive. The states could give the localities a percentage of their VAT, but it would have to be the same percentage to all towns and the towns lose their autonomy.
If anyone has a better solution for those 2 things, let me know.
I know I'm leaving something out, so ask all the questions that you want and flame away.