Monday, March 12, 2007

Real Tax Reform

Jeff Cornwall shares my despair at the lack of progress in Tax Reform, citing the extreme cost of Tax compliance for All, but most especially for small business. The numbers utilized may seem somewhat excessive, until One understands Tax rules makes it practically impossible for any Business entity to file a Tax Report without outside intervention of a bonded Accountant. The old days of ‘Keeping your own books’ leads almost automatically to Audit en masse, and the Accounting firm will charge far more for the hours consumed. One Friend was dissuaded from an Investment opportunity by his Accountant, who stated that his own Billing charges would make the project uneconomical. Welcome to Life in America!

People have been screaming for Tax Reform for as long as the Tax system was being developed. The horror simply continues to grow, without any but the most egregious outrages being moderated. Foul mess piles upon vile corruption, and nothing provides any hope of betterment. No one will surrender any advantage in Tax law, even though it is a complete Prisoner’s dilemma in reverse, where no one will gain until All allow effective revision without impediment; any effective Holdout dooms the Tax reform project. This means only one effective Lobby will infect Tax reform, inciting dozens of other Lobbies, cancelling any effective reform. The only option states when you cannot change the nature of the Beast, change the Beast!

I immediately propose alteration of Income Tax law from one based upon Income, to one based upon Production Hours. Business would be charged $4 per Hour of Employee labor expended, and $1 per production machine hour employed. Workers would be charged $1 per hour of labor worked as Social programs Cost. Nowhere existent in the Tax law would there be any deduction of any type from the basic Tax rate, or would there be any tax reduction incentives. What there would be is a Tax Arbitration Committee established which could reduce the Tax charges by $1 decrements, but for no Period greater than 1 year in duration; complete renegotiation with a newly-appointed Committee must be endured to renew the reduction.

What do We gain by this Change?

The first element gained is the Sidetracking of years of special Tax dispensations granted, which have ruined the nature of the Income Tax progressivity. The second gain comes in removal of excessive Accounting procedures from the estimation of the Taxes owed. The third benefit consists of the easily estimated levels of Tax revenues to be gained. The fourth element provides ease of establishing Tax Arbitration Committees, if they are establishing on the same order as Grand Juries. The fifth advantage states that economic incentive is not destroyed by increasing Tax rates as Business prospers. The sixth benefit states that the Aggregation function for Investment and Recapitalization is least impacted with a limited, recognizable Tax. The last benefit lies in the fact that Taxes would actually work out to be lower in Cost in the long-run. lgl

1 comment:

Bill Hermann said...

Lawrence, I like your idea of linkaing tax to production work, but haven't done the math for the economic impact assessment. Here's an idea you may like -- and the math is all done.

The Automated Payment Transaction tax is the solution. Once understood, one sees this extremely low rate against the broadest tax base brings the government it’s money while substantially reducing taxes for individuals and profitable businesses. It achieves every advantage of the Fair Tax while avoiding the negatives, such as: the leap of faith that prices will be voluntarily reduced 23% to accommodate the retail tax, otherwise economic disaster; double taxation of savings, home equity and other assets accumulated from after-tax money under the “old” system; and, a whole new definition and set of black market schemes for the word “used”. Study this extraordinary concept developed by an internationally known economist at

Bill Hermann