Tuesday, June 15, 2010

Front-Loading the Tax System

I will introduce my theme by first directing my Readers to this Post from Tyler Cowen. It must be remembered that economic policy of necessity impacts social policy, and that often, social changes must be implemented before any desired economic motivation will be achieved. One would do well remind that other ideals can be treasured, besides the social set which We did adopt. Many of these social systems have developed from basic Concepts of the Tribe, where no one figuratively eats until the Poorest of the Tribe have eaten. One of the American problems may have been that We left the trappings of the Tribe behind Us in our migration to American soil, along with the concept of the Extended Family. Consider Tyler’s Post on the basis of needed cultural changes introduced into American society to match its European counterparts.

My major theme of the day, though, is to answer the question asked: What does Front-Loading the Tax system mean? It is an economic policy where legislation is passed demanding that nominal rates of Taxes be paid when earned, and all Tax remissions granted only after filing a Tax Return for the Tax year in a Rebate system. Almost all of such systems also provide a mechanism to reduce Tax remissions in the face of budgetary deficits. The later mechanism basically grades and outlines types of Tax remissions, and defines the order in which those Tax remissions are reduced, and by what amounts. Here is a potential list going from the safest Tax remissions to the Most in Danger:
1) Personal Exemptions---------------------cut by at most 5%
2) Senior Citizen Tax remissions-----------cut by at most 5%
3) Investment Tax remission---------------cut by at most 20%
4) Business Tax remissions-----------------cut by at most 20%
5) Corporate Tax remissions---------------cut by at most 20%
Most legislation would recount such Tax remission reductions could take place only to replace a certain percentage of budgetary imbalance, requiring legislative action if the budget deficit exceeds a certain percentage of the budget–say 30%; otherwise, The Tax Authority is charged with reducing the Tax remissions on an equal basis following the guidelines.

It must first be stated that such a Tax system has not been attempted on this World to my knowledge. The second element states that such a Tax system could well trash any of the standard economic policies–particularly Keynesian policy. Deficit Spending is dropped from the economic policy basket. It forces a rational yearly attempt to balance a Spending package, or face a Public who rightfully believe they are confronted by higher taxation. It provides a constraint on Public Spending not now present, while allowing Government to operate on the Taxpayers’ money if Interest is not paid on the funds withheld during the Tax year; granting a reduction in necessary Securities which must be issued to fund Government operations. Notice that any attempt to introduce such a Tax policy will arouse extreme Opposition. lgl

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