The "Exchange Tax" Flat Tax System

Taxation is another area where reason and fairness would change how things are done. No social system can operate without financial resources, so taxes are necessary. In a fair society, everyone should be taxed equally. But taking the same amount of money from rich and poor alike is not fair, because the rich would hardly notice what would be a devastating loss to the poor. Fairness would mean taking an equal percentage of income from everyone. The poor may feel the crunch of losing twenty percent of their income more dramatically than the rich would, but the rich would be financing more of the services taken advantage of by the poor. For example, the rich can send their kids to any school they choose for higher education and losing twenty percent of their income would not be felt as a devastating loss. The less wealthy may feel the loss more directly, but free education means their kids can be educated with less financial hardship than would otherwise be the case.

When you combine equal taxation to the benefits of being provided with basic necessities at the lowest possible costs, the poor would actually enjoy a much better standard of living than they would if they were denied these services while not taxed at all. The rich would pay the same percentage of their income as the poor, yet still have more to spend than they would if they were taxed at a higher percentage of income, which is currently the case - at least in theory. Loopholes enable many of the rich to avoid paying taxes almost entirely.

Taxation is presently used for both revenue and control, and tax loopholes make the system entirely unfair. '"Sin taxes'" are placed upon the sale of tobacco, alcohol, etc., as a way for government to enforce moral choices upon its '"free'" citizens. Taxes are also levied upon particular items as a way of '"hiding'" how much taxes a person actually ends up paying. There are taxes on the sale of any item (sales tax), on services rendered, on property, inventory, gasoline, utilities, hotels stays, phone and internet access, to name just a few. It is impossible to know how much we actually pay in taxes without laboriously adding up all one's receipts, and this confusion regarding how much we are taxed is exactly what government intended. The result is seeing, say, twenty percent of your income withheld from your pay check, while in fact the majority of us end up paying more like forty percent of our income in all the various taxes. These additional taxes take a far greater percentage of income from the poor than from the rich, which is entirely unfair. This is particularly true with property taxes, where even after a lifetime of paying for a house the government can take it away if retired people on fixed incomes become unable to pay the constantly rising property taxes.

The solution is to create a single tax, upon income, with no loopholes whatsoever. The best way to implement this is an '"exchange tax'" where the receiver pays a fixed percentage of the amount exchanged in any transaction.

An exchange tax differs from a sales tax in that it would affect all transactions rather than just retail sales. Workers and others would pay the tax when they receive their income and would never be taxed on that money again. Nor would anyone have to file a tax return. An exchange tax would also apply to all transactions made by corporations and other business entities. There would be no deductions for '"costs associated with doing business,'" including writing off jet planes, houses and automobiles. Loopholes associated with business taxation policies currently enable multi-million-dollar corporations to pay no taxes whatsoever. When businesses pay an equal percentage of their income in taxes along with everyone else the overall tax rate would drop dramatically. Remember that if you are presently paying twenty percent of your paycheck in payroll taxes, '"hidden'" taxes are doubling that. A true tax rate of twenty percent would cut the average worker´┐Żs taxes in half. Even at 40% most of us wouldn't be taxed any more than we are now, and would be much better off with prices for basic necessities being dramatically reduced and government supplying things like free health care and education. For average workers any tax rate less than 40% would mean paying less taxes than we do now.

What have you been getting for your 40% contribution? For most Americans it is police and fire protection, the roads and highways, and some form of military protection. If you're old you are getting back some of the money you paid into Social Security over the course of your entire working life, but if you die young you never see a dime of that. Basically, most working people shell out 40% of their income and experience almost no direct benefits in return.

An exchange tax with no loopholes, in combination with government providing more services, would redistribute wealth so that the people with nine apples would end up with only eight, and the standard of living for everyone else would double. The 28% of income the average family now spends for health insurance would be cash they could spend. The tens of thousands now spent on higher education for each child would also become discretionary income. High quality, low cost housing could be made available. Government manufactured technology would be less expensive. Energy costs would be reduced. There would be no property tax to pay. All of these changes result in doubling the discretionary income of average citizens, and when that money is spent on goods and services created by the private sector the economy expands and more entrepreneurs become successful.

But don't expect the "authorities'" to support such a change in the tax system. For ten-percent of the population the tax rates will sky rocket to the same percentage that everyone else would be paying, which is far more than they have had to pay in the past. The people with nine apples will forecast doom and gloom for the entire world if they are forced to be fair and have to get by with only eight apples. They will point out that you will lose the deduction for interest paid on your home loan, hoping you will forget that you will end up paying even more in property taxes and twice as much in '"hidden'" taxes. The greedy will fight hard to keep the system favoring them, but fair is fair, and for ninety percent of the population things will become far better when things are fair. Don't forget that.

There is, however, one legitimate argument to consider if this tax system is implemented in just one country rather than in most countries at the same time. It would increase the cost of doing business relative to countries with unfair tax systems which benefit only the rich. Many multi-national corporations could move their operations to these other countries and that could have a devastating effect on jobs.

This situation is clear evidence of the necessity for a single, worldwide government where policies are the same everywhere. Until that happens, when we fight for the Exchange Tax system we may also need to insist that our country only do business with other countries using the same tax system. That means the people in the rest of the world must also become aware of these solutions so they can act to implement them in their own countries.

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Financial Reform, Welfare, Unemployment
and the Creation of Jobs

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