Monday, April 15, 2013

How to Eliminate the Income Tax and Create Tax Fairness in America

Tax Unfairness Grows Every Year

There have been many attempts over the decades to tweak or fix our income tax system, but what they all agree on is the current system is broken. When billion dollar transnational mega-companies like Verizon and GE not only don't pay any income taxes, they get billions back, something is wrong. When a professional that makes $109,000 pays more in Social Security / Medicare [FICA] taxes than a Wall Street Bankster who just made $109,000,000, something is wrong. When American companies can get a tax break to send American jobs to China, something is wrong. When a person who makes millions from stocks pays a lower rate than a Coal Miner or Factory Worker, something is wrong.

Here is how we fix the system:

1. Eliminate the income tax; the current system is too complex, rigged and unworkable with its thousands of loopholes for the rich. Currently about $900 billion and $191 billion is collected from personal and corporate income taxes. We can do better while putting the burden on the people [Corporations] who are responsible for most of the expenses the Federal Governemnet and society incurs.

2. Put the cost of the military on those who actually benefit from it. Tax all sales to the defense dept, military exports, gun, and ammo sales with a 10% sales tax. There is a group of business that had the US Defense Dept at their beck and call, they should pay too. Make all imports and exports by ship pay a 10% defense tax. If the importers want to avoid the tax, they could simply build there goods in America.

3. The TSA currently does the job the air lines did prior to 9/11, there is no valid reason why they shouldn't continue to cover the costs. Make the sole funding for the TSA the airline and shipping industries with a 15% aviation fuel tax and increased annual FAA fees for commercial planes.

4. Most people are used to paying a sales tax on virtually everything they buy; the financial industry shouldn't be any different. A one half of one percent [.5%] sales tax on all financial transactions [stocks, bonds, commodities, commercial paper, derivatives, mergers, etc] would generate close to $2 trillion over a decade.

5. Somebody who makes $20,000,000 a year in wages pays a monstrously lower rate in FICA taxes than a person who makes less than $109k because anything more than this amount is tax free. This is patently unfair. Lower the rate on FICA to what it was under President Carter for the self employed and remove the income cap. Additionally stop this nonsense about only applying the tax to certain kinds of income. If you make your money trading stocks, that's your income. Also if corporations want to claim they are people, then they can pay it too. To avoid this they would merely need to sign a waiver that they are not legally a person. This would fix the current system for at least a century. Last, require any monies borrowed from the SS Trust fund to paper over other expenses be paid back at a 2% higher rate than T-Bills. This would discourage the looting that has been going on for the last few decades.

6. Intellectual property is a government granted monopoly, in a real free market there are no 175 year copyrights or 17 year patents. Furthermore the notion that a copyright deserves the authors lifetime plus 75 years but a patent on a new computer chip or drug only 17 illustrates how broken the system is. Change the time frame to 20 years, but after the first 10 years the Federal Patent and Copyright Office is entitled to a 50% royalty if a copyright or patent is still claimed.

7. Service marks are another highly dubious legal claim that depends on the government to grant a monopoly, they should receive the same treatment.

8. Trademarks should only last 2 ten year terms, after that they are put up for auction, if Coke or Apple wanted to maintain their exclusive name, they better be able to pay for it at a public auction.

9. Big media depends on government granted licenses, some of these are put up for auction, some are just granted. In either case the government gets neither the market value or a public good. All for profit frequencies should be taxed at 10% gross sales. If the use of a frequency was for a home Wifi or garage door opener then there would be no tax. If the use was to operate a TV or radio station then you would pay 10%. If you used it to provide cell service, then the provider would pay the tax.

10. Currently the US collects one of the lowest mineral and oil royalty rates in the world, with the worldwide average being 80%. The US could easily raise the rate to 50% on Federal Land or water rights. If the company wanted to avoid these fees they could simply drill on private land instead.

* The carbon tax is another tax should be considered, I will address that in a future post.

Bottom line:

While this list is not perfect it is light years ahead of the current rigged system. The part of it that is so depressing is that because our government is so completely corrupt there isn't a chance any of these reforms will ever even see the light of day. America is need of a second revolution, if we don't make the smart choices and change now, we may change latter in a violent uprising mirroring 1776.

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