Today, Alan Greenspan Touts Idea of a National Sales Tax (via AOL News). I’ve always said that the one person in the US Government who holds all the power isn’t the President, but the Chairman of the Federal Reserve Board, Alan Greenspan. He’s my hero and idol, and yet again, today he reaffirms my faith in his incredibleness.
So, the idea is to overhaul the tax system and move from an income-based tax system to a consumption-based tax system. This is absolutely fantastic! It encourages saving (read: no more Social Security problem if people can finance their own retirement) and places more of the tax burden on those who spend money (read: big business) — this is the only system that really makes sense. While I wholly enjoy the benefits of an income-based tax system where those with large incomes can find allowances by the tax code to reduce their net income and lower their taxes, it does favor the wealthy and places more burden on the lower-income constituency. This is fine if you’re on the “right” side of the equation, taking advantage of tax breaks offered — the current system is naturally biased in favor of wealthy land owners, who were the founders of this country. However, the lower-income working class get exploited by having the tax burden placed on them. Yet, according to the article, “Democratic critics contend such a consumption tax would hit low-income Americans the hardest.” It’s this same lack of understanding that the Democratic critics exhibit that make me glad they didn’t win the last election.
More evidence of Greenspans genius: “As in past remarks, Greenspan said he supports tax changes that promote capital investment, such as the reduction of taxes on dividends.” Gee, make it more attractive for people to invest their money in big businesses, who in turn spend money and paying consumption tax! How perfect is this? Since I’m not paying income tax, I can take even more of my earned income and invest it which will make me even more money as dividends and help big businesses grow, who in turn pay the taxes to fund the government! This proposed reformation to the tax code, it’s downright Edenian! (Okay, so I just created that word, since utopian carries the negative connotation of ideal but impractical schemes, the Eden in Edenian refers to the Garden of Eden from Biblical context, which is a true paradise and state of ultimate happiness.)
Of course, I won’t be able to totally stop being a consumer, so I’ll have to pay my fair share of consumption tax. But, if it’s collected like today’s sales tax at the time of purchase, rather than today’s income tax which causes much grief and anxiety once a year, it at least makes my life easier, and businesses are already set up to collect sales tax, so it really isn’t an added burden for them. Greenspan even recognizes this by saying, “‘A simpler tax code would reduce the considerable resources devoted to complying with current tax laws, and the freed up resources could be used for more productive purposes,’ Greenspan said.”
The one thing that wasn’t mentioned in the article was whether the consumption tax would be a tiered or scaled system, where certain goods are taxed differently than others. I think certain essential items such as food products — perhaps even a small subset of food products — should either be consumption tax free or have a reduced tax. Luxury items, on the other hand, might carry an increased consumption tax, such as jewelery, automobiles, etc. Regardless, a consumption tax-based system is orders of magnitude better than an income tax-based system, especially the one we have currently implemented in the US.
Now is the time for everyone to embrace change and be vocal about something that really matters. If you’re the type to write to your local government representative, do it, and tell them it’s important that they support a reformed tax code which is consumption tax-based. Hell, people who know me know my position on voting, but if this came up as a referendum on the next ballot, I might bend my personal rules and go stand in line with the dirty huddled masses and vote, just on this issue. That’s how much this tax reform means to me.
I just hope this tax reform happens … and within my lifetime …