Real Pro-growth Tax Incentives to Save America
Economics / US Economy Oct 01, 2011 - 05:36 PM GMTBy: Barry_Elias
There is a better way to optimize our scarce resources.
Six weeks ago, the following information and graphic of mine were published by Moneynews regarding government expenditures as a percentage of GDP.
From 1792-1902, government revenue was generated primarily from import tariffs and excise taxes. In 1792, more than 90 percent of government revenue resulted from tariffs. By 1902, more than 80 percent of government revenue came from an equal distribution of tariffs and excise taxes. In 1913, the formal income tax was instituted.
The graphic below describes government expenditures as a percentage of GDP (income).
| Year | Federal | State | Local | Total |
|---|---|---|---|---|
| 1902 | 2.37% | 0.56% | 3.98% | 6.90% |
| 2101 | 23.58% | 8.97% | 10.71% | 39.55% |
The United States relied heavily on tariffs to finance government expenditures when the country first became independent. Over the past two centuries, import tariffs (taxes paid by Americans for imported foreign goods and services) have fallen dramatically. It was replaced by other forms of taxation including, but not limited to, income, real estate, and sales taxes.
It seems the most efficacious resource management methodology would be to apply the taxation at the point of purchase. This would incentivize more responsible and prudent decision-making based on value added consumption and future investment.
This purchase, or consumption tax, would replace ALL other forms of taxation.
Since government tends to spend more than it receives, a ceiling needs to be placed on government expenditures as percentage of income. A reasonable amount would be in the range of 30 percent. This figure includes all forms of government taxation: all income and assets at all levels of government (federal, state, and local).
This would equate to a consumption tax of 30 percent.
Bear in mind, this would be the ONLY form of taxation. There will not be any taxation on income or assets by any other entity.
Income tax returns would be streamlined to include two items: total family income and number of family members.
Human beings require subsistence expenditures for food, housing, and medical care. An average expenditure per person could be calculated (i.e., $10,000 per person). This purchase amount would NOT be subjected to the 30 percent consumption tax.
Therefore, an individual with annual earnings up to $10,000 would receive a refund of 30 percent for this income, since it represents income need for subsistence purchases. That is, this individual would receive a refund of $3,000 if annual earnings totaled $10,000 or more (30 percent of $10,000).
This methodology would also save the country roughly 2 percent of income on tax compliance expenditures. The Internal Revenue Service projects annual tax compliance expenditures exceed $300 billion.
More importantly, with a tax code as simple as this, the potential liability for self-serving legislation would be minimized: it could not be readily obfuscated by an arcane, complicated, ever increasing bureaucratic tax code.
This pathway seems like a prudent one for our future.
By Barry Elias
eliasbarry@aol.com, beb1b2b3@gmail.com
Barry Elias provides economic analysis to Dick Morris, a former political adviser to President Clinton.
He was cited and acknowledged in two recent best-sellers co-authored by Mr. Morris: “Catastrophe” and “2010: Take Back America - a Battle Plan.” Mr. Elias graduated Phi Beta Kappa from Binghamton University with a degree in economics.
He has consulted with various high-profile financial institutions in New York City.
© 2011 Copyright Barry Elias - All Rights Reserved
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