Location: United States

Saturday, July 16, 2005

How should a Christian Democrat Tax?

I spent this last week talking a bit about taxation and money. Basically, I find myself in total agreement with both Oliver Wendell Holmes who said, "Taxation is the price paid for civilization," as well as with John Marshall who said, "The power to tax is the power to destroy." That puts me in a bit of a pickle for any extremist view on taxation. Rather, it puts me on a crash-course with moderation. Of course, one of my most favorite things to say is, "I started out a political moderate and, with no movement on my part, I seem to have become a part of the far left."

So, you've been warned.

I do believe the idea of taxing business rather than individuals is a good one. There is simply no way to gather enough data to know what people at any given income level can withstand as far as taxation goes. I think it's pretty obvious that people who make less than $20,000 a year are not going to be a good cash cow for taxation. It's equally apparent that people who make $1,000,000 a year probably are going to be able to withstand considerable taxation. Beyond that rather simplistic ideation, it gets rather prickly on specifics. What is the exactly proper tax rates that someone should face if their family income is $55,642 per year? How is that different from someone who makes $5 more or less? Plus or minus $100? $1,000? $10,000?

I know that every business owner out there is going to protest that they are going to be hurt by being taxed. This is simply preposterous. Are we to believe that they will not pass along the tax to their consumers? Obviously they will, as that is the next argument that will be thrown out. They will simply pass along the tax to their customers and thus it will make no difference whatsoever.

Complete and utter hogwash.

If a business is taxed 10% on $1,000,000 of income, then they have to pay $10,000 of tax. However, which items they choose to tax more or less is completely up to them. A convenience store could choose to tax candy at 30% and sodas not at all, or vice versa, or any combination between the two extremes. They could even choose to tax more than 30% on some items. The competing store across the street (and there's always a competing store across the street, isn't there?) could vary the taxes assessed on items there to implement a bit of true competition based on price.

Think of the combinations. A movie theater taxes soda but not popcorn. Automobile producers tax gas guzzlers but not gas sippers. Wal-Mart taxes everything made in China, but nothing made in America (an idea that Sam Waltom may have approved of).

Nor would it depress the economy. How could it? The amount of tax taken is exactly the same, regardless of whether it comes from business or from individuals. The boom generated abolishing personal income tax would exactly offset the drag created by taxing business. There is, however, one area where taxes would not be assessed and a boom could be expected.

Personal savings.

Yes, it benefits those people who can save over those who can't. Honestly, now. I challenge anyone to create a system that does not do so. The truth is that luxury goods would automatically face a stiff tax penalty due to their high cost. As well, taxing businesses on their income provides an incentive to fight inflation by keeping prices low. That would cause a long-term trend in business growth that would be hard to match.

However, I don't think domestic businesses should face taxation alone. Rather, I favor the use of both import and export taxes. The trouble with import taxes arose when export taxes were cut and domestic taxes were eliminated. That put import taxes in the position of being purely protective. While I do favor a mild protective function from import taxes, I don't think they should be used SOLELY to give American businesses a bonus.

I don't hold the naive idea that this would lead to a simplification of tax laws. In fact, don't think simplification of tax laws is necessarily a good thing. The world is a complex place and taxes have to be complex to deal with it. The benefits of a complex system are numerous.

For example, if all businesses are taxed, then of course farm income will be taxed. However, family farms can be singled out for lower tax rates than farms owned by international agribusinesses. Family run mom-and-pop convenience stores could face a lower tax rate than Circle K and Seven-Eleven. Alcohol sold in package stores, where it will be taken home (though not always, I confess) to be consumed can be taxed at a lower rate than the same product sold in clubs and bars where people are then going to have to drive to get home (some places don't have all night taxis or mass transit).

In short, I think a Christian Democrat would tax in such a way to minimize the destructive power of taxes, to maximize the ability of people to provide for themselves and their famlies, and would provide a stong foundation for economic growth from the bottom up. A Christian Democrat, I believe, would tax in such a way as to provide the greatest opportunity for "the least among us" without being overly punishing on those who are fortunate enough to never know want.


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