Tax Fairness

What’s tax fairness? Everyone pays the same amount. A Capitation Tax. Ever notice how folks who come up with a different answer always have to wrap it in some overarching social theory?

Every citizen has access to the same Federal government services. So why should Bill Gates pay more than Joe the Plumber?

Show me a person using more than their share of government services and I’ll apply the appropriate surcharge. Show me a person in dire straits and I’ll apply the appropriate charity. Taxes are a burden to be shouldered equally by all who benefit from their use. Don’t give me that crap about the rich having bigger shoulders.

Contents

  1. Tax Fairness
  2. Capitation Tax
  3. Business Taxes Under Capitation
  4. Tax Administrator
  5. Chrysler Building
  6. The Public Good
  7. Proposal

Capitation Tax

A fixed amount is paid equally by every U.S. 18+ adult resident. Every adult resident no exception sends in a tax payment every month, and can simultaneously send certified evidence if they need an exemption for the next month. Exemptions are calculated using low-temptation tax bases (e.g., gross wages and/or disposable assets). Subsidies are paid to indigents to cover the CPA fees needed to certify their evidence for exemption.

Income or capital gains? One amount. Family of ten? No difference. Not a U.S. citizen? Don’t care.

How much? Depends on what we get from business taxes, below. Wouldn’t it be great if we had a negative Capitation tax every once in a while?

Business Taxes Under Capitation

Businesses are not persons except as codified by law. Moral judgments need not apply. Tax business without moral constraint – confiscatory if you’d like.[1]

We the people set up these limited liability entities called businesses to promote the general welfare. This is how we formalize which individuals can solicit public capital (grandma’s savings) to invest in machinery, technology and know-how, to take Joe’s labor and increase it one hundred fold. We give these individuals, and grandma, limited liability should the investment blow up in their faces.

As long as these individuals promote the general welfare we don’t hinder their capital accumulation. But the moment we sense profiteering we shut off the spicket. We enact confiscatory taxes to dry up further capital accumulation. Doesn’t matter what new tax basis we have to invent. We’ll get the money.

Compensate executives 75 times more than labor and we’ll suck out all the cash you need to pay that compensation. Play games to avoid basic levels of taxation and we’ll adjust the tax base to empty out your coffers.

There is no one-size-fits-all tax policy to get the best out of each firm. Economists like to trot out their models. They’re full of it. They’ll tell you rationally-informed employees would choose to pay more personal taxes rather than approve an increase in business taxes. Depends.

We tailor the tax code for each firm. Whether its tax bases can be nailed to the ground.[2] Whether it’s high or low margin. Whether it’s investing in our community or not (“What have you done for me lately?”). Whether it’s family-owned and operated, or professionally managed. Whether it’s geographically near the borders or at the center of our tax zone. And so on.

Which tax code encourages this named firm to give its best for our community?

We take care to avoid major swings in the tax code which might be offsetting to business formation. But thousands of minor tweaks are constantly in play to maximize the good we get from having your business in our community. Getting ready to go bankrupt? We’ll grab our share before it goes to the bankruptcy courts.

We collect most of our tax from business, further driving home the discipline in politicians that revenues grow only as do businesses prosper. The Golden Goose rule.

Tax Administrator

The individual who assigns DRG’s in any major hospital is often the highest paid administrator in the hospital. DRG’s are Diagnosis Related Groups. These determine the Federal reimbursement to hospitals for patient care. DRG as the name suggests is a generalization. It groups minor variations in treatment in order to simplify the payment schedule.

The task of the administrator who assigns DRG’s is to know the regulations intimately. What is the letter of the law? Their next task is to identify those cases where the patient can move into a higher reimbursement DRG (or not into a lower one). They work closely with physician-providers to maximize hospital revenues.

DRG administrators watch regulatory disputes carefully, and makes sure all assignments fit within the letter of the law. But they will never give the government the benefit of the doubt. It’s a game and the best DRG administrators learn to play it well: they play to win.

Our tax administrator is the highest paid government employee. Outrageous levels of compensation. Knows how to play the tax game well. Plays to win.[3]

Love of country? More than you could ever imagine.

Our tax administrator travels 80% of the time across the tax zone becoming an expert in as many of its businesses as possible. Up close and personal. As disputes arise or conditions change, so does the tax code. And our administrator can name the person in each business who will squawk. They’ll be on the phone.

Chrysler Building

Imagine three floors at the Chrysler building in NYC jam-stacked with cubicles. A tax analyst in each cubicle is assigned custodial duties for 10 to 1,000 firms depending on their size. Overlapping. They track their firms day and night.

Think day traders. Minute by minute our tax analysts will track even more financial and investment data than typical traders on Wall Street. As a matter of fact we recruited them from Wall Street and that’s how we pay them.[4] Our tax analysts know their companies inside and out. Every nuance, every rumor overheard at Trader Vics.

You’ll find our tax analysts tweeting, following corporate tattletale forums, swapping rumors with buddies on Wall Street, and hanging out at high-powered cocktail parties. Your stock got hammered after an Analyst Meeting? Expect worse when we also raise your taxes.

The tax analyst’s job, and management knows this, is to make a simple determination. At the end of each day is this firm on the naughty or nice list?

Our many hundreds of tax analysts come together every evening and draw up a summary list of changes to the tax code. Legislators have been cowed into enacting these changes without question the next morning. Retribution for legislators who balk gets personal.

Our tax analysts are very well compensated and need take no crap. Don’t care who you contribute to politically. Do care if you lose sight of the special role business plays in our society.

A firm can see its tax bill rise 10% in a day, and depending on a sincere atonement, drop 10% the next day. Funny how that generic tax code affected only this one firm!?

Changes to the tax code send unambiguous signals to management. You can give yourself a pile of stock options but your share price will drop 10% tomorrow. We recruited from Wall Street remember?

The Public Good

Who decides “the public good”?

I envision it as the economic well-being of the nation. Tax business moderately with a squeeze now and then when its actors get greedy.

But again those damned special interests will spin their cobwebs.

This is tax collection not social engineering. The purpose of business is to grow national productivity: people able to do more with their God-given allotment of work hours. The greater the productivity the greater the wealth of the nation the greater the funds available for social spending (e.g., pollution abatement, healthcare).

I can’t define what leads to greater productivity.[5] I know it when I see it. Better said I know it when it’s counter-productive.

No hard and fast rules. They just lead to gaming. Increase productivity or we increase your taxes.

Proposal

Do you really want to tax the poor more? Yep.

Doesn’t matter how much you tax someone as long as you give them the corresponding financial support.

Do you really want to tax the rich less? Yep.

Willy Sutton robbed banks because that’s where the money was. Do we really want his moral code enshrined in our Federal tax policy?[6] The rich can’t eat all their money. They’re going to invest it and that’s when we grab our share.

Design the tax code solely to avoid its gaming by politicians, and cheating by taxpayers. Solely. You want fairness? That’s fairness.

The Tax Fairness Proposal. It’s a combination of the Capitation Tax for individuals and a Business Tax that collects its taxes by whatever means necessary to promote the general welfare.[7] It defines how we should collect taxes not how much to collect, the topic of a future blog entry. Tax Fairness is my favorite stand-alone option for inclusion in the Tax Reform Act of 2014.

Give me your tired, your poor, your huddled masses… Nah. Send your millionaires.


1. The stock certificate is one of the clearest examples of a property whose value is fully informed by legally-conjured rights. The government does not infringe on your property rights as a shareholder when it taxes a business. It charges for underpinning the rights that give shares value. Share value emerges from market psychology, with only a tinge of intrinsic business worth. Once shares from an IPO are sold to the general public we’re in Ponzi-land and players must learn to view the tax collector as one of many predators fighting for its share of the booty. However, the more closely held a firm the more our ethical compass swings into action, the less we tax.

2. Does a business have a significant customer base or critical suppliers in our state? They’re nailed.

3. Ideally would also be on the board of a two hundred million dollar PAC set up to punish legislators who try to game the tax code in favor of their political contributors.

4. I want my tax analysts to be financially independent, proud to the point of haughtiness, and aggressive. This is not a job for bureaucrats. We’ll bring in the big guns (Booz, McKinsey, Bain, etc.) for analysis of major acquisitions, mergers or other complex business deals.

5. It’s not income. It’s not profits. It’s not market share. see: Concept and Measurement of Productivity. 

6. I’ve already relented on a morally-ambiguous scheme called Soak the Rich

7. You liked the idea of a Confederated Tax? Then enact Tax Fairness to collect the state level alternate tax.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s