For years, our politicians talked about the need to fix our tax laws, but nothing gets done. For small business, the name of the game soon becomes apparent: “Don’t show a profit!” The goals of big corporations are the same but they use a different tactic of “find the loopholes.” With all the effort to collect business taxes and the effort spent to avoid paying taxes, our highest business taxes in the world become a joke. Why in the world are we taxing the golden goose of private enterprise that provides jobs? There should be no tax on business. The idealistic freedom of taxation of privately owned business and enterprise needs to come with an eligibility clause that prevents the corporate officers or owners to capture all the profits. The employees and stockholders need to be rewarded with their fair share, while allowing for reserves to be accumulated for capital improvements or expansion of the business.
Without a tax on business profits, a gold rush would soon start because businesses would want to locate in the United States. Think of business taxation as double taxation. After a business tax is paid, the business has a net profit for the owner or the shareholder, who receives a dividend and now pays an income tax. Next, we have two tax rates. One rate for earned income and one rate for investment income. It doesn’t make sense to tax income, based on how money is acquired. Money is money to live on, enjoy, invest or give to charity.
The use of tax dollars has put our nation in a nearly 20 trillion dollar debt because politicians think our country’s wealth is theirs to spend. The first thing to do is to charge what it costs our government to provide services such as roadways and transportation systems to ensure for convenience and public safety. For example, as electric cars are being developed that use no gas, the use of roadways must be paid on miles driven and the weight of the vehicle. Our global positioning (GPS) technology can detect miles driven on city, county, state and federal roadways. Rather than a gas tax, motorists should be charged a use fee for miles traveled.
Abolishing the business tax even with expanding growth of new enterprise could cause a short-fall in our ability to fund our military to defend our nation and also to reduce our national debt. An alternate source of federal government revenue is needed and could be provided by introducing a value-added tax on all manufactured goods, products, equipment and machinery. This value-added tax could be levied on the final manufacturer based on production costs before the product enters the marketplace. Exemptions for the value-added tax would be exported goods, homes, medical, food and energy costs. Over the next decade, a goal of reducing our national debt to 5% of our Gross National Product (GNP) would make our nation an economic giant.
Our Social Security could be perpetually solvent if tax on salaries had no cap. In the Reagan Administration, after our salaries reached $118,500, any additional earnings above this amount was exempt. Since then it became worrisome that funds would be depleted. A big plus is when the Social Security Law was passed in the 1930’s when the average age that the male wage earner died was 63 and you became eligible to draw Social Security benefits at age 65. Since then the working age often extends beyond the age 70 with higher benefits. The entitlements for Medicare and for those who became completely disabled before they reached age 65 should have sources of funding for Social Security. A slight raise in premium costs for auto insurance and/or workers compensation would be a boost to ensure for solvency of our Social Security Fund. The IRA tax deferment has been a great incentive for those who voluntarily participate and build an additional funding for their retirement income. IRAs are a great incentive for everyone to develop a retirement savings plan.
Our State Department is an agency that appears to be engulfed with the trappings of royalty and is only involved in telling how other nations should be governing themselves. We do not need so many embassies and certainly we should not be influencing other nations with grants or other financial aid. When a manufacturer closes down a plant in the United States and takes his manufacturing to another country and ships his product back into the U.S., a 35% added-value tax should be levied on all their manufactured products that cross the border back into the U.S. Our manufacturers must understand that our product development and manufacturing needs to stay at home, here in the U.S.
To reduce the cost of government, there are a number of government services that could be privatized by leasing them to private business. This would provide income for our Federal government, not an ongoing expense. Business enterprise to stay profitable for the most part in a competitive world, are best able to balance the cost of the service with a fair market value.
In the next three decades, enterprise, in order to stay financially secure, will require the ability to adopt automation. This will diminish the number of blue collar workers who will be replaced with high-tech professionals. A tax reform needs to ensure for a simplified electronic compiled tax collection system. Since the beginning of recorded history, tax collection was a process vulnerable to corruption, and over the years, taxation becomes a complicated process. Individuals and corporate taxpayers need a break, as tax preparation has become a process that usually requires an accountant to sort out. The current system becomes the basis for a fishing trip by opponents of a political candidate to speculate about what the candidate for public office paid in taxes. Our existing system is so full of loop holes; no one knows who paid what. Without business taxation, there is nothing to ask for or hide. For our country to eliminate an overwhelming debt makes this is the time for tax reform!
All of this appears to be simple. Taxation needs to be made so easy that it can be computed on a postcard and sent in a summary each quarter. All personal income includes a deduction of the taxpayer’s fair share. The service tax for use of roads, government services included. Manufacturers only need to include the added value tax to their product costs, and it is sent to the government at the time of sale. Tax accountants will have to find another profession. Of course the media and politicians will tell us why it won’t work. Somehow, our tax collection needs to be simplified so it allows a standard deduction from monthly income. Complaints for errors of over-taxation are the proof of the pudding that can be resolved by a phone call.
Hopefully, our newly elected president, Donald Trump will turn his business skills to solving our outdated taxation system.
Other articles by David MacCollum published in the Arizona Daily Independent:
- 9/12/16: Does Enterprise Get a Bad Rap?
- 8/2/16: What Happened to our National “Can Do Ethic?”
- 7/5/16: Black Hats vs. White Hats
- May 2016: States Rights Need to Be Expanded