Making tax returns easier — without Turbo Tax — is just reason
“The system of discriminatory taxation universally accepted under the misleading name of progressive taxation of income and inheritance is not a mode of taxation. It is rather a mode of disguised expropriation of the successful capitalists and entrepreneurs”.
– Ludwig von Mises
If the free market has been so successful at massively reducing poverty worldwide, then why do people continue to complain about inequality? People often argue that the free market has enabled a small group of wealthy individuals to profit from the work of the poor. Is that true, or is it some kind of hidden envy?
Well, for starters, Professor Antony Davies tackled this topic in a Learn Liberty video. He teaches that the rich made their money because they gave society more value and, in return, members of society gave them their money. This is not inequality, but voluntary exchange for mutual benefit.
Know what’s NOT voluntary?
Paying The IRS Is Not Voluntary!
In contrast, when the government plunders society to provide funds where it wishes, that does create inequality. People often propose a tax system that ensures wealthy individuals pay their “fair share” of taxes, so that resulting funds can be employed to reduce the gap between the rich and the poor through welfare programs.
The propaganda in favor of progressive taxes only causes more countries to become tax hells. In fact, if we look at the index of tax hells made by The 1841 Foundation, the countries with the highest tax burden are also countries with significant poverty rates.
In addition to its coercive aspect, taxation has lost its primary function. In a free-market economy, taxes are meant only for financing the administrative apparatus of a state; they should not be used to subsidize products or provide social aid. Such measures in the name of social justice cause inequality in the face of the law, generating first and second-class citizens.
RELATED: Why the Rich Like High Taxes
With the perversion of the use of taxes understood, let’s talk about a tax revolution. Let us discuss a simple tax system that is more favorable for individuals: the Flat Tax system.
Flat Taxation Systems
The Flat Tax was proposed by economists Robert E. Hall and Alvin Rabushka in 1985. In short, the Flat Tax is a single rate for individuals and companies with a minimum income threshold that is applied to their consumption.
In a Flat Tax system, returns are easy to file. They consist of a one-page form which is easy to understand, and, most importantly, does not need professionals specialized in tax returns. Imagine a free tax filing, in just five minutes, every year on tax day!
Critics of The Flat Tax system have several valid points. The most compelling is that it’s an unrealistic system that cannot be used in the long term. A counterexample, however, is seen in Estonia, a former Soviet country that has rehabilitated its economy with a Flat Tax system since 1994.
The second main criticism is that it is regressive, but this is also easily refuted. Having a minimum amount of income allows people under this threshold to enjoy all the money they generate … even allowing them to save. This generally leads to an increase in quality of life and poverty reduction; as we know, the best way to improve our lives is with investment and savings. (If you’d like to learn why millennials in particular ought to ask for lower taxes so they can save more, check out this thought-provoking article.)
Latin American Lessons from the Boston Tea Party
We must remember that the American Revolution began with a tax on tea. However, now Americans generally go along quietly with ever-increasing taxes, giving year after year a more significant percentage of their work to the state.
Steve Forbes, former executive director of Forbes, believes the Flat Tax should be a central topic of discussion in presidential elections (though we’ve heard painfully little about it during this election cycle).
The debate does not end in the U.S., however; the Fundación Internacional Bases prepared a Flat Tax proposal for Argentina, for example.
The critical point of this proposal is a 13% rate of the taxable base to replace the income tax, export duties, debits and credits, self-employed, and single taxes. The single rate would be for individuals and businesses. The hope is that it will not only be accepted in Argentina but also influence opinion on tax systems throughout Latin America.
It’s time to change our position on the state tax burden, and it’s time to take advantage of the highest possible percentage of the wealth we generate. It’s time to change the tax system!
By the way, for more perspective, see the 10:01 mark of this video, where Professor Davies debunks a false claim by Wired that the U.S. has a flat tax.
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