Voluntary Taxation — Again!

April 6, 2011

Now that we are in the middle of a Federal election in Canada, with taxation and financial policy crucial components of each party’s platform, I want to raise once again my proposal for making all taxes voluntary, by moving taxtaion from income to consumption.

Back in June 2002, well before the HST controversy that is sweeping BC and Ontario, I proposed doing away with all non-voluntary taxation by replacing income and all other taxes with a consumption tax. This is what I wrote in 2002, and I see little need to change the basic structure proposed:

The basic principles for a semi-anarchistic tax scheme are that it should be essentially voluntary, and concerned with ensuring equal opportunities for all. Therefore, I would propose the elimination of all personal and corporate income taxes as they violate by their very nature the voluntary aspect of taxation. I propose to replace the revenue with an all-inclusive sales tax on goods and services with a few, well-defined exceptions (the figures below represent Vancouver costs of living and could be adjusted as required):

• all foods
• shelter (to $15,000/year rent or the first $250,000 of purchase)
• all non-cosmetic medical and dental services
• educational services
• financial services to $500/year
• legal services to $2,000/year

The sales tax should be a single percentage across all categories of goods and services in order to reduce accounting and bureaucratic requirements.

The use of the sales tax for the bulk of government revenues brings a great deal of volunteerism to the matter. The exceptions provide an important and necessary break for those goods and services which can be described as the necessities of life; above that, the more I choose to buy, the more taxes I choose to pay.

On the other side of the ledger, also to the good, the simplicity of the scheme allows for huge bureaucratic savings in administration and zero non-compliance. It will oblige tens of thousands of “tax lawyers” to find genuine productive employment.

It also assumes that significant portions of current governmental activity have been done away with, returned to the people for their own handling. Those portions of government activity that do remain should be easily categorized into line items that can be shown to have a direct bearing on the level of the sales tax. In this way, the people are enabled to make decisions about what sections of government can be further cut to reduce the level of taxation. Conversely, any additional work to be performed by the government can be easily calculated as an addition to the sales tax. In other words, the cost of a government service will be immediately and directly calculable — and the people can make their judgments on whether to go ahead with it on that basis. It is one thing to say that a government program costs $600 million — an abstraction at best; it is quite another to say that program x will cause a rise in the sales tax by 1%.

In a capitalist system where the government bureaucracy acts as a nanny on so many issues, taxation of some sort is inevitable, as will be resistance to such taxation. The sales tax that I propose will allow the taxation system to operate on a voluntary basis, thus achieving considerably greater support and compliance.


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