Towards Voluntary Taxation

March 1, 2017

It is tax time again.  And yet again I make my pitch for an all-voluntary tax system.

Way back in June 2002, 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 still see little need to change the basic structure proposed:

The basic principles for a new 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 $18,000/year rent or the first $350,000 of purchase)
• all non-cosmetic medical, dental and optical-health services
• all educational services
• financial services (bank charges etc) to $500/year
• legal services to $2,500/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.  Rampant consumerism therefore becomes a tax liability.

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. The tax would also be levied on all capital transfers outside the jurisdiction. It will oblige tens of thousands of “tax lawyers” to find genuine productive employment.

All government activity should be 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 readily 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.

It might be claimed that rich folks will simply remove their money from Canada to avoid the sales tax.  Possibly true, but in my scheme, the sales tax would apply to all such financial transfers from the moment the scheme is announced.

Finally, I believe that many polical types concern themselves far too much with how much money people make. If we concentrate on the input (salaries, bonuses etc) there will always be those who can play fast and loose with the rules.  However, if you apply taxation to outputs (purchases, transfers etc), the returns will always be progressive: the more they spend, the more they’ll pay.

A Reform Proposal For Corporate Governance

February 3, 2016

This is the second in a series of discussions about changes that need to be made to modern capitalism to protect the mass of humanity in advance of a full and revolutionary change to mutual aid and co-operativism. In the first, I proposed new taxation rules for corporations; here I discuss corporate governance in more general terms.   I note once again that these are just notes, eager for debate and adjustment.

The key to the improvements required for corporate governance is a constitutional amendment (or similar, depending on each national situation) stating specifically that corporations do not have the same rights as human beings; they have only the specific and particular rights granted to them by legislative or executive action.

More specific changes would include a ban on quarterly reporting and forecasting; possibly the half-yearly reports, too.  This will enable a new cadre of senior executives to concentrate on managing their companies for the long-term rather than for short-term stock market speculation. The CEO of the world’s largest investment management firm, Larry Fink of BlackRock agrees that CEOs should “focus on creating long-term value instead of emphasizing quarterly targets.”  This is such a fundamental and important priority that I would impose severe penalties (including mandatory jail time) on CEOs for any breach.

Loans from the taxpayer would be permissible (see the current Bombardier requests) but indulgence of this kind in state socialism would trigger a specific set of rules of governance. Until the loan has been completely repaid:

  • no dividends or similar may be paid to shareholders;
  • no share buy-backs or similar schemes are permitted;
  • no increase in executive emoluments (of any and all kinds);
  • no executive bonuses of any form.

Lay-offs totalling 5% or more of company personnel in any two-year period trigger the same rules for a period of two years; this sanction shall not be concurrent with the loans’ rules. The two-year sanction for any breach of maximum lay-offs will be imposed at the end of any loan repayment.

Corporations may pay unlimited salaries and bonuses to executives, subject to sanctions not being in place. However, the portion of any emolument exceeding thirty (30) times the average non-executive wage or salary shall not be a deductible expense for purposes of determining the corporation’s taxes (in a corporation income tax situation), or shall be added to aggregate revenues (in the license scheme proposed earlier). This will assist the system to return to the Eisenhower days (for example) when profits from increased productivity were shared more equitably among all workers. Currently, CEO pay and benefits are on average more than 300 times that of the average employee.

Bankruptcy rules for corporations must be changed to ensure that non-executive wages, salaries, and pensions are first in line for payment. Labour should not be a risk proposition. If you work, you must be paid. I believe trade suppliers should be paid next. Banks, other lenders, and investors have to bear the risks that their rewards suggest.

Finally, no corporation should be allowed to make political donations (in cash, in kind, through third-parties, etc. without limitation) without the express consent of sixty percent (60%) of all shareholders both as to amount to be contributed, and to whom donated.

If we put these rules in place, then we will mitigate some of the worst excesses of modern capitalism. If they stay in place long enough, these changes will tend to lean us in the direction of mutual aid and co-operativism, which should be the ultimate aim.

The next in this series will look specifically at reform proposals for banks and insurance companies.