Tax Reform

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Congress couldn't decide who should see their personal taxes hiked so they just raised the debt ceiling instead. The problem is that government taxes are based largely on economic production rather than wealth or profit. Most economic production today is done by machines and robots who don't pay income taxes. As the population of economic output consumers is increasing, the amount and relative value of human economic output produced is decreasing. You can't have an economy just selling stuff to each other. Someone needs to be producing something. Anyway, there is no one left now to pay for the government.

In theory, a wheat farmer with 1000 acres of wheat should pay a tax based on the number of workers that would be required to plant and harvest the 1000 acres. An acre is defined as the amount of land a farmer with a yoke of (2) oxen can plow in a day. A thousand acres is a thousand man-days of work to plow. That and every other potential tax option is extremely inflationary.

I have a very simple plan to make minor structural changes now which will facilitate flexibility for future tax policy decisions. This isn't tax reform but it paves the way for sensible tax reform that is desperately needed. There would be no immediate change to business payroll expense, government revenue or worker’s take home pay. Most workers would no longer file tax returns. People with investment income, capital gains and self-employment income would still file returns and pay taxes on that income.

The underlying concept is to uncouple and break the link between taxes and earned income without changing either of them. By uncoupling these, we can remove politics from our tax policy decisions and just do what is best for the U.S. economy.

The resulting paradigm eliminates any need for Congress to waste time debating over raising taxes on the rich or the middle class. It eliminates any need to debate over who should pay more taxes for our needed infrastructure investment. And, it permanently eliminates the burden of the government budget, budget deficit and government debt from the backs of current and future generations of workers.

My plan uses existing state and federal tax systems, forms and rates. It costs almost nothing to implement, nothing to operate and actually saves billions of dollars per year in unnecessary and redundant paperwork by business, the government and their workers.

Legislation required at the state and federal level would simply allow responsible businesses to gather accurate dependent information for healthcare benefits and tax purposes, electronically file the tax returns and pay any taxes due, for the worker’s benefit, using the correct exemptions, dependents, and the standard deduction. Businesses would not be required to participate in this program. Responsible business can provide the same benefit to their workers by pledging to absorb any personal income tax increases and not reducing their take home pay.

Once uncoupled, any future increases or decreases in tax rates on wages should no longer affect worker’s gross earned income and will affect business expenses and profits instead.

Workers whose tax returns were filed by their employer would also be provided with a W-2 information statement for their personal records, showing earnings and taxes paid by the business for the worker, and they can use it to file an amended 1040 return to itemize deductions, and/or for reporting additional self-employment, investment income or capital gains that were reported on 1099s.

Until union and other employment contracts and income tax tables are updated to the new gross wage paradigm, companies can add the worker's share of the prior employee deductions being paid by the employer, to compute a virtual gross wage for meeting those requirements and needs.

Once taxes have been uncoupled from worker’s paychecks, we can do some real tax reform, such as a flat tax on wages, a value added tax on all forms of production or increase taxes on business profits to encourage more long-term investment or more profit sharing.

We need to have all the leaders and representatives of the largest U.S. corporations attend a “corporate responsibility” virtual conference to discuss and decide how they plan to tax themselves to fund the government while eliminating personal income tax on human earned income and permanently removing the cost of the government from the backs of current and future generations of workers.