Post by ShivaTD on Aug 14, 2013 15:43:59 GMT
It was troubling to me as a Libertarian to read a study that cited the disparity in the tax burdens relative to income being imposed by the different states. While I had the link to the study I lost it due to a malware attack but the fact remains that state taxation has always been regressive. Sales taxes are especially regressive when it comes to the tax burden relative to income. A person that has to spend 75% of their disposable income on taxable goods and services has a much higher tax burden relative to income than someone that only spends 25% of their disposable income on taxable goods and services. That is just plain common sense and math. It was especially disturbing for me when I read that WA, where I live, imposes over 14-times the tax burden relative to income on low income earners when compared to high income earners.
I'd already addressed federal taxation where an exemption level with fixed rate above that exemption level based upon the cost of government would be imposed on all income earners. It also addressed the growth of wealth of lower income workers by replacing the tax and spend welfare programs of Social Security and Medicare by privatization while retaining the safety net and increasing benefit across the board.
But a solution to the state taxation problem avoided me for quite some time until I realized the solution had already been proposed albeit at the federal tax level. Federal revenue predominately depends upon income taxes authorized by the 16th Amendment while state revenue predominately depends upon sales taxes and property taxes in most states. It is true that some states impose an income tax without a sales tax and some have an income tax as well as a sales tax but I looked at a common solution for all states and this is what I came up with.
A sales tax is a consumption tax and Fairtax.org had proposed a good, albeit politically corrupted, way of addressing a consumption tax that is progressive without being unfair to anyone. The proposed a "prebate" that fundamentally paid the taxes on the basic necessities but everyone paid the same tax rate. At the federal level they didn't propose a consumption tax that would pay for government expendatures but instead just enough to cover government revenues when much of the expendatures were being paid for with borrowing and that cannot be imposed at the state level. The states have to actually pay for the expendatures they authorize.
So, for me, this addressed a primary source of revenue for the states. Impose the consumption tax on all products and services a person purchases, including food, but also issue a prebate to everyone to cover the costs of necessities. While my federal tax proposal had an "exemption" of $50,000 from taxation when it comes to a prebate I would suggest a prebate level of 1/2 that or $25,000. The actual prebate is the prebate level multiplied by the consumption tax rate. So, for example, with a $25,000 prebate level and a 20% tax rate the prebate would equal $5,000.
This is only part of the state revenues because all states also depend on a property tax but personally I don't like them because they increase based upon arbitrary evaluations of what the property is hypothetically worth. It would be my postion that property should be taxed under the "sale tax" laws whenever it is sold based upon the actual sales price of assessed property value at the time of sale or title transfer. There is one caveat to this though and that is that a home purchase is a long term purchase so the sales tax needs to reflect that and for most working Americans it's about necessary shelter and is not a luxury purchase. I would exempt the cost up to the "median sales price" of homes in the state from any sale tax and then only impose the sale tax on the costs above the median sales prices. For example, if the median home price the previous year was $200,000 and a person bought a home for $150,000 they would pay no sales tax. If they purchased a home for $300,000 then $100,000 would be taxed at the sales tax rate. From the example above it that rate was 20% they would pay $20,000 in sales tax on the home. There wouldn't be annual property taxes, just the sales taxes on the homes sold or transferred each year. Non-residential properties would not have any exemption and would pay the full sales tax on the price or value of the property when the title changes.
The sales tax rate imposed is based upon the authorized expendatures. If the people want to pay lower taxes then lower the expendatures. If the people want more services from government then the tax rate increases. It's very simple and direct.
Perhaps not a perfect solution, and perhaps my assumptions on the numbers are off a little, but I believe it provides a much better solution to creating fair taxation at the state level which doesn't exist at all currently. Combined with the proposed revision to our federal taxation that I've proposed I believe it comes as close to imposing fair taxation as is pragmatically possible in the United States.
I'd already addressed federal taxation where an exemption level with fixed rate above that exemption level based upon the cost of government would be imposed on all income earners. It also addressed the growth of wealth of lower income workers by replacing the tax and spend welfare programs of Social Security and Medicare by privatization while retaining the safety net and increasing benefit across the board.
But a solution to the state taxation problem avoided me for quite some time until I realized the solution had already been proposed albeit at the federal tax level. Federal revenue predominately depends upon income taxes authorized by the 16th Amendment while state revenue predominately depends upon sales taxes and property taxes in most states. It is true that some states impose an income tax without a sales tax and some have an income tax as well as a sales tax but I looked at a common solution for all states and this is what I came up with.
A sales tax is a consumption tax and Fairtax.org had proposed a good, albeit politically corrupted, way of addressing a consumption tax that is progressive without being unfair to anyone. The proposed a "prebate" that fundamentally paid the taxes on the basic necessities but everyone paid the same tax rate. At the federal level they didn't propose a consumption tax that would pay for government expendatures but instead just enough to cover government revenues when much of the expendatures were being paid for with borrowing and that cannot be imposed at the state level. The states have to actually pay for the expendatures they authorize.
So, for me, this addressed a primary source of revenue for the states. Impose the consumption tax on all products and services a person purchases, including food, but also issue a prebate to everyone to cover the costs of necessities. While my federal tax proposal had an "exemption" of $50,000 from taxation when it comes to a prebate I would suggest a prebate level of 1/2 that or $25,000. The actual prebate is the prebate level multiplied by the consumption tax rate. So, for example, with a $25,000 prebate level and a 20% tax rate the prebate would equal $5,000.
This is only part of the state revenues because all states also depend on a property tax but personally I don't like them because they increase based upon arbitrary evaluations of what the property is hypothetically worth. It would be my postion that property should be taxed under the "sale tax" laws whenever it is sold based upon the actual sales price of assessed property value at the time of sale or title transfer. There is one caveat to this though and that is that a home purchase is a long term purchase so the sales tax needs to reflect that and for most working Americans it's about necessary shelter and is not a luxury purchase. I would exempt the cost up to the "median sales price" of homes in the state from any sale tax and then only impose the sale tax on the costs above the median sales prices. For example, if the median home price the previous year was $200,000 and a person bought a home for $150,000 they would pay no sales tax. If they purchased a home for $300,000 then $100,000 would be taxed at the sales tax rate. From the example above it that rate was 20% they would pay $20,000 in sales tax on the home. There wouldn't be annual property taxes, just the sales taxes on the homes sold or transferred each year. Non-residential properties would not have any exemption and would pay the full sales tax on the price or value of the property when the title changes.
The sales tax rate imposed is based upon the authorized expendatures. If the people want to pay lower taxes then lower the expendatures. If the people want more services from government then the tax rate increases. It's very simple and direct.
Perhaps not a perfect solution, and perhaps my assumptions on the numbers are off a little, but I believe it provides a much better solution to creating fair taxation at the state level which doesn't exist at all currently. Combined with the proposed revision to our federal taxation that I've proposed I believe it comes as close to imposing fair taxation as is pragmatically possible in the United States.
