Fair Taxation: A Consumption-Based Approach

Taxation has been a part of human civilization since its inception. While all governments need funding to provide essential services, not all taxation methods are created equal. Some taxes are progressive, while others are regressive. In this article, we will argue that the only fair and just form of taxation is a consumption-based tax.

The Need for Government Funding

“Taxation is the price we pay for civilization.” – Oliver Wendell Holmes Jr.
Governments require funding to provide essential services such as infrastructure, defense, and administration. Even if a government’s role is limited to these few functions, it still needs funds, and the only way to raise these funds is through taxation.

The Problem with Existing Taxation Methods

“The only fair tax is the kind that taxes those who vote for it.” – George Will
Over time, governments have established taxes on nearly everything, from goods and services to property ownership and even death. However, many of these taxation methods conflict with the fundamental right to own property. The only form of taxation that does not clash with property rights is a consumption-based tax.
According to the Declaration of Independence, the United States was founded on the idea that the purpose of government is to protect the rights of its citizens. One of those rights is the right to own property. Many of the forms of taxation are juxtaposed to property rights. Only one form of taxation peacefully coexists with property rights.

Consumption Taxes: A Fair and Equitable Approach

Consumption taxes are levied and collected once, at the time of purchase. These taxes offer several advantages over other forms of taxation:
  1. Transparency: Consumption taxes provide transparency regarding the amount of tax individuals pay.
  2. Control: Consumption taxes offer individuals control over their tax burden. For instance, an individual can choose to purchase a less expensive product, thereby reducing their tax liability.
  3. Efficiency: Consumption taxes eliminate the need for a complex tax bureaucracy like the IRS.
Critics often argue that consumption taxes are regressive, disproportionately affecting the poor. This concern can be addressed by exempting necessities from the tax, a practice already implemented in many states for items like food and clothing. Alternatively, providing a monthly pre-bate for the estimated tax burden at the poverty level, as proposed by Fair Tax USA, offers another avenue to mitigate undue burden on the less affluent.
Contrast consumption taxes to other forms of tax, and it becomes clear that most taxes not fair by comparison.
  1. Property Taxes: Property taxes are a perpetual burden on something individuals supposedly already own. Failure to pay property taxes can result in the seizure of the property, disproportionately affecting those on fixed incomes and raising questions about true ownership.
  2. Inheritance and Estate Taxes: These taxes are levied on assets that have already been taxed once when earned or purchased. These taxes are especially harmful to small businesses and family farms.
  3. Excise taxes: These are often used as punitive taxes, are basically consumption taxes but only on certain products, like tobacco and alcohol. These are designed to discourage certain behaviors. However, gasoline tax is an Excise Tax supposed to fund the department of transportation even though they constantly get money in other ways too.
  4. Income Taxes: Income taxes, including social security, Medicare, and income taxes, are deducted from hard-earned labor before individuals receive their paychecks. A progressive income tax system, as implemented in the United States, is akin to income redistribution and penalizes success. Moreover, the complex tax code, with its numerous loopholes and credits, is virtually incomprehensible.
  5. Corporate Taxes: While seemingly fair, corporate taxes are ultimately borne by consumers. Corporations merely pass on the tax burden to consumers through higher prices.

A Single Consumption Tax: The Ideal Solution

The current taxation system in the United States taxes individuals when they earn their money, when they spend it, and again when they pass on their assets. The only form of taxation that offers transparency, control, and does not infringe upon property rights is a consumption-based tax. Therefore, a single consumption tax applied to new goods and services, excluding necessities of life, represents the most just, fair, and equitable taxation approach.

Peter Serefine is the host of Liberty Lighthouseauthor, Constitutional Coach, Institute on the Constitution Instructor, Navy Veteran, and PA State Constable

Homepage: https://www.liberty-lighthouse.com
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