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With tax day upon us, I would like to make a radical proposal. We should stop using taxes to take from one group to give to another. It is possible to have a tax system in which all individuals pay the same amount. Such a tax has been called a “poll tax” or a “head tax,” but let’s follow Jeffrey Schoenblum in calling it what it is: an “equal tax.”
A family’s tax bill would be based on the number of people in the family. Such a tax would be akin to dues: everyone pays the same and everyone gets the same. Taxes would be proportional to benefits, and individuals would all receive the same benefits. Taxes would thus be like an Automobile Association of America (AAA) membership. You pay for the benefits you get. In any given year you may not use the benefits of membership much, and in other years you may use them a lot. In general you hope not to use or need them much or at all. They simply provide a sense of security.
So the state would be like a club in which we pay dues for benefits. As long as we receive the same benefits we should pay the same amount in dues. Consider this: Would you join an organization that wanted you to pay more for the same benefits as everyone else just because you have a higher income? Perhaps some people would. But would you be willing to pay a fixed percentage of your income to join? Of course some people tithe to their church, but few churches enforce this. On that note, consider that 1 Samuel 8: 10-18 warns the people of Israel against having a king because a king will want to take 10% of what they produce. If only our income were merely decimated by taxes in America!
There may be some suspicion that the wealthy benefit more from the state. Wealthy people may have more to lose than poor people and thus they may benefit more from police protection. Does that mean then that they should pay more in taxes? Possibly, but the most important things that the police protect are life and limb. And the value of those is essentially the same for all people. We could try some Byzantine calculation to determine what the protection is subjectively worth to each person or family, but the transaction costs of the calculation would not be worth it.
The fact that some people will derive more subjective benefit from services is just one more reason to minimize the services provided by government. The absolute equalization of benefits in terms of subjective value is not a worthwhile goal; the solution is to minimize benefits, not to try to calculate who is subjectively benefitting more. Government should provide benefits in terms of personal safety and protection. The fact that some people might put a different dollar value on that service, that some people value their lives and safety less in dollar amounts, is not worth accounting for. The calculation would be impractical and unreliable, and so we have to live with the minor imperfection in the system since it is still the best system possible.
Some people may object that this approach lacks nuance and foresight. Most importantly, they might object that the equal tax might not generate sufficient revenue to run the government. That is possible, but it is unlikely, given the way the economy would likely flourish under such a system. Still, even if the economy did not grow dramatically, the solution would be to reduce state spending to fit the equal tax. As in a home so in a state, budget should dictate spending, not vice versa.
One might object that the burden on those with low incomes would be too heavy. Again, this would not necessarily be the case with a flourishing economy. The ideal is to get to a place where very little tax revenue is required to run a government. We should only tax for as much as we truly need, rather than finding ways to spend the money that is collected in taxes.
In 2015 there were 320 million people in the United States, with a federal budget of $3.9 trillion, meaning that every man, woman, and child would need to pay $12,188 a year under the equal tax. That is far too much under current economic circumstances. But we could downsize the military by 50% and completely eliminate welfare, Medicare, Medicaid, social security, the IRS, the ATF, the Department of Education, and the Department of Agriculture. A quick, back-of-the-envelope calculation shows that would reduce the annual budget to about $1 trillion, or $3,125 per person. That would be a good start, but we could and should make even more cuts to lower the tax.
One might object to the equal tax because it would be regressive, charging a lower percentage of income the higher one’s income rose. But this is misleading since the equal tax would not be based on a percentage of income at all. Instead it would be a flat charge for government services. In this way it would be no different from a gallon of gas, the cost of which is regressive if you frame it in those terms. In reality, this price structure is simply a basic tenet of the free market; people pay the same amount for a gallon of gas no matter what percentage of their income that amounts to. Why should minimal government services be any different?
The fact that the equal tax would potentially be a heavy burden on some would be a very good motivation to keep the equal tax very low and thus to keep government services very minimal.
This blog is excerpted and adapted from William Irwin’s book The Free Market Existentialist: Capitalism without Consumerism.
