Designing a simpler and transparent tax system
If you had to design a brand new tax system for a new country, would you use a developed country tax system as scaffolding?
I think a simpler and fully transparent system can be achieved by removing all taxation from every business and putting a single tax on final products and services consumed by end users. That way, we will all know exactly how much tax the government takes.
- income tax - payroll tax (employer contributions) - property tax - capital gains (buy a house, sell 20 years later, pay taxes) - corporate tax - council tax - state level tax - inflation - VAT
When you look at how much is taken at each step, the final amount from your work taken in taxes is in the 70% to 85% range. This could be greatly simplified by translating all those taxes into a final tax on products and services consumed.
1L of milk: 20% price 80% tax
a car: 15% price 85% tax
No taxes on your income, no taxes on companies, no taxes on anything other than the final products and services consumed. The government can provide direct monthly payments to people with lower incomes. If you want to make sure that no one runs out of milk and bread, the tax can be set to zero, making those goods extremely cheap.
This is a fully transparent system that makes it hard to increase taxes in shady ways.
A consumption tax policy like you are suggesting is regressive, meaning people with lower incomes are more impacted by the change in tax laws. They benefit less proportionately when their income is untaxed but things they buy is taxed more. It benefits the wealthy and investment class more.
However congress has recently introduced a "Fair Tax" bill, abolishing income tax, corporate tax, and estate tax. Replacing it with additional consumption taxes that will be managed by the states. https://www.newsweek.com/republican-plan-abolish-federal-inc...
Not having income tax is not new. For a period of time before 1913 Americans didn't pay any income tax. The government was much smaller then and was funded mostly through tarrifs.
There is an argument to be made that American's don't need to pay any tax and that the government could be run through money creation. El Salvador's president Bukele mentioned this in a speech last year. https://x.com/wallstwolverine/status/1860393853355806942 That approach has its own problems.
In "The Revolution of the Giving Hand" (2009), Peter Sloterdijk proposes replacing mandatory taxation with voluntary contributions. He criticizes the state as a "fiscal feudalism" that expropriates citizens and instead advocates for a culture of generosity, where wealthy individuals voluntarily fund public services.
He points to American philanthropy as a model. Critics argue this is unrealistic since essential state functions depend on reliable tax revenue. Sloterdijk’s idea is thought-provoking but difficult to implement.
Could a voluntary tax system actually work? I really like the idea.