Don’t get me wrong, I am voting for Harry Browne. But I’ve heard some who expressed the opinion that even with a true bare-bones constitutional government, it would be impossible to pay the bills without a federal income tax. I’ve never taken a close look at a federal budget, so I can’t say that I’m informed on this issue. What’s the straight dope?
A plan is just a list of things that go wrong
Perhaps a better question to ask yourself, is can a minimalist government (bare-bones constitutional government seems accept a point of view which is debatable) actually function in an advanced, highly-industrialized economy which is fairly internationalized? As for existing without a income tax, look to the late 19th century. Be sure to include state and local taxes into your picture rather than just federal alone and ask yourself if regional distortions might not be an impediment to general national prosperity.
We would have to go back to having large import tariffs like we did through the 19th century. Even larger, since we’ve gotten used to the huge income that income tax brings into the Treasury.
IIRC, in the first income tax year there were 2 tax brackets: 2% and 4%. And only about 5% of wage earners were subject to it. Ah, the good old days.
Or perhaps a 25% national sales tax. :D:D
Here is the Budget of the United States Government, Fiscal Year 2001. (PDF File)
As you can see, the Defense DBA portion of the budget is $306,287,000,000 which is about a 4% increase over fiscal year 2000, and represents less than a thousand dollars per person per year. This portion of the budget, famous for its bloat and excess, is earmarked for grand purposes you might not have imagined, including the maintenance of United States military forces on the soil of more than half the nations on earth. The need is assumed to “[respond] to the full spectrum of crises by stationing well-trained and equipped forces overseas and maintaining capabilities to mobilize and rapidly deploy forces stationed on U.S. soil.” (See page 171 of the budget.)
Perhaps if we withdrew our forces from foreign soil, used our money for defense rather than preemptive aggression, held the stewards of our money to the same standards that we hold business, and eliminated the vast social bureaucracies that comprise the majority portion of the $2,019,000,000,000 budget — if we used “public money” to do what Jefferson said government is supposed to do, secure our rights — maybe we could get by on less. A lot less.
It costs an awful lot to pay career politicians and lawyers, redistribute two trillion dollars of property, and nanny the whole world. Just because we’re used to doing it doesn’t mean it’s necessary, or that civilization would collapse if we stopped.
This is what Harry Browne means when he says that an income tax is not necessary to sustain a good ethical government.
I am sure that would do wonders for the stability of the international system and by extension, economy upon which so much current prosperity resides.
Turn a profit regardless of means or morality? (The proper role of a CEO) Government’s role is fundamentally different from business, hopefully it enables a functional and efficient economic and social system.
Majority portion? Military expenditure is the largest portion. Then social security and related programs. Social bureacracies? Maybe, although terribly popular. Not without some use in maintaining a modicum of social stability.
Hmm, Jefferson of course wrote of a 18th century state facing a much less complicated and demanding world. But if one wishes to abstract away…
Economists often think of what you are blithely dismissing as waste as social capital. Social investments in spheres where private investement is uneconomical is an excellent way to produce future wealth. General education springs to mind, even welfare programs have their use.
Uhu. Collapse, no. Power vacuum, yes. Beneficial in the near and medium term for US interests, either political or economic, no. Long term, who knows. The USA isn’t a minor, marginal 18th century republic anymore.
Ah, the philosopher king!? How about just an ordinary human but reasonably functional government?
There’s two seperate issues here. One is how much money the United States government needs to collect. The other is where it collects that money from.
Taking them in reverse order, the government could undoubtedly continue to spend the same amount of money without collecting any income tax. Other taxes like national sales or property taxes would produce an idnetical amount of revenue.
As for the first question, if you eliminated income tax without substituting other taxes, you would substantially reduce the government revenue. In my opinion, this is the wrong way to go about things; you should reduce government expenditure first and then reduce revenue collection to match that figure.
Wimps, all of you. We should do away with the Federal Government and federal income tax altogether. What good does it do?
Just think of the savings if there were absolutely NO federal government.
We could let the states build their own roads (of course, if the highway ends at the state lines, or two states have different objectives and the highways don’t meet, well, tough. We might have some minor inconveniences to put up with.)
We shouldn’t let the federal government interfere in businesses. Think how much better off we’d be if the FDA weren’t trying to regulate the pharmaceutical industry, if we just left it to the free market!.. and the courts, of course. (With the emphasis on personal gain and quarterly profits, we would see an increase in drug companies making shoddy – or dangerous – merchandise, but we could let the courts sort that out later through individual lawsuits from the relatives of the deceased.)
Similarly with safety standards for autos and such. What a waste of money, to have the federal government interfere! Wouldn’t it be far better for business to let the car companies produce whatever the market will sell? Airbags, seatbelts, headlights, pollution-reduction stuff, bah! Why should we have to pay more for that crap?
And think how much the federal environmental agencies waste every year, trying to save some foolish little fish in some stupid lake. If there weren’t any federal environmental agencies, we could go back to the far better standards of the 19th century! Los Angeles could get it’s wonderful smog back, that used to be such a tourist attraction for the city! Cleveland’s famous burning river, that was another one that pulled 'em in!
And the armed forces, what a waste of time and money. After all, there’s no great Communist menace anymore, we don’t need to maintain any sort of military. The science research done by the military, too, that could all go down the drain.
And the social services. Fui! People should take care of themselves, or else their families should take care of them. With all the money that would be saved by having no taxes, the poor will no longer exist: they’ll all have made their fortunes on the stock market. Forget social security, save for your own retirement (and be sure you have plenty of life and disability insurance!) And anyone who still happens to be poor, well, there are churches and voluntary charities. Or, leave it up to the states.
We could let the states print their own money. Think what that would do for private enterprise! Why, a whole new industry would emerge in currency conversions!
Equal rights, too, much better left to the states. Absolutely. If the federal government hadn’t tried to interfere back in the 50s and 60s, there wouldn’t even BE racial issues in this country today.
Yeah, let’s get back to the 18th Century ideals and let the states and free market handle everything!
For the record, the GQ answer to your question is, “Yes, the income tax could be replaced with other forms of revenue generation and/or with a smaller government. Substantial dislocation could be expected during the transition.”
Off to Great Debates.
It seems to me that the income tax fits what Churchill said about democracy: that it’s the worst system except when compared with all the others.
Property tax. The fact that I could afford to buy a house twenty years ago says nothing about my ability to pay 1-3 percent of its value in cash right now. People lose jobs, retire, etc…
Sales tax. The more income one makes, the bigger percentage of one’s income is saved and the smaller the percentage spent. So the sales tax falls more heavily on a household the less income it makes. And while I’m not a big fan of progressive taxes, REgressive taxes don’t seem like such a good idea either. 
A head tax. We don’t have that in this country, but it has existed in other nations and at other times. I would hope that I wouldn’t need to explain how regressive this one is.
Tariffs on imports. Sounds like a good idea – protect American business and labor AND raise revenue at the same time, from people who can’t object at the voting booth! But high tariffs are inevitably met by high tariffs on imports by the countries that buy stuff from us. “We were going to buy a Boeing airliner, but now we’ll have to go with Airbus because of the 50% tariff on U.S. goods. So sorry.”
Fines. Oh, yeah, right, we want a major portion of official’s salaries to be directly tied to catching crimes and offenses in their jurisdiction. NOT! There’s a reason nearly every state abolished justices of the peace – they were paid directly from the fines they assessed! Out-of-town motorists who had the misfortune to end up before a JP almost never left without forking over some cash, regardless of the truth of the case.
No, only the income tax is directly related to the ability of the citizen to pay the tax in ready cash, instead of having to sell assets or borrow money. Is it an ideal system? Hell no. But I feel better about the income tax than any of the alternatives, and I would prefer a world where the only tax was the income tax to one where the income tax didn’t exist.
Define “get by.”
Is it possible for the US government to operate without the revenues generated by income tax? Certainly; you just have to scale back the goverment. Fewer social programs, less military strength, etc… The question is whether this is a desirable change. For instance, I would like to see more money devoted to education; this can’t happen unless you have tax money to spend.
Another possibility is to levy additional taxes to compensate for the loss of income tax revenues. But the inherent problem with this is that it becomes difficult to generate a budget. For example, taxing consumption (sales taxes, import tarrifs) aren’t so great because if you increase the cost of goods, people will buy less. Thus, you don’t have a reliable way of predicting how much tax money you will have available to spend. On the other hand, everyone needs to eat, have a place to live, etc…, and so people will need to generate income to purchase such necessary goods and services. Further, people who enjoy a particular standard of living will not likely choose to revert to a lower-cost standard of living (i.e., taking a lower-paying job). Thus, the incomes of citizens can be estimated (worst case, you simply assume that people will earn as much this year as they did last year) and so you can estimate the tax revenues likely to be generated from a tax on income. From this, you can formulate a budget.
Libertarian wrote:
I was not aware that any of the Federal government’s outlays go to pay lawyers.
… except for attorneys working as salaried employees of the Attorney General’s office, of course.
Well, every single industrial nation has an income tax. But I don’t think we even COULD replce it, even if we wanted to. The Treasury estimates a 20>28% “sales tax” or “vat” would be nessesary to replace the FIT. And that is on top of your State sales tax, for some 30%+. No way are folks gonna pay a 30+% sales tax. The non-compliance would be HUGE, leading to an even higher rate. We would have to seal the borders between us & Canada/Mexico.
Lets not go into pipr dreams, tho folks. We have such a large budget because WE want it. Yes, WE, as in “We the people”. Libertarian can’t understand that, we HAVE a “contract” with our Government, and our Gov’t gives US what WE want. Oh, not what any ONE of us wants, true- give me a few hours with the Budget and a blue pencil, and you’ll see some changes, fersure. But, it is what WE “all” want.
Now, assuming just a normal amount of “fat” cutting, those programs which are mainly pork barrel, ie about 10%, could we replace the FIT with anything else? No, not and have it be fair or feasable. If you think it could be, WITHOUT cuts (over 10%, I’ll give you that), then let’s see it.
And, please don’t come up with that old "the feds did it in the 19th century, so we can now’, unless you KNOW what was taxed, and at what rate, and how you would implement those taxes now, not to mention the large increase in the overall budget.
As you can see, the question isn’t whether it’s possible, but whether people are willing to give up all these government, er, services.
Since you say you are voting for Harry Browne, it would appear that you are at least leaning libertarian, and so agree with those of us who don’t want to be serviced in this way (I feel like I’ve been serviced to the point where it hurts to sit down).
Obviously, there are others on this board who are horrified by the idea.
Which is why this got moved from GQ to Great Debates.
-VM
Libertarian:
While we certainly don’t agree on much it seems obvious to me that you are an intelligent person.
Is it your belief that the majority of the money that the US government spends outside of the country is intended to benefit those foriegn nations?
I find it dificult to believe that your answer would be yes.
Does building a useless nuclear missle defense system on forgien soil count as help? If so yes.
I think the answer to that depends greatly upon a couple of things: (1) what governmental services are REALLY needed, i.e., essential; and (2) how will the public respond to the shifting of taxation to other bases.
First, of course it would be entirely possible to eliminate the income tax, but the country would have that much less money to work with, which would then leave 2 options: (a) cut services; or (b) raise revenue through some other mechanism of taxation.
So, I think in order to make an elimination of the income tax work, you have to be able to convince people to either be happy with less governmental services or be happy paying the same taxes by another means.
In NYC the sales tax becomes around 35%. This is a great way to collapse a thriving economy.
Quick reply to capacitor: replacing income tax with sales tax wouldn’t necessarily stifle the economy, since even though prices would rise, so would after tax incomes. If one raised the same revenue, demand conditions might increase or decrease depending on the distributional impacts of the tax (ie whether the change was regressive, which is almost certain) and the marginal propensities to spend of different income groups.
Proposals to get rid of income tax come from two angles: to reduce the amount of tax that the government can raise; or to do away with certain inadequacies of the tax system that arise from using income as the tax base.
The latter proposals revolve around replacing income tax with some variant of expenditure tax, taking the form of a personal direct expenditure tax, wages taxes or sales taxes (in least to most regressiveness). These proposals were taken very seriously by economists in the 70s but much of the force of the arguments has dissipated.
The former proposals have at their heart a belief that governments will raise and spend whatever revenue is available to them. Public opinion is supposed to be little constraint on the ability of government to do this and limits on the potential revenue available to government is the “cure”.
picmr