complex problem there is usually a trade off for that simplification. Simple solutions offer many advantages, particularly in efficiency and thus cost savings; however, they seldom allow for or adequately address all of the exceptions or provide perfect equality in their application. Complex solutions are, on the other hand, by their nature usually inefficient and often more difficult to administer; however they do typically attempt to accommodate many exceptions and often with better equality. But which one is really better?
To illustrate this concept, imagine a situation where you want to clean the germs in your shower at home. A complex solution would be to hire a team of scientists and a sophisticated laboratory, locate and identify all of the germs and employ a variety of different chemicals each targeted to kill each specific germ identified. The procedure would take an inordinate amount of time and expense; but probably would kill 99.98% of the germs thereby getting you very close to your goal, but at great expense. Or, the simple solution would have been to use some low cost chlorine bleach over the entire surface area and be content with killing 98% of the germs having never identifying where or what germs you killed; only trusting your simple solution solves the basic problem. Did you treat all the germs equally? No. But did you satisfy your goal? Yes.
The reader needs to understand this basic fundamental concept of why it is often actually better in many situations to apply a simple solution, even if the final outcome is shy of perfection or there is a potential of relative inequities, than it is to have a complex solution trying to achieve perfection and equality.
Taxes
Nothing seems to command the attention of people more than the topic of money. Jesus knew this well which is why most of Jesus’ parables related to money; even though he was trying to teach his followers a higher lesson. People seem to listen more when you talk about money.
So imagine for a moment if a simple efficient tax system was in place. By it shear efficiency, would not society as a whole be financially better off? To start with, just think of the savings to the economy just by eliminating the manpower spent by the IRS and the countless accountants and lawyers working to either understand the complicated tax code or finding ways to avoid paying taxes for their clients; then, you can begin to appreciate the potential savings to society of a simple tax code.
Ask yourself, if given a choice, which system would you rather live under in taxation. Like the example of the two Chicken Farmers, one system which has a simple set of tax rules, and because it is more efficient for society as a whole, the average net income (after taxes) ends up being higher for everyone; but there may be some inequities of tax burden. While the other system, our current system, has complex rules and is inefficient and has a lower average income for everyone; it does, however, have fewer inequities (or at least we would like to think so, no one really knows for sure). For example, let’s say that typical citizen under a complex tax code pays an average tax burden of 20% of their income of which approximately 5% of the 20% collected is used to pay for the cost associated with the collecting (or avoiding) the tax and minimizing inequities. Now imagine living in a society with a simple tax code, where perhaps only 2% of the tax was needed to offset the cost to collect the tax and many inequities were tolerated. All things being equal then, the average citizen now only needs to pay 17% tax, boosting their income by 3%. Is not the average person better off?
Even if, because of the simplicity of the tax code, you happen to be one of the unfortunate taxpayers who ended up “paying more than you fair share” by let’s say 2%, you would still be better off, paying only 19% tax instead of 20% tax. Your heartburn may be that you know someone else was fortunate enough to pay “less than their fair share.” But does it really irk you enough that you are willing to pay even more tax just to make sure that the other person pays an equal amount? Neither of you is profiting from this. Under the simple tax system you are still financially better off than if you were under the complex tax system – so why should you really have a complaint?
Thus, it is argued that the average taxpayer would be better off financially living under a simple taxation system then they would be under a more complicated tax system even if they were the ones paying a disproportionate share of the tax burden. Many politicians have run on the promise of simplifying the tax code because it appeals to the masses, mainly ones with average incomes, and that promise helps get them elected. Every year we elect them hoping for a change, yet, it never seems to get implemented. Why?
Unfortunately, there are two groups that believe that the simplified tax code would be particularly unfair to them; the rich and the poor; so the measure to reform the tax code usually gets thwarted. While the poor may be often ignorant and fearful; and it is difficult to explain to them that a simplified tax code will benefit them too. It is hard to explain that the simplification of our tax code does which might have inequities is still better for them because they would probably be paying less than they would under the current complex tax system. All they hear is “inequity.” Society as a whole pays a heavy economic burden because of this ignorance believing that the best taxation system is one that is perfectly equitable, not one that is the lowest. Unfortunately, you can’t fix stupid. The group of poor ignorant taxpayers is usually the one who supply the votes to the elected representatives who keep tax simplification from occurring, because the elected officials are ultimately swayed by the one group who really fears the ramifications of a simplified tax code the most – the rich. Why do you think the richest representatives supported by the richest lobbyists seem to be so concerned about the equity and individual rights of the poorest group of people? They aren’t saints, the want their vote, and they fool them into voting for them with promises of equality and protection of individual rights. And the elected representatives deliver on his promise of equality, because the poor do get equally poor. The majority of citizens cannot afford what the rich can – hiring tax lawyers and accountants to find ways to postpone, minimize or even avoid paying taxes. So who do you think really has the most interest in keeping the tax system complicated? It is not the majority of the people who want a complex tax system; it is the very rich, because a complicated tax code allows them to pay less tax relative to their income. Ironic, isn’t it? In the attempt to make things fair for everybody, the equality makes things worse for everyone except those who could have best tolerated the inequality!
Consumption Tax
It is recommended to simplify our complex set of tax laws it would be best to create and impose a general tax to pay for all government services through the use of a consumption tax on all raw materials and a sales tax on all finished goods sold to the end user. Eliminate all other forms of taxes, such as income tax, property tax, inheritance tax, capital gains tax, corporate tax and so forth. In effect, there is only one type of tax: a consumption/sales tax on all items considered “consumed.” This tax is often is referred to a “virgin” tax.
A consumption tax would essentially be on all tangible goods which are removed directly from the earth such as harvested crops, livestock, lumber, water, fossil fuels and mined minerals. The tax would be issued at the time the good was sold into production or otherwise consumed. A similar type of sales tax would also be imposed upon on all completed items for consumption, such as a manufactured product like a television set. The consumption tax proposed is not a “value added” tax; but simply an initial tax on all raw materials and a final sales tax upon a completed good consumed by the end user. The sales tax is applied only at the point where the product is considered to be consumed, either by an individual or a company or an organization; and, when its value is expected only to decrease further because of its use. For example, a television purchased for home entertainment or an automobile for business or personal use is considered an item to be consumed by the user; its value will only continue to decrease. Paper and ink purchased by companies are likely to be considered consumed items even if used by a company in t
he production of something else because it basically makes them unusable to anyone else. They cannot be re-used or turned back into raw goods or forwarded on to be used again.
However, items purchased only to resell later or to be embedded into another object that still in effect preserves the original value of product or has not significantly diminished its value are not subject to a sales tax because they have not yet been consumed. For example, a car manufacturer who purchased steel for the production of an automobile does not pay a sales tax on the purchased steel because it was incorporated into another product which has not yet been consumed and because the process could be considered reversible. Likewise, its product only serves to increase the value to the user, the creation of an automobile. The steel in the car could be reprocessed into steel again. However, any steel not salvaged and reused and was simply thrown away, probably as a result of the manufacturing process would be subject to a final sales tax because it was consumed. Thus eliminating waste in order
You Can't Fix Stupid. Page 3