2017 Apr 15^th

April 15^th is the awful day when taxes are due, but not this year. Although separation of church and state is specified in the constitution, a well known religious holiday, the Easter Weekend, has caused a delay of this obligation until April 17^th; few strict constitutionalists are objecting.

Of various crimes against the state, from treason on down, failing to pay your income tax is not particularly shameful. There are organization that advertise on TV that claim to negotiate down the amount of tax and penalty you owe the IRS. These ads feature very ordinary looking citizens who claim that they have paid no income taxes in year, that they had owed thousands of dollars in back taxes and that this fine group had settled their debt to the government for pennies on the dollar.

We do not hold IRS agents in high esteem. This is not the case in other countries. Japanese television has a program in which the heroine is s young attractive government revenue agent whose job it is to bring tax cheats to justice. She is shown on a motorized scooter chasing a miscreant in a Maybach through the back alleys of a Japanese city. Any similar program would be impossible in this country.

The big deal here is tax reduction. President Trump is all for tax reduction and his emphasis is on reduction for those poor abused souls who pay the largest tax; naturally they should get the largest tax reduction and not just in absolute terms but in percentage terms as well. Trump’s plan to eliminate the estate tax will be a huge boon to his children and to his grandchildren. When a politician says that he will reduce taxes we should ask him/her what programs supported by this now absent tax money will be reduced or eliminated.

There is one method of taxation we haven’t tried in this country which is used with success in Europe and that is form of consumption tax called a value added tax. This tax is not all that noticeable because it is collected in stages during the manufacturing and then the sales process. A woolen mill sells a bolt of cloth to a tailor. They bought the yarn, died it and wove it into cloth. The difference between the value of the dye, the yarn and the value of the woven result will be taxed and that tax will be paid by the mill when the bolt of cloth is sold to a tailor. He, in turn will fashion some of that cloth into a jacket and the difference in value between the cloth and the jacket will be taxed when the jacket is sold. Does it sound complicated? It does and it is. But many countries use it.

There is another possibility and the mere suggestion of it could decimate my readership…but here it is: Why not a tax on net worth? The critics might answer that you’ve paid tax on your income as you acquired your net worth so this is taxing the same money again. Not always; dividends from municipal bonds are not subject to any federal income tax. Corporate income is taxed and then when distributed as dividend income it is taxed again. Money in an IRA can increase with no tax consequences until the owner reaches a certain age.

About 1 percent of the population has a net worth over 8 million dollars. You could start a net worth tax at a 1 percent from 10 to twenty million net worth, gradually increasing it to three percent at the top. I have no idea how much tax this would generate but it would surely get more money in circulation.