To me it's plain that of all The Beatles, George Harrison was the best musician. Controversial, no doubt, but it's undeniable—having compared the songs that he wrote to the ones written by Lennon, McCartney and Ringo many times over—that his songs were the most insightful, pleasant, heartfelt and wise. I would argue Harrison wrote most of their best songs despite contributing a small percentage of the total: Something, Here Comes The Sun, Savoy Truffle, While My Guitar Gently Weeps. (If you require further evidence compare John Lennon's famous solo tune Imagine—pseudo-intellectual, arrogant, ill-construed drivel that it is—to Harrison's Give Me Love (Give Me Peace On Earth), which is a hundred times more beautiful, wholesome and radiant with the spirit that will actually make the world a better place.)
He also wrote another of their best: Taxman, which is both hilarious and incisive. In the spirit of fully enjoying it, and using it as a springboard to more than mere amusement, let's consider the nature and role of taxation and how it might be leveraged for a more harmonious and just society. The tune begins:
Let me tell you how it will be
There's one for you, nineteen for me
Cause I'm the taxman
Yeah, I'm the taxman
Should five percent appear too small
Be thankful I don't take it all
Governments are kept afloat by the resources they extract from the public. How much they take, and the manner in which they do so, has momentous implications for the structure and character of a nation. If we are to have a government at all it must be funded somehow. The concept of taxation, in my view, is not inherently bad or destructive; yet, as in so many other cases, our contemporary approach to it is supremely wasteful and insufferably arcane, an insidious parasitism that does little to foster the common good.
Most don't even realize how many taxes they're paying. We're all familiar with income and sales taxes, which are exorbitantly high in many Western countries, but how many people realize that their utility bills, their rent, the phone bill, airplane tickets, college tuition, gasoline and food bought at a restaurant are significantly inflated by hidden taxation? How many have noticed the growing prevalence of "sin taxes" on things like alcohol, cigarettes, gambling, and even sugary beverages? Owning a dog, going to a concert or the movie theater, checking into a hotel or taking a taxi across town; all of these are taxed heavily in multiple cities and states in the US. Of course we as consumers are rarely aware of it, as they are baked into the price of the goods and services we consume and usually do not appear as line items on our bills. The cost of this surreptitious taxation is invariably passed onto we the consumers, and we are then charged sales tax as a percentage of the artificially inflated base price—how cunning! Recently the Biden administration proposed a tax on people having the audacity to drive their cars, based on the mileage driven. (To save the environment, of course.)
If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold, I'll tax the heat
If you take a walk, I'll tax your feet
Taxman
There is a great deal of sophistry in play. Modern politicians, slimy invertebrates that they are, have mastered the art of vampiric subterfuge. They bleed their constituents dry in a way that is difficult to detect, their thieving obscured either by legal contrivances or moral grandstanding. One way or another the spoils are reliably funneled into a generic slush fund that can be spent in whatever way government administrators see fit. That they often see fit to increase their own salaries and benefits, or to purchase lavish dinners at high-end restaurants, or copious amounts of top-shelf alcohol, ought to surprise no one.
There are fundamental problems with our current taxation scheme. The American Revolution was motivated in no small part by excessive taxes levied by a government which the colonists had no real power to influence or change. Resisting "taxation without representation" is a sound principle, but, as the centuries since that revolution have proven, it does not go nearly far enough to reign in the excesses born of government chicanery. To have voted for the man who fleeces you may provide comfort to some, but when every candidate on offer increases the tax burden in one way or another it seems to me a Pyrrhic victory.
Don't ask me what I want it for
If you don't want to pay some more
Cause I'm the taxman
Yeah, I'm the taxman
There are several key concepts that would render our taxes markedly less oppressive and more conducive to the public weal, were we to implement them sensibly:
(1) Transparency as to how the taxes we pay are actually spent and showing any taxes relevant to the cost of goods and services we purchase on the bill
(2) Tax choice, having some say in where a portion of our individual taxes go
(3) Hard limits on taxation which cannot be exceeded
(4) Taxes conditional on exceeding a tax-free threshold
(5) Localism, highest taxes reserved for the community in which one lives, smaller and smaller taxes as one moves further away from the locality
(6) Maximally simple tax code, radical reduction of exemptions, write-offs and loopholes
Firstly, transparency is what makes it possible for the public to have confidence that their taxes are being utilized for their benefit, and to know in what circumstances they are actually being taxed. In the absence of transparency there are only vague and indirect indicators that the money taken by the state is actually being invested for the benefit of the citizenry, and the costs these taxes impose on us can remain entirely hidden. This vagueness is precisely what allows ghoulish bureaucrats to abuse the system, to inflate their departments to monstrous proportions, and to underperform in all of their duties while still receiving generous salaries and benefits.
Every single tax that has factored into the cost of something we buy ought to appear on any receipt when purchasing it, not just sales tax. Including the ones that are given euphemistic names or not mentioned at all, as can be seen on utility bills, phone bills and so on. Every such line item would include "TAX" in its name, as well as what level of government levied it (e.g. city, state, federal). Departments of government should have to publically publish their account books and show where that taxpayer money went. Shining some much-needed light on this den of vipers is essential if we wish to reform it. There would of course be some exceptions for reasons of security, as it would be reckless to publically display every line item expenditure the military or law enforcement is making, but they would be the rare exception to the rule.
Second, tax choice is something I never see discussed, which seems very strange. It's a very simple idea which could radically improve the efficiency of government. Those who are paying taxes should have a say in where most of that money is ultimately spent. One of the main reasons so much corruption is found in government is that taxpayer funds get sent into generalized funds that have few or no restrictions on how the money can be utilized. The excesses and abuses of this policy are manifold and easily obtained by a few hours of research. Suppose when filing each year you were able to choose what percent of the taxes you are paying went into infrastructure, emergency services, education, healthcare, or the military? Suppose further that the manner in which each department could spend the money they received was well-defined. This would immediately create incentives for the various branches of government to perform well in their respective duties. If they are suddenly accountable to the people actually paying the taxes, and must compete with one another in order to get desired funding, the whole dynamic changes for the better.
Suppose you end up paying $10,000 in federal taxes for the year. In order to ensure the preservation of basic commerce, national sovereignty and the rule of law let's stipulate that everyone must contribute a minimum of 10% of their total taxes to infrastructure, emergency services and the military (in this case, $1,000 to each). That would leave you with $7,000 to distribute as you saw fit. You could give $2,000 more to the military, $3,000 to government-run healthcare initiatives, and $2,000 to public education. The choice of where that money goes, beyond that initial requirement of some percentage invested in services crucial to the preservation of the law and country, would be ours.
Would that not make the average person feel far more involved in and a part of society? Why would anyone in their right mind want to rely on some feckless shill that was elected to "represent them" when they could make an informed choice with their own tax dollars? There could be a further statute that tax choice must always compromise at least 50% of the total taxes paid, so that the hobgoblins of the political class cannot slowly chip away the choice portion of taxation into nothingness. That is, if you paid $10,000 then it would be flatly illegal to automatically take any more than $5.000 out for those aspects of government deemed essential. The numbers and deparments that can be separately funded could vary, the devil is in the details, but this is the rough idea. Give the taxpayers far more say in where their money goes, incentivize government to become more efficient, effective and transparent, and approach truly representative taxation that does not rely on unctuous, readily corruptible middlemen who make backroom deals at our expense.
Another crucial aspect of reforming taxation would be hard, legally-codified limits as to how much taxation may occur. Imagine that it was not allowable for sales tax on any transaction to ever exceed 10 percent. That is, the sum of every single local, state and federal tax on any purchase could never exceed 10 percent of the base, tax-free cost. It could be less, it could be exactly 10 percent, but it could never be more. The end. Suppose the same thing were true of income tax. Reassuring, no? There would be no point at which this limit may be exceeded, even "temporarily." Even in a time of war, or a famine, or an actual pandemic. Literally never. If the government truly requires more money and their tax income proves insufficient, it can kindly ask the citizenry to voluntarily contribute more to the effort. If the citizens really love their country and trust that the government would use the funds well, this should work. (Bear in mind, with tax rates that low these citizens would generally be far wealthier than we are.) If they don't, and this results in ruin, I suppose the whole experiment deserved to fail. I'd say it's worth a shot.
A further perk of the hard limit is that in order for the government to increase its income it must foster the economic flourishing of the citizenry. If they can never take more than 10% of our income, it benefits them to get us earning more money, as their 10% cut would then be a more substantial sum. They cannot, as they do so often now, merely suck more blood out of us to make up for their own failings. Their success is now far more contingent on our success. This may be the only way to stop the criminal elements of the business and political classes from getting their way at the public's expense in the long run. Absent this unyielding protection the tax-hiking encroachment, on whatever specious rhetorical basis, will inevitably build to gargantuan stature with time. The very same system could be applied to taxes on corporate entities, but the allowable tax could be different than it is for individuals. I think it would make more sense to tax corporations a bit more heavily than individuals while still keeping the taxes as low as possible. For example, if we had an individual limit of 10% income tax the corporate rate might be set at 12%. Capital gains, money made from selling assets like stocks or cryptocurrency at a higher value than what they were bought for, would merely count as further income. (If you bought 1,000 shares for $10,000 and sold them when they were worth $30,000, you would simply add $20,000 to your income for that year and it would be taxed like any other income source.)
Tax-free thresholds, while they do exist in our current system, could be leveraged far more effectively. By tax-free threshold I mean that there is some amount of non-taxable allowance for things such as income or property. Suppose we determine the poverty line is at $20,000 a year or less. For income tax we could have the first $20,000 be totally tax free for every single person. If you make $15,000 a year, you would not pay any income tax. If you made $25,000 you would pay income tax on $5,000 a year, and if you made $1,020,000 a year you would pay income tax on $1,000,000. Fair and simple enough: the first X amount is untaxable to ensure that the most disadvantaged are not taxed out of essential funds for living. (This already exists in the US, though the dollar amount is lower.)
A similar scheme would also make sense for property taxes. Suppose that every citizen in the US were allowed to own up to 5 contiguous acres of land that could not be taxed. (This would mean we actually own the land, rather than renting it from government. It is absurd that we cannot actually own property. I discuss this point more thoroughly in The Great Inversion.) The acreage would need to be contiguous to disallow crafty citizens from buying extremely expensive homes on 1-2 acre lots and trying to split their 5 acres out across multiple properties, avoiding tax on all of them. For this reason the tax-free stipulation can only apply to a single contiguous piece of land. Any amount of land beyond that initial 5 acres would be taxable, and the rate at which the taxes grew could be non-linear, to make it very costly for a small group of people to own large swaths of land. This would combat the ability of a super-wealthy elite to buy up huge tracts of land while ensuring that families who bought a small plot actually owned it and couldn't be kicked off of it for not paying the state in perpetuity. This alone could arrest the disturbing development of corporations and the wealthiest members of society buying up more and more of the land the world over while average citizens and families have less and less. The gobbling up of all real estate by the rich and powerful is a well-beaten path to serfdom which no sane person would tread.
Localism in taxation would also be a great boon to society. Nothing guarantees waste, arbitrary tyranny and corruption half as well as funneling resources from one part of the world into the hands of unaccountable administrators half a world away, who have no care for or familiarity with the locality from which the funds were taken. The European Union is a fine example of this corruption run amok, as the citizens of Europe are (very) slowly realizing. The federal government of the United States—a towering monolith of inefficiency, short-sightedness and corruption if ever there were one—is another.
Suppose our system were the exact inverse of the idiocy that prevails in the United States at present: Rather than having the lion's share of our taxes go to the federal government, a modest amount to the state, and the smallest amount of all to our city, what if our taxes primarily benefited the locality we actually live in? Our city would receive the biggest cut of our taxes, the state less than that, and the feds the least of all. The further away one goes from the place in which the income was earned or the purchase was made, the smaller and smaller the cut of that income or purchase becomes. This would ensure that those who end up spending most of our tax dollars are also members of our community. It would be much easier to hold them accountable. They would have access to crucial context, which would inform the way in which the funds are used, just by living there. It would give them much-needed skin in the game; even self-serving, entitled, acquisitive people want the city in which they personally live to flourish.
A local bias in taxation would also have a tremendous impact on the productive competition between different regions of the country. There would be a powerful incentive to keep city and state taxes as low as feasible, and to use those funds as efficiently and productively as possible, because if a neighboring city or state had lower taxes or spent them more wisely, and those were the great majority of the taxes we all pay, it would be far more tempting to leave a city or state which taxes too highly or doesn't utilize their taxes well. Currently, since the feds take most of the taxes wherever we are, the differences between one city and another or one state and another are comparatively minor. This reduces the competition between local and state governments to do a good job with the fewest resources possible. The localist tax scheme would have the very opposite effect. Imagine city and state governments actually having to compete to keep their citizens happy, to judiciously oversee the manner in which they levy and utilize our taxes; it sounds almost utopian!
Consider a simple example: Suppose we have a hard limit on income tax of 10%, in line with the previous example. We could, from there, dictate a few more simple rules to skew the taxes in a localist way:
(1) Any city taxes collected must be less than or equal to 40% of the total allowable tax
(2) Any state taxes collected must be less than or equal to 35% of the total allowable tax
(3) Any federal taxes collected must be less than or equal to 25% of the total allowable tax
This means that with a hard cap of 10% on total taxes the most a city could tax a person's income would be 4%, the most a state could tax would be 3.5%, and the most the feds could tax would be 2.5%. If the hard limit were 20%, it would be city max 8%, state max 7%, and federal max 5%. You get the idea. It would be quite alright for the city, state or federal governments to tax at rates lower than these maximums, which, at least in the case of cities and states, would encourage the aforementioned competition among different regions of the nation. If we lived in a highly efficient city and state with a nationwide hard limit of 15% total income tax, and the feds decided to max out their portion, we might pay something like 3% city, 2.5% state, and 3.75% federal. If we lived intead in a different state and city that had also maxed out their portions we would be paying 6% city and 5.25% state along with that 3.75% federal—a 15% income tax versus the 9.25% of the more efficient city and state. A substantial difference, one that could well motivate a person to move (and take their tax dollars with them).
The same could apply for sales tax, where the hard limit or proportions each level of government can get might vary, though it would still follow the same localist distribution. Note that despite the state and federal levels having lower allowable taxation than the cities they would still rake in far more money than any individual city, as each state encompasses many cities and the federal level encompasses all states. This ought to be enough to justify the true functions of the higher-level governments while ensuring a far less top-heavy distribution than what is currently in place in the US.
Finally we come to what may be the most important principle: radical simplification of the tax code. The titanic quantity of human energy that has been squandered on codification, interpretation and manipulation of the United States tax code alone could likely have cured all disease, ended world hunger and solved several intractable difficulties in mathematics and computer science. It is an insane and inexcusable frittering away of valuable time and energy, which benefits only the parasitic scum that pay for lobbyists, those wealthy enough to hire a team of accountants to game the system, the soulless functionaries that actually draft and enforce the rules, and the legions of accountants whose only role in society is helping others take advantage of a grotesquely recondite system that ought not exist at all.
This in no way serves the common good and the whole affair would be a thousand times less stressful, corrupt and tedious if it were drastically simplified and made illegal to complicate it beyond a very conservative starting point. There would be no writing off of expenses. Ever. No writing off donations or giving to charity. No writing off business expenses. No loopholes to exploit. You pay the percentage that is in place as constrained by the aforementioned principles. There could be some extremely simple and minimal tax benefits. Two come to mind which actually would be conducive to the public weal:
(1) Married couples would get an additional 50% of the base individual tax-free income. That is, if the tax-free portion of income were $20,000, which they both receive, then they would get an additional $10,000; thus $50,000 tax-free.
(2) Couples with children would receive an additional 25% on top of the base tax-free income per child under the age of 18.
Take the case of a married couple with 3 children: With a base tax-free income of $20,000 each they would receive and additional $10,000 for being married and $5,000 for each child, totalling a tax-free buffer of $65,000. This would relieve financial pressures on lower-income families while still giving those in the middle and upper classes the same benefit. The only way this could be "gamed" would be by getting married and having a lot of children, while also making enough money to render the extra tax-free income meaningful. The incentive is modest enough that it wouldn't be worth having children or getting married merely to get the additional tax benefit. If a couple jointly earns $120,000 per year and they decide to "game" this system by getting married and adopting 4 children, they would go from paying taxes on $80,000 ($20,000 tax-free each) per year to paying taxes on $50,000 ($20,000 tax-free each, $10,000 for marriage, $20,000 for 4 kids). Assuming a total income tax of 10% that would mean they go from paying $8,000 to $5,000. A nice savings, to be sure, but not even remotely close to covering the expenses of 4 children. There wouldn't be a meaningful way to game something this simple, yet it would still help those in need and provide an incentive to start a family.
I can already hear a chorus of imbeciles bemoaning the fact that they wouldn't be able to write off business expenses or their "charitable" donations, but the objections ring hollow. The benefits from keeping the system extremely simple and the overall tax rates low would dwarf any modestly helpful incentives these easily hackable loopholes, exemptions and write-offs currently do. It would do much to curtail the colossal waste of human energy already mentioned.
Perhaps you think this wouldn't result in the rich "paying their fair share"? I disagree. Firstly, the current taxation rates for the highest earners and massive corporations are largely fictional, in that the obscurantist complexity and fluidity of the current system allows anyone with enough accountants to pay many times less in taxes than they theoretically ought to. That would no longer be possible in this system. Secondly, they would be paying their fair share. If a rich man earns $5,020,000 per year, and the average person makes $60,000 per year, both of them would be paying exactly the same percentage of their income after their initial $20,000 deduction. With a total income tax of 12% this means the rich man would be paying $600,000 per year and the average earner would be paying $4,800. Percentages possess the wonderful property of scaling with the values that they operate on, so the rich man is in fact paying his fair share, despite the tax levied on both being the same. Since there would be no wiggle-room to avoid the taxes as in our current system, moreover, the rich man would actually have to pay it. What a concept!
Has this bored you to tears? I should hope not, as it's really very important to discuss these things if we want to make a better world. This is only a rough outline of how taxes could be reformed, but I think every principle presented here deserves serious consideration, and that implementing even one or two of them sensibly could radically alter our societies for the better. Would it be a monumental undertaking to change the current system, which has as much inertia as any institution that has ever existed? Absolutely. I'll not pretend this is a simple or likely change, but the journey of a thousand miles begins with a single step, as Lao Tzu said, and we have to begin to discuss these things candidly and openly in the public sphere if we ever expect them to change.
Or would you prefer to content yourself with griping and groaning about how much you hate taxes instead, paying more and more with each passing year, losing more and more ability to direct your own life and finances as you see fit, inexorably sliding into serfdom? Complaining about taxes can be amusing and stress-relieving, but it fundamentally changes nothing. Let us discuss how things could be improved, let us experiment and model different possibilites; with persistence and a bit of luck it will slowly work its way into the public's consciousness. When a certain threshold of awareness is reached there may well be some hope for seeing the best of those ideas implemented in reality. That, or we can continue to blithely stumble down the current road, which leads only one place:
Now my advice for those who die
Declare the pennies on your eyes
Cause I'm the taxman
Yeah, I'm the taxman
And you're working for no one but me
Choose wisely!