WHTT Eliminate the Income Tax for Equal Opportunity:
Note: Readers who prefer a simpler overview of this topic, with some added humor, might want to visit Zero taxes in our lifetime
Children should be assured of an equal opportunity to achieve, but there is no such opportunity in the world today. There are many ways in society in which some children receive significantly greater advantages and much better opportunity to achieve than other children. Different parents provide very different motivation and education resources to their children, both pre school and during public education. Poorer peer groups provide less reinforcement and more distraction. The best teachers are attracted to the more affluent school systems. Children of wealthy and powerful parents are given a better home and college education in the areas of money, politics, and power than children of poorer parents. Finally, children of wealthy parents frequently inherit large sums of money, and start life with more wealth than many other children will achieve throughout their adult lives.
The status quo is a permanent class system in which children of poor parents have little opportunity to progress into the middle class, and children of middle class parents have little chance to progress into the society of the rich and powerful. The opportunities available to a child now depend mostly on the resources provided by that child's parents. Equal opportunity to achieve, however, requires that a child's chances to achieve to its full potential must depend more on the talents and motivation of that individual child than on how wealthy and powerful its parents are. But the status quo can be changed to make opportunities more equal for all children.
It is true that parental diversity is inherent within the freedom to raise families. Parents will inevitably have different values and different motivation levels, so those factors will never be truly equal for all children. However, other pages within this WEB site will describe how society can dramatically reduce the inequity in opportunity by preventing most socially irresponsible people from raising children who have little motivation to learn or desire to achieve. The overall level of education will improve, and so too will the motivation of all children to learn and to achieve. This improvement will be directly reflected in the amount of support and reinforcement which peer groups provide to the children within those groups. Peer groups which now stress drugs, gang war, or criminal activities will essentially vanish and be replaced with peer groups which place a higher value on achievement and success through academic pursuits. Instead of being a detriment to the child's progress and intellectual growth, the new peer groups will provide much less distraction and far more positive reinforcement for children's development. Similarly, the concentration of very poor children who have no motivation to learn or to achieve will rapidly diminish. This reduction in the most difficult of school problems will provide an opportunity for schools in urban poverty areas to dramatically improve the quality of their educational product. That improvement, combined with a funding plan which promotes truly equal educational opportunity, will return some of the best teachers to schools which can now attract only lesser quality of teaching talent.
The benefits given to children of wealthy parents represent huge inequities in different children's opportunities to achieve. Children of wealthy parents grow up with a much better education and an enhanced sense of self worth. Children born to poor parents have deficient nutrition and health care, weak motivation, a sub-standard education, and low self esteem. Most babies are born to poor or struggling middle class parents who must continually juggle their resources to just keep food on the table. Conversely, a small number of babies are born to very wealthy parents who can afford any luxury they desire. Babies born to rich parents begin life with an incalculably greater opportunity to achieve than babies born to poor parents. Richer parents provide their children with a more diverse environment in which to grow and learn, healthier diet and living conditions, greater ambition, a better education, and an enhanced self image. Those inequities are inherent within the family structure and the diversity between different sets of parents, and are not possible to be made equal for all children.
There is, however, one other source of massive inequity that easily can, and must, be fully eliminated. Babies born to rich parents begin life with a possibly immense fortune that they will inherit. There is absolutely no justification in an equal society for permitting some babies to be born with more wealth than most adults can possibly earn in a lifetime of hard work. There can never be equality of opportunity between babies born to poor parents and babies who will inherit great wealth from rich parents. All children should begin life as equitably as possible with a good education, but with no other inheritance. Then all people should be able to keep all the money they earn in life without being subjected to an inequitable income tax structure that has more loopholes than the tunnels in a ton of Swiss cheese. After each person dies, all of that person's wealth should revert to the source from which it came, the people via the government. Appropriate controls would be needed, of course, to prevent people from giving away their money, hiding it in other countries, or even from spending it foolishly before they die. The wealth accumulated during people's lifetimes should only be theirs to use wisely and productively until they die, then it should revert to all of the people from whence it came. Interestingly enough, implementing this proposal would pay off much of the national debt by reclaiming for the American people the immense fortunes accumulated by many wealthy families.
The 100% inheritance tax should be combined with a sensible energy policy to reduce the incredible flow of American dollars to Arab oil producers. A simple, but effective, energy policy would be to place a high tax rate on the use of energy, so that less energy would be wasted, and all energy would be used more efficiently. An energy tax would be automatically graduated to levels of affluence, because rich people would use more energy than poor people, so the wealthy would pay more energy tax than the poor. However, everyone uses energy everyday, so everyone would pay their share of an energy tax. The energy tax would be high enough and slowly raised or lowered to maintain an approximate balance in the government's budgets. If the people voted to increase the government budget, then all the people would pay for that increase through a higher energy tax. The combination of regaining the wealth from people who die, and a variable energy tax to balance the government's budget, would provide the government with an opportunity to practice financial sanity for the first time in many, many years.
As described above, a high tax rate would be collected on the consumption of energy. The transition would be eased by starting the initial energy tax rate at a modest level of perhaps 10%, and then increase monthly in small increments until the final energy use tax is sufficient to balance government budgets. Since luxury boats, planes, cars, ski lodge condos, and penthouse apartments all consume high levels of energy, the rich would pay more of this tax than the poor. Perhaps even more important than tax revenue would be the effect on national consumption of energy. An ever increasing energy tax rate would encourage everyone to use energy more efficiently. There would be a dramatic reduction in oil energy imported from foreign nations, so the national balance of payments would have a major improvement. Similarly, there would be much less demand for electrical power, so very expensive peak load generators would not be needed, and the pre tax cost per kilowatt of electrical power would decline significantly. Last, but far from least, a major reduction in the consumption of energy would result in significantly less pollution, and thus directly translate into a substantial improvement in the environment. The nation would be a much healthier place in which to live, both physiologically and financially.
The current tax structure is a very complicated patchwork which is roughly based on a percentage of earnings, but with many exceptions and exemptions and reductions which make computation of one's tax bill more an art than a science. A simplistic view of the result of the current tax structure is that poor families stay poor, but rich families get richer and pass that wealth from one generation to the next within the same family. It is this retention of wealth within families that makes it impossible for poor children to have an equal opportunity to achieve.
A different tax structure would be simpler and far more equitable to children of future generations. Instead of using a complicated formula to tax a percentage of current income, the simple structure would be a one hundred percent inheritance tax. During their working life, people would be permitted to retain all of the money they earn from any legal source, whether from work or investment or gambling or whatever. When a person dies, that person's wealth would be adjusted for a surviving spouse, with the remainder transferred to the government. Thus, while alive and working, a person would be able to accumulate and retain wealth without having it taken away prematurely by income taxes. In return for that gain, the person would lose the ability to bequeath an estate to children. That will directly improve the equality of opportunity for all children since children of rich parents will no longer inherit large amounts of money. The result of this tax simplification is that wealth will no longer be concentrated and retained in a few rich families over many generations, but instead will be more evenly divided across the nation. All children will have a more equal opportunity to earn more, to acquire wealth, and to prosper during their working lives.
One unusual feature of this tax proposal is that all children would have a financially equal opportunity to achieve a college education with present costs paid out of taxes which will not be collected in the future. This would be accomplished by having parents pay college tuition, fees, room, and board at a rate proportional to the parent's wealth. College admissions would be based on scholastic aptitude rather than on ability to pay high college fees. Thus, bright children from poor parents would have a financially equal opportunity to enter the best colleges.
The transition from an income based tax system to a structure based mostly on a 100% inheritance tax can be accomplished with little difficulty. The national energy taxes could be quickly phased in over a few years. Anyone who had not received an inheritance prior to the beginning of the transition phase would be permitted to phase out payment of income tax over a similarly short time interval. People who had previously received an inheritance would be permitted to repay the government the full and current value of the inheritance, and then phase out the income tax they must pay, in the same manner as those who had not received any inheritance. Alternatively, those people who received an inheritance prior to the start of the phase in interval would be permitted to keep all of that inheritance, but they would be required to continue paying income tax at a full undiscounted rate for the rest of their lives. All inheritance wealth generated after the phase in process was initiated would revert to the government.
There are obviously many details to be developed to fully implement the proposal to replace the current tax system based on income with a new tax structure based on a 100% inheritance tax and a national energy tax. However, the rewards to be obtained more than justify the work needed to define those details. First, all children would be born with a far more nearly equal opportunity to achieve to their natural potential. Second, there would be an immense flow of wealth from the few rich families to the government as this proposal is implemented. That flow of wealth would dramatically reduce the nation's national debt and budget deficit for several years, without causing a national recession. This relief from the economic pressures of immense budget deficits would be a time window in which the national government could put its financial house in order. It is an inevitable financial disaster for any individual, family, community, or government to continuously spend more wealth than it receives. It is hoped that the financial relief provided to the government by this tax plan would be accompanied by an equally significant change in the government's priorities so that borrowing would be almost eliminated and spending would be limited to available revenue. This tax plan offers the current best hope for returning the government fiscal system to financial sanity.
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