By Abdul Hakim-Shabazz
Republicans in Congress are about to begin negotiations on tax reform, and as someone who considers himself a practical, moderate conservative, they’re getting it all wrong.
Abdul Hakim-Shabazz is an attorney and the editor and publisher of IndyPoltics.Org.
Now don’t misunderstand me, I am a big fan of cutting corporate tax rates. I firmly believe, and the data is out there to show, that reducing corporate tax rates makes America a much more competitive job market when it comes to business. I am also a fan of simplifying the tax code.
However, if the GOP wanted to hit out of the park and do real tax reform, they would get rid of income taxes altogether and replace it with a commercial transaction tax.
Of all the taxes a government can levy, I have always found an income tax to be most morally reprehensible. I firmly believe that it’s your money. You worked for it, and you should be allowed to keep as much of it as you want to do whatever legal thing you want to with it.
The way a commercial transaction tax works is that you only pay the tax when you engage in a commercial transaction. So whether you’re buying groceries, a car or a TV, you pay the tax. And you get to keep all of your paychecks.
The commercial transaction tax should not be confused with the value-added tax, which applies predominantly to goods which are taxed at each stage of production or the “fair tax” which is a tax only on retail sales. The commercial transaction tax is applied to all commercial transactions, whether there be goods or services. In 2016, the United States annual gross domestic product (the value of all goods and services) is more than $18 trillion. If you take just three percent of that, you have $540 billion. And that GDP only includes new products; this does not count the sale of previously used goods nor stock market transactions. And if you think about the trillions in stock and financial transactions that take place in this country annually, eventually you start talking about real money.
Now, of course, some folks wonder what about “the rich” and will they pay their fair share? Yes, they will. Because when the rich buy expensive cars, homes or jewelry, they will pay the commercial transaction tax. And for you social justice warriors out there, when the rich get disbursements from their investment portfolios, they will pay the tax as well.
Also, under this plan there are no exemptions or deductions, per se. If it’s a commercial transaction, you pay the tax on the transaction. The only “exemption” if there must be one is gifts, for either family members or charities. This protects inheritances as well as charity. Of course, the rules would have to be tight enough, so someone doesn’t transfer millions of dollars of stock to someone and try to label it a gift. If I may paraphrase scripture, the tax cheats will always be with us, but we can disincentivize cheating as much as possible. And I think since everyone will keep all of their paychecks, most of the motivation to cheat is gone.
And here’s something else to ponder, a commercial transaction tax can even reach the underground economy because even drug dealers and hookers have to eat and buy clothes, well at least the drug dealers have to buy clothes.
And when it comes to simplification, the commercial transaction tax is real simple. You pay the tax when you engage in the commercial transaction, that’s it. And since the tax collection would function as a sales tax, there’s already a system in place.
So if you’re not happy with the GOP tax plan, I don’t blame you. In my opinion, what Republicans are doing is the equivalent of my friend in college who is so desperate to go home at the end of the night with someone that he will take whoever will consent, even though he knows he’ll be gnawing off his arm in the morning to try and get away. There’s a much better system out there. A commercial transaction tax. That, my friends, is what real tax reform looks like.
Abdul is an attorney and the editor and publisher of IndyPoltics.Org. He is also a frequent contributor to numerous Indiana media outlets. He can be reached at firstname.lastname@example.org.