Taxation

Tax Reform

The first section of this policy paper is on what we tax. Off the top of my head I have paid Sales Tax, Property Tax, Income tax, Social Security Tax. Business and Operations Excise Tax, Medicare, Medicaid, Unemployment tax and Labor and Industry Insurance Tax in the last year. In addition I paid two different CPA's to help me prepare taxes for a business and my personal taxes.

This is by all means not a complete list. There are all manner of application fees and processing fees and licensing fees. This also does not cover regulatory compliance costs. Rather this is about how the government generates the revenue it uses to pay for it's budget.

In general we need to move away from taxing Labor to taxing Capital.

Right now a construction company gets a contract to build a building. If the company hires an employee, labor, it has to pay a wide variety of taxes and fees to the state for every hour that employee works. The direct wages can be deducted but for every $1 an employer pays an employee $.25 goes to the government. In other words to pay one of my employees $100 I have to actually pay $125 dollars because of taxes and government related compliance costs. But if the company buys a new backhoe, capital, it gets to deduct the entire cost and there are no similar taxes or compliance costs. $100 dollars spent on capital costs $100.

As time passes we are investing more into capital and less into labor. Artificial Intelligence and Robotics are going to hasten this trend. Within most of our lifetimes the number of hours humans need to work is going to approach zero. This goes beyond "flat" tax or "fair" tax or even minimum wage. Our system of taxation needs to tax things that exist if it is going to be useful. In the example above w need to shift the burden off the employee and onto the machine because shortly it is only going to be machines doing the work.

Not only do we need to consider the changing ratios between capital and labor we need to think about what we want to encourage. Everyone talks about wanting more jobs. If you want more jobs reduce the cost of employment for employers. The best way to accomplish this is to eliminate payroll taxes and replace them with taxes on robots and automated systems.

Self driving vehicles are already outperforming human drivers and it is only a matter of time before Truck Drivers are replaced. Truck Driver is the most numerous job in most states. For all of the reasons above we need to start taking the tax burden off a career and family supporting job and placing it on the new technology that is going to disrupt this industry.  We want to incentivize maintaining jobs and keep pace with changing technology.

In the end when there are no truck drivers or construction workers or doctors or lawyers or hair stylists or fast food servers the tax base will still be there and we will be able to implement a universal basic income program.