A Better Way to Tax


Boy! Yesterday’s posting caused quite a discussion today. One of my coworkers had had a long lonely drive the day before and had a lot of time to think. Needless to say, he came into the conversation with his ruminations. He brought a very intriguing idea on how to collect taxes.

Bottom line up front; the IRS goes away and the admin section of the treasury department shrinks down to about 100 people. Of course with the fed’s propensity to manufacture money the mints would have to keep running as well as the secret service.

First the setup; remember that there are 435 representatives in the House. Each representative elected represents approximately the same number of US citizens.

OK, here’s the plan. Each year, Congress would determine the
budget for the next year, just like they are supposed to do now. The figure Congress decides is required for running the federal government is divided by 435, the number of representatives. That number is multiplied by the number of representatives in each state. That final figure is entered on a bill that the greatly reduced treasury admin section will send to the governor of the state as what the state owes for the next year.

Let’s put some numbers to it for an example. Let’s say Congress decides it will take $2T to run the government for the next year. $2T / 435 = $4,597,701,149. This represents the prorated amount due from each representative district. Let’s say a state has 10 representatives. $4,597,701,149 X 10 = $45,977,011,490. This represents the amount that state would owe the federal government for the next year’s expenses.

The state is free to determine the method of collecting that money. It could be all income tax, property tax, sales tax, or any combination of taxes. This takes the federal government out of the tax collecting business and gives more control to the states where it belongs.

This is where my contribution to the plan comes in. One thing that needs to happen is to repeal the 17th amendment. This is the amendment that put the election of senators in the hands of the voters. I believe that senators should be directly answerable to the state legislatures and the governor as originally intended. The reason is coming below. Now back to my friend’s plan.

When the governor of the State of Confused receives his bill from the federal government and looks at this enormous figure, he will have someone who is accountable to him to call home and have stand tall on the carpet in front of his desk and tell, “this bill is too much, take it back and get it reduced!” Since the Senator works for the governor and legislature, he has to comply with his bosses’ wishes and goes back to DC to say that he is getting too much heat and that the budget needs to be reduced. As it stands right now, senators have a very high plausible deniability factor in that they can always point to someone in the state and say that they are doing what the voters wanted. In this way we may have some hope of reining in the profligate spending that is a constant in DC.

This is obviously a very simple description of what would have to happen for this plan to work but I thought it was brilliant in its simplicity. I have long been a fan of the Fair Tax (as long as it comes with a repeal of the 16th amendment) but this one makes more sense than any plan I have seen to date.

As always, I welcome your comments and discussion.


2 thoughts on “A Better Way to Tax

  1. Dan,

    Brilliant! This suggestion could be used as the cornerstone for a great method to hold lawmakers accountable.


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