Don’t increase taxes…

Increase the tax base.

What is the tax base? That is the group of people who pay taxes, which is part of the reason that this solution isn’t mentioned by the US political parties.

This solution would be considered “socialist” since what it proposes is getting more people working. Although, if you consider the actual alternative, progressive taxation, where the rich pay far more in taxes, this is more palatable. On the other hand, most tax proposals are regressive and effect the poor far more than the rich (e.g., increasing sales tax).  Preferably, the tax base should be increased in tandem with a good progressive income tax system.

Also, decreasing taxes has proven detrimental to society. Or, as I like to say, become unemployed if you don’t want to pay taxes. So, while people may decry “welfare queens” at least they have money to spend and are contributing to the economy. People who are out of work drain on the society in that they don’t contribute labour, they cut their spending 9or go into debt), and don’t pay taxes. Or to quote Time magazine:

Nearly everywhere, tax revenue plummeted as property values tanked, incomes dwindled and consumers stopped shopping. Falling prices for stocks and real estate have made mincemeat of often underfunded public pension plans. Unemployed workers have swelled the demand for welfare and Medicaid services. Governments that were frugal in the past are just squeaking by. Governments that were lavish in the good times, building their budgets on optimism and best-case scenarios, now risk being wrecked like a shantytown in an earthquake.

Many taxpayers might say that it’s about time spending dropped. But then they start hearing the specifics. Government budgets contain a lot of fixed costs and herds of sacred cows. K-12 education absorbs nearly a third of all spending from state general funds. Add medical expenses, primarily Medicaid, and it’s over half. Prisons must be maintained, colleges and universities kept open, interest on bonds and other loans paid. Real cuts provoke loud howls, and you can hear them rising in every corner of the country. College students have marched in California, firefighters have protested in Florida, and on June 10, Minnesota saw the largest one-day strike of nurses — some 12,000 — in U.S. history.

I am glad to learn that I am not the only voice out there mentioning this viewpoint, but increasing the tax base means:

To Build Tax Revenues, Build New Businesses and encourage growth in the businesses which already exist. There needs to be a tax system that doesn’t penalise business. For example, Philadelphia’s system of taxation is extremely business unfriendly. For example its Business Privilege Tax is most appropriately named since if Philadelphia treats doing business as a privilege, then it will discourage anyone wanting to come there. But the business privilege tax taxes both gross and net profit. This tax is then augmented by another Net Profits tax!

Get the picture?

If Philadelphia taxed business at one reasonable rate, it might just encourage people to do business in the city.

We can add in that Philadelphia has a sales tax which is 1% more than the neighbouring suburban jurisdictions. There are a myriad of complaints on that one. It might encourage people to do business in the city if there were no difference, but if you have a choice of buying at 6% or 7%, where are you going to go?

In other words, Consistent, competitive tax rates, investment incentives for businesses, incentives to venture capital, and the avoidance of one-time levies which cause financial planning problems for small businesses. Of course, one has to wonder why taxation is so skewed as to favour large business rather than entrepreneurs.

But the issue of equitable taxation goes beyond just creating jobs, this includes infrastructure and other aspects of social change. Economic growth is highly dependent on the quality of neighborhoods, educational systems, public transportation, and overall quality of life. of course the policies needed to address inequality (even if it means more jobs) “will always be controversial since they mean neutralising the advantages of wealth. A prospect that those with money and influence will fight hard against.”

Advertisements
%d bloggers like this: