Five Political Imperatives: 2-3

2. Tax reform: 

A large state is a futile endeavour by which, as Bastiat says, ‘everyone endeavours to live at the expense of everyone else’. One way to curb this destructive urge is to reform the tax system. Currently, taxation hits different groups in different ways. For instance, under the progressive income tax, rich people pay a bigger percentage of their income than poorer people. This non-uniform taxation leads people to demand services from their government, but expect not to have to pay for them themselves. People will seek to tax the rich, corporations, manufacturers, alcohol vendors, or whoever else so that the services they desire are paid for by someone else. This principle leads to the destruction of representative democracy, when political decisions are about who should loot the other to pay for the services that they want. Thus, a radically simplified taxation system is needed. There shall be no loopholes, progressive rates, corporate taxes, or anything else. The only permissible forms of taxation are universal, flat taxes. These can include a flat income tax, where everyone pays a certain percentage of their income, or a flat sales tax, where everyone pays a certain percentage of the sales price, regardless of the nature of the good. Tax lobbying and shifting the tax burden will be eliminated. Though the rich will in fact pay more, everyone will pay the same portion of their income and expenditures. A tax rise will mean more funds coming from all people at the same percentage, which will cause people to more closely associate tax increases with more government services, which will allow them to make a more informed decision on the matter.

3. Balanced budget requirement: 

Politicians enjoy promising services and promising to cut taxes at the same time. But how do they do this? Besides reneging on their promises, the answer is often deficit spending. The government, made easier by their control of the monetary printing presses, borrows money to pay for its expenditures so that it does not have to reveal the full costs, in the form of taxation, of their programs. Inflation constitutes a hidden tax on the people which governments blame on others. Or, if inflation is not used, deficit spending simply means paying the debt back in the future, plus interest payments, resulting in capital diverted to less productive purposes in the present, and more taxation being necessary in the future. In either case, deficit spending should not be allowed under any circumstances. This includes war, for the world would be a much more peaceful place if people knew that they would have to pay the full cost in taxation for each war their government undertakes. As with progressive taxation, allowing large government deficits and debts subverts representative democracy. One generation of voters are allowed to make political decisions about the future taxable incomes of future generations of voters.  

With these first three reforms, taxes will be more closely associated with government services than they are at present.  Rather than the illusions of inflation, budget deficits, and shifting the tax burden, each citizen will know that for whatever service they vote for, they will have to pay a corresponding cost out of their own pocket. The association will not be as direct as for free-market exchanges of course, but it will be a significant improvement I think over the present situation. Hopefully, voters will be able to be more prudent about what services they vote for, making sure that the services are truly useful before they vote for them.