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America's Debate > Archive > Policy Debate Archive > [A] Domestic Policy
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logophage
So, this idea has been sitting in the back of my mind for a while and I thought I'd start a debate on this. Here's the proposal:

Do away with all taxation -- income tax, luxury tax, sales tax, everything -- and replace all those taxes with a single 100% estate tax. That is, when you die all your assets are liquidated and absorbed by the state.

Do you think such a proposal is workable? What are the pros and cons? Is such a tax "fair"? How would you define a "fair" tax?
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deerjerkydave
While I like simple solutions, I can think of a major loop hole in this scheme. If such a method of taxation came into existence, you would find the older generation "gifting" many of their assets to their families before they die. Hey, maybe such a tax scheme isn't so bad after all. thumbsup.gif

I personally like the idea of replacing all Federal tax with a single consumption tax. Necessities like food would be exempt. It's simple, it doesn't stifle economic progress, it closes loop holes, it's visible to the public, and it taxes wealth, not just earnings. Let's not forget the savings of 10 billion dollars annually with the elimination of the IRS.
logophage
QUOTE(deerjerkydave @ Apr 18 2005, 04:19 PM)
While I like simple solutions, I can think of a major loop hole in this scheme.  If such a method of taxation came into existence, you would find the older generation "gifting" many of their assets to their families before they die.  Hey, maybe such a tax scheme isn't so bad after all.  thumbsup.gif

This can be resolved. Require gifts to be considered part of the estate (either the receiver's estate or the giver's estate). Require periodic filings of net worth of your assets. The government could use the assessed value as collateral to borrow against if it desired the money before your demise.
Erasmussimo
While I find your proposal philosophically charming, I must rain on your parade with the sad observation that it is unlikely to generate enough revenues to sustain the government. Moreover, the ups and downs of such income would make budgeting a hair-raising prospect. Also, it would make it impossible for the government to stimulate the economy with tax cuts or increased public spending. Although I've always been a bit suspicious of Keynesian economics, it does appear that the government is hooked on it. Lastly, the loopholes arising from various pre-death financial shenanigans are going to be tough to close.
overlandsailor


The main problem with this idea, though an interesting one, is that it promotes a sort of living for the moment lifestyle.

Why save for a rainy day? If the rainy day never comes, all that was saved is lost to the government. If it does come, the government has systems in place to bail you out.

Another problem with this system is it can only really address domestic holdings. What would stop people with money to invest from investing in foreign markets to avoid this loss in the future?

The inevitable massive reduction in domestic investment would likely be catastrophic for our countries economy.

One of the realities we face when trying to address the problems of the world is human nature. The best solutions use human nature to their advantage.

Humans, by nature are greedy. This greed can be overcome by ideals, however this is quite rare, and it more frequently involves a different kind of greed. That greed being the greed for something else, be it emotional gain or whatever else. Rarely, is the lack of financial greed really the complete lack of greed.

So, taxation, on the individual level is necessary. The best we can hope for is a system that allows people to succeed while limiting the ability of their greed to discover ways around the tax.

One idea on the table is a national sales tax. Of course, it has a regressive nature that needs to be addressed for it to be viable. The other issue is the likely creation of new black markets, again due to individual greed.

There are many ideas out there to address taxation. However, looking at the current income tax system, I really do not see a problem. The levels are reasonable, the needs of the poor are addressed and the wealthy are not hammered to the point that they must take their money to other shores.

Some taxes do cause harm. Those should be looked at and addressed. Perhaps the country would be better severed with the elimination of some of these, married to a small increase in income taxes, perhaps there is another solution.

However, the best solution IMHO is to take a look at what those tax revenues are funding and start eliminating those programs that fail to serve their purpose, or no longer have a purpose.
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