I guess I have a more libertarian bent. I don't buy the utility theory because to me fairness trumps utility every time. Taxation makes us work involuntarily for the state. That strikes me as unfair, regardless of the good purposes to which the money may be put, and therefore something to be minimized.
Having said that, I believe that those who want a truly libertarian society are indulging in a utopian (for them) fantasy. We have to have government at least to enforce laws, defend the country from attack, and provide basic public services of various sorts. Indeed the argument then boils down to how much government we need, and what the tax rate structure should be.
To the first point, decades of historical data suggest that 20% of GDP is about what the government's aggregate size ought to be. Since I don't like to be in debt, I'd like to see the revenues collected match this figure. I'd rather not engage in social policy through the tax system, though. And I'm afraid the marginal dollar utility argument doesn't outweigh the fairness issue for me, either, except at the bottom.
I'd favor a system with some sort of bottom-end cutoff, say $20K plus $5K/head, and then a flat rate tax thereafter, with minimal deductions (I'd keep the deduction for state and local taxes mainly on the argument that you should only be taxed once, and I'd keep the deduction for charitable contributions on the argument that if you didn't keep or spend the income, it shouldn't count). I'm afraid I don't see why loan interest should be deductable, so ax that. Oh, and while we're at it, let's stop pretending the social security system is really an investment scheme and do away with the payroll tax completely; we'll fund benefits out of general revenues and means-test the program just like any other transfer program. Now given those parameters it should be possible to calculate a flat rate that's revenue-neutral. The only wrinkle I might add is some sort of treatment for capital gains; mainly I want to correct for false "gains" that are actually due to inflation. The fairest system is simply to allow people to adjust the cost basis of an asset for inflation when calculating the taxable gain. |
