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A Proposal to Completely Eliminate Federal Income Tax
by Paul Hibbert

 In order to make my case consider the purest and cleanest conditions — the more general case can be expanded later. Libertarians will generally agree that the only legitimate form of government is one that protects individual rights, that is: a system of justice, including courts of law, police, judges and prisons, and defense of the nation from invasion and imminent threat. Therefore, for the time being, consider just those two branches: Justice and Defense.

Two funds for each of those branches will be set up, the “More” Fund and the “Less” Fund. Donors can make contributions to the ”More” Fund of Justice or the “Less” Fund of Justice and the corresponding ones of Defense. Contributions to a More Fund stay in that fund but they also cause an equal amount in the Less Fund to be transferred to the More Fund. Similarly, contributions to a Less Fund stay in that fund but they also cause an equal amount in the More Fund to be transferred to the Less Fund. Thus, for instance, if a donor wishes that there be more federal money spent on justice he will get his wish, with double benefits, and vice-versa. The operating budget for a program is the surplus of the More relative to the Less fund. Note that this process is equally fair if one is a progressive or a conservative.

Money that resides in a Less fund acts as a reserve for future necessities, emergency, or as a savings account for things that the government (in less enlightened times) would have borrowed or floated bonds for. For instance, if in world affairs war clouds appeared in an otherwise peaceful climate, public opinion would cause large donations to be made to the More Defense fund, thus making even larger amounts of money immediately available by drawing money from the Less fund and transferring it to the More fund. If this principle was applied at the municipal level and there was a program to build an ice arena, for example, donors might initially react negatively and donate to the Less fund. As time goes on they might say, “Yes, we have the money and it’s a good addition to the community” and donate to the More fund thus releasing money from the Less fund. The ethic would be, “If you want it … save for it.”

Norms for donations would spring up quickly with pundits, analysts, commentators, bloggers, politicians, and the media providing opinions and facts to the citizens. If a fund were to be judged under-funded or over-funded the donations would react accordingly. Thus there would be a dynamic, real time reflection of the wishes of the electorate. Donors could make their contributions whenever they wished. If, in the happy event that the funds were judged over-funded, donors would refrain from contributing anything. Withdrawals from the surplus to fund ongoing operations would deplete the More fund until the program was judged under-funded.

It would be naïve to think that this could be accomplished without some other motivation on the part of the donors, and that motivation is that their donations would be of public record. Only the amount of their donation would be revealed (unless they requested otherwise) so that their political position could be respected. Charities routinely publish a list of their donors classified as to the amount of the gift and for good reason — the donors are proud to be recognized for their generosity and it encourages further donations. My own opinion is that there shouldn’t be any sense of “duty” associated with donating and that donors should be just doing what they “want” to do. There would be many free-loaders but there are many at the present time: the underground economy with cash transactions, criminals not reporting drug money, loopholes, off-shore income, and on and on. Furthermore, only about one third of the population pays any federal income tax at all. A whole industry exists devoted to minimizing or avoiding federal income tax. Think of what this does to the mentality of those participating in this endeavor. It fosters antagonism towards government even among those most inclined to view government as a benevolent agency and they still take advantage of every loophole, subsidy, grant, incentive, deferment and concession that the government provides in its programs of social engineering, the result of which transfers the tax burden to others who are not as adroit.

In my opinion, donating would become a source of pride that one’s friends and neighbors could appreciate rather than it being a duty. Undoubtedly there would be some “discrimination” against those who don’t contribute in the sense that those who donate appropriately will naturally tend to associate and do business with those who do.

I don’t think that corporations or businesses should be allowed to contribute, as employees and stockholders might not hold the same views as the entity and they shouldn’t have to contribute to programs with which they may disagree. This is similar to unions forcing members to contribute to programs that they are opposed to.

Imagine, just imagine, what this would do for both the economy and ethos of the nation. No longer would there be any, I mean any income tax with its stultifying burden on the citizens. Perhaps a million or more smart, well-meaning people could be freed up from trying to do the best they can within the system and instead allocate capital and resources where they can best be used — for the good of everyone. Currently, every business decision has to consider the tax implications and this distorts all the signals that the free market depends on. The IRS could be relegated to a tiny fraction of its size with its only duties being to ensure that the donations get funneled to the right bucket and to keep an on-line ledger of all the donors and their amounts so that the data are available to anyone at the touch of an iPad. Of course fraud might be a problem so the identity of donors would have to be protected.

The examples of Justice and Defense are just that but the principle of publicly visible donations could be applied to other (less legitimate, in my view) functions of government such as social policy, environment, consumer protection, and so on. Surely, one can visualize the complex interactions affecting the funds as donors react to the changing “market” forces. Some donors might put all their contribution into the More Social Policy Fund, for instance, and others the Less but what will result would be a dynamically stable system that reflects the mood and aspirations of the citizens as to the direction the country should go. In this sense the government would be under control of the citizens rather than the opposite, as it seems to be now.

If you believe that a civilized country can’t exist without coercion and that taxation is moral even though it is coercive then you are stuck and can’t move forward. You are reduced to being a pragmatist believing that the present system works — kinda, sorta. Without ideals to provide a framework for all your beliefs then you are inevitably confronted with all kinds of contradictions. The perpetual, vicious fighting between political parties regarding who should be taxed, and by how much, that fosters class warfare would completely disappear with those decisions being made automatically by each citizen when he votes with his pocketbook. Citizens would tend to take more interest in current events and they would feel, justifiably, that government is responsive to their opinions and needs.

 So, no matter whether you’re a progressive or conservative the benefits of a publicly open donation system of funding government should be apparent. In spite of my arguments you might still regard this scheme as impractical, pie-in-the-sky utopianism but nevertheless it’s my contribution to what I think is a means of leaving this world in a better state than when I was brought into it. In my mind, this proposal could release the repressed energy and usher in a whole new era of pride and prosperity to the USA that could rival the industrial revolution. That’s my position and I’m stickin’ to it.
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