Hold on to that Mexican condo
Via Small Dead Animals (which should be your choice here for best Canadian Blog), we find this world-rocking proposal for tax reform in the USA.
Proponents have spent millions on research and have concluded that a national sales tax can replace the income tax, payroll tax, estate tax and corporate tax. Advocates say the new tax would lower the cost of manufacturing and job creation and attract foreign investments, among other things.
"If we were to get rid of the sales or the income tax and the payroll tax and all compliance costs, we would be so ferociously competitive in a world economy that corporate America would not be competed with unless foreign corporations started building their plants in America," Linder said.
Proponents seek a 23-cent national sales tax on all retail goods, everything from groceries to clothes, cars to electronics. Everyone would pay the same rate, which critics argue is part of the problem.
I've been thinking this over for 15 minutes or so, and I think the lack of progressivity in such a tax is probably a minor hurdle compared to some of the other issues that would need to be addressed.
First of all, full credit to a politician who is actually spending his time thinking about how to make his economy more competitive, instead of dreaming up new ways to prevent citizens from hurting themselves. (Side note: I sent a one-line email to my MP on the topic of the trans-fat ban: "Stay out of my kitchen." I got a prompt response; it began with "We agree with you" and morphed into an explanation of how unhealthy some "school lunch-sized" snacks are. I'm so disappointed in the Conservative Party these days, I nearly can't talk about it.)
Anyway, such a tax reform would be absolutely the greatest experiment ever with the Law of Unintended Consequences. What happens when you turn your economy into a fantastic system for accumulating wealth, and a terrible system for actually having it?
- I assume the tax will be applied to all imported goods, unless they intend on making reimportation the largest industry in America. Trade war, anyone?
- Perhaps this is actually a cleverly disguised plan to make up the Social Security liability. You would certainly expect retirees with any significant savings to emigrate, thereby increasing their net worth by roughly 23%.
- Many industries, certainly manufacturing would indeed become much more competitive. Business providing personal services, though, especially anywhere near a border, would be decimated. Would you like to have your plastic surgery here in Buffalo, or go up to Hamilton and avoid a 23% tax? There doesn't seem like much point in paying your accountant an extra 23% to do your books locally, does there? (Oh, right, there is no more accounting. The CPAs should be fine with that.) How about getting a freaking trim with some highlights? "Where should we go to dinner tonight, honey? Whether or not we pay 23% extra in tax certainly won't enter into my decision!"
Obviously it's not quite that straightforward: if US business aren't paying corporate tax or payroll tax, and their employees aren't paying income tax, you might expect pre-tax prices to be lower. But by how much? Does anyone - can anyone - have the foggiest clue?
Of course none of this really matters, because it will never, ever happen. The unpredictability alone is no doubt reason enough, not to mention the zero-ish likelihood of the U.S. government reducing their own relevance by an order or two of magnitude by eliminating their ability to influence anything at all via tax policy.
But the biggest reason is in the last paragraph of the story. There is presently a segment of the population to whom governments provide everything from monthly cheques to free medicine to discounts on $2 bus fares. They scream bloody murder if anyone so much as broaches the subject of even tinkering with any of these entitlements, and they all vote - every time.
Maybe there is a scenario in which the U.S. government announces to these people that the price of everything is going up 23%, in order to benefit everyone but them. This scenario, such as it is, begins with Satan performing a triple lutz.