Tuesday, January 10, 2012
This is America’s 100th year for [the] individual income tax, a system as out of touch with our era as digital music is with the hand-cranked Victrola music players of 1912. It is also the 26th year of the Reagan-era reform for both personal and corporate tax, a grand design now buried under special-interest favors.
With U.S. elections in November, and the George W. Bush tax cuts due to expire at the end of 2012, it’s time for a debate that goes beyond ginning up anger over taxes and the superficial issue of tax rates.
It’s time to consider whether to get rid of income taxes, personal and corporate. What are the strengths and weaknesses of our current system? Should we tax individual and corporate income — or something else? ... Tax systems must change with them or else their lubricating effect turns to sand, wearing down the gears of commerce.
Just as the Industrial Revolution transformed a nation of farmers and mechanics into a land of factory hands and office workers, so too the digital revolution and globalization are fundamentally remaking society.
We need for our tax system to serve our 21st century civilization and its needs, including the costs of aging infrastructure and an aging population, costs that will be borne one way or another.
Five ancient principles that have survived the test of time and are, therefore, profoundly conservative, should guide us.
The first is the moral principle of progressive taxation. ... The second is horizontal equity. ... Simplicity, transparency and ease of payment should be the last three of the five guiding principles, as Adam Smith taught more than two centuries ago.