A Better Tax System, A Better Life

A better tax system is possible. And it will be revealed in this article. But first, a little about the current situation and how it got there...

In 1915 the Australian government introduced Income Tax to help fund the war effort. After the war the tax remained to help fund the rebuilding effort. And after the rebuilding effort, many people had become so used to it, it wasn't questioned any more.

Fast forward to today. Many people are now paying 50 cents in the dollar tax. Which is to say... for every dollar they earn, they pay 50 cents tax to the government.

Not content with that, the government introduced a Goods and Service Tax (GST) of 10%. Here is how this tax works...

If you are a lawnmowing guy, you must pay the government a tax which is equal to 10% of your income. So if you do a job that is worth $20, you owe the government $2 GST. This GST can be added onto your charge thus taking your total charge to $22.

If you do not wish to add on the tax and you decide to wear the tax yourself, the calculation is your charge divided by 11. Thus $20/11 = $1.82. So you would pay the government $1.82 in GST and get to keep $18.18 for yourself - which will be taxed as income at the normal rate.

If you buy a product, you will also pay this tax. And this tax is calculated on the purchase price. So if you buy a washing machine for $550, $50 of that ($550 / 11 = $50) will go to the government in tax.

As you can see, the higher the purchase price the higher the tax which goes to the government.

As has been experienced by all countries which have introduced this tax, the government has ended up with a HUGE surplus of funds. They have an obligation to give this money back to the people in the form of income tax cuts. But they do not do that. Instead, they create more programs, which means more government workers, so they can spend the money.

With the introduction of the GST, the government also had to create extra positions within the tax office due to the enormous tax collecting which now takes place - as all businesses send in "Business Activity Statements" revealing how much money they made, how much they spent, and how much money they owe the government (together with payment).

The money owed is worked out as: Total GST collected minus total GST paid out in running costs.

Taking the lawn guy. If he makes $660 a week, he owes the government $60 in GST. However, if he spent $44 on petrol, the $4 GST from the petrol is taken away from the $60 he collected, and he only owes $54. Thus the tax paid is "shared" amongst various businesses, and always totals 10% of the full retail price.

A Better Tax System

A better way to collect tax and fund the government is to remove income tax altogether and replace it with an optional tax on goods.

For example: Assume, for sake of example, the Goods Tax (GT) is a flat 10%, here is how the tax system would work...

Item in store is $500 (without tax). Those who buy will then have the tax added on at the register ($50) making the total price $550. (Yes, this is similar to what is known as VAT).

This VAT is given to the government.

And if the government wanted to "spread this around" then each time the good is bought, the same 10% is collected.

For example: The manufacture sells the item to the wholesaler for $100+tax = $110. Then they pay the $10 to the government.

The wholesaler sells the item to the retailer for $220 ($20 being tax). But because $10 of the price they paid was tax, they only owe the additional $10 as tax.

The retailer sells the item for $550 ($50 of that being tax). But seeing as $20 of that was tax paid to the wholesaler, they only owe the government $30.

In total, the amount of tax the government gets is $50 ($10 from manufacturer, $10 from wholesaler and $30 from retailer). And all of it finally paid for by the consumer. But collected by the business on behalf of the government.

This also keeps any tax loses down if a business goes bust before paying all of the tax it owes.

This is a better system because...

1: Paying tax cannot be avoided - unlike the current system which sees the wealthy pay minimal tax due to tax loopholes and other tax avoiding measures they know about which are not available to those who are not wealthy (such as normal workers).

2: The tax is optional. If you do not wish to pay tax, don't buy anything. Simple.

3: It simplifies the tax system. A flat 10% added on tax is about as simple as it can get. And most people could figure out the tax in their head.

4: It reduces the number of tax office staff needed. Without needing to process tax returns each year, do audits of people and businesses, create task forces to catch tax cheats, and the whole range of money spent and devoted to the tax department, the tax department can be made MUCH smaller.

5: It gets money coming in quickly (cashflow) because the tax is paid monthly or quarterly by the businesses who collected the tax. No more waiting for business owners to file income tax returns and the like.

6: It reduces tax department spending. Besides fewer staff, buildings and so on, there is much less money spent printing up yearly tax returns for workers to fill in and submit for inspection.

7: It gives people more money to spend. When people have more money, they spend it. The more they spend, the more tax the government will collect. But better still, the better the economy will be!

8: The government will have more free money. With the reduction in spending on the tax department, the government will have available funds to devote to other more-worthy areas - such as health, education, citizen safety, and so on.

9: Offshore bank accounts won't be attractive. With no income tax, there will be no need to keep money in offshore bank accounts making money. With more money kept in local banks, more money will be available for investing which will also boost the economy.

This simple system will have arguments put against it. Let me now answer some of those arguments....

Will the tax apply to food?

Yes. No good is exempt. Including the so called staples such as milk, bread, etc. If you want to make something exempt then fresh fruit and vegetables and meat shall be the only exempt items. Because they are natural items and everything else is processed.

Doesn't this tax take a larger percentage of a poor person's income?

The tax is optional. If you don't want to pay the tax, don't buy the goods. Simple. If a poor person wants booze they will have to pay the tax - though you should be more concerned why with so little income they are spending it on booze in the first place. (Same applies with cigarettes.)

And let me say... wealthy people spend more money than poor people. They drive cars that cost more money to buy, build bigger houses, hire people to look after their homes and yards, often own businesses and thus employ a great many people. In short, the wealthy are the driving forces behind the economy. Their increased spending keeps the economy going.

Do not think of it as them vs us. It is not a competition. They (the wealthy) are not the enemy, as some politicians would have us believe.

If you want to compare the amount of tax on a $20 pair of shoes as a percentage of a poor person vs a wealthy person's income, then yes, as a percentage of their income the poor person pays more. But the fact is, the wealthy person is more likely going to buy a $100 pair of shoes and end up paying five times the tax the poor person would pay.

And besides, without income tax, the poor person would be able to save and get ahead and not be poor for long. So there would be no Poor vs Rich comments. Because we would all be better off. And we didn't have to "tax the rich" (steal their hard earned money) to do it.

And another thing... they already pay tax when they buy items. So this would not be anything new.

Without the government getting income tax, won't they run out of money for other things like health and education?

The biggest government department is the tax department. This system will reduce that department by as much as 95% in size. Thus, all money which had previously been going to the tax department could be spent on the areas of concern.

Also, because the people will have more money, they will spend more. As they spend it, it will come back to the government in the form of this Goods Tax. As money freely flows throughout the economy, the economy will flourish. A better economy means more money being spent on new buildings, businesses, etc. And that will also result in more tax coming into the government.

So there will be a minimal effect on the important government programs.

Besides, once people have more money, they may be inclined to improve their own health instead of relying on the government health system. Thus, the number of people using the government health system will diminish. Because people will be healthier as well as opt for private health care - through private health funds and private doctors.

Also, with more money, many people will opt to send their children to private schools. With more children in private schools getting better educations, there will be fewer children in the public school system, which means the public system won't need the vast sums of money it needs now.

What about the elderly - how will they get by without government pension?

The current elderly can be supported with the money which has already been reserved for them in the government's pension fund - whatever they call that fund.

The new elderly will not need the government. With more income available to them throughout their working life, they will be able to invest. So by the time they retire they will have plenty of money to live very well for the rest of their lives. Totally independent of government handouts.

What about unemployment benefits?

With increased money circulating in the economy, businesses will expand and grow. During their expansions they will need staff. Thus more jobs will be available to those currently out of work. Which will drastically reduce the number of unemployed people.

We might even find almost 100% employment!

What about unmarried mother welfare?

Traditionally, the unmarried mother money is handed out to poor people. Whether you like to admit it or not, the fact is, they have children so they can get money from the government.

Many women with children are able to manage by working while raising their children. And because the economy will grow and more people needed for the workforce, many of these unmarried mothers will be able to get jobs and support themselves. Giving both themselves and their children a better life.

Others will see that they can get ahead without sponging off of government handouts and will actually take precautions to avoid getting pregnant out of wedlock.

The flow on effect is a society with better morals.

As you can see, by removing income tax and having a single 10% flat tax on goods, the economy will flourish and we will all be better off.

Comments

I have received a LOT of response to the above system. Interestingly, all responses contain the same two basic "arguments" against such a system. And I shall address those below...

This will lead to inflation as business owners increase prices to cover the Goods Tax. The consumer will be no better off.

First, the Goods Tax is another name for what most likely already exists in your country.

In Australia, after the 11% - 33% import duty (depending on what the item was), we used to have a 12% wholesale tax and a 22% sales tax. The importer would pay the 11% to 33% import duty to the government. The wholesaler would pay 12% tax to the importer. And the retailer would pay the 22% sales tax to the wholesaler - passing it on for the consumer to pay.

While the consumer knew these taxes existed, they did not know how much of the price of the item was tax.

Removing these taxes and having a 10% flat tax across the board, would simplify the process and prices would pretty well stay as they are. Some prices would even come down!

If the tax was included in the price - but not mentioned - the consumer would only see one price. Nothing different for them there.

All up, no need for the business to raise prices.

If there was an inclination or leaning towards raising prices, the business still won't because they too get to keep the money they make without having to pay tax on it.

The standard tax rate for companies in Australia is 30%. So the company pays 30% of its profits to the government as tax. If the company makes $1,000,000 (one million dollars) profit, they would have to pay $300,000 in tax.

Under this new system, the company would get to keep that $300,000. It would be like making extra money without extra cost. So the company would not need to raise prices for any reason.

With people getting more money in their pockets, they would have more buying power. It would be as if everything just got a bit cheaper. As now they could afford things they hadn't been able to afford before.

While you may think this would lead to increased demand and thus higher prices, it won't.

Remember, the company gets to keep their money too. And besides, with the increased amount of money being saved in the banks, there will be an oversupply of money in the bank. Interest rates will drop to encourage borrowing. This "cheaper" money will lead to more business start ups and imports from overseas. Which will mean more competition. Which always leads to cheaper prices.

Also, with companies not having to pay one third of their profits to the tax man, competition will see them lower their prices to a point where they clear the same amount of money as they did before. So lower prices will also be the result.

With increased buying power the consumer can also source their goods from overseas. To compete, the existing businesses in the country will also lower their prices. But they won't be adversely effected because they get to keep all of what they make.

Inflation is the result of the government taking money (in the form of taxes) from businesses and workers.

Think. The government hits the business up for more tax. To preserve their profits, the business increases prices. With everything now a higher price, the workers petition the business to increase pay. The business then pays out more money to the worker, which makes the worker happy but eats into the business' profits. To compensate, the business increases prices. Which makes the worker worse off. When the worker gets another pay rise, that puts them into a higher tax bracket so they pay more tax and need an even higher increase to cover the extra tax.

See the inflation spiral caused by taxes.

Without these government income taxes placing un-necessary strain on prices, consumers and businesses have more money in their pockets. The free enterprise system will keep prices in check.

And if you are still concerned with the possibility of inflation, then a price freeze and/or close price watching to make sure no sudden price increases takes place, could easily come into effect while the system was adjusted to.

Because the poor are paying a higher percentage as tax, the gap between rich and poor will widen. Taxing the rich more, is thus fairer.

Under the current system, when a migrant arrives in the country they have nothing. Often less than nothing because they are not entitled to health benefits and other welfare and do not speak the language.

This person who is starting off at a great disadvantage in comparison to the natural born citizen, if often able to get by and become successful. They become successful despite being heavily taxed along the way. If they can do it, there is no excuse for other people not to do it.

Also, giving money to poor people does not encourage them to do anything for themselves. It actually encourages them to do nothing.

Besides this... what is unfair in letting a person keep the fruits of their labor? Unfair is stealing one third to one half of that person's money and giving it to someone who doesn't want to work.

The productive person works 20, 30, 40 or 50 years to get to where they are. Fair is being able to keep what was earned. Unfair is taking from that hard working person and giving it to some 20 something who doesn't want to work for some silly made-up reason.

If a person knows they will get to keep the fruits of their labor, they will have incentive and will work harder to get ahead.

Thus, the poor will have a reason to get off their butts and do something. And with reduced prices because of increased competition, they will also be able to afford more items. Increasing their standard of living. Remember, if a migrant with nothing can do it, they can too. (And they will, specially if they see others like them getting ahead.)

The increased demand for goods by the wealthy, as shown, will bring prices down. But also consider, the wealthy do not buy the same items a poor person does. And comparisons must be made with the items actually bought.

Which is to say, a wealthy person will buy a $220 pair of shoes while the poor person buys a $22 pair of shoes. In actual dollar figures, the wealthy person will thus pay more money out in tax.

With the flat goods tax concept of 10%, the wealthy person paid $20 in tax for their shoes while the poor person paid $2. The wealthy person pretty well paid in tax, what the poor person paid entirely for the shoes. And that is as it should be under this system... the more you spend the more tax you pay. There is nothing unfair about that.

If by some quirk the wealthy person bought the $20 pair of shoes, the chances are they would also buy more than one pair of $20 shoes. Thus spending more money and paying more tax than the poor person.

Further, with being able to keep all the money they make, the poor person would be able to save and invest. Increasing their wealth that way. And as interest on savings is income, and income isn't taxed, their investment would also grow faster than without such a system.

By suggesting a wealthy person should pay income tax, it is actually a punishment - a disincentive - to earn. Currently, the wealthy person starts off paying income tax just like everyone else. As their income increases and they get ahead they are punished by having to pay more tax. There is nothing "fair" about this. If the wealthy person could get by paying the income tax along the way, others can also do it.

The 10% flat goods tax sees the tax being optional - if you don't want to pay tax, don't buy anything - and also being paid in increasing amounts by those who can afford it and who consume the most. In other words, spend big and you pay more tax. Spend more often and you pay more tax. A true user/consumer pays system. Which is 100% fair and does not steal from one producing person to give to an unproductive person.

Thus, if anything, the standard of living will actually increase and the gap between the rich and the poor will grow smaller. With possibly the elimination of poor people altogether!

Never Ask Permission To Perform

With the local state election just two days away, more and more documentation is hitting our mail boxes.

What is interesting is how much work the wanna-be politicians have already done even though they are not in power, and how little the sitting politician has done.

The sitting member boasts how she has secured an additional $400,000 to "study" traffic problems along a well known congested road.

While one of the people running for the seat has already paid for and done a study and paid for engineer plans and other planning documentation which will solve the bad road problem. Meaning, if she is elected everything is already in place to fix the road.

While the party who is in power has wasted six years talking about another traffic jam hot-spot, they have just today announced their solution to the problem - which will involved reclaiming fourteen homes and placing a road smack bang in the middle of a housing estate. Displacing some people who have lived in their houses for 40 years.

Yet, a person who is running for the seat has already solved the problem. And they too have already paid for plans drawn up by engineers which will fix the problem without reclaiming any homes. Another example of someone taking action to solve a community problem even though they aren't yet an elected politician.

This reminds me of another man down here in Australia. He got so fed up with government promises of this and that regarding cleaning up the roadside garbage, he did something about it. The result is now known as "Clean Up Australia Day." And on that day, hundreds and thousands of volunteers donate their time and walk the roads and highways picking up garbage.

This has even inspired some local business owners to team together to clean up the "backs" of their buildings and beautify the area with landscaping.

And all of this shows that people who don't bother to ask permission to perform (unlike politicians) can achieve wonderful things.

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Under the leadership of the current state leader, the child welfare system has ignored and even tried to cover up child sexual abuse! Their solution was to dismiss the minister for that department and put another politician in her place.

When asked about one particular town where EVERY child has been sexually abused, he said he had been their as the leader and was working on a program to fix the problem. BUT, the opposition has found media footage where he was previously asked about that town and he had denied knowledge of it and said he had never been to that town as the leader. Caught in an out and out lie. And also, showing that he had known about that town and the rampant abuse and had done nothing. Just for that alone he does not deserve to be in power any more.

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The leader of the national opposition party is ranting and raving on about how he will spend more money on schools so kids will have more books and other educational stuff.

But while he talks about that, he ignores the abused children (as just mentioned) as well as the children who don't even have food on the table.

Further, due to the neglect of that state leader to the school system, truancy has gone up. Their solution is not to overhaul the education system and encourage children to go to school, nor to encourage home-schooling (which is pretty well illegal here), but to fine the parents $3,000!?

One word describes that.... crazy!

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So the leader of the state has been seen visiting schools during his re-election campaign. When asked about it he said, "This isn't political, I am here because I am interested in the school."

Well excuse me all to hell. But seeing as he neglected the school system for six years - even sucking money out of it to fund his pet projects and increase his personal staff by an additional 148 people - I don't believe he is interested in the school.

This blatant lie - one among many from this politician - shows the depths this politican will go to. And to campaign to juniors while they are at school, should be against the law. It is child abuse - mental abuse. Because the child does not have the choice of listening to the politician or not... the polly turns up and class is halted while the polly brainwashes the children into his party's dogma and belief system.

This act alone is enough to turn me off such a person. Let alone the child sexual abuse cover ups.

Teaching A Boy How To Fish

Oh

My

God

Just got the brag-sheet from our local politician who is running for re-election next week. Funny how I've never received anything from her before, in the last three years she has been the local member of parliament.

And what does she list as some of her achievements?

• She gave a new flag to the local police station
  
• She was present at a Government Funded Workshop that taught kids how to fish. (Like watching the plethora of fishing shows on TV doesn't teach them anything; nor fishing with their parents.)
  
• She was present at a "Nice Garden" award ceremony where people on welfare who live in government housing could get an "Encouragement Award" if they had a nice garden
  
• She pulled up some weeds in a natural bush park (reserve) which no-one goes to or uses because there is just thick impassable bush there and nothing to see
  
• She thinks it's good the city (population 425,000) will be getting a second police boat at some point in the future after tenders have been called for (whenever that will be)
  
• She thinks the new cycling training facility (which has yet to even start construction and which will be a private enterprise facility not a government owned one) is much needed by the training cyclists
  
• She was present when the state government announced three extra train carriages and two extra train services for the city (Australia's sixth largest city), and had her photo taken to prove it (even though there is no rail service in our area)
  
• She is pleased the state government is going to spend yet another $400,000 to research how to improve a local congested road - despite the previous research already done (some of it taking an entire year), and despite the simple answer being to continue with the two lanes approaching the congestion area instead of bringing the lanes down to one - after all, when two lanes come into one it always results in congestion

In short, she hasn't really done a damn thing in the three years she has been our local member for parliament. Unless you call being present while some kids learned how to fish, something productive.

WMD's - MIA Or Something Else

According to the mass media, David Kay, former UN Special Commission (UNSCOM) chief nuclear weapons inspector and now head of the team looking for Weapons of Mass Destruction (WMD) in Iraq, doesn't think Iraq had any WMD stockpiles since after the 1991 Gulf War.

Careful analysis of the reporting reveals one important word... Stockpile.

It turns out, David Kay is talking about stockpiles of weapons and not individual weapons.

When you realize this, you get a whole different picture.

1: Of course Iraq wasn't going to have a stockpile. Imagine if the UN weapon inspectors had found it. But, if they found one, or maybe two (as the case actually was), then those can be claimed to be left overs from times gone by.

2: Iraq wasn't going to hide its weapons in logical places. Wherever there was a known weapons cache or storage area, Iraq would not have illegal weapons there. So searching those places and finding nothing should come as no surprise.

3: Iraq would hide illegal weapons where no one would look. Way back when Saddam's son in law defected, he told the weapon inspectors where to look and what to look for. And sure enough, Iraq had continued on with their WMD program even while weapon inspectors where in the country finding nothing.

Buried in the sand without visible signs there are weapons around (just like the SCUDs were buried); submerged in bodies of water. These are places the current weapon inspectors should look. However, without a clue hinting at which sand dune to dig under, the task of trying to find them is near on impossible.

4: No-one in the higher echelons of Iraq's government will ever give away what they know. The previous case was an exception because the son in law feared for his life and was "getting at Saddam" before Saddam got at him. The captured high ranking Iraq government members do not have this fear or payback mentality. Besides, what would it mean to them if they revealed where WMD were stored? (It won't involve being released, that's for sure.)

5: Only a small area has been searched. The current inspectors have a list of sites to search. These sites include sites the soldiers found while fighting and thought were suspect, sites the US government thinks are suspect, and others that intelligence has led them to. That is like looking for the needle in the haystack.

6: Iraq are masters at hiding weapons. As mentioned previously with Iraq importing and making WMD while the UN inspectors were in the country inspecting, Iraq knows how to hide what they are doing. And has become very good at it. From building tunnels from Palaces to Air Ports, nuclear bomb proof bunkers capable of supporting three or four hundred people for years, and so on. When you are doing something illegal, you make sure you do it in such a way no one knows you are doing it.

Picture this scenario... Iraq knows the heat is coming. They get fair warning from the UN. This gives them plenty of time to dismantle any weapon manufacturing program they have and move it out of the country. It gives them plenty of time to remove any incriminating evidence and move it out of the country - into neighboring Syria (whom they have a verifiable long-standing alliance with, as proven by the secret oil line Iraq was using to give Syria oil).

Think of it like a police raid on a drug house. If the drug dealers know a month in advance that the police are coming, they make sure the house is spotlessly clean. So by the time the cops come, they find nothing.

It's the same with Iraq. Except, instead of drugs it is weapons of mass destruction.

And what exactly is a weapon of mass destruction?

It is a weapon that can cause damage and death to many people at a time. A gun shoots one bullet at a time and can thus only kill one person at a time. But a bomb on a rocket can blow up a building full of people.

Further, just because the current inspectors have not found any WMD yet, doesn't mean they never existed. To draw that kind of conclusion is ludicrous.

I can't find records of my great grandparents existing. That doesn't mean they didn't. Osama Bin Laden hasn't been found yet - that doesn't mean he doesn't exist.

Perhaps, though, the biggest thing about the WMD is that they have been found. Just not in stockpiles.

A drone aircraft capable of spraying nerve gas here, a Chinese silkworm rocket there, a few drums of chemicals somewhere else. If these small insignificant finds are added up, you discover a LOT of WMD have been found. And a lot of WMD pre-cursor equipment and supplies, which is use for making WMD, have also been found.

This leads to the question: If Iraq had WMD why didn't they use them during the recent war and why haven't the terrorist fighters used them now.

There are several reasons...

Reason # 1: The US-Led Forces were able to get within the Iraq decision-making circle. Which is to say, by the time Iraq saw what the US-Led Forces were doing and had made a decision about a counter effort, the US-Led forces were already doing something else. If Iraq had still gone ahead with its original decision it would have been useless. So they needed to come up with a new response. BUT, as soon as they had, the US-Led Forces were already doing something else.

Reason # 2: Iraq communications had been knocked out. In war, who has the best communication wins. Iraq could not communicate with its troops in the field - or anyone else for that matter. From transmission towers being destroyed to radio jamming devices used by the US-Led Forces, Iraq was fighting blind. Front lines couldn't communicate fast enough about what was going on, and orders from headquarters to the front lines couldn't get there fast enough. The Iraq military was effectively fighting without leadership.

Reason # 3: Only the most highly trusted personnel knew where the WMD were. And with loss of communication, they could not get the weapons into the hands of the troops. Remember, the forces were moving fast and advancing from multiple fronts. They also had air supremacy. Which meant

Reason # 4: Even if they could get the weapons from where they were being hidden, the supply trucks would have been blown to bits before the weapons could be used. This is also why the terrorist doing the fighting now are doing so with conventional weapons instead of WMD - they don't know where the small scale WMD are.

Reason # 5: It takes a lot of machinery to launch WMD strikes. With the countryside swarming with special forces troops, this machinery could not be used. Safer to get it out of the country on disguised trucks - something the Iraq government was very good at.

The fact is, the biggest deal being made about WMD stockpiles having not been found yet, are mainly associated with the liberal media. And so far, the liberal media (and liberal politicians) has been very short on its praise of anything President Bush does. Instead of offering solutions, they pick apart and try to find problems. Concentrating on stockpiles while ignoring individual weapon finds.

And if you are wondering still, ask yourself this question: Does it make more sense that Iraq - and specially Saddam - and their historical disregard for human life and proven desires for WMD would turn over a new leaf and actually get rid of them and dismantle WMD programs - or - that they employed their proven skills of deception and simply hid the WMD and moved the WMD where they would not be found?

The common sense answer is... they moved the WMD. They moved the incriminating evidence - just like any drug dealer would do given advanced warning of a police raid.

It might be nice to think Saddam had a change of heart and suddenly became a conscientious leader. But a man who can willingly and personally kill many people in cold blood does not have such changes of heart. Specially when they consider this ruthlessness paramount to being able to rule the country.

Forget the romantic sentiments and what we wish he had done. When you look at the situation without emotion clouding your vision, you see removing incriminating evidence and hiding it better or giving it to Syria for safe storage, makes sense.