Skin in the Game

"Charity is no part of the legislative duty of the government." ~ James Madison

In America today, the government takes money from a few of us and gives it to others. With the federal government there is domestic giving, there is foreign giving, and there is giving to support the government infrastructure. Sadly, DOGE is finding inappropriate giving, as well. That is what we call waste, fraud, abuse, and corruption.

The last information I have (2022) is that 40% of Americans PAY NO individual income tax. That means that 40% of Americans have no financial interest in how the government spends the taxpayer’s money. It isn’t their money, so who cares? That is a problem, in my mind. Because of the mishmash of federal charities (programs), I couldn’t determine how many people are totally dependent on federal government support. There are more than a few, no doubt. On the trajectory the Obamaists of Biden’s administration had America on, more Americans would be paying no taxes than were paying taxes by 2028. That would have been a big, big problem.

There is one and only one absolutely fair way to collect taxes. There is one and only one fair way to see that all Americans have financial skin in the game. There is one and only one way to entice ALL Americans (some will and some won’t) to take an interest in how the government spends their money. The solution is a federal sales tax, which some refer to it as a consumption tax.

Common sense dictates that the only logical way to tax fairly is to tax spending and not tax income. This is particularly true when considering the complexity of the bizarre U.S. Tax Code. In my view, there is nothing fair about taxes today.

If a consumption tax replaced our income tax system, those with the most money in America will spend the most and pay the most in taxes. Those with the least money will spend the least and pay the least in taxes. Everyone in between will pay taxes in accordance with their means. That is a fair tax system with every citizen then having financial skin in the game. It also insures that everyone pays their fair share, no matter what the source or amount of their income.

In addition, everyone visiting America will pay their fair share of the cost associated with their using the American government infrastructure. Tens of millions of foreign visitors, legal and illegal, would become American taxpayers. They too, would be paying their fair share to be in America.

Another consideration is that entities that currently do not pay income taxes would become taxpayers as well. Heretofore, untaxed “non-profits” would become taxpayers. Under current tax laws, most tax payers no longer benefit from charitable donations as they once did, so the non-profit designation is meaningless for taxpayers. So, the non-profits will experience a bit of pain. However, I would expect that a national, all-inclusive, sales tax would be 5% or less, so the pain wouldn’t be that bad and their donors would have more money to donate

With the technology available today, automating the collection of these taxes would be a breeze. Elon Musk’s DOGE kids could probably put together a program in about 30 minutes. The size of the IRS could be significantly reduced. More importantly, the Tax Code would be reduced to an understandable level, from 10s of thousands of pages to just a few pages. 

Sadly, the IRS couldn’t be eliminated because there will always be criminals trying to steal taxpayer’s money. This would likely kill the tax accounting and tax filing industry, but they are capable people who will find other productive work.

I am also aware of how this sales tax would impact the poor. This falls into the category of short term pain for long term gain. When 40% of Americans are too poor to pay taxes, we have more than a tax problem. Half of these poor should be firmly in the middle class. Most of these problems are being addressed already by President Trump and his MAGA team, but this proposal will also be a benefit helping with that effort.

I would hope that if the feds implemented a sales tax, all states would eliminate state income taxes. Then if the government, state or federal, wanted to raise taxes, far more people would be interested and need to be convinced. In America today, 40% of our citizens could care less about taxes and the abuse of taxpayer’s money, because it doesn’t impact their lives. A federal sales tax would change that and would get their attention because it then would hit them in the pocketbook. Then a lot less “stupid spending” would take place.

Lastly, this type of sales tax would seriously diminish the opportunities for corruption of our federal elected officials. The U.S. Tax Code is a petri dish for breeding potential corruption.

America needs all of her citizen to feel they have ownership in their country and hopefully have a higher degree of interest in what happens in this country. A federal sales tax instead of income tax would help achieve that goal. I firmly believe that everyone should have skin in the game.