While taxation remains at the lowest since the 1950s, the new tax code enabled through the fiscal cliff has resolved one of the long-standing issues in taxation, fairness.
For the first time since 1979, according to an article at the New York Times, our tax code is progressive, making those who utilize the system more, pay for the cost to support the system. Since the Carter tax reforms of 1980, our tax code has shifted, with more and more of the tax burden being carried by the poorest in the United States. This in turn created a retarding effect on income, further repressing wages.
The issue which remains is that the total government revenue still remains at record lows. This, however, can be addressed through several methods. The best solution is to increase revenue alongside the drawdown of the over inflated military budget. But where would this added revenue come from?
One solution would be to reinstate the financial services tax, repealed over 40 years ago. The financial services tax was a simple half-percent sales tax on financial transactions. It is estimated that this tax would in a single move bring in half a trillion in new revenue. It would furthermore punish companies which engage in the market destabilizing technique of flash trading, which can cause collapses of stocks, and entire markets, in a matter of minutes.
Another would be to raise the so called “vice taxes,” that is, taxes on recreational material such as tobacco, alcohol, and yes I’ll say it, cannabis. It is estimated that increasing these vice taxes would raise enough revenue to fund the treatment of substance addiction, currently estimates to cost over $100 billion per year.
To improve the economy, another revenue source long ignored can be employed, tariffs. They are at an all-time low, and with multiple nations now engaging in dumping practices to drive US firms out of business, it is a step that must be taken. Historically, tariffs were the single largest revenue stream for the federal government. While a return to the Smoot-Hawley rates is not called for, a moderate, smartly crafted tariff designed to counter the dumping methodologies of certain nations would do wonders not only for revenue, but for jobs in this country.
Nathaniel Downes is the son of a former state representative of New Hampshire, now living in Seattle Washington.
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