Martin Armstrong recently had a blog post regarding ending the Income Tax and replacing it with a system where the Federal government prints what they need with a maximum cap of 20% of GDP. Though I believe he stated 10% to 15% of GDP would be much better (which I agree).
I can’t find Martin’s post right now, but the premise was, why bother with all the back and forth with taxes? It took a bit to wrap my head around the idea, but the more and more I thought about it the more I liked the idea.
So basically the printing of money would be more inflationary and that aspect would replace the income tax. So why is that better?
Here are the Pro’s and Con’s.
Pro’s:
- It would save everyone time and money going through complex tax code each year.
- The government could end their NSA spying on it’s own citizens, and it’s war on cash since it is all just a hunt for money under the guise of fighting terrorism.
- It would render government smaller as there would be no need for the IRS and the hunt for money.
- It would reduce stress likely resulting in much more favorable opinions about government.
- Without taxation business would be equalized for competition. Example: GE makes windmills. Another company want’s to compete with GE on making windmills. Thanks to GE’s lobbying efforts they have an effective tax rate of 0% while the new smaller company must pay the full 35% in corporate tax. The smaller company can’t compete with such a drastic disadvantage even though their windmills are more efficient.
- Companies would have no tax reason to hold their money overseas, much of which would be brought back to the Unites States.
- It would end Federal debt. Governments never have any intention on paying back debt which results in:
- Defaults, loss of confidence and the destruction of a currency.
- Governments try and distract it’s citizens with war when the debt gets out of control. WWII is a great example.
- May prevent large capital flows out of an economy.
- It caps spending to the economy and business cycle. So that if GDP is down, government spending would also be down.
- No longer a need for Primary Dealers. Wall St primary dealers always hold sway over the government for the government needs these banks to sell their debt. The Wall St. / Government manipulation would be greatly diminished.
- Because government spending would be consistent, and the fact that taxation is no longer a mystery, confidence would rise for the nation, which could result in making the currency more valuable globally and the global currency demand may offset the inflationary printing.
Con’s:
- The biggest con is that printing money is inflationary. Though if Federal spending was capped to 15% of GDP the effects should be consistent. Currently the Federal government is spending over 20% of GDP.
- Is it realistic to be able to hold the government to only 15% of GDP? Would congress keep passing bills that would adjust the amount higher? Definitely a big concern.
- There is an entire industry based on taxes and filing taxes. This industry would be greatly reduced an many jobs loss. Though I believe jobs in other industries and small business would more than make up for the loss of jobs. There is also state taxation that will require assistance.
- The change over to a new system would likely be difficult, and most likely only to occur after a crash and burn of the current system.
- May be difficult for people to mentally adjust and understand the new system.
The bottom line is the inflation would be the substitute for taxing. Basically, what is better… the constant back and forth with taxes and the need to police for tax money? Or just printing a constant that the Feds can spend each year with no more interference? The inflation would be the substitute for taxing.
For those that say there would be massive inflation, well we already have massive taxation. So which is worse? Which is easier for everyone and results in more liberty?
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