Today I had a bit of free time so I thought I’d ponder the concept of taxation. This includes types of taxation, are they necessary, how they may be viewed ethically, etc.
This isn’t about Sapiocracy – these are just my own personal thoughts and I’m happy to revise them if presented with information persuasive enough to do so.
All of this (I hope) is based on rational deduction, so I don’t believe this will be too controversial.
In general, my feeling is that taxation is necessary and should be levied in such a way that those who pay are those responsible for the problem whose solution needs funding.
Taxes should always be levied in the best interest of the collective. In other words, if a tax doesn’t provide a collective net win (or loss prevention), then that tax is unfair. If one demographic gains more or less than another group, then the tax is unfair. It may be impossible to achieve perfection, but it can certainly be done better than the current systems.
How Would Sapiocracy Handle This?
I don’t know and that’s not the point of this article. This article is a personal brainstorm. Under Sapiocracy, the group would decide how they wanted to deal with taxes. Perhaps they would use these thoughts and perhaps they wouldn’t. That isn’t for me to say (except perhaps through my participation as a voter with equal opportunity to participate under Sapiocracy.)
Is Taxation Necessary?
Yes. Humans operating in groups significantly larger than a tribe makes it a requirement. Large collectives have costs that don’t work well with human nature at sizes much larger than the size of a tribe. Everyone agrees that (a) no-fault accidents happen and (b) certain collective initiatives are in everyone’s best interests*. These things require resources to manage and those resources must be collected from everyone somehow. Thus, taxes in one form or another.
* Note: If you’re an anarchist who prefers the idea of large groups without organized collective initiatives, please don’t comment and we’ll leave this as an impasse. There are some (very few) positions I won’t waste time acknowledging.
A good example of a universal good is traffic lights. Few people are needed to manufacture, install and maintain traffic lights. The cost of taxing the people and paying these specialists offset by the advantage of having them is vastly superior to the cost of not having an agreed to system of traffic lights. One could argue that people without cars don’t use traffic lights, but that would ignore the crosswalks used by foot traffic, which are primarily used by those without cars. If you wanted to get detailed about being fair, those without a car who live and work more than X distance from the nearest traffic light could be exempt from the taxes.
Two more obvious examples are police and fire departments. People commit crime and things burn down. No forseeable system of government will stop these events. It is cheaper to employ specialists than it would be to try to operate without these departments. Thus, it is a win for the collective to have them and fund them with a fair tax.
Any time you have more than a certain number of people in a group (about the size of a tribe), you’ll end up with collective management issues like this that require some form of agreed-to mandatory taxation in order to fund certain initiatives. The important detail to remember is to make the taxation fair so that those causing the costs are those who bear the costs.
In short, the only rational reason taxation should exist is to fund those problems that the wise agree are a net win for everyone (or as close as can be achieved.) The taxes in question should be paid by those causing the problem(s). If there is cost with no fault (as in natural fires, for example), then everyone should pay in some fair way.
Kinds of Taxes
What kind of taxes exist? Well, here’s a (perhaps incomplete) list:
- Income Tax
- Sales Tax (also Excises)
- Property Tax
- Capital Gains Tax
- Holding Tax
- Luxury Tax
- Vice Tax
- Sin Tax
- Franchise Tax
- Retirement Tax (Social Security)
- Inheritance Tax
- Expatriation Tax
- License Fees (Tax)
- Use Tax (i.e.: Tolls)
- Tariff (Outside Transaction Tax)
To prune this immediately, I’ll remove the taxes I feel are essentially ridiculous or at least mostly poorly conceived. These exist mostly for historical reasons because when they were first enacted, they seemed like a good way to solve a budgetary problem at the moment. In my view, they should either be forgotten or restructured into a different tax. The reason is the quantification of the tax doesn’t closely match any collective cost requiring funding.
- Income Tax – What cost does X’s income cause?
- Property Tax – What cost does X owning property cause?
- Capital Gains Tax – What cost does X owning their money cause?
- Holding Tax – What cost does X’s assets cause?
- Luxury Tax – What cost does X buying expensive things cause?
- Sin Tax – What cost does participating in activity X cause?
- Inheritance Tax – What cost does passing assets to relatives cause?
- Expatriation Tax – What cost does a person leaving cause?
- Tariff – What cost does transacting business with outsiders cause?
This is not to say that the amount of assets or income a person has cannot be used to scale certain types of collective taxes – it can. It just shouldn’t be at the scale it is being done at present. For example, upper middle class taxpayers typically pay between 40-50% of their income. This is absurd as the people with these incomes are not causing most of the costs they’re paying for. This is unethical as it uses the upper middle class as tax mules to the benefit of everyone else (including the rich, who escape these income taxes because of lower capital gains tax rates.)
I propose an alternative, which is to fund most of the collective needs through actions involving people’s interactions (trade.) Sales tax is fair when funding sales supportive systems. Most of people’s needs scale with their interaction (trade) with each other. Property tax is fair when funding local police, fire and road maintenance (in proportion to some heuristic of use – perhaps proximity to population factored with road traffic.)
Capital gains could be eliminated using sales tax instead. When you sell property or stock in a company, you should pay sales tax specific to that type of asset. As far as I can understand, capital gains tax being separate from sales tax is a tricky way for those with more financial assets to avoid paying income or sales tax. But a sale is a sale is a sale, no?
Holding tax and luxury tax appear to be ways to extract money out of the rich with no associated cost to the collective. Is there a direct collective cost attributable to a large bank account or safe full of cash? Luxury tax is similar: There is no direct cost to the collective when a person buys something expensive. Luxury tax should be embodied in sales tax.
Sin tax is essentially one group of people imposing their beliefs on others because they don’t feel some activity or product is good for you (or against their deity’s mandates.) Participants, they say, should pay the government money when they participate. This is absurd. Either you can prove there’s a collective cost or you cannot. By sin tax, I’m talking about taxes on otherwise legal things (like strip clubs) simply because some wish such businesses weren’t legal. If the business shouldn’t be happening, then make it illegal, otherwise, don’t try to tax it in order to stuff the public coffers.
Inheritance tax seems like a way for the collective to rob parents of part of their holdings that they may have saved for their children. In nature, children of responsible parents benefit; government should not try to undo this natural occurrence. If your parents save a lot, then you should receive the rewards of having such responsible parents. There doesn’t seem to be a moral argument in favor of redistributing wealth to the collective when a parent dies. To do so is financial violence inflicted on the progeny. Besides, if the descendants spend the wealth, the collective will be appropriately funded with the resulting sales taxes.
Expatriation tax is a clear way for a group to keep members via financial punishment for leaving. No group worthy of membership would threaten theft as a deterrent to expatriation.
Tariffs are complicated because they only exist because of geopolitical borders and a million other details. They are essentially financial warfare used for various complicated reasons. They have more to do with the dynamics of nation states and have nothing to do with a collective’s internal affairs. I’m going to ignore them here in order to focus on how a collective manages itself internally.
This leaves us with the following (perhaps incomplete) list:
- Sales/Excise Tax
- Property Tax
- Vice Tax
- Franchise Tax
- Retirement Tax (Social Security)
- License Fees (Tax)
- Use Tax (i.e.: Tolls)
In my opinion, most collective funding should be drawn from sales taxes. Different types of products can have different sales taxes (i.e.: equipment, tools, food, furniture, leisure items.) Taxes on certain commodities like gasoline can be approximately mapped to road maintenance, for example. Excise taxes (sales taxes between entities before retail sale) can have different tax rates to scale the collective cost of operating manufacturing businesses match the cost to the collective more closely. Funding the collective mostly through sales taxes makes sense if you think of what a collective actually is: a group of people trading with each other in a myriad of ways.
Property taxes should be based on the collective costs associated with public departments involved with the collective’s required management of the property (anything agreed that the owner cannot or should not do by themselves.) If a property is remote with no public traffic, then the costs should be low because there is little collective cost. Properties in high traffic areas cause more costs through road maintenance, etc.
Funding education via property taxes is immoral, in my opinion. Those without children should not be forced to fund the education of their neighbor’s children. Having children is a personal choice and the choice to have children should come with the cost of raising them, including education.
Vice taxes can be argued to be moral only if the money raised goes to the collective costs associated with the vice in question. If it is true that X amount of collective cost is shown to be caused by the use of product Y, then it can be successfully shown that all of that cost should be borne by those using product Y. Today, however, vice taxes often fund things completely unrelated to the products and services incurring a vice tax. A nauseating example of this is lotteries, which are essentially a tax on the poor that functions because the poor have less understanding of the risks and have different psychology than the wealthy. Lotteries essentially tax the poor without the poor realizing that they are being used as tax mules.
Franchise tax (fees for corporations or businesses) should be used for the support of those functions the collective must support in order to create and maintain the franchise system, and no more.
Retirement tax (Social Security in the U.S.) is not necessarily a bad concept, but the structure of pension systems worldwide are essentially unsustainable Ponzi schemes benefiting the wealthy at the expense of the poor and middle classes. The result is that the children of the early beneficiaries have paid in large amounts of money and they will never see their promised dividends. Any retirement should be converted into commodities like gold which are immune to currency debasement. If the currency is structured in a way that debasement is impossible, then a retirement account could be denominated in such a currency. For example, if a currency is allocated such that there will always exist X units of currency per person with no possibility of change, then the currency will always have the same relative value to the population. This would be guaranteed to be a reasonable assumption over time. Sapiocracy could make such a rigid monetary system possible.
License fees make perfect sense if the collective decides the function in question needs to be licensed. The cost of each fee event should be directly mapped to the cost of the function being executed. If additional costs not related to executing the function are associated with the category of licensed position, then those costs should be funded with a tax that more accurately assigns payment to costs instead of a fee.
Use taxes (i.e.: tolls) are a fair way to pay for facilities and have those responsible for the costs bear the costs. Unfortunately, these taxes and fees are often perverted over time to covertly pay for other things. It becomes very easy for these taxes and fees to increase over time, even though the cost of maintaining the facilities often decreases. This should never be allowed to happen.
I disagree that having everyone pay for education is good because it leads to future economic prosperity. It forces people producing no cost to pay for those who are producing the cost. It promises benefits that those bearing the cost will not enjoy – their peers’ children may enjoy the benefit if the prediction is shown to be true. My thinking is that all cost and risk should be borne by those producing it. I also believe that public education systems have been shown to be inferior to every other form of education known to man, including perhaps no formal education at all.
Sapiocracy Tax Efficiencies
Sapiocracy’s computing system offers the possibility of completely redesigning how money is executed. If this were the case, further integration with Sapiocracy is possible to make the system of taxation much more powerful than anything ever implemented.
For example, I eluded above to exempting people from the tax for traffic lights if they lived and worked more than X distance from the nearest traffic light. Sapiocracy could already know this and automatically compute the tax each person owes without cost.
Further, Sapiocracy’s laws could be set up such that taxes are not filed. Instead, they happen. Sapiocracy already knows how much you owe. Keep in mind, with the hyper efficiency Sapiocracy offers with virtually no corruption and the wisest minds crafting the rules, taxes would be much lower and they would not be seen as the burden they currently are.
Beyond just knowing how much you owe, Sapiocracy could automatically pay taxes with each transaction. Before you recoil in horror, keep in mind that this is within a system that is 100% transparent, auditable, agreed to and managed by everyone. This is the kind of innovation that you should rethink entirely. The cost of being in the collective is a constant ongoing thing that you examine whenever you like, in as much detail as you like. This would be the end of tax season.
This kind of integration would further reduce the cost as there would be no need for tax collection agencies or tax preparation agencies. It would be automated out of existence.
In summary, it seems to me that income tax, holding tax, inheritance taxes and some others should be abolished. Sales tax should fund the majority of collective costs. Use taxes where approximate mapping can be accomplished are reasonable. Property tax should be based entirely on what it costs the collective to manage the fact that the property exists. Education should be funded by those with children, because they cause the cost of education.
Sales tax seems to be the most intuitive way to map collective cost to funding the collective because sales involves people trading with each other. Is this not the whole point of a collective with a money system? If not this, then what? If a person doesn’t interact (trade) with others, the collective cost is low. If a person interacts more with others, then the cost to the collective is high.
If you see flaws in my logic or have a different viewpoint, please let me know. I appreciate it.