Posted: May 10, 2005 By: Mark Goodson

Subject: Characteristics of the Most Productive Tax Code

Comment: The following are adapted from Adam Smith's 1776 publication. They describe the proper characteristics of the tax system of a free society:

1. Every person should pay in proportion to the revenue that he or she enjoys as a result of the protection government provides. This means neither a "head tax" nor a graduated tax, but a flat tax.

2. Taxes should be predictable, not arbitrary. Each person should know with certainty exactly how much he or she will pay given a certain level of revenue. There should be no preferences, abatements, exceptions or biases for or against selected taxpayers, occupations or revenue sources.

3. Taxes should be convenient to pay.

4. The tax should not be expensive to administer.

5. The system should not create huge incentives to avoid paying, such as excessive rates or burdensome compliance costs.

6. The tax should not skew or destroy incentives to work and invest.

7. The tax system should not attempt "social engineering." The only proper role of a tax system is to raise revenue to run the government. It should not explicitly attempt to encourage or discourage certain types of behavior. (This may seems to contradict many person's incorrect view of the purpose of government. May it be known that the only purpose of government is to foster individual liberty.)

8. The tax system should not encourage political corruption by creating incentives for special interest to buy tax favors from legislatures.

Please note that our present system fails every point. Our system cannot be "fixed"... it must be DISCARDED... we must start from SCRATCH. The tax must be uniform, flat, no exceptions, no exemptions... and much lower than they are now. Productivity will be maximized when the tax rate has the characteristics 1-8 above, and the overall rate is minimized to allowing the government to perform its most basic functions... and no more.