Fair Taxation
Nov 2019

In this post, we explain our concept of Fair Taxation derived entirely from Book 5, Chapter 2 of Adam Smith's Wealth of Nations.

The taxation of modern Economics suffers from the fact that:

  1. Taxes are imposed not on where they are meant to be
  2. Taxes must only be paid in money
The first one creates an obvious economic injustice while the second one creates an indirect injustice by forcing the taxpayer into the role of a merchant as he has to sell his product or service for money (which may not be his primary skill). We correct this by levying taxes directly on the people's revenue-valueand by allowing tax payment in kind, through a system called Social Shared Direct Taxation or simply Fair Taxation that meets all of Smith's taxation maxims that have been forgotten. This taxation system will then lead the way to a fair, regulated democracy, as explained in the last part of this post.

What was the problem with the Economic or Commercial system of taxation?

The Commercial system is built on the idea that money is wealth which converts all metaphysical, subjective value into a physical, objective number, manifesting as money-objects. Instead of having subjective, symbiotic agreements like "You scratch my back, I'll wash your feet," commerce degrades all value-interactions into objective, mercenary transactions as "I'll wash your feet if you give me $1." This shifts the consciousness of people from being naturally concerned about other people, into being concerned with numbers and an external, artificial object called money, and is opposite of Adam Smith's sympathy-based society, and explains why he was so much against the Commercial system.

This lack of concern for the people and immense concern for numbers is evident in our modern taxation system which was descended from the Commercial system. Basically, taxation in commercial or Economics-systems follows these steps:

  1. Total revenue is determined
  2. Deductions are removed to arrive at the taxable revenue
  3. A tax is computed on the taxable revenue depending on tax laws
  4. The tax is paid by whoever filed the tax (such as withholding taxes)
  5. Mistakes in the process result in penalties or tax credits
Because of this, taxation in Economics has two quirks:

This causes problems:

Because of this, taxation becomes unnecessarily burdensome and leaky, causing people to avoid it as much as possible while providing less-than-optimal revenue. In addition, the complexity of taxation leads to tax loopholes and tax havens. All of these then leads to lower tax revenues and higher budget deficits, weaking government and reducing the infrastructure and services available to the people, even causing governments to privatize its most essential parts. America now has a $22 trillion debt and its government shuts down parts of itself more often.

The impossibility of taxing people according to their revenue by any capitation led to the invention of taxes on consumable commodities. The state, not knowing how to directly and proportionally tax the revenue of its subjects, taxes it indirectly by taxing their expence. Their expence is supposed to be proportional to their revenue.
Wealth of Nations, Book 5, Chapter 2

Our Solution: A new double entry system

Our solution is a new process that factors in the nature of the revenue and the people involved in generating that revenue, either as a buyer party or a seller party:

  1. Put all transactions in a form, with each party listing down their offer
  2. Categorize the form as a transaction for labor, professional services, raw material, basic goods, finished product, luxuries, etc to arrive at the tax rate
  3. Tax each party according to tax rate equally
  4. Parties pay when the payment amount becomes feasible for payment. This means that a tax debt of bananas will be accumulated until harvest time comes.
A commercial receipt only shows info from one party in the transaction
A fair taxation system would show both parties and can split or even shift the tax to the proper target
Fair taxation can scale to any transaction size. Here, a normal 10% tax on new buildings would be split evenly between the buyer and the makers of the building. The parties have the option to pay their taxes in cash or in kind depending on their output, freeing them from needing so much money in their operations.

The main difference with the old system is that our system focuses right away in getting the correct values and information in the form, whereas the old system focuses on rebuilding the information from receipts and memory. By setting the values from the very beginning, then the following advantages are obtained:

Commercial or Economic Taxation: Tax paid by consumer

Fair Taxation: Tax paid by both

Inflated Fair Taxation: Selling price raised

How will it be implemented?

As you can see, Fair taxation either reduces or increases the tax burden on consumers depending on how the supplier reacts. The system can be implemented gradually, first in consumer goods with online payment systems to see if the buyers will actually pay their share of the tax.

What if the buyers don't pay?

Delinquent taxpayers can be prevented from availing of government services until they pay, such as:

  • Exiting the country
  • Registering vehicles and property
  • Getting licenses such as driver's license, professional license, marriage license, etc.
  • Voter's registration. This is the most important feature of the tax system because it is the first step towards a fair, regulated democracy   as it will prevent the unproductive and selfish citizens from electing leaders and having a say in the direction of their society. In David Hume's proposed political system, the basic productive value of citizens is one of the key requisites:
taxBuyers will have a choice to pay the normal price of the commercial system on the left and get a commercial receipt, or the lower price of the Fair Tax system at around 5-6% off on the right, to be paid later as long as they can provide their tax number, identity, and consent.
Let all the freeholders of £20 a year in the county, and all the householders worth £500 in the town parishes meet annually in the parish church, and vote some freeholder of the county to be the county representative.
Idea of the Perfect Commonwealth
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