America’s federal income tax system is even worse than you think it is, rife with outmoded, complex, and unfair rules. In a new book, Professor Daniel Goldberg, a tax law expert at University of Maryland Carey School of Law, suggests the solution lies in taxing consumption instead of income.
“The Death of the Income Tax: A Progressive Consumption Tax and the Path to Fiscal Reform,” (Oxford University Press, 336 pages) explains why the current income tax isn’t just hopelessly out of date, complex, and mismanaged, but it actually hurts the economy by taxing earnings instead of consumption. In the book, Goldberg proposes a progressive consumption tax, collected electronically at the point of sale, and adjusted so that poor people do not end up paying an undue burden of their overall income. His system, he says, would encourage personal saving, eliminate political manipulation of the tax code, and sharply reduce tax cheating.
Goldberg has spent much of his 35-years at UM Carey Law researching, teaching, and writing about tax policy. While he is not the first to propose radical tax reform, or even a tax system based on a value-added tax (VAT), he says his plan specifically addresses the technological, political, and financial issues that a successful plan will need.
His plan collects taxes automatically, and electronically, when a consumer makes a purchase. He calls his system e-VAT, for electronic VAT. The consumer price reflects the taxes paid on the production of a good or delivery of a service, from start to finish. It allows workers to take home essentially all of their wages free of tax (low-wage earners get even more than that), and taxes them only when they make a purchase.
“It’s such an efficient revenue raiser for the age of electronic commerce that people should be talking about e-Tax as inevitable,” says Goldberg.
Just like death and, well, taxes.