On the ethical side, all taxation should develop from two moral maxims. First, it is the duty of every government to develop a just and sound revenue system - just in the way taxes are assessed and collected, and sound in the way public revenues are administered and spent. Second, it is the duty of every person to pay his (or her) fair share of the costs to maintain the government that serves and protects him.
This moral maxim for taxpayers cannot operate if governments fail to develop a fair and just tax system. A taxpayer cannot be expected to pay his share if the laws do not obligate him to do so. Nor should the government be surprised when taxpayers attempt to avoid and/or evade taxes that exceed his justifiable share or ability to pay. While these maxims are important, other valuable principals should not be ignored. For example:
1. A tax should be easy to explain with regard to its purpose and the means of collection.
2. A taxpayer should expect taxes be transparent and equal to others of similar wealth, income, and ability to pay.
3. Exemptions and deductions should apply equally to like incomes without regard to dissimilar situations or circumstances. A renter for example should not be more heavily taxed than a homeowner nor should a single person be told to subsidize his married co-worker receiving an identical income. Social Engineering via the Tax Code should be avoided. The dissimilarity between tax and welfare systems should be as distinctive as hot and cold.
4. Nature does not bestow wealth equitably. A minority of citizens will inevitably acquire great wealth, which by natural justice they should share with the community. This sharing should be enforced by moral persuasion and a strong public opinion, not by force and confiscation.
5. All citizens, from recruits in the military to the chief leaders of society, should serve the state unselfishly, motivated more by a love of community and country than by power, pay, and the perks of office. The obligation to serve should be instilled at home during a child’s formative years and during the educational processes. Besides pay, a key reward should be the good feeling aroused within and recognition from others for a job well done.
6. Consent is required for all lawful taxation, either by longstanding custom or by the common consent of all the taxpayers. Without viable consent civil disobedience and evasion should not be unexpected. As taxes increase, evasion increases. Regardless of the meritorious purposes or reasonableness of a tax, if it is not universally accepted as being essentially fair and just, fair-minded people will attempt to avoid it.
7. "Soak the Rich" tax schemes do not work. Excessive taxation of the wealthy often causes great wealth to magically disappear since the rich generally have the means to escape heavy taxation. The income tax (including the Payroll Tax) as practiced in the United States is a bastardized form of wealth redistribution and transfer payments that resembles a Communist/Socialist state, not one based on Capitalism and Free Enterprise. In this quasi-quagmire of tax injustice, the more wealth a taxpayer possesses, the easier it is for him to secure professional advice to avoid taxable income. A person's wealth and ability to pay often bears little relation to the amount of taxes required by US law and even less relation to combined FIT & FICA income taxes required of middle class workers.
Defective US Tax and Welfare Laws Create Social and Economic Abuses
An income tax is a tax levied on financial income (wages, salaries or fees) of persons, corporations, and other legal entities. Other types or names of taxes are excise, sales, profit or capital gain, inheritance or death (estate), property or real estate (City, County, Public School, Colleges, or Roads), Payroll (including FIT and FICA contributions), etc. Money to pay these taxes generally derives from two primary sources – Income and Wealth.
The cumulative rates and amounts of taxes extracted on family incomes vary widely between the needs and options of the taxing jurisdictions and the differing types and levels of individual income and wealth to be taxed. By using a bottom line approach of total taxes payable and total benefits received by families, general assessments can be made to determine if tax burdens are fairly shared among the aggregate tax base. This evaluation process may also ascertain if (means and non-means tested) entitlements or benefits are disbursed only to those are earned them or those who can demonstrate humanitarian need.
The difference between the characteristics of a fair tax structure and one that is unfair may be evaluated by measuring the impact of taxes and welfare on middle-income household wealth and income contrasted against the extreme levels of poverty and wealth. By examining the effects of multiple tax and welfare jurisdictions on tax payers and welfare recipients, a general understanding of wealth redistribution may emerge, that expose injustices embedded in current tax and welfare policies.
The power of government to redistribute income or wealth by force of law leads to large scale abuse and unintended consequences. The history of Social Security, the most popular retirement program in the US, provides overwhelming evidence that good intentions often result in ill-conceived policies that produce undesirable results. The SS retirement program has the most deceitful scheme ever perpetrated by the ruling elite on the working class. Contributors to the program are generally unaware or unconcerned that they are being victimized by their employers and the government.
Variable Currency Distorts Political Policies
Throughout history, governments have regularly relied on trickery and legal obfuscation to cover up their real objective from a suspicious public. The incalculable quality of fiat currency introduces a variable into policy making that is not measurable. The inflation created by a depreciating currency is a hidden tax on wealth and income that make policy-making, problematic; however, well intended. The difficulty in developing transparent, fair and equitable public (tax) policies under these conditions is formidable, if not impossible. A stable currency that represents a time tested, sustainable store of value, against which other assets can be reliably measured (denominated), is essential to developing fair and honest public policies. See A Tax System built on FiatCurrency
The fiat US dollar is a depreciating asset that disguises the true value of physical assets. Artificial, inflated gains produced by a depreciating currency should not be taxed because in terms of purchasing power, wealth is diminished not increased. A fair tax policy would require that losses in purchasing power of assets denominated in dollars and measured by the CPI should be indexed against inflation to determine capital gains and losses. Only real gains or losses should be subjected to the tax code and the rate of tax should be commensurate with tax rate on wages.