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A Market Based Tax System

Several years ago I was introduced to the idea of a market based tax system that allows taxpayers to choose where their money will be spent. I began my career as a tax accountant and am actively pursuing the CPA, should be complete soon. I hold a bachelors and masters in Accounting.

Given my background in tax, I cannot imagine working in this system without trying to improve it. That is why I want to get a group together to discuss, trade, write, and begin a process that completely overhauls the US tax system.

I firmly believe the fundamental issue with our tax system is not the percentage that we pay, or the method we us. Instead, the fundamental issue is taxation without representation. Give me a flat tax, marginal, progressive tax system, it does not matter. When the tax payer gets to the line on a 1040 that says "tax" I would want them to fill out one additional page. Yes I know... more forms.

The additional page will allow the taxpayer to select funds (like a stock), or a pool of funds (like a mutual fund) for where their tax dollars will be spent. ALL government agencies and Federally Assisted groups will need to register with an oversight board that will place the entity in an " index." The entities will submit a budget, and hope the taxpayers help fund the budget. Those entities that receive tax dollars, will do so because taxpayers believe in the entities public service. Those that do not receive funding will scale down, or diminish all together. Once an entity meets its budgeted amount, the remaining money selected by a taxpayer will go towards the taxpayers second, third, fourth choice.

This is the only type of system that can bring transparency to the tax code, and give people fair representation in tax matters. Nay Sayers say this overhaul cannot be done... I say they have no vision or background in tax. If we can create an efficient stock market, we can do the same with the tax code. It is important to have an efficient tax market.


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    Jul 17 2012: Joseph, In order for your system to have a chance I would recommend that step one would be to reduce government to a managable level. Once we are back to a Constitutional government level we can set administrative and operational costs then optional items can be funded in the manner that you propose.

    Kids would never fund Social Security or Heralth Care as that is not the priority of the young so I would see the military being a problem in funding as the liberals would oppose that expenduture. Thus the problem.

    So what if we went back to a Constitutional government and reduced the NEED for taxes returning the power to the states. This would take care of career politicians and all of the pork and perks. So far I have talked myself into this idea. Congress would have domain over the four areas the Constitution allow for. Yea!!!!!

    All the best. Bob.
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      Jul 19 2012: Maybe it would be a good thing if we could basically have a referendum on government spending by choosing based on our values. Roughly half of the people are conservative, so I think the military would still get enough funding. One drawback that I would see is that it may cause unpredictability in funding from year to year, causing a set of fluctuating programs that can't plan ahead.
      • Aug 6 2012: Eric, I think you are correct about military spending. I believe a market based tax system will force many American's to evaluate their priorities in determining where their tax dollars were spent. We want our children to learn, we want our women and men the opportunity to find work, and we want to provide security for old age. I can imagine a market based tax system will reward programs that successfully offer us these luxuries.
    • Aug 6 2012: Robert, the thought that popped into my head when reading your first paragraph was the "chicken or the egg" argument. I completely agree that government needs to be reduced to a manageable level, undoubtedly! I am just not sure that the govt. will be reduced to a manageable level, without an overhaul of the tax system that brings more transparency to federal programs that receive tax dollars first.

      As far as kids funding programs like social security, I would not hold back on our youth too much. I am in my early twenties, and there is no way I am holding my mom and dad out to dry ha! Besides, if administered properly, even social security sounds good to younger people such as myself.

      In reality though, we would not implement this system overnight. It would be a many years process. For example in year one we would mandate 25% of all federal expenditures to go towards agencies listed on the index. Leaving congress with 75% to continue their current spending habits (funding social security/medicair). Throughout the next 7 to 10 years, my idea would be to have the system fully implemented and at maximum require 90% of all federal expenditures to be provided to agencies listed on the index, leaving congress with 10% for misc. govt. actions. As a taxpayer I have trouble even leaving the 10%, but I realize we will need to make some compromise to get any legislative action in an overhaul like this!

      Robert, before I can fully agree with your third paragraph I would have rephrase where you said "Taxes returning the power to the states." I will rephrase your words to include "taxes returning the power to the PEOPLE."

      Best Regards, Joseph

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