Another Stimulus is Nice, But This is Better

As Congress Fumbles on More Stimulus, They Miss the Point Entirely

Forget stimulus checks, we can do better. Stimulus checks, whether they are $800, $1200, or $2000, provide a nice boost to the economy when it is direly needed. But they are but a band-aid on larger and deeper economic problems. Instead of more stimulus, we could achieve a similar economic growth boost, with less government expenditure, and make that growth sustainable in the long term by doing one thing: chuck the tax code into the trash can.

Okay, you don’t have to throw it in the trash can, you can shred it, burn it, bury it, or throw it into a river (just make sure it doesn’t float back up). The tax code is a corpse comprised of the bones, shells, and ashes of powerful vested interests. And a corpse is a corpse, no amount of dressing up will make it any less a corpse. We cannot modify the tax code any longer. A fresh start is needed, so lets chuck it and start anew.

Why We Hate Taxes

The government needs money to operate; taxes are the price of civilization. But how we tax makes an enormous difference on how those taxes affect us. Isn’t is rather odd that we tax “good” things? Why tax people on their income when they worked to hard to earn it? Why tax sales when my purchases help support business activity? Taxes like these don’t only suck money out of our pocketbooks, they give rise to a hidden demon: dead-weight loss.

Dead-weight loss is economics jargon for a loss of economic activity beyond the tax itself. Think of it this way: dead-weight loss is a hidden tax upon the tax. It is one of the reasons that many people intuitively despise taxes.

Doing Taxes Right

So what is the answer? Replace all taxes…income taxes, sales taxes, payroll taxes, property taxes, excise taxes…etc with four main taxes: Land Value Taxes, Severance Taxes, Pigovian Taxes, and Estate Taxes. That’s it. No other taxes.

A land value tax, taxes the unimproved value of land, and carries with it virtually no dead-weight loss. An LVT is just as effective as property taxes at raising revenue but doesn’t drag down the economy. Further, it encourages the development of land and discourage idle land speculation.

A Severance Tax, otherwise known as a resource tax, taxes the use of Earth’s natural resources, such as coal, oil, iron…etc. This type of tax also imposes very little dead-weight loss on the broader economy, but helps encourage conservation and sustainable development.

Pigovian Taxes, are taxes that seek to recapture negative externalities on economic activity…think of them as taxes on “bad” things. Pigovian taxes can be used to raise revenue with very little economic impact, while providing incredible social benefits. The most common type of tax would be a pollution tax, or a carbon tax. Again, this tax serves a dual purpose of raising revenue while helping ensure sustainable development.

An Estate Tax is a tax on inheritance. The American right wing is so vehemently against this tax that they have nicknamed it the “death tax.” Believers in capitalism say that they believe in providing everyone an equal opportunity (though not necessarily equal outcome) for success in life. That is precisely the aim of the Estate tax. The Estate tax helps redistribute wealth after someone dies, preventing the formation of family dynasties where each generation is able to build upon the wealth, power, and connections of the one before it. Estate taxes help level the playing field so that everyone can achieve their true potential and no one has too great an advantage.

A Better Future

Together, these four taxes could replace the leaky, inefficient tax code that we have today. They would unlock huge amounts of pent-up economic activity and while helping restore economic justice. There is no logical reason not to chuck the tax code and start over. The pandemic provides the perfect opportunity to write a new tax code that works for America and its people.

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The Lianeon Project is a publication for people who recognize that civilization’s growth requires forward-looking public policy that prioritizes reason, truth, and human progress.

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