Only Supreme Court Justices who are strict constructionists ought to be appointed – those who will interpret the Constitution as it is currently written - not as they would like it to be.

There have been times and will be times when we wish to amend the Constitution. This should be done through the amendment process given in the Constitution and not by judicial fiat.

Spending and Taxes

1) The Constitution should be amended to require a balanced budget. A government that lives within its means does not pass on its debt to our children, who must pay it off with interest. Such an amendment would force our legislators to make difficult decisions regarding spending and taxes, and not be able to cut taxes and raise spending just to get more votes. The amendment should include a provision so that, in an emergency, Congress may spend more than permitted if two-thirds of both Houses vote to do so.

2) In addition, the Constitution should be amended so that any tax or spending increases over and above those due to inflation and population growth must be approved by a 2/3rds vote of both houses of Congress.

3) Every proposed piece of legislation, including budgetary items, should indicate the clause in the Constitution that grants Congress the authority to enact that law or budgetary item.

By helping to control federal spending, the three items above will help to keep Congress and the president from insinuating themselves into the lives of the people any more than is necessary.

4) The income tax ought to be phased out. Taxes should consist of solely of ‘user fees’. For instance, a toll road whose toll is based on the weight of the vehicle and the number of miles driven would be a fair user-fee tax.

It is counterproductive to tax the labor of our citizens, as does the income tax. We should be encouraging work, not taxing it.

Once the income tax and FICA taxes are phased out, the Constitution should be amended to forbid Federal, State or local governments from taxing income.

5) The most broad-based user-fee tax would be a natural resource tax, that would tax the companies or individuals who initially extract a natural resource in proportion to the amount of resource that is extracted. Land is also a natural resource, and a monthly tax paid by the owner of the land to the government is appropriate.

6) Since pollutants either can directly or indirectly harm human, plant or animal life, they may also be taxed (or outlawed when practical).

Why the Income Tax is Bad

Ever since the IRS was established, people have complained about its abuses. Many bills have been passed in Congress in the hope they will correct some of these abuses. Unfortunately, any fix is doomed to fail.

It is not the IRS but Congress that has established a tax on income. It was Congress that has modified a tax code that initially levied a 1% tax on those with above-average income to a tax code that is over a million words in length and that literally no one understands. The IRS is authorized by Congress to enforce this code and to collect such taxes. Since some people will try to hide income in order to avoid paying income tax, the IRS naturally tries to find these people. Is it a surprise that the IRS has a computer database that stores information about us? Or that they can use this database to check to see if someone's purchases correspond to his or her reported income? Or that they monitor cash deposits over $10,000?Most of us don’t like this, and we shouldn’t. But it’s not the fault of the IRS. The problem is the income tax itself.

Taxing income is bad for a large variety of reasons. It has been estimated that it costs the American people between $160 - $400 billion dollars each year for the tax attorneys, accountants, record keeping, books, software, etc., just to comply with the tax code and minimize their taxes. This does not include the millions of hours we waste each year in tax related activities.

The income tax is arbitrary and frequently counterproductive as far as what deductions are allowed. For instance, you can deduct day care expenses from your income tax, but if a mother chooses to not work outside the home, no deduction is available. Congress uses deductions as a way to encumber us to them and they are loathe to make major changes. There are so many deductions we think we depend on, that we'll vote for whomever will maintain or increase them. Woe is he who runs for office and who wants to eliminate popular deductions.

Another issue is that having to report income to the government is an invasion of privacy. Should it really be the government's business how much money we earn, where we earn it, or how far we drive while earning it?

Because of the complexity of the tax code, taxpayers must concern themselves with taxable events, such as selling stock or property. The economy is distorted and less efficient when we make decisions based upon whether or not a taxable event will occur rather than what we think would be a good use for our money.

But the biggest reason against a tax on income is that it is unjust.

An income tax is unjust because it is a tax that does not pay for a service provided by the government. What government service does a person use just because he or she is earning money? To clarify this point, imagine two people who have the same job and earn the same salary during the day. At night, one of them watches TV and the other does marriage counseling out of his home. Is there any rational reason that the second person should pay more taxes that the first? No, because the counselor is certainly not benefiting any more than the TV watcher from government services. Taxing the counselor more than the TV watcher is tantamount to discouraging him or her from counseling. In fact, the income tax is unjust for the same reasons that the tax on polluters is just. We should tax polluters because of the harm they cause; and this tax discourages them from polluting. We should not tax money earned by working people, since people who work are clearly benefiting our country. Taxing their productivity is precisely the wrong thing to do for such taxes discourage work.

Interestingly, I have a hard time getting an appointment with my dentist because he only works three days a week. When I asked him why, he said that if he worked any longer, he'd go into a higher tax bracket, and it would not be worth it for him. So taxing income is not only unjust, it is also irrational.

So let’s replace the income tax (and FICA taxes and the sales tax, too). No more tax on wages and salary, no more sales tax, no more wasting time, money and human intelligence trying to minimize or avoid paying income taxes and complying with an impossible-to-understand tax code. No more intrusion into our personal lives. No more taxing productivity. No more tax forms to fill out or tax audits to go to.

And of course - no more IRS.

Of course, the government has many legitimate needs, and there will have to be some kinds of taxes to pay for them. What taxes are fair and just?

Replacing the Income Tax - The Natural Resource Tax

What kinds of taxes are fair and just? In a sentence, fair and just taxes are those that pay for the use of a government provided service. These are frequently called ‘user fees’.

Actually, many of our current taxes are just. The gasoline tax is a good example. The government (Federal, state or local) builds and maintains the majority of the roads. It is fair and just that those who use the roads the most pay the most for them. A semi-truck that travels 100,000 miles a year should clearly pay more for the roads than Aunt Pearl who only drives to church on Sunday. Since the amount of gasoline a vehicle uses is proportional to the weight of that vehicle and the distance it travels, gasoline taxes are a fair way to pay for the roads, (although a road tax based upon the weight of the vehicle and the miles driven would be even better).

The FAA provides another good example of a just tax. The FAA exists mainly to monitor air traffic and ensure the safety of aircraft. Clearly, the people who fly are the ones who should pay for this. And this is currently the case because each airline ticket has a small federal tax on it to pay for the FAA.

How about taxing human-caused pollution? By definition, human-caused pollution consists of substances that harm either individuals or plants or animals. Thus, it would be fair and just to tax a polluter in proportion to the harm caused by the pollutant for which they are responsible. This also has the beneficial side effect of encouraging less pollution, since creating less pollution means paying less pollution tax. And it so happens that those who are rich usually pollute more for the simple reason that they own more cars, homes, boats, jets, etc. Thus, a pollution tax would naturally burden those who can most afford to pay it.

Each of the taxes mentioned above, I believe, would fit the definition of fairness of any five-year-old.

However, there are some legitimate and constitutional functions of the government for which it is more difficult to assess how they can be fairly taxed. The military, foreign affairs, FBI, police and fire departments fit this category. How can we fairly pay for them? One way to think about this is to ask who gets more protection from the military or the police or fire departments, Bill Gates or Aunt Pearl? While Aunt Pearl only has, say, a small apartment that benefits from military or police protection, Bill Gates gets quite a bit more protection because he owns many vehicles, buildings and many acres of land. Moreover, he would suffer much more if we were to be successfully invaded by a foreign power. The general principle is that those individuals or companies that own the most property or natural resources should pay the most for these kinds of government services. Thus, a natural resource tax (NRT) would be a fair and just tax. Such natural resources include land, as well as coal, oil, minerals, etc.

Another principle concerning natural resources is that they are a product of nature (i.e. our Creator and His helpers) and thus are not produced by man. Therefore, the only just way to treat natural resources is to treat them as the property of the people as a whole. Therefore, if government wishes to sell or lease a natural resource or allow them to be extracted, it is appropriate to tax that resource as compensation to the people for allowing the use or extraction of that resource.

For example, in Alaska, private companies are permitted to extract oil from the ground. To compensate the people of Alaska for this, Alaska taxes each barrel of oil removed and that money goes into Alaska’s Permanent Fund Dividend. These funds go to the residents of Alaska each year. In 2006, the dividend was over $1000 per person.

On the practical side, all local governments and some state governments have already established such taxes, usually called property taxes. Thus, it would be fairly easy to have such a federal property/natural resource tax as a replacement for the income tax. Ownership of property and natural resources such as land, oil wells, coal mines, etc. are already publicly recorded, so there would be no additional intrusion into our lives as a result of this tax. It would take no tax attorneys, accountants, tax software, or tax forms to do our taxes. Individuals and companies that owned property or natural resources would be billed regularly, preferably monthly. Furthermore, the property valuations that have already been done at the state or local level could be used at the federal level, thus avoiding another bureaucracy.

There are many other benefits to a natural resource tax. For instance, today some of those who are rich can often live off tax-sheltered investments, and pay virtually no tax. With an NRT, those who are rich would naturally pay more taxes than those who are not, because they would use more natural resources. Own five homes? No problem, but you’ll be paying taxes on each lot that the homes are on.

The fairest way to apply the NRT is to apply it once, at the point where the natural resource is extracted (if it is consumable). In the case of land, only the land owner would be taxed, as a monthly land rental fee. Those who lease/rent the land from the land owner would not be taxed directly. For example, a company that mines bauxite (from which we get aluminum) would be taxed a certain amount per ton of bauxite extracted from the ground, as well as being taxed for the land they own. Any buyers of the aluminum would not be taxed again for the same resource, but of course, the cost of the tax paid by the company that extracted the aluminum would be indirectly passed on to the ultimate consumer.

Another subtle but important point about the NRT is that homeowners (as well as owners of other buildings) would pay an NRT only on the land that their home sat upon, and not on the value of the home itself. Thus, in a given subdivision, all lots that are substantially the same would have the same tax value, and the tax assessors would not have to be concerned with the value of the home itself. This would encourage people to build and maintain nice homes, since they don’t have to worry about their taxes going up because of improvements they make. In addition, it would be fair to tax farm land, residential lots and commercial lots at different rates given their various uses.

Life would be easier on farmers as well. They would only be taxed on their land and not on their profit. Thus, they would be encouraged to make the best use of the land they have. There would be no incentive to not grow crops as there is now in some cases.

Because people naturally want to minimize their taxes, a wonderful side effect of an NRT is that if people want to save on taxes, they just need to consume fewer natural resources. This then encourages the use of more energy efficient cars, homes and buildings, and encourages recycling as well.

And finally, but importantly, just as with Alaska’s Permanent Fund Dividend given to the people of Alaska from oil companies, the federal government could give all citizens and legal residents an NRT Dividend to compensate them for others use of natural resources. This would be a fair and just thing to do, and it would be a fair way to assist the poor (and everyone else). If done right, this NRT Dividend could replace all other subsidies that the government gives out, saving the taxpayer money from the reduced bureaucracy of administering hundreds of different subsidies.

Let’s replace the income tax and sales tax with user fees, a tax on pollution, and a natural resource tax. It is the right thing to do.

If you are interested in more details about what is called a Natural Resource Tax in this monograph, here are two sites that I would recommend (although I don’t necessarily agree with everything in them):

The Geonomy Society

The Land Belongs to God

Part 3 will deal with policies related to defense and military policy, border security, and immigration policy.

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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. The opinions expressed in this monograph are his and do not necessarily reflect those of Beverly Hall Corporation. You are welcome to contact him at tfarage@hotmail.com.

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Appointment of Justices

Spending and Taxes

Why the Income Tax is Bad

Replacing the Income Tax - The Natural Resource Tax