US Congress Should Forget Taxes!

As the United States Congress faces the onerous task of funding massive disaster recovery efforts and a multi-trillion dollar federal budget, taxation is stage center in Washington. The task is further complicated by the need to reform the law apportioning taxes amidst the caterwauling of lobbyists for special interests. We argue that none of this is necessary: in the Age of the Internet and Worldwide Web Congress can eliminate all income taxes and establish crowdfunding as the means to pay for all government expenses.

 The switch could pay off the national debt in short order, get the economy firing on all cylinders, virtually wipe out unemployment and end the homeless problem in America.

How would it work? There are several ways to institutionalize crowdfunding. My favorites are web-based lotteries offering as prizes travel packages to tourists and housing to Americans.

The Numbers

The Trump administration’s 2017 budget proposal totals $3.65 trillion ($3,650,000,000,000). Revenues from taxes are estimated at $3.21 trillion ($3,210,000,000,000). That leaves a deficit of $443 billion, adding to the national debt now standing at over $20 trillion ($20,382,178,657,059).

To generate revenues on that scale Congress should authorize two new federal agencies, one to run the lottery for tourists, the other offering apartments and houses as prizes. They would sell as many tickets for each prize as needed to pay costs, plus an additional number to replace tax revenues.

Tourism Lottery

Consider the math. Some 75 million tourists visit the United States each year. Say the average prize (travel and hotel package) costs $10,000. The tourism agency would have to sell just 10,000 $1 tickets to generate that amount of revenue, a ridiculously low figure. It could easily sell an additional 100,000 $1 tickets to generate tax revenue. At that rate, it would generate $7,500,000,000,000 annually, more than double the amount needed for the 2017 budget.

The actual packaging of tours would remain in the hands of those who now handle the business; but they would be paid by the lottery rather than by individual tourists. As the odds of winning one of the 75 million prizes on offer would be excellent the lottery can be expected to sell out its tickets in short order.

Housing Lottery

In the 12 months preceding August 2017 there were over seven million private homes for sale in the United States and 14.39 million housing starts. For the purpose of calculation, let us say the lottery would have approximately 12 million prizes. On the basis of the national median sale price of $300,200 for an American house in August 2017, that would mean selling 300,200 $1 tickets to cover costs, plus whatever level is authorized by Congress for revenue purposes. If that is 100,000 $1 tickets per house, it would generate an annual revenue of $1.2 trillion ($1,200,000,000,000).

 In addition to making houses available for the price of a $1 lottery ticket, these arrangements would optimize efficiencies in the housing sector. Builders could sell out entire housing estates in a day and get right back to the next project. Realtors would have the happy prospect of dealing with the secondary market created by those who win houses and want to sell them immediately. Further, if a quota of prizes were made available only to the very poor, it could end the problem of homelessness in America.

Many Benefits
There would be many direct and subsidiary benefits from eliminating taxation as a source of revenue. The primary direct benefit would be in the immediate universal raising of incomes. Perhaps as important a benefit would be eliminating the need to maintain the accounting and record-keeping infrastructure necessary to satisfy the taxman. 

Also, without personal or corporate income tax to dodge, an entire sector of criminality would be wiped out instantly. American corporations could bring home huge amounts of capital now stashed abroad. Investors all around the world would compete to enter the American market. All the massive infrastructure investments of the country could be easily met. Unemployment would be reduced to minimal levels. And not least, the national debt could be paid off.

Healthy Disruptions

Of course, these changes will be hugely disruptive of the banking, accounting and lawyering professions. In fact, we can argue that the change would shift the entire capitalist system into new territory. But that is not a reason for avoiding crowdfunding. Unless we make the shift to a new economic system the galloping advance of Artificial Intelligence will create massive waves of unemployment, opening the world to unrest and possibly revolutionary violence similar to what it witnessed at the onset of the Industrial Age.

The disruptions of transition to crowdfunding should be seen as draining the swamp  built up by vested interests in the last five centuries of corporate capitalism. As Adam Smith explained at great length in The Wealth of Nations (1776), corporations  unavoidably create corruption and waste because of their inefficiencies in controlling massive amounts of “other people’s money.” Taxation has become part of the swamp, supporting a punitive system of surveillance and exaction that has become the enemy of liberty around the world.

A New Capitalism

The possibilities for crowdfunding coincide with the development of two technologies – 3D printing and off-grid renewable energy – that allow decentralized manufacturing of the finest industrial products on the smallest scale. That shift implies the end of many major trends of the industrial era dominated by mega-corporations, especially the growth of cities based on manufacturing.

In the future now taking shape, the wealth of nations will not come from heavy industry or long-distance trade in commodities but from the innovative talents and skills of individuals. More than at any time in the past, societies that nourish liberty will be rich; those who do not will be poor.