Time To "86" The Federal Tax Code

The federal tax code has become increasingly Byzantine in its complexity, and the very rich easily get away with paying next to nothing due to the loopholes that they themselves write into the code.  The TSAP believes it is best to overhaul it entirely. 

That's why any serious tax reform idea needs to begin with, "The Internal Revenue Code of 1986 is hereby repealed".  And then replace it with something much, much simpler and more efficient:

The Universal Exchange Tax (UET) is one potential thing to replace it with.  A tax of typically 0.1% or less on (practically) all electronic transactions, and only on the destination or deposit side.

Another similar idea is the Automated Payment Transaction Tax (APT), from Dr. Edgar Feige.  This one taxes both sides of each transaction, and posit a higher rate than the UET due to less optimistic assumptions about the tax base, among other subtle differences.

Another similar idea is the Automated Deposit Tax (ADT, aka the "Tiny Tax"), from Dr. William J. Hermann, Jr.  Formerly one of the largest supporters of the APT above, he later came up with an even simpler idea, that only taxes the deposits into financial institutions.  Given a smaller base, as "within account" transactions would not be taxed, the revenue neutral rate is expected to be around 1% to replace all federal taxes and 1.2% to replace all federal, state and local taxes.  A more optimistic assumption would of course put the tax base much higher, and thus put the tax rate even lower still.

Keep in mind that, unlike the UET and APT, the ADT (Tiny Tax) would be unlikely to result in any significant shrinkage of the theoretical tax base in practice, since most if not all of the predicted shrinkage in the former, would result from fewer high-frequency stock, bond, and derivative trades within accounts (which are far more sensitive to that).  That is, what the latter lacks somewhat in the relative size of the tax base, it largely or entirely makes up for in relative lack of shrinkage. And switching to any of the three of course removes all of the compliance costs, distortions, finagling, and deadweight losses from the status quo, resulting in significant savings right there.

All of the above are the logical conclusion of the "lowest possible rate on the broadest possible base" with the latter idea adding "with the least complexity" as well.  All of these taxes are also surprisingly progressive, since the rich transact disproportionately more money than the non-rich, thus they pay disproportionately more in practice.  And yet it is not a particularly heavy burden on anyone, rich, poor, or anyone in between for that matter.  In fact, it's equivalent to everyone getting a raise, we can still afford to have a robust social safety net (if not the entire progressive wish list), AND America still becomes a global tax haven nonetheless.

It's a win-win-win situation for everyone but the oligarchs at the top that benefit from the status quo at the expense of the rest of us, in other words.

Some plans aim for revenue neutrality, while others aim for a balanced budget or even a surplus.  But what if there was a way to make the concerns about balanced budgets completely obsolete and irrelevant?

PAGING DR. FIRESTONE!

Enter Dr. Joseph M. Firestone, a proponent of one flavor of Modern Monetary Theory (MMT).  He argues that Congress can simply pay off the entire fictitious "National Debt" in one fell swoop and simply create the money ad hoc to pay all of its expenses, without needing to raise revenue at all.  He calls it "Overt Congressional Financing" (OCF), and can be done by a simple Act of Congress and/or the Treasury minting a high value platinum coin (i.e. valued in the trillions).  As does Rodger Malcolm Mitchell (of Monetary Sovereignty fame) and Ellen Brown as well.

That's not to say that taxes are completely useless.  There in fact are a number of reasons for them.  They 1) create demand for the currency, 2) help control inflation to some extent as an automatic stabilizer, and 3) control the economy to one degree or another to encourage and discourage various things (also known as social engineering).  And they can also be used for less than lofty motives as well to rig the game for the oligarchy, of course.  But for a government that can issue it's own currency, like our own federal government (but unlike our state and local governments), simply raising revenue is NOT of them.

So how do we retain the desirable features of taxes without the drawbacks?  Pigouvian taxes, such as vice taxes and eco taxes, for example, can then be added (back) in after repealing the old outmoded tax code.  Ditto for perhaps a limited "rich-only" or "very rich-only" individual income tax like the sort that prevailed prior to World War II, or alternatively an excise tax on executive compensation (like Bernie Sanders advocates) exceeding a maximum pay ratio between executives and their average or lowest-paid employees, in order to reduce the yawning chasm of inequality these days.  And perhaps a "too big to fail" tax on any bank or corporation that is so large and interconnected that it poses the externalities of systemic risk as well.

So what are we waiting for?

UPDATE:  One mild criticism right off the bat is that jettisoning the income tax entirely would also inherently jettison the proven poverty-fighting Earned Income Tax Credit and Child Tax Credit as well.  The answer?  Until we implement a Universal Basic Income (UBI), we can and should implement a "Reverse Payroll Tax" that tops up wages by matching wages in each paycheck dollar for dollar up to a point (say, the first $200 per week), which is actually much simpler than the EITC and CTC.  As for the criticism that tax-free municipal bonds will lose their luster in terms of investment incentives, and municipalities will suffer as a result, the Monetarily Sovereign federal government can simply provide more federal aid to municipalities so they don't have to borrow at high interest rates.  And regardless of what the feds do, municipalities and states can also set up their own public banks (like the famous Bank of North Dakota) as well and borrow money interest-free, of course.

UPDATE 2:  Even if the Tiny Tax is implemented, there is nothing to prohibit maintaining (and increasing and harmonizing) the SEC Fee on Wall Street transactions, if one wishes to implement a sort of "gaming tax" on speculation as well.