Our basic fiscal policy is absurd and should be scrapped. Largely devised seventy to a hundred years ago, it is hopelessly antiquated and is ill suited to our present highly automated global environment. Most all of our taxes and often healthcare are embedded in the prices that must be charged for things produced by American firms and American labor. This hinders our ability to fund needed programs and makes us less competitive globally.
To have an American worker, an employer must: 1. Pay him a take home wage. 2. Pay him enough for him to pay his Social Security and income taxes. 3 Then the employer must pay his own share of the worker’s Social security, plus Workman’s Compensation and Employment Compensation Taxes. 4. If he also provides health insurance, the cost of having a worker might be 150% of the worker’s take home pay. All of this has to be included in the price the employer charges for what is produced. Things made elsewhere or by machines are largely untaxed by our government.
Firms recognize this situation and avoid these expenses. They do so by hiring few American Workers and relying heavily on imported products, outsourced labor and machines that replace workers. Many industries today are not labor intensive, such as movies, athletics, CD’s, TV, Cable, Cell Phones etc. They are not subject to the expenses of having many employees and hence make huge profits while contributing very little to healthcare, social security and the welfare of our nation.
Our present income and Social Security taxes need to be replaced by a non- regressive consumption tax. It would tax imported and domestic products equally and would also derive a huge amount of income from firms that have few employees. It could adequately fund our needs, including healthcare and Social Security. It would lower the cost of hiring American Workers and make our products more competitive in a global market.
Ideas are inherently conservative. They yield not to the attack of other ideas but to the massive onslaught of circumstances with which they cannot contend. (John Kenneth Galbraith, The Affluent Society, chapter on Conventional Wisdom)