Last week I attended a conference of state legislators from around the USA (www.alec.org). One evening I had dinner with a group of legislators (the state will remain anonymous) so eventually the conversation turned to tax policy. In a rare moment of personal candor :-) I stated that I am , "tired of legislators just tinkering around the edges, I want to see a legislative debate over some fresh, revolutionary ideas such as scraping our state income tax system to be replaced by a sales tax system.
The legislator sitting across from me at dinner responded to my comment with perhaps the most predictable response possible -- ".......but a sales tax is a very regressive tax so it will hurt the poor people............." My immediate response to counter this worn out record was that the state legislature should use a guide such as "Maslow's Hierarchy of Needs" whereby the basic human needs of - food, clothing, and shelter -- would be completely tax free. Yes property taxes and taxes on utilities (included in the definition of "shelter") would go away in my plan!! Consumption would be taxed (via a sales tax) so the rich would definitely pay their "fair share" (as the old saying goes -- not my phrase but I had to throw it in) because if they purchase a Hummer they would pay accordingly. At the same time lower income people would actually see tax relief since their basic needs would not be taxable events and they would never pay income tax so overall that is a pretty darn good deal.
However, let me address the question of "fairness" from another perspective. Is it "fair" for a state government to raise income taxes on the rich to the point that the rich choose to move to a state that does not have an income tax? Once a state chooses to "soak the rich" they tend to drive the "job creators" to leave the state. Is it any surprise that a Minnesota icon like 3M announced earlier this year that they are exploring options to relocate some jobs to low tax, overseas location as noted in this quote:
A report in the Pioneer Press quoted Pat Campbell, the company's chief financial officer, as mentioning the United States, Western Europe and Japan in connection with possible areas the company would move its operations from. "All of our key operations are in high-tax areas," he said.
Eventually the only taxpayers left in a high tax wil be the poor people with very few employment options. So I ask the legislative decision makers -- "So once we are all living in poverty in Minnesota will life be 'fair enough' to meet your goals?"
Revolutions were never led by moderates,