The reader wrote:
Your
suggestion is very interesting.
As I
understand it you are basically proposing a tax reduction (money printing still
creates a claim on resources in society - hence it is a tax). You also are
proposing a switch from income tax towards a form of consumption tax. While you
propose elimination of the GST with all its idiosyncrasies consumers would
basically still be paying a consumption tax that would be driven by the
elasticity of demand for various products, the impacts of supply based on
assumed market growth in response to reduced taxation levels and the impact of
specific government purchases on labour and goods availability.
Your
proposal would diminish the government's role in income (and wealth)
redistribution in society unless there were specific subsidies to replace the
progressive nature of the tax system and targeted tax write-offs (guaranteed
minimum national income for everyone?).
Your
proposal would, I'm guessing, eliminate corporate taxes - which makes total
sense ("artificial persons" don't pay taxes - they pass them on to
real people) - but most people don't understand that (politically difficult -
as I'm sure you are aware).
Philosophically
I like the shift to consumption taxes as people get taxed on what they take out
of the economy rather than what they contribute to the economy.
A
couple of questions I would have about your idea:
(1)
It sounds like your proposal would restrict money creation to the amount of
approved government expenditures
-
i.e., a balanced budget (something abhorrent to most politicians!)? Since
the Libertarian idea is really driving at reducing the role of government in
society how does the legislated monetary expansion get set and the objectives
of debt reduction and less government spending happen procedurally?
(2) How
do you prevent provinces from moving in to take up the taxation room left open
by the federal government?
I think that the first question is an
issue of the federal government being clear about what it should and should not
do, then pricing the Do activities, and then creating the money to pay for
those. After that, they need to stick to the budget. The Libertarian approach
is that government only do what is best done by government, and to allow the
market (the collective result of individuals acting freely on their own
decisions) the freedom to determine outcomes that the government currently
tries to control. In the end, there are some things government ought to
do. For example, enforcement of rights
of person and property. By the way, I don’t think incarceration is an effective
methodology of carrying this out. It IS an expensive one though.
Once the government has its budget, it
should only create enough money to execute it. What if some essential activity
is under-budgeted? Then it waits until the next go round. Nothing to say that
budgets must be done annually. Perhaps quarterly is better. That way, if a
major error was made in the budgeting, it could be rectified 3 months later.
As to the second question (about the
Provinces), the constitution does give the Provinces the right to directly tax,
and until there are libertarian governments running the Provinces, there would
be no way to curb such taxation other than people voting. Perhaps with their
feet. Such voting is expensive though, and if some Provinces had absence of
taxes, the Provinces who did not would likely find voters favoring the non-tax
party in a subsequent election.
But how would provincial governments gain
the revenue to carry out their newly limited functions? It seems to me that
they could either issue a currency that was spendable within their province, or
they would have to be subsidized by the federal money creation. This would make
the Provinces dependant on the federal system, not a perfect solution, but
perhaps there is a way to have such a system function outside of political
parties.
