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Each week I have been writing about the Nebraska Taxpayer’s Bill of Rights. The Nebraska Taxpayer’s Bill of Rights will be included in legislation I will introduce in January for the consumption tax. So far, I have discussed the failures of the income tax, the property tax, and the inheritance tax. This week I will explain why the consumption tax works better than any other form of taxation.
The fourth right delineated in the Nebraska Taxpayer’s Bill of Rights states that “Because the consumption tax manifests a security against government excess, it shall be preferred above all other tax systems in the State of Nebraska.”
The consumption tax is the only tax system which naturally regulates itself. The consumption tax has a built-in mechanism which naturally prevents the government from taxing its citizens too much. Whenever the government raises the rate of the consumption tax, the result is less money for the people to spend; hence, less revenue for the State. Consequently, the consumption tax forces the State to find that delicate balance between government spending and healthy commerce.
Alexander Hamilton was a fan of the consumption tax, who explained this very same principle in Federalist Paper #21. Hamilton said, “It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of revenue.”
Whereas the financial condition of the private citizen is never the concern of the State under the other forms of taxation, it suddenly becomes the concern of the State under the consumption tax. That’s because State spending suddenly becomes tied to consumer spending. Unless people are out shopping and spending their own money, the State won’t have any money to spend.
The consumption tax is the only tax that the consumer controls. The State controls all other forms of taxation, but the consumer controls the consumption tax. The consumer avoids paying the tax simply by refusing to shop or by purchasing used goods instead of new goods.
All forms of taxation allow the government to spend other peoples’ money. So, regulating when the government gets to go shopping makes all the difference in the world. Taxation makes the most sense when the private citizen gets to go shopping first. All other forms of taxation allow the government to go shopping first, while the private citizen gets to spend whatever is left over. The consumption tax, however, turns the tables on taxation and allows the private citizen to go shopping first, while the government spends whatever is left over.
Finally, the consumption tax is the only form of taxation which taxes people within their means. Under the consumption tax a private citizen will never pay any more taxes than what he or she can afford to pay. Moreover, the monthly allowance that will come with my version of the consumption tax will ensure that those living at or below the poverty line never make a positive net contribution in taxes to the State. In fact, the State will only keep the taxes on what any person spends above the federal poverty line.
As you can see, the consumption tax is the only form of taxation which equalizes the playing field between the private citizen and the government. For this reason, it has earned the reputation of being called the Fair Tax. However, my bill will be known as the EPIC Fair Tax, where the word EPIC stands for the Elimination of Property, Income, and Corporate taxes.