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10 Tax Principles

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10 Tax Principles
Short Introduction
State of Hawaii Excise
Tax
Full Explanation
Contact Information
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10 Sound Tax Principles
To create excellent systems of
government, it is important that certain
high standard principles are
established and adhered to. Such
principles should be used as solid
guidelines for creating systems of
taxation as well. Not very much
attention has been paid in any country
to establish such important guidelines
for taxation and the result has been
that no excellent systems of taxation
exist in India or any other country.
The following 10 sound
principles are largely ignored by
all systems of taxation in
existence and also by most tax
reform proposals. Only 2020Tax
follows all 10 tax principles almost
exactly.
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exactly.
The first 4 principles of taxation are by
Adam Smith (1776 Wealth of Nations).
Adam Smith can be regarded as the
"Godfather" of economics. The
additional 6 principles of taxation are
by Alf Temme (author of Automatic-
Tax 2005 and other economics
related topics such as
www.UniversalDemandLaw.com1975
):
1. The subjects of every state
ought to contribute towards the
support of the government, as
nearly as possible, in proportion to
their respective abilities; that is, in
proportion to the revenue which
they respectively enjoy under the
protection of the state.
Actual complete text of Adam
Smith maxim nr.1:
I. The subjects of every state
protection of the state. The
expense of government to the
individuals of a great nation is like
the expense of management to
the joint tenants of a great estate,
who are all obliged to contribute in
proportion to their respective
interests in the estate. In the
observation or neglect of this
maxim consists what is called the
equality or inequality of taxation.
Every tax, it must be observed
once for all, which falls finally
upon one only of the three sorts of
revenue above mentioned, is
necessarily unequal in so far as it
does not affect the other two. In
the following examination of
different taxes I shall seldom take
much further notice of this sort of
inequality, but shall, in most
cases, confine my observations to
that inequality which is
occasioned by a particular tax
falling unequally even upon that
particular sort of private revenue
which is affected by it.
2. The tax which each individual is
bound to pay ought to be certain,
and not arbitrary.
Smith maxim nr.2:
II. The tax which each individual is
and not arbitrary. The time of
payment, the manner of payment,
the quantity to be paid, ought all to
be clear and plain to the
contributor, and to every other
person. Where it is otherwise,
every person subject to the tax is
put more or less in the power of
the tax-gatherer, who can either
aggravate the tax upon any
obnoxious contributor, or extort,
by the terror of such aggravation,
some present or perquisite to
himself. The uncertainty of
taxation encourages the insolence
and favours the corruption of an
order of men who are naturally
unpopular, even where they are
neither insolent nor corrupt. The
certainty of what each individual
ought to pay is, in taxation, a
matter of so great importance that
a very considerable degree of
inequality, it appears, I believe,
from the experience of all nations,
is not near so great an evil as a
very small degree of uncertainty.
3. Every tax ought to be levied at
the time, or in the manner, in which
it is most likely to be convenient
for the contributor to pay it.
Smith maxim nr.3:
III. Every tax ought to be levied at
the time, or in the manner, in
which it is most likely to be
convenient for the contributor to
pay it. A tax upon the rent of land
or of houses, payable at the same
term at which such rents are
usually paid, is levied at the time
when it is most likely to be
convenient for the contributor to
pay; or, when he is most likely to
have wherewithal to pay. Taxes
upon such consumable goods as
are articles of luxury are all finally
paid by the consumer, and
generally in a manner that is very
convenient for him. He pays them
by little and little, as he has
occasion to buy the goods. As he
is at liberty, too, either to buy, or
not to buy, as he pleases, it must
be his own fault if he ever suffers
any considerable inconveniency
from such taxes.
4. Every tax ought to be so
contrived as both to take out and to
keep out of the pockets of the
people as little as possible over
and above what it brings into the
public treasury of the state.
Smith maxim nr.4:
IV. Every tax ought to be so
contrived as both to take out and
to keep out of the pockets of the
public treasury of the state. A tax
may either take out or keep out of
the pockets of the people a great
deal more than it brings into the
public treasury, in the four
following ways. First, the levying
of it may require a great number of
officers, whose salaries may eat
up the greater part of the produce
of the tax, and whose perquisites
may impose another additional tax
upon the people. Secondly, it may
obstruct the industry the people,
and discourage them from
applying to certain branches of
business which might give
maintenance and unemployment
to great multitudes. While it
obliges the people to pay, it may
thus diminish, or perhaps destroy,
some of the funds which might
enable them more easily to do so.
Thirdly, by the forfeitures and
other penalties which those
unfortunate individuals incur who
attempt unsuccessfully to evade
the tax, it may frequently ruin
them, and thereby put an end to
the benefit which the community
might have received from the
employment of their capitals. An
injudicious tax offers a great
temptation to smuggling. But the
penalties of smuggling must rise
in proportion to the temptation.
The law, contrary to all the
ordinary principles of justice, first
creates the temptation, and then
punishes those who yield to it;
and it commonly enhances the
punishment, too, in proportion to
the very circumstance which
ought certainly to alleviate it, the
temptation to commit the crime.
Fourthly, by subjecting the people
to the frequent visits and the
odious examination of the tax-
gatherers, it may expose them to
much unnecessary trouble,
vexation, and oppression; and
though vexation is not, strictly
speaking, expense, it is certainly
equivalent to the expense at
which every man would be willing
to redeem himself from it. It is in
some one or other of these four
different ways that taxes are
frequently so much more
burdensome to the people than
they are beneficial to the
sovereign.
The following 6 maxims of
taxation have been authored by Alf
Temme:
5. A tax should not be used to give
favorable tax treatment to different
people or businesses for any
reason or purpose no matter how
well intentioned. Any reduction in
taxes to some will necessarily
increase the rate of taxation to all
other taxpayers. There has been
always great sentimental debate
and implementation of lower or no
taxes for people on the lowest
taxes for people on the lowest
rungs of the socio economic
ladder. This is, and always has
been one of the greatest mistakes
and it most often amounts only to
shameless vote buying by
politicians. The fact is that the
paying of taxes by "the poor" gives
them the equal dignity of all other
taxpayers who contribute equally
to the running of their government.
The equal paying of taxes does not
create the class strife that has
been created by the politicians who
pretend to care for the poor and
the under-classes they are
identifying in their election
campaigns and whose votes they
endeavor to "buy" with money they
"steal" from all the rest of the
taxpayers by indirectly increasing
their tax rates in the process. The
"poor" do not benefit from
favorable tax treatment because
the ironic reality is that their "take
home" wages gradually decline by
the amount they otherwise would
have paid in taxes.
have paid in taxes.
6. A tax should be as broad based
as possible, resulting in a low
percentage rate that offers little
incentive for tax evasion and tax
avoidance and all the unproductive
activities people engage in to lower
their taxes..
7. A tax code must be formulated in
simple language easily understood
by all who are subject to it and not
be a document of 65,000 pages
(like the shameful United States
income tax code) that cannot
possibly be known and understood
by the average tax payer and will
be subject to many interpretations.
8. To keep a tax system as simple
and clear as possible, it must have
as few as possible exemptions or
special provisions. Instead
of exemptions or special
provisions in the tax code,
a government can have refund
provisions or bestow grants rather
provisions or bestow grants rather
than use favorable tax treatment as
a political tool or for social
engineering. Governments that
understand economics well
and know the rules and
consequences of
www.UniversalDemandLaw.comwill
refrain from social engineering
because it violates this universal
law and is destined to fail in its
doubless wellmeaning aims.
9. Anoptimum tax replacement
must be able to be phased in very
incrementally to create as little
economic and political disruption
as possible. People and their
politicians are very risk adverse
and will not easily accept a
proposal that will create sudden
drastic economic and political
changes over a short span of time.
10. The optimum tax replacement
proposal must be attractive enough
to be accepted as optimal by
multiple countries. The fact that all
multiple countries. The fact that all
major countries have totally
different tax systems serves as
proof that none of them as yet has
found or implemented an excellent
tax system that many other
countries would like to copy.
The 10 principles in more detail:
1. The subjects of every state
protection of the state.
Adam Smith's Taxation Principle #1
deals with the subject of dignity and
justice and fairness in taxation. There
is dignity in the paying of tax by the
poor. In most current tax theory and
legislation it is erroneously held that
poor people do not deserve respect
and belong to an underclass that
and belong to an underclass that
needs special tax treatment and
cannot function with dignity as
respectable full function citizens that
proudly will contribute to and
participate in the financial support for
the running of their own governments.
That sort of paternalistic thinking
places "the poor" into a class by itself,
rather than making them an integral
part of society with the same rights
and duties of everyone else. That sort
of, undoubtedly well meaning but
divisive class strife baiting and
paternalistic thinking gave rise in the
past to the notion that only those who
pay taxes should have the right to
vote.
This warped justification of using
taxation as a tool for social
engineering that leads to progressive
taxation shows a total lack of
understanding of taxation. It is a
complete fallacy to believe that
excluding the poor from this or the
other tax makes them exempt from
taxation. It is wrongly thought that "the
taxation. It is wrongly thought that "the
poor" need tax breaks and financial
support and that "the rich" should foot
the bill for that financial support by
paying higher taxes. It is a complete
hoax and fallacy to propose to
exclude "the poor" from taxation and
that taxes should be structured
according to the arbitrary socialistic
doctrine of "ability to pay". Under all
systems of taxations the poor pay
taxes embedded in every product or
service they consume. The embedded
taxes they pay are in direct proportion
to their spending. The exclusion of
the poor from certain taxes is
arbitrary and the establishment of tax
brackets is not only arbitrary but also
out of proportion "to the revenue
which they respectively enjoy under
the protection of the state". The
concepts of current tax theory are in
gross violation of the Adam Smith #1
maxim and 2020Taxis in total
compliance with Adam Smith #1.
Moreover, the vast majority of people
who are classified as "poor" are
young and will make a natural
young and will make a natural
transition to all the higher levels of
economic success with a proportional
percentage distribution to all levels of
economic wellbeing including the
ascension by a small percentage of
them to the level of "the rich".
2. The tax which each individual is
and not arbitrary.
This "Adam Smith's tax maxim #2"
requires a very simple tax rate that
applies to any and all economic
transactions without exception, so that
everybody knows what the tax rate is
and that there is certainty of the tax
and , very importantly, that there shall
be no arbitrary exceptions to the tax
(no matter how persuasively any
proposals for exceptions may be
presented by special interests and by
well meaning political leanings.)
2020Tax is in full compliance with
Adam Smith's tax maxim #2..
3. Every tax ought to be levied at
it is most likely to be convenient
for the contributor to pay it.
This means that a tax should be
levied with the least amount of
inconvenience to the tax payer. Need
I say more, there is zero
inconvenience for the tax payer with
the way in which tax is paid under
2020Tax. The 2020Tax is
automatically collected through the
banking system exactly at the same
time when any money transaction
takes place. No records need to be
kept by the tax payer, no tax forms
need to be filed and no audits will be
conducted. Many other tax
replacement proposals seek to reduce
the inconvenience somewhat or often
even a great deal, but none reduce it
to ZERO inconvenience as
does 2020Tax which is "levied at the
time, or in the manner, in which it is
most likely to be convenient for the
contributor to pay it". In fact, the
taxpayer has to do absolutely nothing
because the tax deduction is
completely automatic without human
completely automatic without human
interface. The great thing of 2020Tax
is that it not only replaces the federal
tax, but also replaces State, County
and Local taxes with the single low tax
percentage of around 5% tax
collected by the banking system.
4. Every tax ought to be so
contrived as both to take out and to
keep out of the pockets of the
public treasury of the state.
This means that the total direct and
indirect cost of paying and collecting
the tax should be as little as possible.
The direct and indirect cost and
burden on the total economy and
society as a whole cannot be
expressed in money alone, but with
the 65000 page USA income tax code
the total, direct and indirect, cost
could be as much as $900 billion per
year (in 2005 dollars). The direct and
indirect cost of collection for 2020Tax
is certainly less than 3% of the current
cost. As such 2020Tax keeps "out of
cost. As such 2020Tax keeps "out of
the pockets of the people as little as
possible over and above what it
brings into the public treasury of the
state".
5. A tax should not be used to give
favorable tax treatment to special
interest groups.
Legislators are generally subject to
enormous lobbying efforts by special
interests and political groups to
modify the tax codes in favor of
special tax treatment for these groups
and the special interests. The
2020Tax can be easily protected from
manipulative use for social
engineering and favorable tax
treatment by prohibiting any
exemptions from the tax for such
social engineering purposes and only
allow changes or amendments to the
tax with a 90% majority vote.
6. A tax should be as broad based
as possible, resulting in a low
percentage rate that offers little
incentive for tax evasion or tax
incentive for tax evasion or tax
avoidance.
2020Tax is enormously broad based.
It is a tax on all forms of fund transfers
except the transfer of funds involved
with financial instrument trades such
as stocks, bonds and other financial
"products". Only the profit portions of
such financial transactions are subject
to the tax. Also transfer of funds
between accounts owned by the
same account holder are excluded. In
addition there is a provision for refund
petitions on certain transactions
deemed eligible by an 2020Tax
refund authority (as detailed in the full
92 page disclosure of the 2020Tax).
7. A tax must be formulated in
simple language easily understood
by all who are subject to it.
The complete 2020Tax can be stated
in easy to understand language as
shown in the "Short Introduction". A
total of fewer than 5 pages of writing
are needed to state the full rules of
the 2020Tax.
8. A tax must have no exemptions.
Rather than exemptions, subsidies
and grants can be given and there
is a special provision in 2020Tax
that provides for an office that
handles tax refund requests that
may be granted for transactions
deemed eligible for such refunds.
2020Tax follows Adam Smiths and Alf
Temme's principles of taxation as
closely as possible to create a very
simple and effective tax replacement
for www.GlobalTaxReform.com .
9. An optimum tax replacement
must be able to be phased in very
incrementally to create as little
economic and political disruption
as possible. People and their
politicians are very risk adverse
and will not easily accept a
proposal that will create sudden
drastic economic and political
changes over a short span of time.
An absolute requirement for any tax
replacement proposal is that the new
tax can be phased in gradually and
tax can be phased in gradually and
incrementally without causing more
than just minor economic and political
discomfort during an almost "painless"
transition from the existing tax system
to the new proposed tax replacement
system. The 2020Tax can be phased
in at 0.1% for the first year. The
federal tax revenue can then at the
same time be reduced by 2% to offset
the amount collected through the
0.1% 2020Tax. The objective will be
to reduce the 65000 page long USA
Federal Income Tax Code by as many
pages as is possible to bring about
the reduction of 2% in Federal tax
revenue that will approximately match
the revenue collected through the
0.1% Automatic Tax. The Federal Tax
code can already be reduced by a few
hundred pages only on account of the
first 0.1% step in the 2020Tax.
An additional bonus is that the 0.1%
2020Tax will determine nearly
EXACTLY what percentage rate the
eventual full 2020Tax needs to be to
cover the budget requirements for all
cover the budget requirements for all
levels of government for which it
becomes the single combined
replacement tax. The following year
the 2020Tax can be raised by an
additional 0.25% and Federal tax
proceeds can be reduced by another
5% and additional pages of the
income tax code can be eliminated to
approximately offset the tax collected
through the additional 0.25%
Automatic Tax. This process can be
continued with 0.25% additional
2020Tax for each following year with
matching decreases of additional 5%
of the taxes collected through the
Federal income tax, and of course
additional pages eliminated from the
Federal Income Tax Code. This
method of phasing the 2020Tax in
and phasing the current income tax
out, is completely transparent and
predictable and will cause the least
amount of economic surprise and
disruption. It will provide for about 15
to 20 years of total tax predictability
that provides for tremendous
economic stability and facilitates long
economic stability and facilitates long
term economic planning for individuals
and businesses alike. This form of
phasing in 2020Tax is less risky for
legislators to enact into law because it
cannot create the large unexpected
economic impact that these legislators
could be blamed for later. Both
legislators and the general public are
very risk averse. That is the reason
why most bold tax reform proposals
do not have much chance to be
enacted into law. Legislators
generally will still wish to enact some
sort of reform so that they do not look
like complete laggards in the eyes of
their constituent populations and
therefore they resort to desperate
small dabbling with the minutest
details of the existing tax code
monstrocities. In the process they
most often complicate the codes some
more and they cause outcries over
"unfairness" and other protestations
from diverse and opposing special
interest groups.
proposal must be demonstrated to
be superior to all other
"competing" tax replacement
proposals so that much needed
support from all other groups that
promote tax simplifacation can be
consolidated behind such optimum
tax replacement proposal. It must
be proven that the proposed new
tax will indeed bring in enough
revenue to adequately replace the
total revenue collected under the
tax systems it seeks to replace.
It is quite conceivable that proponents
and promoters of other tax
replacement proposals may wish to
join ranks to promote a tax
replacement proposal that can be
proven to be superior to the tax
replacement they are currently
promoting. To demonstrate the
superiority of 2020Tax as the optimum
tax replacement proposal it must be
shown to be superior in terms of
testing all "competing" tax
replacement proposals against these
10 sound tax principles. Additionally
10 sound tax principles. Additionally
some of the current tax-myths
misconceptions about taxation must
be debunked in clear language that is
easily understood by all.
Catchphrases such as "ability to pay",
"regressive, proportional and
progressive taxation", "tax fairness or
equitability" and other such
misconceptions of current forms of
taxation have been adopted by well
meaning governments that have
pushed the United States into the
quicksand of socialism and also have
promoted class and racial strife.
Currently governments almost
everywhere are promoting tax
theories that are tainted by socialist
doctrines and myths because of
lacking understanding of basic
economics and taxation principles and
objectives. Many of these misguided
taxation myths promote strife between
different population groups where
strife did not exist and they promote
deteriorating effects on the economy
that lead to economic decline.
NOTE ON TAX REFUND
PROVISIONS AND CHANGES
UNDER 2020Tax.
2020Tax has provisions for tax refund
offices in each State that are
empowered to issue refunds on
certain transactions that are judged to
amount to double taxation.
Legislatures may also bestow
subsidies and grants as they may
deem appropriate but they will be
strongly reminded not to tamper with
the tax collection side of 2020Tax, lest
they want to run the risk (actually the
certainty) that they will create once
more an incomprehensible mess like
the current 65,000 page USA income
tax code. Such vote-fishing lures as
"no tax on poor people" or "no tax on
life necessities" or "no tax on
medications" or "no tax on old people
pensions" etc. are all sham politics or
they reflect total ignorance on the part
of the politicians of the workings of
economics and taxation. Shame on
us, the people, to allow our legislators
to create such a mess.
We have to be vigilant at all times
now and in the future.
As soon as a single special tax
treatment would be permitted by any
legislative body, the armies of
lobbyists will mobilize once more to
procure similar special tax treatment
for their special interest clients. To
completely or largely prevent future
tax-law complications that would
gradually return 2020Tax to such an
incomprehensible and very costly
systems of taxation that we currently
are suffering under, I propose that
there be a requirement for a 90%
majority vote to make any changes in
the 2020Tax code other than one time
increases or decreases of smaller
than 0.25% in the percentage rate of
the tax within any 10 year period that
must be approved by a 75% majority
vote.

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