The Poulan Weed-Eater consumption tax model

Frank Hill Contributor
Font Size:

The 14th-century English philosopher William of Ockham (Occam) came up with the “crazy” notion that sometimes the simplest solution to a problem is the best one.  That idea became known as “Occam’s Razor.”

Occam’s Razor suggests that the United States should replace its income tax system with a consumption tax system.

The income tax might have made some sense back in 1913, when the passage of the 16th Amendment made it constitutional to tax people’s income, even though, at the time, only the wealthy had much income and wealth to tax. (The 16th Amendment can be repealed just as easily as it was passed; you know….has anyone seen the good old 18th Amendment lately?)

For much of US history, incomes were modest by any standard, especially when America was primarily an agrarian nation where people worked on their farms to put food on the table.

But now that millions of Americans own stocks and a large middle-to-higher income cohort exists, maybe it really is time to rethink what is the best way to tax people so that they can not monkey around with the tax code.

The simplest way is to make everyone pay their “fair share” of taxes at the end of the line of consumption, i.e., at the cashier’s scanner.

Imagine this:

Every time a person buys something at Wal-Mart — let’s say a “Poulan Weed-Eater” — it would be scanned and the receipt would pop out with the following information on it:

Poulan Weed-Eater: retail price, $200.
Federal Consumption Tax at 20 percent: $40
State Tax: $16
Total: $256.

Of Your Federal Tax Payment of $40:

$13.20 goes to pay for current Social Security payments for today’s retirees
$10.00 goes to pay for Medicare payments for current retirees
$5.20 goes to Medicaid
$4.00 goes to pay the interest payments on this enormous debt we have rung up
$7.60 goes to pay for some of the discretionary spending but not all of it and none for defense.

Everything else is borrowed from the Chinese.

Thanks for shopping at Wal-Mart!

This would help the average American see where his tax dollars are being spent.

Just being able to make the connection between their tax dollar payments and where their taxes actually go would be an enormous help in getting people to see what we are dealing with nowadays in real-time.  Today, people are just being fed distorted information from both sides merely and purely for tactical political gain and advantage.

There could be some limited exclusions for people below the poverty line, since so much of their resources go towards the basic necessities of food and shelter. But that would be about it. No longer would people be able to manipulate this nation’s arcane and byzantine tax laws to their advantage. Everyone would clearly know and see what their tax liability is on each and every purchase and receipt printed out at the check-out counter or at the closing of a purchase of a home or automobile.

Imagine seeing the taxes you will pay on the next t-shirt you buy for your kids from Wal-Mart, which will have this emblazoned on it:

‘My Boomer Parents Got Everything They Wanted During Their Lifetimes and All We Got Was This Enormous $24 Trillion National Debt to Pay Off For the Rest of Our Natural-Born Days!’

Frank Hill has served as chief of staff to former Congressman Alex McMillan (R-N.C.), House Budget Committee staff, Commission on Entitlement and Tax Reform staff, and as chief of staff to former Sen. Elizabeth Dole (R-N.C.).