The Optimal Tax Rate
This question comes up daily. What is the optimum tax rate for a working Americans?
Hell, thatís easy. Itís ZERO. At least thatís the optimum tax rate
But there are expenditures that require dollars and I get that. National defense is
certainly something I would not want to live without. The Federal
Reserve is another area that is needed. After all, without a standard
medium of exchange, we have to revert back to barter. That would
certainly make grocery shopping interesting. Just picture the long
lines, while the milk, bread and bananas are paid for with whatever the
consumer brought in to exchange.
What muddies up the argument over optimum rates are all of the additional resources that
are required Ė the lobbyists, attorneys, legislators and assistants that
must be accounted for in the process. It would be easy if our tax
dollars got from point A to B without all of the confusion in between.
(Confusion is a nicer word than what some call the tax code.)
A tax has 2 main components. The amount is needed to run the program or service,
and secondly, the amount needed to fund all of the other ancillary costs
associated with the distribution of the tax money. Arguing about the
program or service would be diminished if the method of distribution was
forced to be fully automated and transparent prior to pushing through
new legislation on any new tax. If we could reduce this latter
process by 5-10%, we get that much closer to the real optimum rate.
Mark Schuster, Partner
March 8, 2013