Sunday, June 23, 2013

An Interface to Government

The Object Tax might best be understood as simply a new interface for the income tax.

Object Oriented Progrramming is often used in interface design and computer games. In many games, the graphic user interface is more important than the logical structure of the game.

The reform does not seek to impose a radical economic or governmental change. The goal of the reform is to create a more intuitive system for the existing tax code.

The current withholding system was designed by Milton Friedman. In this system, employers withhold taxes from an employee. They send employees a W2 firm. People are then required to file an annual tax return.

This is an awkward interface.

The Object Tax makes an abstract model of this interface and invites developers to develop a new implementation of the tax code.

I used the term "implementation" in "The Object Tax in a Nutshell," to emphasize that the reform changes the flow of money from the taxpayer to the government.

In the income tax, money flows from the employer to the government.  In the Object Tax, money flows from a Tax Aware Account owned by the taxpayer to the government.  Changing the flow of money transforms the tax from an income tax to a consumption tax.

Changing the flow of money is a substantive change.

However, most people will simply experience the Object Tax as an interface change.

People interface with the income tax through pay-stubs, W2 forms, an annual return and random tax audits. With the Object Tax, people will have a streamlined interface developed by their bank.

Anyway, I've been wracking my brains trying to explain why the interface matters.

This morning, I was reading through To my utter astonishment I read the following sentence attributed to Leo E. Linbeck, Jr. (cofounder of the FairTax). This sentence was on the page I read it on June 23, 2013.

"The tax system is the most fundamental interface of the citizen with his government. And in America, uniquely, the citizen is sovereign."

I was astounded to see this wording by a cofounder of the Fair Tax because the Fair Tax effectively destroys the use of taxes as an interface between the people and the government.

The Fair Tax replaces the income tax (a direct tax on income) with a 23% sales tax imposed on retailers and service providers. The Fair Tax is a direct tax on sales. People pay the tax indirectly.

Advocates of the Fair Tax advertise that the tax would destroy all aspects of the direct interface between the governed and the government.

The primary claim of the Fair Tax crowd is that it will eliminate the side of the IRS that interfaces with taxpayers on an individual basis.

The Fair Tax is doing the exact opposite of what Leo E. Linbeck, Jr claims the tax will do. Replacing direct taxation with indirect taxation destroys the interface between the people and government.

If one believes that sovereignty flows from the people to the government, then taxes should flow from the people to the government. By chainging from a direct tax to an indirect tax, the Fair Tax destroys a direct interface between the people and the government. It also destroys individual sovereignty.

People who hold that sovereignty flows from the people to the government (as I do) should look for a mechanism like the Object Tax which uses computer design techniques to create a robust interface between the people and their government. People should shun the Fair Tax which replaces a direct interface between the people and the government and replaces it with an indirect one.

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