Wednesday, June 26, 2013

Design Matters

Design matters.

In Silicon Valley, engineers have learned that the way to create quality design is to start by creating a quality design process.

Tax Reform could be a winning issue for the Tea Party Movement. Unfortunately, the tax reform proposals on the plate are poorly designed and excessively contentious. Notably the Fair Tax seeks to create radical change through economic disruption.

Creating a quality design starts with a quality design process. If a Tea Party group were to discuss tax reform from a design perspective, they would draw people into the movement.

I believe that the best approach to tax reform is to start with a proven design methodology.

I named "The Object Tax" after a design methodology used in Object Oriented Programming. Object Oriented Design is a proven design technique. Elements of Object Design exist in all software projects. The ideas were used in the development of your web browser, smart phones, etc..

The Object Tax starts with the question: "Can we use the design techniques from Silicon Valley to improve our tax system?"

Please note. The Object Tax does not seek radical change. The goal is simply to create a better interface for the collection of taxes.

The best way to develop a quality interface is to separate the logic of taxation from the interface.

In the design process we create an object model of the existing income tax system. This is a critical design element of the tax. The Object Tax can be implemented as the current income tax. This eliminates disruptive change.

With the object model in hand, we can invite third party financial firms to step in and create new interfaces for the tax system. In the essay "The Object Tax in a Nutshell," I present my vision of how we could apply better design to the tax code.

One way to implement the code is through a system of "Tax Aware Accounts." A Tax Aware Account works as follows. Employees would have their entire paycheck deposited into a Tax Aware Account. People will pay taxes (at a progressive rate) when they withdraw money from their tax aware account.

The Tax Aware Account eliminates payroll withholdings. It eliminates W2 Forms and 1099 Forms. If done correctly, the program can even eliminate the need to file tax returns.

Please note, the system can be implemented as the current Income Tax or as Tax Aware Accounts. Only people who want to use the new interface will use the new interface.

The Object Tax allows third parties to develop new interfaces for the tax system. I imagine that people will come up with exciting new ideas.

The Object Tax taxes an abstract object between income and consumption. This allows us to create a program that combines the best of a progressive income tax with a consumption tax.

The Object Tax is a true consumption tax. The important aspect of a consumption tax is that the money flows from the consumer. (The Fair Tax is actually a tax on business). With the Tax Aware Account, people pay their taxes when they withdraw money from savings for consumption. This encourages savings.

By using proven design techniques from Silicon Valley, the Tea Party could create a better design for our tax code. Creating a better design for the tax code would help legitimize the ideals of the Tea Party.

The first step of bringing this idea to life is simply for a group of people to meet and discuss tax reform.

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