Creating a Better Tax Reform Proposal

It is likely that Tax Reform will be the driving issue of 2014.

Unfortunately, there is not a good tax reform proposal on the table. If there is not a decent plan on the table, we will be stuck with bad approaches to reform such as the Fair Tax.

I contend that, if a small group of patriots got together, the group could create a much better tax reform proposal that will bring people into the freedom movement.

Decades ago, when I was studying object oriented programming, I came up with a fun approach to reform that I took to calling "The Object Tax."

The reform uses ideas from the computer industry to replace the tax withholding system with Tax Aware Accounts.

A Tax Aware Account is a smart account. You put money in the account. You pay a progressive tax to get the money out. If your employer put $1000 in your account and your tax rate was 20%; you would get $800 in cash and pay a $200 tax when you withdraw the funds.

Smart accounts can accurately apply taxes throughout the year, ending the need to file an annual return.

Implementing the tax is not disruptive. The program starts by creating an object-model of the current tax code that can be implemented either as the current withholding system or through the system of tax aware accounts.

Accountants and financial institutions would create implementations of the object-model. Once tested these third party would present Tax Aware Accounts as a product.

People would switch to the Tax Aware Accounts at their discretion.

Employers wishing to reduce compliance costs are likely to change. Employees who wish to eliminate the hassles of filing taxes will appreciate the change.

Tax reform experts will notice that the Object Tax combines the best of a progressive income tax with a consumption tax.

For that matter, unlike the FairTax which is a business tax, the Object Tax is a true consumption tax. The money flows from the consumer at the point when consumers transfer money from their accounts for spending.

The really important part of the Object Tax is that it empowers individuals to take greater control over their personal finances. The programs that host the tax will give clients a full accounting of their personal spending and taxes paid. While the tax reform itself will not decrease government spending, an empowered electorate is likely to demand spending reductions.

The rogues in power fear an educated public.

Moving the Object Tax from conception to consideration as a viable alternative to the Fair Tax requires just a few people meeting and hashing out the plan. I started the Object Tax blog to start the process of developing the concept.