L. Neil Smith's
THE LIBERTARIAN ENTERPRISE
Number 246, November 9, 2003
Wrong Way, Right Way
The Rake Tax
Special to TLE
Taxation is theft. Some entity which has not earned something takes it by force from its rightful owner.
Because of this basic truth, I've tended to stay out of movements which seek to improve the system of legalized theft. But, occasionally someone would ask me whether I preferred a flat tax or a national sales taxthe two most popular forms of taxation amongst those in the liberty movement.
I answered that my preferred system of taxation would be none, but if there is to be a system of legalized theft it should be organized into a system I have since termed the "Rake Tax". Since the reactions have been overly favorable, I decided to compose this article and share the idea with the world.
The Rake Tax derives its name from poker rooms around the world. In a poker room, the casino does not earn its money by playing a game of chance against its customers. Instead, it taxes a portion of virtually every pot.
It works like this:
If a pot is big enough, the casino takes five percent of it up to three dollars. Which means that if a pot is 30 dollars, the casino takes a buck and a half? If a pot is sixty dollars, it takes three dollars. And, if a pot is one hundred and twenty dollars, the casino again takes three dollars.
The casinos' rules are designed to encourage economic activity betting. Any tax system should also try to create economic activityor rather do its best not to impede economic activity.
So the tax system I prefer is one where for example, the government leaves the first ten thousand dollars earned untouched. It then steals ten percent of the next fifty thousand dollars earned. After that, it takes nothing.
So, if you earned 10,000you would pay zero taxes.
If you earned 30,000 you would pay $2,000.
If you earned 60,000 you would pay $5,000. And, you would not need to file any paperwork with the IRS.
If you earned 100,000 you would pay $5,000. And, you would not need to file any paperwork with the IRS.
Those who pay the full tax file no paperwork. Those who don't pay the full tax are still required to file papers proving how much they made and how much the government is legally entitled to steal.
The numbers I've chosen are fairly arbitrary. I picked ten thousand because it's a round number near the current poverty line. Not taxing income below this number allows those on the bottom rungs of the economic ladder to use all of the fruits of their labor until they can better afford to be the victims of theft.
I picked ten percent because if it's good enough for Jesus it ought to be enough for Uncle Sam.
The income level where all tax obligations are satisfied should be set at an amount low enough that two thirds of income earners can pay the full taxeven if it means increasing the rate of taxation. It would do no good to have a rake tax where the full tax could only be paid by those who make slightly more than Bill Gates. The goal of this tax scheme is to establish a relatively non-intrusive system of government sponsored theft where most taxpayers can afford the full cost of government and keep their economic privacy.
The Rake Tax is preferable to a flat tax because it allows for individual privacy and it limits the amount of your income the government can steal.
The Rake Tax is preferable to a national sales tax because while a sales tax would reduce the intrusion of the IRS in the lives of wage-earners. It would not reduce the impact and intrusiveness of the IRS in businesses.
Proposing any tax system which differs from the Infernal Revenue Code and its ability to regulate the lives of peaceful individuals is politically difficult because the pro-government extremist control freaks in Washington really like pulling those strings. But, if the liberty movement is going to get behind an organized system of government sponsored theft, it may as well be one which actually does its best to promote economic expansion and individual liberty.