Summary: the author doesn’t like an income tax, wants a flat tax instead. Not much else.
Such a Randian collection of economic platitudes – Ayn Rand, Rand Paul, random tropes, take your pick. The idea of libertarianism – that (at the Norquist extreme) government should be so tiny as to be able to be drowned in a bathtub– has never grown a large following and is fading. That is because it doesn’t work, and leads to a society of a few haves and the rest having naught. But then to imply that the only alternative is an extreme the other way that no longer exists is lazy at best, disingenuous at worst.
There is so much wrong with this, I just want to point out a few key flaws.
First, “In a free market economy, workers should keep the money they earn.” No, that is not what a “free market economy” means. In the past it meant, and to many Americans they think it still means, a market based on competition. That has changed so that today “free market” mostly refers to a laissez faire treatment of producers. It is not a statement about low taxes. And if you look at a chart of worker productivity vs. wages, you’ll see that workers haven’t been paid the money they earned since 1980. Look it up.
Second, IRAs and 401Ks are not “tax deductible”. They are tax deferred. You will pay taxes on your income eventually, just hopefully lower when you are in a lower tax bracket after you are working.
Third, grotesque and debilitating growth in income inequality since the 70s has occurred both pre-tax and post-tax. The lack of income taxes paid by the uber riche does exacerbate the problem as that lost government tax revenue becomes their untaxed personal revenue.
Fourth, the longest sustained, robust, and widespread growth in both income and personal welfare in the US was in the period after WWII until the mid 70s. Kennedy had cut the maximum personal income tax rate from 91% to 70%, but the real turning point came when Reagan slashed that further in half. That loss of income tax revenue started a decline in so many areas of American life that has been steady and pernicious and continues to this day. And that began the serious growth in the national debt which we will never pay down.
And, yes, there are eight states without an income tax. Two of the eight have substantial resources from oil and gas deposits, one gets revenue from gambling. The other five have high sales or property taxes - South Dakota getting a large share from cigarette and liquor taxes and Tennessee has the highest beer taxes in the nation. And 5 of the 8 are net “takers”, getting more in federal aid than they contribute to federal revenue, with two others essentially neutral. So just by looking at the eight states touted as role models, it is clear that this model would be a disaster at the federal level.
Finally, what’s this with the 5% tax? A true libertarian would want no tax at all.
Libertarianism is a pipe dream. It sounds great – yeah, less government, lower taxes – woo hoo! Who wouldn’t want that? It is a great system for the uber riche, as they get to hoard their wealth with no need to share with the rest of the society that they live in and in which they built their wealth. It works for the corrupt, as it is always the most nefarious that get away with the most in a society with few rules. If you believe our civilization should be run by and for the rich and the strong, with chaos for the rest of us, this is your path.
