Taxes are an undesirable necessity. They are required to provide the minimum resource levels to maintain a society – a monetary supply and national defense to name a few. The amount of resources is usually when the arguments begin. Do we pay for healthcare for all, have deductibles, provide scaling based on wealth, etc.? While the debates are going on regarding what should be provided, the bigger question is “Who should pay?”

Well, if you have deductibles and exemptions based on wealth, obviously ‘who pays’ becomes convoluted from the outset. We’ve become a society that makes promises on what we will provide, and then we try and figure out how to pay for it. Kind of a toxic combination, don’t you think?

So we have two tax questions. What is needed? How do we pay for it?

A common sense, fiscally-responsible approach would dictate that regardless of which resources and resource levels were decided upon, that the ‘pay-as-you-go’ approach should be adhered to, unless there’s extraordinary circumstances. Debt financing to the levels to where we are today is a recipe for disaster and in the near future, we will all be paying dearly.

The three general types of tax are: property, income and consumption.

I’m not a proponent of a property-based funding. It’s too subjective, requires periodic assessments to stay relevant and in the case of personal hardship, is debilitating. In many cities, people can’t afford the taxes and are abandoning their property.

Income taxes are a bit fairer. But our tax system is so complex with its deductions and the size of the code that it really ends up being a tax that hurts the poor. Where the affluent have the ability to hire CPAs, financial planners and others that understand tax reduction, those less affluent week to week and pay as they go. If the more affluent reduce their taxes because ‘their people’ can navigate the tax code, guess who pays more?

Consumption taxes are the most fair. They are the simplest. You pay a percentage on top of everything you purchase. They are the ones easiest to monitor – a benefit when evaluating the effectiveness of our elected officials. Unfortunately the powers have no incentive to migrate to this type of tax system. What a shame.

As our debt spirals out of control, there is not enough common sense to work together to correct a problem that is very evident and even more dangerous.

Mark Schuster, Partner