Tonight, I plan to offer a brief essay on three kinds of taxation models, and some thoughts about them based on the information that I found. The three models specifically are the progressive income tax that is presently used, the progressive consumption tax that is espoused by Robert Frank, and a proportional income tax that is considered in the article “Progressive Taxation Reconsidered” by Hayek. They all have their considerations and their champions, but they all have the same objective: to give the government that works for the people the money it needs to operate effectively.
First is the progressive income tax model. It is, as previously noted, the model that is presently used. As such, it is the one that has the most evidence, and the most baggage from all of us. Its theory is simple: it is meant to keep the government funded, without reducing the purchasing power of the people in the country (http://nontrivialpursuits.org/Tax_Policy.htm), which is all very well and good. However, Hayek discusses that this kind of taxation is vulnerable to political manipulation by the most populous and therefore most powerful groups, which would be the middle class. The political machinations that Hayek discusses shift the tax burden off the middle class; presumably, the intent is that the upper class bear the burden, but the lower class also bears a disproportionate amount under the system.
Progressive consumption would work very differently. It would tax the purchases that people make, adding to the price of already expensive items (http://www.economist.com/blogs/democracyinamerica/2010/11/inequality_and_executive_pay). This would have the desirable effect of not completely killing the expensive items. They would still be available for the consumer who wanted them. However, there was a concern raised (http://www.americantaxpolicyinstitute.org/pdf/ShaviroPCT.pdf) that different tax policies between the Untied States, if we adopt this model, and a trade partner that still has progressive income tax, could make the act of trading very difficult. Also, it strikes me, personally, as possible that a person of wealth could buy exclusively from foreign providers and have his or her purchases imported to try to duck the tax. Never mind that this could easily be more expensive in the long run; people will do what they believe is in their best interest, even if they are dead wrong.
Finally, there is the proportional income tax that Hayek was discussing. It is, just like it sounds like, a tax where everyone pays the same percentage of their income in taxes. It is quite simple sounding, and has the advantage of being fairer than the progressive income tax (http://smallbusiness.chron.com/proportional-tax-system-16054.html) , as discussed at length above. The only downside that I could find came from the assumption that the tax was being levied as a sales tax, rather than an income tax; that would be unfair, because someone who makes $30,000 annually would be hurt more than one who makes $300,000.
So, ultimately, what I have found indicates that the progressive income tax that we presently have is the least effective and most unfair model of taxation. The proportional income tax seems to be the simplest one, and the most immune to political tampering, but the progressive consumption tax would be the most fine tunable. In the case of both, however, there is one thing that I can’t help but be concerned with, and that is trade. In the case of consumption taxes especially; the WTO has the ability to pressure nations, even the United States, into changing their laws. Without a trade conversion ability, these taxes may prove to be politically difficult on the international scale.