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Could America Become a Tax-free State?
Part I: The Lock Box
You start with the idea of a Lock Box. Money that goes into the Lock Box never comes out, it just stays there and generates
interest forever. Half of each year's interest goes back into the Lock Box to increase the principle and half goes to current
spending.
When the day comes that half the current year's interest equals the current year's spending, America becomes a tax-free
state. Moreover, since the other half of each year's interest is being put back into the Lock Box unendingly, the interest
available for spending increases unendingly. The America of the future could be a country where the government provides everything
the public could ever want, not only free of charge but also without anyone being taxed to pay for it all.
How long would this take? Probably a long time. There's a chance that everyone alive today would be dead and in the
ground before America ever reached such a goal.
Still, that's no reason not to get started. President Kennedy never lived to see man land on the moon and yet others
did, because of his vision. Likewise, we may never live to see a Tax-free America and yet others might, because of our vision.
But the Lock Box by itself isn't enough. It's good but it's incomplete. What's also needed is a refinement of the tax
code that assists the goal of making America a tax-free state, a refinement that phases out taxes over the years by means
of an ever-increasing Exemption Line.
Part II: The Exemption Line
Imagine an Exemption Line below which all income is tax-free. Starting modestly, the Exemption Line might be, say, $3,000.
No one pays tax on the first $3,000 of income. Babysitters, paper boys, kids who wash cars on weekends, all these will be
exempt from paying taxes if their income never rises above $3,000.
But the Exemption Line can be raised slowly. At first the Exemption Line might be $3,000, but it can be raised to $4,000,
then $5,000, and on and on and on. As the Exemption Line rises, the tax burden gradually shifts from the middle class to
the rich. Sooner or later the Exemption Line reaches the $50,000-$100,000 range, at which point the middle class effectively
no longer pays taxes, only the rich do. But even the rich are paying less and less because more and more of the tax burden
is being paid by the interest from the Lock Box.
The ever-growing Lock Box and the ever-rising Exemption Line lead America slowly but surely in the direction of a tax-free
state. Just because it might take a hundred years or more is no reason not to get started. It's said that man is the only
animal who realizes he has a future. Let's hope it's true.
Part III: Strategy
In America there are two ways to change the law:
1] an Act of Congress, and
2] an Amendment to the Constitution.
An Act of Congress requires a mere Congressional vote and is much easier to get than an Amendment to the Constition which
requires three-quarters of the 50 states to agree to the Amendment (which in practice is a stupendous political undertaking
involving the co-ordinated efforts of thousands of people in all 50 states).
The peril is that the easy-to-get Act of Congress can be overthrown by any subsequent, just-as-easily-gotten Act of Congress.
Today Congress may vote the Lock Box sacred and inviolate but tomorrow they could as easily vote to raid it for spending
money.
An Amendment to the Constitution, on the other hand, can be undone only by another Amendment to the Constitution. Just
as the original decision to create the Lock Box required three-quarters of the 50 states, likewise any decision to raid the
Lock Box for spending money would also require three-quarters of the 50 states.
The strategy then would be to create the Lock Box and Exemption Line by an Amendment to the Constitution, rather than
a mere Act of Congress. This would be a more difficult path but a more reliable one. If followed faithfully it would eventually
make America a tax-free state.
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