Strategic Choice Taxation: A Solution to the Federal Revenue Crisis

Sunday, January 1st, 1995 at 12:00 am by Bruce Anderson
Bruce Anderson, Strategic Choice Taxation: A Solution to the Federal Revenue Crisis, 1995 Colum. Bus. L. Rev. 281

The current congressional spending and taxation debates assume that a trade-off must be made between tax revenue and economic growth. Because it appears as though federal revenue cannot keep up with spending without great damage to the economy, a political consensus has developed for drastic spending reductions. However, the revenue/growth trade-off only appears to be required because of inadequacies in our revenue raising system. Our current taxation system is too narrow in scope and base. What is needed is a progressive approach that will stimulate growth in employment and in the economy while significantly increasing overall tax revenue.

This Note advances a specific income-wealth tax system and argues that it can be an effective means of simultaneously advancing these and other objectives. The Strategic Choice Taxation (“SCT”) concept allows the government to significantly increase overall revenue while reducing tax burdens on wage earners. It allows the government to tax the wealthy more aggressively while encouraging growth oriented investment in factories and equipment. In fact, by eliminating existing distortions of large scale investment decisions created by the income tax, SCT encourages near perfect investment efficiency. This Note also argues that SCT will increase taxpayer compliance, reduce oversight costs and thereby further increase net revenue, by curtailing the value of tax avoidance and evasion. Other tax schemes do not offer this range of benefits. SCT is designed to solve problems rather than to optimize a single characteristic at the expense of many others.

Part I outlines a diverse set of revenue generation problems that appear intractable, but for which this note proposes a common solution. Part II considers the common analytical understandings that give these problems the appearance of *282 insolubility. Part III presents the basic principles of the SCT concept and provides a conceptual statutory framework to assist the reader in interpreting these principles. Part IV presents economic arguments. Part V analyzes the constitutionality of SCT. Finally, Part VI argues that SCT would be administrable.

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