With A Vengence

by Handsome Matt

I survived my week at camp. Barely. All that playing, swimming, and severe lack of sleep took its toll.

But I had a great time, was very lucky to have a cabin full of well behaved children, and worked with a great staff. I even got tan!

During the week, I had a realization: Our current tax system actually inhibits sustainability.

A quick google search on the average business tax rate reveals that it’s anywhere from 13% for single owner, small businesses (ala the SBA) up to 40% for large corporations. According to the OCED the corporate tax rate for 2010 was roughly 20%.

This means that anywhere from a tenth to a full fifth of a company’s gross income is eaten up in taxes. Meaning that profit margins are that much smaller. This actually discourages the adoption of sustainable methods due to their higher initial costs. High taxes plus higher initial cost means even smaller profit margins. Small profit margins encourage higher prices. Which pushes sustainable made items out of reach for most consumers.

Up next, income tax. From personal experience, a full 20% of my income is eaten up in taxes and deductions. Federal, state, and local taxes add up to shrink my take home pay. Smaller paychecks encourage the purchase of cheaper products. Cheaper products are less likely to be sustainable made. If an individual is living paycheck to paycheck, they can’t save money to make a sustainable purchase.

What needs to happen is this:

Lower corporate tax rates. This will immediately increase profit margins, meaning that companies have no excuse to adopt sustainable practices. At that point, it’s a comparable option, and is the smart decision to make as far as publicity and reputation are concerned.

Combined with that, those companies that don’t adopt sustainable practices should face higher taxes. This creates a favorable environment for businesses to adopt sustainable models.

Secondly, eliminate the income tax. Individuals need to know exactly how much money they take home. Currently $24,000 a year, isn’t actually $24,000 a year. It depends on location, and could be anywhere from $20,000 to $17,000.

In lieu of income tax, I propose better state sales taxes, and a federal tax rate. Sales tax is easy to understand and estimate, and is fairly simple to enforce. Meaning that revenue generated from a sales tax is fairly guaranteed. It also is a cost visited solely on the consumer. That encourages a smarter consumer.  And by increasing the actually amount taken home each pay period,  consumers can afford to purchase sustainable made products.

What I envision is this: We redistribute the tax rate. The net change is zero, but by reworking everything, we actually could encourage better purchasing habits.

This is of course combined with smarter government. It’s incredibly easy to start a government program; it’s impossible to end one. While we rework our tax system, we also need to audit our government agencies, and eliminate as much waste as possible.

There you go: A simple way to encourage smarter purchasing habits and better government. All just by changing how we tax our citizens.