Alleviating deadweight

You know, there’s one very simple way the government can reallocate billions of dollars in revenue that quite literally does nothing because it is nothing but virtually permanently labeled tax money, and I’m surprised no one has discussed this at all.

So what’s the solution? It’s quite easy, I promise.

Make all salaries of Federal employees exempt from Federal income taxes and proportionally reduce every Federal employee’s salary to an amount comparable to their current take-home pay.

Okay the accounting and math could be complicated, but when Federal salary disbursements are subject to Federal taxes, it basically becomes virtual money that never leaves the Treasury. This is why income taxes were not intended by the Founders, and why in economics taxes, especially income taxes, are considered a deadweight loss on a market or economy.

And when a government is taxing what it spends, it creates a near permanent deadweight loss that only grows as the size of government grows and more money is disbursed. Hmm… perhaps this is something to be studied further.

Eventually all Federal disbursements should be exempt from Federal income taxes. Actually, all government disbursements from any level of government should be exempt from all income taxes, whether State, Federal, or local. I wonder how much money would actually be freed up in not only the economy but the Federal budget doing this, and it’ll be a real economic stimulus, not a false stimulus paid for with borrowed funds.

Again, perhaps something to study further?