Tax Active Economic Activity
Since governments are the primary parties responsible for creating and maintaining an environment where fair economic activities are free to take place, it is reasonable to fund this effort and compensate governments by allowing taxes to be charged upon each economic transaction that takes place. Governments should raise the vast majority of their revenues through the taxing of active economic activities (namely, sales taxes on all goods and services).
Proportional Sales Taxes On All Transactions
As a rule, a proportional sales tax should be levied on all active economic activities. Active economic activities would be defined as any activity in which a good or service was exchanged for another good or service. In other words, virtually every good or service sold would be subject to a sales tax.
To adequately illustrate the pervasive nature of this type of sales tax, examples would include labor (wages/income), food, rent, real estate purchases, gambling purchases, stock and bond purchases, investment income (such as stock dividend payments, real estate income, interest income, etc.), utility purchases (water, electricity, natural gas, etc.), business-to-business sales (when sold to distinct economic entities), purchases by non-profits, purchases by governments, and all other goods and services at the point of sale regardless of who the parties to the transaction may be. The sales tax applied to all these transactions would be the same. If governments need more money, they would raise the rate, or if they need less, they would lower the rate. Never should different sales tax rates exist for different goods or services within the same political jurisdiction. That would inevitably lead to unnecessary complexity of the tax code.
Non-Profit Organizations Should Not Enjoy Any Tax-Exempt Status
These organizations (churches, charities, educational, etc.) should pay taxes at the same rate as everyone else.
Passive Economic Activity Should Not Be Taxed
Passive economic activities, which are activities that do not include the buying or selling of a good or service, should not be subjected to any form of taxation. Examples of passive economic activities include the appreciation in the value of goods (capital gains), merely owning goods (such as property), gifts (including tips (gratuities), etc.) under $500,000, inheritance or estate transfers under $500,000, compensatory payments (such as insurance payouts for damages), catching a ball that was hit into the stands or other sports memorabilia gained in such manner, and other such instances in which economic activity takes place without a corresponding exchange of goods or services.
Any gifts, inheritance or estate transfers with a cumulative value of over $500,000 should have this excess value treated as income taxed accordingly.