Arizona Voters To Decide On Ban Of Vehicle Miles Traveled Taxes in the midterm elections of 2026. Really!

Whoever came up with this absurd idea! Is this another crass attempt for  government to subsidize electric vehicles via government?

What about e.g. daily commuters driving long distances? 

It reminds e.g. of the famous phrase by President Reagan: "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it" (Source).

"Arizona voters will weigh in next year on a proposed constitutional amendment that would bar the state and local governments from taxing drivers based on how many miles they travel, as well as from placing limits on an individual’s vehicle mileage.

The proposed amendment, which will be placed on the November 2026 ballot, would make Arizona the first state in the nation to constitutionally prohibit vehicle miles traveled (VMT) taxes and related mileage restrictions.

VMT taxes—also referred to as mileage-based user fees—charge drivers a per-mile fee for use of public roads. While proponents argue the system offers a fairer alternative to traditional gas taxes, especially as electric vehicles become more common, opponents have raised concerns about privacy, government overreach, and potential impacts on rural and suburban drivers. ..."

Arizona Voters To Decide On Ban Of Vehicle Miles Traveled Taxes - AZ FREE NEWS

Trump tariffs may signal stealthy shift to consumption tax, analysts say

That is an interesting and plausible perspective! A consumption tax comes also closer to a desirable flat rate tax.

A consumption tax is supposedly much easier to administer and to comply with than an income tax. 

Google AI search result: "A consumption tax can have several advantages over an income tax, including higher economic output, more savings, and a more stable revenue stream. However, consumption taxes can also be regressive, meaning they take a larger share of lower incomes."

"U.S. consumers would pay more to fund transition away from income tax"

Trump tariffs may signal stealthy shift to consumption tax, analysts say - Nikkei Asia

Legalization of recreational marijuana for extra tax revenues?

Like proposition 207 on the November 3rd, 2020 Arizona general election ballot! If accepted, it will impose a 16% excise tax on marijuana sales to fund community colleges, infrastructure, public safety, and public health programs!

Sounds good! Doesn't it! Don't be gullible! A 16% excise tax is extremely high. Tax evasion will be pervasive and effective! You can bet that lot's of efforts will be spent to evade this tax, which will likely trigger then more government regulations and controls and so on ...

As I pointed out before in this blog (e.g. here), will e.g. driving under the influence (DUI) laws be adjusted to reflect strict consequences. Will other laws be in place that assign a higher responsibility and strict consequences to those who choose to consume psychoactive substances or alcohol.
Or will this be reneged or neglected to achieve higher tax revenues?

If someone becomes a severe addict of psychoactive substances, this person ought to be held responsible to seek medical treatment as soon as possible!

A Consumption Tax Becomes Fashionable Again

Advocates In Action

Most recently, an AEI scholar even invoked Thomas Hobbes as a proponent for such taxation. There is another advocate right here at the Goldwater Institute in Phoenix, AZ. Some may argue a consumption tax would be better than a European style value added tax.

The Counter Arguments Outnumber And Outweigh

I think it is overall a bad idea for many reasons:

·         Taxes have to be paid by those who can afford to pay. Not all consumers earn money to pay for consumption taxes, e.g. retirees, people between jobs or in job training or people who take some time out from working etc. Thus, would exemptions or lower rates on basic consumption etc. be necessary?

·         It may require a constitutional amendment. That is difficult.

·         How do you define consumption? I would imagine it is as thorny as the definition of income for tax purposes. E.g. buying a home vs. renting an apartment, would renting be an act of consumption as currently already sales taxed e.g. in Phoenix, AZ?

·         A consumption tax is regressive unless you introduce tax-free consumption thresholds and/or progressiveness. Anticipate controversy.

·         What will happen to the existing income taxes? Will the income tax be abolished and removed from the constitution? Unlikely! Or will there be high income taxes besides high consumption taxes like in Europe? Not very desirable!

·         If one aim of introducing consumption taxes is to eliminate the corporate income tax, this could be achieved without a consumption tax. Just abolish the corporate income tax. Distributed profits like dividends and the remuneration of company owners or managers are already taxable. Retained profits would be tax-free. Double taxation would finally and simply be eliminated. Low income tax rates would reduce the distortion faced by business owners when they decide whether profits are to be retained or to be distributed.

·         The US is not alone in this world. A massive change in the US tax system like the introduction of a consumption tax will most likely have international implications of which kind I am not sure. However, the introduction of a consumption tax may well require some form of international coordination and new agreements/treaties. Is it worth it?

·         The proponents of consumption taxes claim that it would foster more investment etc. are not convincing at all when compared to a low rate, simple flat income tax.

·         A consumption tax if too high and if introduced while other taxes still apply (e.g. income taxes, property taxes etc.) invites tax evasion, black market and barter exchanges, which might be more difficult to detect than income tax evasion. E.g. high taxes on cigarettes or alcohol.

·         If avoidance of taxation of capital gain or so-called unearned income is a major aim of some proponents of a consumption tax, then this can be achieved by reforming income taxation or just by keeping income tax rates low. Perhaps this is all some consumption tax proponents are after in the end. Why should realized capital gain or unearned income not be taxed? What a detour!

A Low Flat Rate And Simple Income Tax Is The Superior Solution

A flat and low rate income tax levied on a broad base is still the best solution. Get rid of all the loopholes, exemptions, credits, other special provisions etc. to make the tax code as simple as possible. The tax code should not be the playground of social engineers. Taxes should strictly and exclusively be raised for the sole purpose to cover government expenses, nothing else. Social policies are purely to be realized on the expenditure side of government budget. This is would be fair and transparent.

Confiscatory Taxation: Spain Raises Value Added Tax To 21% By September 2012

It’s Madness

Given the dire economic conditions, it’s insane to raise the value added tax from 18% to 21%. That is a 17% increase. Only two years ago, in July 2010, the previous, socialist government raised it from 16% to 18%.

Spain’s government justifies such an increase with the absurd argument that they are only bringing their VAT tax rate in line with the rest of the European Union. Yes, it is true the VAT tax rate in Germany is 19%, in France it is 19.6%, and in Italy it’s 21%. However, this is typical big government absurdity, when my neighbor raises taxes then me too. By this twisted logic we soon would see VAT tax rates in the 30-40% range. If businesses in the EU would do this kind of price fixing, they would be suit.

Confiscatory Taxation And The Laffer Curve

The top personal income rate is 43% in Spain, the corporate tax rate is 30%. Thus, besides high VAT taxes, Spain is a high tax country.

To use an exaggerated and oversimplified example, the average Spaniard employee pays about 30% in income taxes and soon 21% taxes on everything he or she buys. That is a combined taxation of over 50% of hard earned money. This example does not even include payroll taxes etc.

Any taxation that reaches or exceeds 50% of one’s income is legalized confiscation or theft by big government. Laffer curve analysis strongly suggests that revenue will rather decline in such a high tax environment. Citizens are no fools.

Revealing Exemptions To VAT

I do not know all the details, but the tourism sector enjoys an exemption from VAT in form of a considerably reduced VAT rate of currently 8%, which the new, conservative government now intends to raise to 10%.

Why are there such exemptions like tourism and also for basic foodstuff (VAT rate of 4% in Spain)? One easy answer is that big government knows exactly that tax rates as high as 20% are confiscatory and abhorred by the people, not to mention bad for business. Or is it just a clever move by big government to prevent riots in the street?

A Warning For The USA

In the US, we find a lively discussion of introducing some kind of consumption tax. Even conservative think tanks like the Goldwater Institute here in Arizona are in on this misguided policy advice.

To put it very simply, a domestic consumption tax cannot be implemented without abolishing the personal income tax first. Otherwise, our greedy big government politicians see $$$ signs and revenue.