Whenever there are changes to the tax system, you always find people who say “We’re worse off now than before!” Yeah well, you can’t please everybody all the time. And that’s usually because the changes are too abrupt. The government decides to tax him less and her more after July 1, so the changes will be sudden and potentially disruptive.
But it doesn’t have to be. As I touched on in the previous section, with a system like this we should be able to smooth out the sudden changes to the economy by varying the change slowly over time. All we need to do is pick a date to roll over to the new system, prepare the database with 20 billion products and services, — and/or half a million product/service types, whatever you feel like — set a G value, and at the last minute before change over, set the thing to calculate a D-Factor for every product (or type) such that the price including tax will be exactly the same as it was yesterday, taking into account all the existing taxes that will simultaneously be removed.
Then over time, slowly adjust the D-Factors on a daily/weekly/monthly/whatever basis to more appropriate values so that people don’t feel the pinch all of a sudden. D-Factors would be publicised widely so everyone knows exactly what rate of tax they paid on things.
What could go wrong?
How to change the D-Factor
D-Factors can be fixed and released on any date. Normally while fixed, a D-Factor remains at that value. If a D-Factor is determined to need adjusting smoothly over, say, six months to prevent bill shock, for example, a release date will be specified for that product’s (or category’s) D-Factor, followed by a fix date six months later. While the system is between a release date and a fix date it can calculate the D-Factor based on how far along the ramp we are between the two dates.
For example, the government decides to increase the D-Factor of cigarettes from 10 to 15 over a 6 month period starting on July 1. The system would figure out that on September 30 the D-Factor would be 12.5. On the next day it would be slightly higher. In fact the system could make the adjustments at any interval over the larger period. It could change daily over six months. It may change weekly over 12 months.
Of course, if an abrupt change is desired then the Release date and subsequent Fix date would be just one day apart. Sunday the D-Facfor is 10, Monday it’s 15. It’s all possible.
Publicly displayed D-Factors and mobile apps would inform everyone of the current values, past histories and even future projections.
Fix and Release dates for all D-Factor categories would be stored for historical purposes and tax auditing.