The proposed Freedom Tax is a revenue neutral shift in tax policy away from taxing jobs and work and substituting a tax on petroleum. There are numerous reasons for the shift, the primary being that taxes are very effective in shifting market signals to discourage whatever is being taxed. Currently our high levels of taxes on employment discourages job creation, while our very low level of taxes on petroleum, encourages wasteful use of petroleum products and discourages the development of effective alternatives.

With two thirds of our petroleum imported and world wide petroleum discoveries now forty years past their peak, many of our current and potential future national problems can be traced directly to our excessive use of petroleum. Trade deficits, environmental problems, economic challenges and national security concerns can all be traced directly to our unsustainable levels of petroleum use. While well intentioned people may dispute the details of such impacts, nobody credible suggests that our excessive use of petroleum is either good for the nation or sustainable at current levels.

There is an emerging consensus that the place to start a tax shift to the Freedom Tax is in reducing FICA payroll taxes significantly while substituting a tax on petroleum imports and production. Opinion leaders across the political spectrum all suggest and support such a plan. Today what is needed is a concerted effort to push for its passage through Congress.

Ideally the Freedom Tax will be phased in to reduce immediate disruptions to markets and to the expectations and lifestyles of Americans. The easiest mechanism to do this is through a ratcheted increase in the tax on petroleum. When market forces push the price of petroleum higher, prices would be allowed to rise. When market prices decline, the Freedom tax would ratchet up to maintain then current pricing. Such a mechanism has the added advantage of discouraging volatility in petroleum markets and providing a more predictable future for companies developing alternative energy supplies.

For the balancing tax reductions, in the current economic environment, the most rational tax based economic stimulus would be a reduction in FICA taxes, ideally in a 50/50 split of employee and employer contributions. Such changes would reduce the impacts of the least progressive aspect of our current tax system, immediately put more money directly in the pay checks of every worker and reduce the cost to businesses of keeping and creating jobs.