The Worst Tax of All

Tuesday, February 10, 2015

I've seen all sorts of rants against taxes. Many are against income tax; others are against taxing purchases. There is one type of tax that is far more harmful to the economy than any other, and it was levied against me. I speak of course about the car tax.

I am first to agree that governments need to collect revenues in some manner. That said, as a former resident of Rhode Island, I was shocked to receive a yearly tax bill for the car that I owned. Every resident's car is billed proportionately to its assessed value. The dollar amount that I had to pay? Roughly ten dollars.

Tax office
Image courtesy of Wikipedia

Many laughed at my complaints when I spoke about this outrageous fee. I didn't have a problem figuring out how to fill out the necessary forms. I didn't necessarily have a problem with the idea of taxing car ownership. What I did object to, however, was the size of my bill. The money that I sent in wouldn't have any effect on the government's bottom line. After the state paid for the processing costs (postage, printing, staffing and bank fees), it would likely wind up losing money on the ordeal.

By performing my civic duty, I was probably helping to bankrupt my state. Not only had the state taken my hard-earned money, but it had also made me feel bad about it too.

Wouldn't it have made more sense to let me go without paying? Had the government worked to estimate the cost of tax collection, it could have kept more money and allowed me to keep more money as well. A veritable win-win for all parties involved.

Organizations need to understand that there is a very real difference between revenues and profits. Many firms talk about increasing revenues and bringing in more cash. These actions are not valuable in and of themselves. It is more important to focus on profitability instead.

A year ago, Rhode Island faced a crushing level of $18.86 billion - nearly $18,000 for each man, woman and child in the state. The residents of Rhode Island shouldn't sit by and allow money-losing strategies to permeate their tax code. While I doubt that any of the state's staffers have read my excellent software pricing book, it's clear that not a single one of them asked me for a pricing consultation. Don't make the same mistake.