on June 03, 2013
People currently pay income taxes directly to both the state and federal government. The State and Federal government then pay for their expenditures. The problem with this model is that the needs of people in specific locations are different. A blanket answer to local needs does not always provide cost effective solutions. The need of one city is very different from the needs of another. Local governments should have more power to control income taxes and social programs because they can provide for their people more efficiently than the Federal government.
The idea of a trickle up taxation system is the cities or counties tax the residence and businesses that reside in their boundaries. States can then tax the income of the city or county in the exact same way they tax people today. People and businesses would only have to pay local taxes and not Federal or State. The Federal government would then taxe. This will result in more power bestowed on the local governments. This way there will be less need for federal programs and local governments will have more power to address the unique problems in their region.
Each region becomes a small business like entity with the goal of attracting and producing quality people. The competition with other locations for residents and businesses will create an friendly environment for lower taxes, higher education, better healthcare etc. If one locality wants to have a progressive tax rate and their citizens agree they will keep their customers happy. If they want a flat tax to encourage more wealthy people they have to option to do so. If the want to tax lower income people more than the higher, to encourage upward mobility they can do that as well. In this way local governments will be more able to provide for the needs of their population. If a city is not doing well it will be up to the state to provide them aid much like welfare for individuals. Agreements can be made by surrounding localities to aid them as well. All in all this would provide a more flexible system based on freedom of choice and competition.