In the world of Adam Smith, specialization of labor and free exchange of goods and services lead to lower prices and a higher standard of living for all. In modern democracies like the United States business is dominated by corporations and improvements in communication and transportation have extended markets worldwide. Is the world of Adam Smith really comparable to modern society?
The goal of corporations is to provide goods and services at the lowest possible cost to compete in the free market, while maximizing profits to their shareholders. Large corporations like Wal-Mart have done this very successfully and their growth has been phenomenal.
In small town America, residents get the advantage of low prices, and at least comparable wages and benefits so this seems a good proposition for shrinking small towns. In larger cities, residents making even higher wages in other jobs reap the benefits of the low Wal-mart prices, so it’s even a better win-win situation. Or is it?
There are still benefits from the economies of scale and the free exchange of goods and services. And, the laws of supply and demand haven’t been repealed. But in modern society, no one is allowed to starve or die from lack of shelter or medical services. If wages are low and benefits like health care are eliminated many in the work force cannot afford to pay for the services they need, and the burden falls on government to make up the difference. So in effect, large businesses who offer only low-paying jobs which do not support their employees are increasing the size of government to make up the difference.
Yet, supporters of free markets and big business place the blame for the growth of government on “tax and spend” “socialists”. If we truly want to limit the growth of government it appears the only way to reconcile this dilemma is to let people in these low-paying jobs go without health care or adequate food and shelter, or increase their wages to the level required to pay for their needs. It would seem the latter alternative is better than the former.
In California, there is now a movement to prevent Wal-Mart from moving into neighborhoods. This may be short sighted. It seems a better solution would be to take advantage of the economies of scale that Wal-mart offers and simplify increase the minimum wage to a reasonable level. This would be accompanied by howls from the usual suspects about throwing people out of work. But, this is just another red herring offered by the same people who blame big government on tax and spend liberals. People have to live and there is a cost to that. You can pay them a living wage or you can subsidize their pay with government services. It is likely that everyone will be happier and more productive if they have a job that pays their way.
Saturday, August 07, 2004
Wednesday, April 21, 2004
Political Luddites
Luddites were the workmen, named after Ned Lud, who in the 1800’s, tried to prevent the use of labor saving devices by smashing them. That is, they didn’t try to understand the real role of labor saving devices in the long run. They were content to attack the problem in a short sighted way that fit their existing narrow and outdated view of the world.
Political luddites have a firm, fixed view of how things are, or previously were. They are not open-minded to how things have changed, may be changing, or will change in the future. They seek sources of information to reinforce their already held beliefs and avoid sources that may challenge their beliefs.
They deal in hackneyed clichés rather than discussing specifics in their own words. They first look at the source of the information, and if it is not from a source they know to be sympathetic to their views they reject it. They deal in personalities. There are personalities they can identify as being sympathetic to their views. Any others are immediately considered untruthful, untrustworthy, or have a hidden agenda. They are quick to hitch their chariot to the former, and are brutally loyal from that point on.
To allow you to spot these political luddites by the clichés they use, here are some of the most popular ones and a description of what they mean when they use them.
Liberal – Anyone promoting the general welfare, advocating for the average citizen at the expense of the political donor class, or advocating redistribution, class warfare, fair markets, or regulation as defined below. Often used interchangeably with libertine or big spender, and prefaced by the adjective, bleeding heart. Not to be confused with the more conventional definition of an open minded, tolerant individual of free birth and noble ideals.
Socialist - Anyone who may have discovered that the preamble to the Constitution includes the charge that government is to establish justice and promote the general welfare, in addition to providing for domestic tranquility and the common defense. A person who believes that taxation is not a form of theft, and believes that taxes can be used for things other than national defense and policing. Anyone who supports government involvement in programs that could be handled in the private sector. This definition is not to be confused with the more conventional definition of a socialist as someone advocating government ownership of the means of production.
Redistribution - The spending of tax money to abet one class of people over another, even if this expenditure is to correct injustices or inequities in the system, or ensure survival of individual citizens who are threatened with economic disaster. Any money used to promote the general welfare, as opposed to spending for national defense and policing. Implicit in this definition is that all salaries, wages, profits, and other income are accounted for and taxed fairly. There is no recognition of any class of people including the political donor class. All laws are assumed to be legitimately made, and the influence of political contributions is assumed not to have any effect on how tax laws and exemptions are made. No account is taken that corporations pay taxes on net income and individuals do not.
Class warfare - This is said to occur when citizens discover and complain about a political donor class funding politicians to obtain access and pressing for laws that advantage them. Used to fight any form of progressive taxation or discourage any recognition of an increasing income gap between the political donor class and the rest of the citizenry.
Free market - The holy grail of luddites economics. An unregulated interchange of goods and services without government involvement. Generally means that any form of regulation disrupts markets and prevents them from operating efficiently. Implicitly fair. No distinction between free markets and fair markets.
Deregulation - Getting the government out of market regulation. Allowing unimpeded consolidation. Sometimes implies advantaging business over consumers. Not necessarily full deregulation. As in the energy market in California, deregulating wholesale prices, while keeping retail prices regulated to advantage producers over consumers. Allowing decisions to be made by suppliers rather than consumers, as in the cable TV industry.
GDP – Gross Domestic Product. Another holy grail of luddites economics. An aggregate measure of the goods and services produced in the country. Used as a measure of the health of the country, as opposed to using employment, job satisfaction, health or other citizen related indicators. Implicitly ignores variations between different segments of society and between the donor class and others, but still considered all important to luddites.
Political luddites have a firm, fixed view of how things are, or previously were. They are not open-minded to how things have changed, may be changing, or will change in the future. They seek sources of information to reinforce their already held beliefs and avoid sources that may challenge their beliefs.
They deal in hackneyed clichés rather than discussing specifics in their own words. They first look at the source of the information, and if it is not from a source they know to be sympathetic to their views they reject it. They deal in personalities. There are personalities they can identify as being sympathetic to their views. Any others are immediately considered untruthful, untrustworthy, or have a hidden agenda. They are quick to hitch their chariot to the former, and are brutally loyal from that point on.
To allow you to spot these political luddites by the clichés they use, here are some of the most popular ones and a description of what they mean when they use them.
Liberal – Anyone promoting the general welfare, advocating for the average citizen at the expense of the political donor class, or advocating redistribution, class warfare, fair markets, or regulation as defined below. Often used interchangeably with libertine or big spender, and prefaced by the adjective, bleeding heart. Not to be confused with the more conventional definition of an open minded, tolerant individual of free birth and noble ideals.
Socialist - Anyone who may have discovered that the preamble to the Constitution includes the charge that government is to establish justice and promote the general welfare, in addition to providing for domestic tranquility and the common defense. A person who believes that taxation is not a form of theft, and believes that taxes can be used for things other than national defense and policing. Anyone who supports government involvement in programs that could be handled in the private sector. This definition is not to be confused with the more conventional definition of a socialist as someone advocating government ownership of the means of production.
Redistribution - The spending of tax money to abet one class of people over another, even if this expenditure is to correct injustices or inequities in the system, or ensure survival of individual citizens who are threatened with economic disaster. Any money used to promote the general welfare, as opposed to spending for national defense and policing. Implicit in this definition is that all salaries, wages, profits, and other income are accounted for and taxed fairly. There is no recognition of any class of people including the political donor class. All laws are assumed to be legitimately made, and the influence of political contributions is assumed not to have any effect on how tax laws and exemptions are made. No account is taken that corporations pay taxes on net income and individuals do not.
Class warfare - This is said to occur when citizens discover and complain about a political donor class funding politicians to obtain access and pressing for laws that advantage them. Used to fight any form of progressive taxation or discourage any recognition of an increasing income gap between the political donor class and the rest of the citizenry.
Free market - The holy grail of luddites economics. An unregulated interchange of goods and services without government involvement. Generally means that any form of regulation disrupts markets and prevents them from operating efficiently. Implicitly fair. No distinction between free markets and fair markets.
Deregulation - Getting the government out of market regulation. Allowing unimpeded consolidation. Sometimes implies advantaging business over consumers. Not necessarily full deregulation. As in the energy market in California, deregulating wholesale prices, while keeping retail prices regulated to advantage producers over consumers. Allowing decisions to be made by suppliers rather than consumers, as in the cable TV industry.
GDP – Gross Domestic Product. Another holy grail of luddites economics. An aggregate measure of the goods and services produced in the country. Used as a measure of the health of the country, as opposed to using employment, job satisfaction, health or other citizen related indicators. Implicitly ignores variations between different segments of society and between the donor class and others, but still considered all important to luddites.
Saturday, April 03, 2004
Homeland Security
Are we ever going to be secure with thousands of unidentifiable people in our midst? Can we check every bag, secure every aircraft, every train, every building, every gathering place, every power plant, every dock, every vehicle against satchel bombs of one kind or another? Can we protect our air, water, and food from lethal contaminants everywhere? In a few words, aren’t we going about this in the wrong way?
Wouldn’t it make more sense to approach homeland security like we approach motor vehicles and handguns? Every car is inspected and registered in a database by make, model, and description, or it can be impounded so it can’t be driven. Yet people can enter the country illegally at most places along our border or obtain a drivers license with a fake piece of paper without even as much as a picture on it. Are we stuck in such a time warp that we can’t have a positive, verifiable personal registration system because we think the government is someday going to gather us all up and put us in jail if we are registered in some database. On the contrary, we should have a system where the government can gather up those who aren’t registered in a database and deport them or otherwise determine why they are here illegally. Only then will we have any hope of being secure in our person and property.
Such a registration system could be very simple, consisting of simply a number and a picture in most cases. When you are involved in legal infraction, go to board a plane, or interview for a job you produce the picture and the number and the airline or employer looks up the number in a database. If the picture stored there doesn’t match the picture you furnished, or doesn’t obviously look like you, further investigation is required. In cases where people have criminal records or other past history of illegal behavior, a fingerprint or a DNA sample may be required. For citizens to be registered in the database would require proof of domestic birth or naturalization.
For people requesting entry to the country, a much more complete registration would be required. For limited term visitors, a visa with pictures and fingerprints, together with purpose of entry, country of origin, planned itinerary, length of stay, and most importantly, a responsible party in the country whose responsibility it would be to keep track of the whereabouts of the visitor, and notify authorities if such whereabouts were ever in doubt. This party could be a tour company, employer, school, a relative or friend being visited, or a series of hotel registration and departure notifications. The database computer would automatically kick out the names of those who have overstayed their visa or whose whereabouts have been determined to be uncertain.
I suspect the reason we don’t already have such a system has more to do with special interests and politicians desire to utilize undocumented labor, expand tuition receipts, or pad voter rolls. And the price is our homeland security.
Wouldn’t it make more sense to approach homeland security like we approach motor vehicles and handguns? Every car is inspected and registered in a database by make, model, and description, or it can be impounded so it can’t be driven. Yet people can enter the country illegally at most places along our border or obtain a drivers license with a fake piece of paper without even as much as a picture on it. Are we stuck in such a time warp that we can’t have a positive, verifiable personal registration system because we think the government is someday going to gather us all up and put us in jail if we are registered in some database. On the contrary, we should have a system where the government can gather up those who aren’t registered in a database and deport them or otherwise determine why they are here illegally. Only then will we have any hope of being secure in our person and property.
Such a registration system could be very simple, consisting of simply a number and a picture in most cases. When you are involved in legal infraction, go to board a plane, or interview for a job you produce the picture and the number and the airline or employer looks up the number in a database. If the picture stored there doesn’t match the picture you furnished, or doesn’t obviously look like you, further investigation is required. In cases where people have criminal records or other past history of illegal behavior, a fingerprint or a DNA sample may be required. For citizens to be registered in the database would require proof of domestic birth or naturalization.
For people requesting entry to the country, a much more complete registration would be required. For limited term visitors, a visa with pictures and fingerprints, together with purpose of entry, country of origin, planned itinerary, length of stay, and most importantly, a responsible party in the country whose responsibility it would be to keep track of the whereabouts of the visitor, and notify authorities if such whereabouts were ever in doubt. This party could be a tour company, employer, school, a relative or friend being visited, or a series of hotel registration and departure notifications. The database computer would automatically kick out the names of those who have overstayed their visa or whose whereabouts have been determined to be uncertain.
I suspect the reason we don’t already have such a system has more to do with special interests and politicians desire to utilize undocumented labor, expand tuition receipts, or pad voter rolls. And the price is our homeland security.
Friday, April 02, 2004
Worker Capitalism
Recently, maybe forever, corporate titans have been giving themselves big raises and bonuses by being on each others boards, buying tax code favors from politicians, and letting trickle down take care of anyone that doesn’t have any influence over who gets what in the corporate world. Lately, some have even gone so far as to adopt corrupt practices to make sure their bottom line titillates Wall Street, to ensure that their stock options reap big rewards. So what about the old maxim that the primary responsibility of a corporation is to its stockholders? Some capitalists seem to be taking issue with this tenet of corporate practice if the stockholders happen to be owners of large pension funds who exercise their voting power to curb the excesses of corporate managers.
Jay Hancock of the The Baltimore Sun has recently reported that as early as 2001 U. S. pension funds owned 26% of corporate America, while mutual funds controlled only 19%. The only difference is, pension fund managers seem to take their fiduciary responsibility more seriously than mutual fund managers. Pension fund managers are starting to press corporate managers to pay more attention to owners and less attention to feathering their own nest, while mutual fund managers seem to count on their “investors” automatic approval of management decisions, as long as the bottom line is competitive.
Since corporate titans own politicians, for the most part, particularly those in the Republican party, not much is ever going to get done in closing tax loopholes bought and paid for by their benefactors. So, if the widening gap between rich and poor is ever going to narrow, it calls for even more worker capitalism. If more workers can be encouraged to invest in funds which exercise their power for the benefit of workers without killing the goose that lays the golden egg, the situation for those in the bottom 99% of the economic ladder might actually improve. If there is pressure from worker owned funds to reduce executive compensation in all industries and pass it down to those without corporate decision making power, maybe the welfare of workers, whose economic progress has stagnated for the last thirty years will actually improve. After all, are these executives going to quit if they make ten million a year instead of a hundred million? I doubt it. Ditto for overpaid athletes and celebrities. They all work for one corporation or another that could be owned significantly by funds owned by workers.
Maybe if workers actually saw the fruits of ownership they would come to appreciate more and more the benefits of the invisible hand, honest dealing, competitive pressures, and realistic regulation of business, without just demanding a greater share of the take. Maybe they would accept reductions in corporate taxes, reduced corporate paid benefits, and accept more responsibility for their own welfare if the result was a more competitive company and more income tricking down beyond the command level.
Of course this would be labeled the new socialism by those in high places who would no longer have the run of company to divert profits to their own pocketbooks. But, really, it’s just capitalism at its best.
Jay Hancock of the The Baltimore Sun has recently reported that as early as 2001 U. S. pension funds owned 26% of corporate America, while mutual funds controlled only 19%. The only difference is, pension fund managers seem to take their fiduciary responsibility more seriously than mutual fund managers. Pension fund managers are starting to press corporate managers to pay more attention to owners and less attention to feathering their own nest, while mutual fund managers seem to count on their “investors” automatic approval of management decisions, as long as the bottom line is competitive.
Since corporate titans own politicians, for the most part, particularly those in the Republican party, not much is ever going to get done in closing tax loopholes bought and paid for by their benefactors. So, if the widening gap between rich and poor is ever going to narrow, it calls for even more worker capitalism. If more workers can be encouraged to invest in funds which exercise their power for the benefit of workers without killing the goose that lays the golden egg, the situation for those in the bottom 99% of the economic ladder might actually improve. If there is pressure from worker owned funds to reduce executive compensation in all industries and pass it down to those without corporate decision making power, maybe the welfare of workers, whose economic progress has stagnated for the last thirty years will actually improve. After all, are these executives going to quit if they make ten million a year instead of a hundred million? I doubt it. Ditto for overpaid athletes and celebrities. They all work for one corporation or another that could be owned significantly by funds owned by workers.
Maybe if workers actually saw the fruits of ownership they would come to appreciate more and more the benefits of the invisible hand, honest dealing, competitive pressures, and realistic regulation of business, without just demanding a greater share of the take. Maybe they would accept reductions in corporate taxes, reduced corporate paid benefits, and accept more responsibility for their own welfare if the result was a more competitive company and more income tricking down beyond the command level.
Of course this would be labeled the new socialism by those in high places who would no longer have the run of company to divert profits to their own pocketbooks. But, really, it’s just capitalism at its best.
Friday, March 26, 2004
Dr. Greenspan, turn off the bubble machine!
The Federal Reserve Governors are said to have a primary responsibility for preventing inflation or deflation in the economy and maintaining a stable economic environment free of recessions and bubbles, through the use of monetary tools like regulating interbank interest rates and controlling the money supply. Their activities are closely linked with the Treasury Department, whose Secretary meets with the Fed Chairman, Alan Greenspan on a regular basis. Since the Fed is a quasi-independent organization linked to the Federal Reserve banking system it tends to look out for banking and securities interests, and government interests, while trying at the same time trying to make responsible decisions protecting the economy at large. This can be a daunting task so criticism of its actions should never be levied without caution and qualification.
In recent years, the threat of inflation has been minimal, while the economy has been sluggish, so the Fed has dropped interbank interest rates to very low levels. In turn, bank prime rates, mortgage rates, and consumer credit rates have dropped accordingly. This results in temporary dislocations, which later result in more long term effects. For example, when mortgage rates drop, existing homeowners refinance, dropping their monthly mortgage payments so they have more to spend on consumer goods. Consumers run up their credit buying balances since interest payments are lower. This stimulates a sluggish economy. Senior citizens and others whose income derives substantially from investments tend to shift their investments out of interest bearing instruments and into equities or real estate where returns may be higher, at least temporarily. As this process progresses, home buyers also make adjustments. Since their payments are less, they can afford to pay more for the real estate they buy. This drives up real estate prices, offsetting to some extent the effects of low interest rates. Eventually, bubbles start to develop. The real estate market starts to inflate, creating a real estate bubble, and the demand for equities in the stock markets begins to outstrip earnings, creating a stock market bubble.
Meanwhile the sluggish economy is causing a reduction in tax revenues, and federal and state deficits start to develop, the effects of which are often discounted because interest rates are low. But, eventually, either the economy picks up and inflation rears its ugly head and interest rates are increased to meet it, or as in the current environment, the economy contines to be sluggish, employment refuses to pick up, and the bubbles get larger and larger and eventually burst.
If the Fed continues to view only aggregate inflation rates to trigger interest rate increases, the bubbles (inflation in real estate and equity prices) continue to grow. The government will continue to run deficits which will threaten federal retirement programs like social security and medicare, and the seniors, who rely on these programs and regular investment income will be put in jeopardy. Dr. Greenspan has recently called for reductions in these retirement benefits at the same time as his low interest rates are driving seniors away from stable long term interest based investments into speculative equity investments.
It is my contention that interest rates should start to be increased now. Although aggregate inflation rates are still low, real estate and equity price inflation rates are high. The real estate market is already overheating in growth areas, and the P/E ratios of stocks are at historically high levels. The markets have recognized this so the stock market volatility has increased markedly with fits and starts on every news story hitting the press. These low interest rates, and the stock and real estate market bubbles that develop from them, discourage long term investment and encourage speculation, and puts those dependent on investment income in jeopardy.
Dr. Greenspan, it’s time to turn off the bubble machine!
In recent years, the threat of inflation has been minimal, while the economy has been sluggish, so the Fed has dropped interbank interest rates to very low levels. In turn, bank prime rates, mortgage rates, and consumer credit rates have dropped accordingly. This results in temporary dislocations, which later result in more long term effects. For example, when mortgage rates drop, existing homeowners refinance, dropping their monthly mortgage payments so they have more to spend on consumer goods. Consumers run up their credit buying balances since interest payments are lower. This stimulates a sluggish economy. Senior citizens and others whose income derives substantially from investments tend to shift their investments out of interest bearing instruments and into equities or real estate where returns may be higher, at least temporarily. As this process progresses, home buyers also make adjustments. Since their payments are less, they can afford to pay more for the real estate they buy. This drives up real estate prices, offsetting to some extent the effects of low interest rates. Eventually, bubbles start to develop. The real estate market starts to inflate, creating a real estate bubble, and the demand for equities in the stock markets begins to outstrip earnings, creating a stock market bubble.
Meanwhile the sluggish economy is causing a reduction in tax revenues, and federal and state deficits start to develop, the effects of which are often discounted because interest rates are low. But, eventually, either the economy picks up and inflation rears its ugly head and interest rates are increased to meet it, or as in the current environment, the economy contines to be sluggish, employment refuses to pick up, and the bubbles get larger and larger and eventually burst.
If the Fed continues to view only aggregate inflation rates to trigger interest rate increases, the bubbles (inflation in real estate and equity prices) continue to grow. The government will continue to run deficits which will threaten federal retirement programs like social security and medicare, and the seniors, who rely on these programs and regular investment income will be put in jeopardy. Dr. Greenspan has recently called for reductions in these retirement benefits at the same time as his low interest rates are driving seniors away from stable long term interest based investments into speculative equity investments.
It is my contention that interest rates should start to be increased now. Although aggregate inflation rates are still low, real estate and equity price inflation rates are high. The real estate market is already overheating in growth areas, and the P/E ratios of stocks are at historically high levels. The markets have recognized this so the stock market volatility has increased markedly with fits and starts on every news story hitting the press. These low interest rates, and the stock and real estate market bubbles that develop from them, discourage long term investment and encourage speculation, and puts those dependent on investment income in jeopardy.
Dr. Greenspan, it’s time to turn off the bubble machine!
Saturday, March 06, 2004
Discourse
This is a discussion of the methods and purposes of discourse. People engage in discourse for many reasons. It can be for fun, to strengthen ones resolve on currently held positions, or to get at more fundamental truths about the way things are.
Engaging in discourse for fun usually involves humor and put-downs (zingers) to make a winning point at the adversary’s expense. There is no claim to logic.
Discourse to strengthen one’s resolve on currently held positions also does not rely on logic as much as selecting information which supports one’s position, while suppressing or ignoring information which conflicts with it.
To get at more fundamental truths requires close attention to avoiding logical fallacies, and close examination of the underlying assumptions that are basic to a firmly held position.
If two or more people are engaging in a discourse, but there is not agreement on what the purpose of the discourse is, it can become very frustrating. If one person is trying to make serious points to get at more fundamental truths and another is engaging in the discourse for fun or to strengthen a currently held position there is a basic disconnect which can lead to frustration or anger.
What follows applies mainly to what must be avoided if the purpose of the discussion is to get at more fundamental truths.
Logical Fallacies
Logic involves deducing conclusions from accepted assumptions through a series of steps where each step can be deduced from the prior step, leading to valid conclusions. Appeals to authority, ad hominem attacks, testimonials, inflammatory rhetoric, etc. are considered logical fallacies which cannot be used to support or validate a position. Logic fallacies are welcome in discourse for fun, but generally are not valid in strengthening a currently held position, unless the position is held on primarily emotional grounds. Discussions based on faith require no logical foundation, and logical fallacies are often used in such discussions. Logical fallacies are enumerated at several places on the internet. Here are a couple:
http://www.datanation.com/fallacies/
http://www.fallacyfiles.org/
Assumptions
Engaging in discourse to get at truth involves first examining assumptions that each party brings to the table. For example, if one party hold that free markets always bring about the best economic results and the other party does not accept this assumption, there is no need to discourse further. At that point, an examination of the assumption should proceed and arguments should be made for or against the assumption are in order. Or qualifications should be placed on the assumption that both can agree on.
Clichés
Clichés are frequently used catch phrases that can mean different things to different people. For example, “liberal” can mean as the dictionary says, 1. Befitting a man of free birth, 2. Bestowing in a large and noble way; generous; bountiful; openhanded, 3. Bestowed in a large way; abundant; bountiful; ample, or 4. Archaic Free from restraint; unchecked; licentious. A so-called liberal person using the term might interpret it in the first or second way, while a so-called conservative person using it might mean it in the fourth way. Likewise, the term “conservative“ might be used by a so-called liberal person to impugn the motives of a so-called conservative person implying stinginess or fixed attitudes, whereas the so-called conservative might view it as conserving worthwhile values. Other clichés often used without definition to put down groups, rather than attribute meaning include “socialist” and “fascist”. The use of clichés in discourse is just another logical fallacy if a common meaning is not clear to both parties, and is usually met by returning “zingers” which put down the cliché user. This only leads to anger and frustration.
Emotional Arguments
Emotional arguments do not submit to logical scrutiny. Any attempt to argue logically against a position that arises from emotions is futile. Therefore, in any discourse aimed at finding truth, if one feels emotion creeping into the argument, it’s time to sit back and relax and examine why the emotion is entering the argument. Are critical underlying assumptions being challenged indirectly? What are they? Are they valid? How you been offended by a zinger? Are you frustrated by flying clichés? Are you responding to an illogical personal attack, etc? Find the cause before proceeding.
Selective Argument
It is human nature to gravitate towards literature or pundits that reinforce one’s closely held positions. In the process, it’s easy to overlook logical fallacies used by authors or pundits expounding one’s own position, while recognizing those being used by someone promoting an adversarial position. For this reason, it’s wise to avoid authors and pundits of all stripes, who use emotional and one sided arguments to support their positions. You can usually detect these people by their predictability. The same applies to think tanks. They are usually sponsored by people or organizations that want to promote a specific viewpoint. Therefore, if you know the viewpoint they are promoting you can predict what their position will be.
In making arguments which aim at truth, it’s usually better to make your own logical arguments. If that’s not possible, present only the arguments of others which do not appeal to logical fallacies or which attempt to present both sides of the story. It’s usually not hard to tell if someone is trying to be fair-minded on an issue.
The Fog and Snow Index
People who make long-winded, round-about arguments in an emotional way usually don’t clearly understand what they are talking about or are intentionally trying to make up for lack of truth with verbosity. If one clearly understands a point, arguments can usually be made in a concise and clear way.
Pundits usually have to provide some opinion on a regular basis whether they really have anything profound to contribute, or not. This usually leads to weak, long-winded arguments about minor or perfunctory matters that are best left to undiscriminating readers.
The same applies to some book authors. They publish all their recent columns in a book to make some more money. Or they have to publish a book every couple years to make a living. Or they have a TV or radio show and see a book every couple years as a way to make some extra money from the same audience they have cultivated on their show. They take advantage of the second purpose of discourse, the reinforcement of currently held positions, without regard to the logical validity of the arguments.
Are the positions you hold in your overall best interests?
The positions one holds may not arise from logic at all. We adopt positions because our parents held them, because they accord with our religious convictions, because our circle of friends holds them, because we like an advocate of a particular position, because we haven’t really thought about them, because they applied in a previous time but may no longer be in our interests, and many other reasons. Times and attitudes change. It’s worthwhile to take the time to reevaluate our positions and our basic assumptions from time to time to make sure what we are advocating is really in our own interests. I believe there are many people today who hold positions which may have been valid in the past, but which no longer are in their own interests. There are also people who hold positions that they think will be of advantage to them in the future, when they have moved to a higher station, but the higher station is an illusion which never comes. And, people tend to identify with power and celebrity vicariously, and therefore overlook advantages which accrue to power and celebrity but will never accrue to themselves. In a few words, promote and vote your self interest. The democratic system depends on it.
Engaging in discourse for fun usually involves humor and put-downs (zingers) to make a winning point at the adversary’s expense. There is no claim to logic.
Discourse to strengthen one’s resolve on currently held positions also does not rely on logic as much as selecting information which supports one’s position, while suppressing or ignoring information which conflicts with it.
To get at more fundamental truths requires close attention to avoiding logical fallacies, and close examination of the underlying assumptions that are basic to a firmly held position.
If two or more people are engaging in a discourse, but there is not agreement on what the purpose of the discourse is, it can become very frustrating. If one person is trying to make serious points to get at more fundamental truths and another is engaging in the discourse for fun or to strengthen a currently held position there is a basic disconnect which can lead to frustration or anger.
What follows applies mainly to what must be avoided if the purpose of the discussion is to get at more fundamental truths.
Logical Fallacies
Logic involves deducing conclusions from accepted assumptions through a series of steps where each step can be deduced from the prior step, leading to valid conclusions. Appeals to authority, ad hominem attacks, testimonials, inflammatory rhetoric, etc. are considered logical fallacies which cannot be used to support or validate a position. Logic fallacies are welcome in discourse for fun, but generally are not valid in strengthening a currently held position, unless the position is held on primarily emotional grounds. Discussions based on faith require no logical foundation, and logical fallacies are often used in such discussions. Logical fallacies are enumerated at several places on the internet. Here are a couple:
http://www.datanation.com/fallacies/
http://www.fallacyfiles.org/
Assumptions
Engaging in discourse to get at truth involves first examining assumptions that each party brings to the table. For example, if one party hold that free markets always bring about the best economic results and the other party does not accept this assumption, there is no need to discourse further. At that point, an examination of the assumption should proceed and arguments should be made for or against the assumption are in order. Or qualifications should be placed on the assumption that both can agree on.
Clichés
Clichés are frequently used catch phrases that can mean different things to different people. For example, “liberal” can mean as the dictionary says, 1. Befitting a man of free birth, 2. Bestowing in a large and noble way; generous; bountiful; openhanded, 3. Bestowed in a large way; abundant; bountiful; ample, or 4. Archaic Free from restraint; unchecked; licentious. A so-called liberal person using the term might interpret it in the first or second way, while a so-called conservative person using it might mean it in the fourth way. Likewise, the term “conservative“ might be used by a so-called liberal person to impugn the motives of a so-called conservative person implying stinginess or fixed attitudes, whereas the so-called conservative might view it as conserving worthwhile values. Other clichés often used without definition to put down groups, rather than attribute meaning include “socialist” and “fascist”. The use of clichés in discourse is just another logical fallacy if a common meaning is not clear to both parties, and is usually met by returning “zingers” which put down the cliché user. This only leads to anger and frustration.
Emotional Arguments
Emotional arguments do not submit to logical scrutiny. Any attempt to argue logically against a position that arises from emotions is futile. Therefore, in any discourse aimed at finding truth, if one feels emotion creeping into the argument, it’s time to sit back and relax and examine why the emotion is entering the argument. Are critical underlying assumptions being challenged indirectly? What are they? Are they valid? How you been offended by a zinger? Are you frustrated by flying clichés? Are you responding to an illogical personal attack, etc? Find the cause before proceeding.
Selective Argument
It is human nature to gravitate towards literature or pundits that reinforce one’s closely held positions. In the process, it’s easy to overlook logical fallacies used by authors or pundits expounding one’s own position, while recognizing those being used by someone promoting an adversarial position. For this reason, it’s wise to avoid authors and pundits of all stripes, who use emotional and one sided arguments to support their positions. You can usually detect these people by their predictability. The same applies to think tanks. They are usually sponsored by people or organizations that want to promote a specific viewpoint. Therefore, if you know the viewpoint they are promoting you can predict what their position will be.
In making arguments which aim at truth, it’s usually better to make your own logical arguments. If that’s not possible, present only the arguments of others which do not appeal to logical fallacies or which attempt to present both sides of the story. It’s usually not hard to tell if someone is trying to be fair-minded on an issue.
The Fog and Snow Index
People who make long-winded, round-about arguments in an emotional way usually don’t clearly understand what they are talking about or are intentionally trying to make up for lack of truth with verbosity. If one clearly understands a point, arguments can usually be made in a concise and clear way.
Pundits usually have to provide some opinion on a regular basis whether they really have anything profound to contribute, or not. This usually leads to weak, long-winded arguments about minor or perfunctory matters that are best left to undiscriminating readers.
The same applies to some book authors. They publish all their recent columns in a book to make some more money. Or they have to publish a book every couple years to make a living. Or they have a TV or radio show and see a book every couple years as a way to make some extra money from the same audience they have cultivated on their show. They take advantage of the second purpose of discourse, the reinforcement of currently held positions, without regard to the logical validity of the arguments.
Are the positions you hold in your overall best interests?
The positions one holds may not arise from logic at all. We adopt positions because our parents held them, because they accord with our religious convictions, because our circle of friends holds them, because we like an advocate of a particular position, because we haven’t really thought about them, because they applied in a previous time but may no longer be in our interests, and many other reasons. Times and attitudes change. It’s worthwhile to take the time to reevaluate our positions and our basic assumptions from time to time to make sure what we are advocating is really in our own interests. I believe there are many people today who hold positions which may have been valid in the past, but which no longer are in their own interests. There are also people who hold positions that they think will be of advantage to them in the future, when they have moved to a higher station, but the higher station is an illusion which never comes. And, people tend to identify with power and celebrity vicariously, and therefore overlook advantages which accrue to power and celebrity but will never accrue to themselves. In a few words, promote and vote your self interest. The democratic system depends on it.
Wednesday, February 25, 2004
Pushing on a Rope
Some readers have raised questions about the relationship between my Modest Proposal and the current recession and the benefits to business as well as labor. I hope this answers some of your questions.
A short discussion of the short term situation.
Why are we in a recession? Because businesses aren’t selling enough products, so their inventories grow, they cut production, and eventually lay off workers, or reduce labor costs by shipping jobs overseas. They have excess capacity, and don’t see anywhere to invest that makes sense, since demand has diminished.
Why aren’t they selling enough products? Because people, domestically or worldwide are not spending as much, or because they are not competitive in overseas markets. People have reduced their spending for a number of reasons. They are overextended on their debt, or lost equity when the market bubble burst, which paid for some of their previous purchases. They have lost confidence that their job is secure, or their incomes will no longer meet expenses, due to uncertainties in the economy or deteriorating worldwide conditions, and or other reasons.
So what should be done to get out of the recession? Where will tax cuts for business and investers go? One place is in the bank or in the market where it won’t create any demand. Will modernizing business or innovating create more demand? Maybe, if costs can be reduced so products can become more competitive in overseas markets. But, what if overseas markets are also depressed? Putting money in the hands of business and investors will be like pushing on a rope. It will only create demand if modernizing will improve competitiveness and demand is already there. Demand pull is needed either domestically or from abroad to stimulate business. Only after overcapacity is worked off will investment and hiring be needed. GNP increases, without corresponding hiring suggests that overcapacity is not yet worked off, or that hiring is coming mainly from offshore. What is needed in the short term is to put money in the hands of people who will spend it, i. e. tax cuts for spenders, not business or investors.
What is required in the long term?
About the only thing that will help the long term situation, with the disparity in labor rates here and abroad, is for companies to improve their competitiveness in offshore markets in other ways. The domestic market in the US is a small percentage of the world market, and it’s not growing as rapidly. If we are to remain an affluent society, we must prosper in international markets, and the profits from those sales must be spread over the great mass of people in the country to sustain domestic demand and to maintain a high average standard of living.
What my proposed program does.
First, on the business side, it reduces or eliminates administration, labor, health care and pension costs from the price of the products sold, making them much more competitive in both domestic and foreign markets. It recaptures some of these costs through taxes on the increased profits which will accrue to businesses and distributes them across all economic levels in the stipend and healthcare and education benefits. The important distinction is that these costs are not including in the price of products which makes the products much cheaper both domestically and overseas.
On the people side, it reduces the cost of domestic labor to business, making domestic labor more competitive relative to foreign labor. One reason we are not as competitive as we could be on world markets is because other countries are doing precisely this already. They ship products offshore at production costs, which don’t include the costs imposed by company sponsored health care, pensions, and high administrative costs.
Even if the current complex tax system were kept, and just the earned income credit adjusted in leiu of the stipend, it would accomplish some of the benefits to business and labor addressed here. This may be more easily implemented, but there is major savings to be reaped from eliminating the whole administrative tax code mess as I have proposed.
A short discussion of the short term situation.
Why are we in a recession? Because businesses aren’t selling enough products, so their inventories grow, they cut production, and eventually lay off workers, or reduce labor costs by shipping jobs overseas. They have excess capacity, and don’t see anywhere to invest that makes sense, since demand has diminished.
Why aren’t they selling enough products? Because people, domestically or worldwide are not spending as much, or because they are not competitive in overseas markets. People have reduced their spending for a number of reasons. They are overextended on their debt, or lost equity when the market bubble burst, which paid for some of their previous purchases. They have lost confidence that their job is secure, or their incomes will no longer meet expenses, due to uncertainties in the economy or deteriorating worldwide conditions, and or other reasons.
So what should be done to get out of the recession? Where will tax cuts for business and investers go? One place is in the bank or in the market where it won’t create any demand. Will modernizing business or innovating create more demand? Maybe, if costs can be reduced so products can become more competitive in overseas markets. But, what if overseas markets are also depressed? Putting money in the hands of business and investors will be like pushing on a rope. It will only create demand if modernizing will improve competitiveness and demand is already there. Demand pull is needed either domestically or from abroad to stimulate business. Only after overcapacity is worked off will investment and hiring be needed. GNP increases, without corresponding hiring suggests that overcapacity is not yet worked off, or that hiring is coming mainly from offshore. What is needed in the short term is to put money in the hands of people who will spend it, i. e. tax cuts for spenders, not business or investors.
What is required in the long term?
About the only thing that will help the long term situation, with the disparity in labor rates here and abroad, is for companies to improve their competitiveness in offshore markets in other ways. The domestic market in the US is a small percentage of the world market, and it’s not growing as rapidly. If we are to remain an affluent society, we must prosper in international markets, and the profits from those sales must be spread over the great mass of people in the country to sustain domestic demand and to maintain a high average standard of living.
What my proposed program does.
First, on the business side, it reduces or eliminates administration, labor, health care and pension costs from the price of the products sold, making them much more competitive in both domestic and foreign markets. It recaptures some of these costs through taxes on the increased profits which will accrue to businesses and distributes them across all economic levels in the stipend and healthcare and education benefits. The important distinction is that these costs are not including in the price of products which makes the products much cheaper both domestically and overseas.
On the people side, it reduces the cost of domestic labor to business, making domestic labor more competitive relative to foreign labor. One reason we are not as competitive as we could be on world markets is because other countries are doing precisely this already. They ship products offshore at production costs, which don’t include the costs imposed by company sponsored health care, pensions, and high administrative costs.
Even if the current complex tax system were kept, and just the earned income credit adjusted in leiu of the stipend, it would accomplish some of the benefits to business and labor addressed here. This may be more easily implemented, but there is major savings to be reaped from eliminating the whole administrative tax code mess as I have proposed.
Friday, February 20, 2004
A Not so Modest Proposal
After watching the Frontline program, “Tax Me If You Can” and reading the book, “Perfectly Legal” I am convinced that half the corporations and the people who run them are eating everyone else’s lunch through deceptive, or even illegal, practices. Their access to, and power over, government through campaign contributions, is made possible through complex tax and regulation laws that neither congress nor the administrators fully comprehend. Corporations, including major accounting, legal, and financial firms have the resources to keep one step ahead of the politicians and administrators in devising schemes to avoid paying their taxes and to keep labor costs at a subsistence level.
There are several related issues which the country supports but which politicians will not support because it will limit their access to contributions and their ability to manipulate the various sectors of society to get elected and reelected. Among them are tax code simplification, illegal immigration control, health care cost containment, and limitations on the export of jobs. This lack of support for programs the country favors is not only undemocratic, it borders on fraud when laws get enacted that allow corporate cheating.
The press is complicit in sustaining this situation. Driven by the bottom line, the press concentrates on the sensational, the sexy, and the salacious while the real problems are addressed only by a few outlets, not dependent on commercial success, like C-SPAN and PBS. Until the press sees fit to inform the public about what is going on, voters will continue to vote for candidates on the basis of their religiosity, their company or union’s recommendation, their standing in the polls, or their spin on the stump. Therefore it is imperative that grass roots pressure be applied on the press to inform the American people about the problems, and on the politicians to start acting ethically and enact programs the people support.
There is immense wealth in this country, but it’s in the hands of a few. It may be time to give every person a stipend of about $1000 a month, with cost of living adjustments. Then tax people at graduated rates on incomes above the stipend. This would take some people, who want to do their own thing on a shoestring, out of the job market and raise wages for those who stayed in. And companies would only have to pay wages above the stipend. So some people would be willing to work for little or nothing above the stipend, and fewer jobs would move offshore, since the stipend is not being paid to offshore workers.
Social security, along with the payroll deduction for it could be phased out over time when existing contributions by workers are paid out.
The tax bureaucracy could be eliminated almost entirely. No tax return would need to be submitted. Every employee could be taxed at their average rate for the previous year and employers and institutions could deduct the tax and submit it to the Treasury. Any reconciliation could be factored into the next year’s withholding. All deductions, exemptions, and tax credits would be eliminated. Instead of corporations maintaining two sets of books as they do now, one for the IRS and one for shareholders, businesses would be taxed on the net earnings in their quarterly and annual reports, eliminating the need for any tax return. All businesses would be required to publish these reports and be subject to ongoing audits by the appropriate agencies.
Government regulation of business could actually be reduced and limited to protection of the environment, worker safety, and accurate reporting . The only thing left for the politicians to manipulate the electorate would be the progressivity in tax rates. That would insure that the cliché, “class warfare” would not disappear from the lexicon.
Together with this tax program, the government should negotiate and pay for health insurance contracts with insurance companies for everyone in the country on competitive bids – no cherry picking of healthy people, no special programs for government employees, everyone in one gigantic group. Medicare and medicaid could be phased out, along with their payroll deductions. The health care system would still remain private as it is now. Pressure for cost containment would come from the bidding process and copays. Business will no longer be the custodians of health care and retirement plans.
Government should also work towards fully funding education at government controlled institutions, through the college level, as was done in the 1950’s. Outside of health insurance, education is the single largest cost to families with childen.
Believe it or not, this should not represent a big dislocation in the economy, since everyone now employed or on unemployment is making at least the stipend. Education and health care costs are being paid right now. And, gigantic savings would accrue from the elimination of all the paperwork associated with the programs that would be terminated. The only significant change would be that the tax burden would be shifted from struggling people on the bottom rungs of the ladder to corporations and the people who run them who have been robbing the rest of us for a long time.
There is one caveat. You would have to show proof of citizenship and reside in the US in good standing to receive the stipend. If you’re incarcerated, owe taxes, have outstanding warrants or unpaid infractions, the stipend would stop until arrangements are made to get back in good standing.
There are several related issues which the country supports but which politicians will not support because it will limit their access to contributions and their ability to manipulate the various sectors of society to get elected and reelected. Among them are tax code simplification, illegal immigration control, health care cost containment, and limitations on the export of jobs. This lack of support for programs the country favors is not only undemocratic, it borders on fraud when laws get enacted that allow corporate cheating.
The press is complicit in sustaining this situation. Driven by the bottom line, the press concentrates on the sensational, the sexy, and the salacious while the real problems are addressed only by a few outlets, not dependent on commercial success, like C-SPAN and PBS. Until the press sees fit to inform the public about what is going on, voters will continue to vote for candidates on the basis of their religiosity, their company or union’s recommendation, their standing in the polls, or their spin on the stump. Therefore it is imperative that grass roots pressure be applied on the press to inform the American people about the problems, and on the politicians to start acting ethically and enact programs the people support.
There is immense wealth in this country, but it’s in the hands of a few. It may be time to give every person a stipend of about $1000 a month, with cost of living adjustments. Then tax people at graduated rates on incomes above the stipend. This would take some people, who want to do their own thing on a shoestring, out of the job market and raise wages for those who stayed in. And companies would only have to pay wages above the stipend. So some people would be willing to work for little or nothing above the stipend, and fewer jobs would move offshore, since the stipend is not being paid to offshore workers.
Social security, along with the payroll deduction for it could be phased out over time when existing contributions by workers are paid out.
The tax bureaucracy could be eliminated almost entirely. No tax return would need to be submitted. Every employee could be taxed at their average rate for the previous year and employers and institutions could deduct the tax and submit it to the Treasury. Any reconciliation could be factored into the next year’s withholding. All deductions, exemptions, and tax credits would be eliminated. Instead of corporations maintaining two sets of books as they do now, one for the IRS and one for shareholders, businesses would be taxed on the net earnings in their quarterly and annual reports, eliminating the need for any tax return. All businesses would be required to publish these reports and be subject to ongoing audits by the appropriate agencies.
Government regulation of business could actually be reduced and limited to protection of the environment, worker safety, and accurate reporting . The only thing left for the politicians to manipulate the electorate would be the progressivity in tax rates. That would insure that the cliché, “class warfare” would not disappear from the lexicon.
Together with this tax program, the government should negotiate and pay for health insurance contracts with insurance companies for everyone in the country on competitive bids – no cherry picking of healthy people, no special programs for government employees, everyone in one gigantic group. Medicare and medicaid could be phased out, along with their payroll deductions. The health care system would still remain private as it is now. Pressure for cost containment would come from the bidding process and copays. Business will no longer be the custodians of health care and retirement plans.
Government should also work towards fully funding education at government controlled institutions, through the college level, as was done in the 1950’s. Outside of health insurance, education is the single largest cost to families with childen.
Believe it or not, this should not represent a big dislocation in the economy, since everyone now employed or on unemployment is making at least the stipend. Education and health care costs are being paid right now. And, gigantic savings would accrue from the elimination of all the paperwork associated with the programs that would be terminated. The only significant change would be that the tax burden would be shifted from struggling people on the bottom rungs of the ladder to corporations and the people who run them who have been robbing the rest of us for a long time.
There is one caveat. You would have to show proof of citizenship and reside in the US in good standing to receive the stipend. If you’re incarcerated, owe taxes, have outstanding warrants or unpaid infractions, the stipend would stop until arrangements are made to get back in good standing.
Wednesday, December 22, 1999
A Transaction Tax
Op-Ed piece written in 1997, in my libertarian phase
"Better taxation" sounds like an oxymoron. But, without some way to generate revenue we could not secure the freedoms we enjoy. The best alternative would be voluntary contributions, which would involve no coercion. But, this would hardly be fair, since there would always be those who would enjoy the fruits of other's contributions without contributing themselves. So the best we can do, as several thousand years of history have shown, is to refine the tax system to be as fair and equitable as possible and to keep it from becoming too intrusive. We must also find mechanisms to keep taxation from becoming excessive, which could lead to avoidance, evasion, and further intrusion to collect them. To keep tax collection efficient, taxes must be simple and direct. Armies of accountants, lawyers, and tax collectors only drain revenue from the tax stream, resulting in the necessity to raise taxes even higher. With these factors in mind let us consider how the present tax system could be modified to accomplish these goals.
The constitution places few constraints on the tax system, other than providing for taxation and requiring that taxes be uniform among the states. The sixteenth amendment, enacted in 1909 gave the Congress the power to levy income taxes. Since then we have seen this behemoth grow to where the average person requires expert help to compute their taxes, and where a significant portion of the nations resources are required to interpret tax law and adjudicate tax cases. We have an internal revenue service which has powers of seizure which appear to be in conflict with the privacy provisions of the fourth amendment. And we have provisions in the tax law which cause individuals and businesses to adjust their investment and work decisions to avoid excessive taxation. In short, we have gone too far astray of the qualities of a good tax. In the words of Adam Smith a tax was bad that "required a large bureaucracy to administer, encouraged evasion, and that put people through odious examinations by tax gatherers". The income tax as we presently know it does all of these things.
In looking for ways to eliminate the evils of the income tax, especially if you take the libertarian view that taxation is legalized theft, we can take a clue from the notorious bank robber, Willie Sutton. When he was asked why he robbed banks he said, "Because that's where the money is!". Another clue reveals itself if we look to how the income tax was enacted. It could only have been enacted if rates were low, which indeed they were initially. Citizens will pay a small premium to ensure their freedoms any day. It's only when it becomes large that the problems set in. The third clue is found in the burgeoning growth of consumer credit cards. I would venture to say that a large number of consumers don't know that every time they use a credit card the merchant who takes it pays 2 to 5 percent of the purchase to the bank issuing the card and the card clearing services who process the transaction. This, of course, is factored into the price of the purchase, and for all practical purposes is ignored by the buyer.
Well, where is all this leading? Apparently, what we need is a very large number to take a very small percentage of, such that taxpayers will not be led to avoid taxes because they are a large percentage of their income. Using the Willie Sutton and credit card clues and the Statistical Abstract of the United States, Table 822, we soon find that about the largest number in that fat book is one giving the debits (charges) to all the bank demand deposit accounts in the United States. The number is now approaching 300 trillion dollars! The total expenditures of governments at all levels; federal, state and local, is about 3 trillion. So for a 1% charge on all the checks written and cash disbursed, less than half of the minimum charged by credit card companies, would allow us to get rid of all other forms of taxation. Amazing, huh?
Now what about collection? Easy. The banks collect it and send it right to the treasury. With their monster computers this would be less work than the reporting they do now for interest income. No income tax forms, no sales tax to compute, no heavy duty tax lawyers and accountants.
But is it fair. How could it be less fair than what it is replacing, and at 1% who is going to feel they are being abused?
You might wonder, how can such a large amount of money can be generated by such a small tax rate, that is, how can the bank debit number be so large? To get a clue, examine the deposit turnover ratio of bank debits to assets. The average is 818. To get a better picture of what's happening, consider your own situation. Suppose you deposit $50,000 a year in your bank account, and your average balance is only $100. Then the turnover ratio is would be 500. For the average to be 818 means that there is a lot of money going in and out with relatively small balances on account. This ratio has increased from 203 in 1980 to 818 in 1991. There must be a lot more money churning now than then. To see where this might be coming from we look at the ratio for major New York City banks. It's a whopping 4375. Why so much higher than the average? Well, that's where all the financial markets are. All the money going in and out every day on Wall Street maybe? On the surface it appears that this tax would hit individuals, particularly individuals living from paycheck to paycheck, very lightly. For example, on your $50,000 a year deposited and spent, you would pay only $500, much less than what you are paying now in income tax. Even considering that the company paying your paychecks in paying another $500, the total is still much less than you pay now. So the rest of the bucks must be coming from those people and businesses who are churning money in investment accounts, that is, taking advantage of opportunities above and beyond those used by the average wage earner. In this way taxes would be assessed more heavily on those manipulating the most money. Is this fair? Maybe so, maybe not, but at 1% it's about the same as the brokers fee to execute a trade. Big deal!
Obviously, more massaging of the numbers needs to be done to see if this is a viable way of removing some of the burdens of the present tax system. But, it should give the accountants and economists something to do besides figuring our income taxes and the performance of the economy. Anyway, it appears worth a look by the experts.
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