Thursday, October 16, 2008

Tax: Restitution, Reallocation, or Reward Purpose. None. Tax is for Funding, Productivity.

Studying Uses of Tax and Tax Relief:

Government Inverventions
For Purposes of Essential Needs Funding and Productivity

    Tax. Unnnhnh. What is it good for?

    Here we look at tax policies.  Is tax to reward success. Or is tax policy a tool to spread what money we have over the whole field, for the sake of the whole crop. Like fertilizer. But only for the conjoined national purposes of  a) promoting productivity, and  b) funding essential governmental services. Our conclusion so far is sequential:  Rewards for success begin once the national goals are met. People productive or in a position to be? Then let the rewards for success begin.

    Nowhere is tax properly applied from the outset to make wealthy people wealthier for its own sake, or set out to make anyone wealthy apart from the overall goals of national productivity and meeting essential needs. Tax is not to entrench some on the top steps; and continue to dump on those in the hole at the bottom.

    Tax relief is part of overall tax policy for the good of the nation.

    Then the implementation issues begin: How to get people better started up the "stairway" to productivity -- up the two risers and a run that each step entails. See FN 1.

    Tax relief can serve as a kind of leveling of the risers at targeted points.  It targets freebies - economic boosts -  to groups where that will boost their productivity, as deductions, credits, boosts, stimulus packages, rebates. Historically, freebies, giveaways, are a valid form of booster shot - and part of our history from our earliest days. See FodderSight: American Uses of Boosts, Freebies.  Upper echelon people call those "freebies" property transmission rights, inheritance, matching funds, etc. And consider them entitlements. So there should be no difficulty - reality check needed - in seeing that others in their echeloi enjoy similar boosts.

    An issue remains, however:  There is a tipping point. Some people end up living off their freebies: those who inherited may just coast, in the same way they accuse the lower folk of "coasting" on payouts. The freebie works to reduce their productivity? Is that a rule or a myth, or worth fussing about at all. Most folks like to "do" and will if they can. Is that a rule or a myth?

    Is it true that the second or third generation down from the mogul really doesn't do much? Perhaps. You look around. Are they creative, energetic, the same calibre as the forebear? See FN 2.  Our view is why worry. First we get everybody out of the hole at the bottom of the stair, make opportunity a reality, then worry about moral or cultural value issues of people living without producing. Rich and poor  do it. Cope later. Or why bother? First, to the hole.

      I. Tax and Financial Policy Options

       A. Impose Tax Rates to Protect High Earners in our Capitalist System And Their Wealth. 

      If we free up more money for the high earners, they will invest in the country and wellbeing trickles down. To do otherwise is Socialism.  Reinstating or restoring old tax rates, in order to reallocate which income groups pay what to promote nationa productivity or for governmental needs, is "socialist" if it impinges on the ability of others in the big time to accrue wealth.

      B.  Impose Tax Rates to Enable Workers to Benefit from their Work. 

      If we free up more money for the lower earners, they are better able to meet their own needs with a cushion against disaster: stable productivity, and the opportunity even to accrue wealth. Reinstating or restoring old tax rates so those on the lower rungs of the economic ladder can put something aside after taxes, is a valid way of valuing work by giving a reward to the worker. 

       C.  Karl Marx. "From each according to his ability, to each according to his need."

      THE SOCIALIST! (Hush!)

      That is one phrase out of 2500 pages, see ://;://

        Do We Toss all of Karl? Or can we learn from his theories?

        See the quotation at ://; and biographies at ://; ://

        Spend time with Marx, since his name is being raised. Read his predictions because he knew altruism alone would not work.

        We agree that altruism alone fails. See section D. Things don't trickle. Stuff goes offshore. But this Marx concept of allocation is a complex area, and how many citizens have studied Marx, in order to critique the use of the term "socialism." Marx wrote of the dangers of unbridled capitalism - it leads capitalists to consume themselves - to a "krach" or crash - see Business Times OnLine, "Banking crisis gives added capital to Karl Marx's writings," at ://

        D.  Don't intervene with tax or any other governmental act.  Trust Altruism. Promote Work for Others Without Reward.

        This alone fails.  Marx was off base in that adage, as shown by earlier attempts to raise moral pleas to the level of obligation, as at Plymouth MA colony. Marx's approach does not increase productivity for long, because people run out of steam working without reward - working for others. Most people are not altruistic enough.

        But Karl Marx had significant predictions about the demise of capitalism, that capitalism left unchecked would lead to the devouring of capitalists by each other, as we recall - looking it up - and see what else he said, and how the predictions are coming along - see "Das Kapital." See ://

        E. We need a hybrid.  Change the cultural narrative to encompass whatever works to foster productivity and fund legitimate governmental enterprises

        II. The Bonanza as Legitimate Government Intvervention

        A.  Open up choice by changing the narrative: Value Freebies

        Government inverventions, including tax policy, are to fund essential government needs, and foster productivity so that people do not need the same degree of governmental interventions as before.

        Culturally, we think we are a great nation because we work for a living. We pull ourselves up just like our ancestors when they first arrived here.  But that is a lie.  Our ancestors enjoyed vast freebies.  And getting a freebie was not a bad thing. National and, earlier colonial, goals were served even when the act was to give someone something - free, at least for a time.
        Targeted giveaways are a valid financial policy.

        Freebies increase productivity. Freebies, boosts, are part of our history, but only a negative when people imagine the needy getting it. See FodderSight, American Uses of Boosts.

        Stimulus packages have fostered people from Plymouth Plantation. to the Sooners, to freed slaves in the the Georgia coast area after the Civil War. Freebies do spread the wealth around - and have long been behind our national success, for those who got them. Boosts, freebies, stimulus packages, gifts, all part of our background. Inheritance rights, deductions, establishing dynasties through favorable tax, and corporate welfare, all forms of freebies. Fine for me but not for you.
        B.  Reduce resistance to government interventions by figuring out first, What is essential to productivity in people, and national needs that cannot be addressed locally? 

        1. What does it take to foster productivity in the population?

        A mere "income" tax is inadequate in concept.  Even where a graduated system means some working people earn so little that they only pay sales taxes, or social security taxes, or medicare taxes, and no "income" taxes at all, that still leaves people in the hole. Too many are in a hole and unable to get a leg up - even by paying only sales, medicare and social security taxes.

        How to carve out enough for people at the lower income levels so that we meet our funding and productivity needs, but fill in the hole.  Why not a modified idea -- tax "disposable" income.

        That would mean many people still pay no "income" tax until a far higher level had been reached - they continue to pay social security, sales and medicare; but the larger bite of "income"  tax comes only when they are able to meet basic expenses after they have paid those other taxes.

        That is a freebie. A boost. More time with no "income" tax.  But can we look back to our own history and use freebies, boosts, as stimulus ideas as we have since our earliest national history. Can we see the place of imposing higher income taxes on those with very high "disposable incomes" - in order for the culture to fill in the hole at the bottom.

        2.  What other areas should government be involved in

        C. If Government Does Intervene, then When and For How Long?

        Simple - you need Transparency, Accountability and an Exit Strategy as to each proposed or in-process intervention, and then the answer will become clearer in each instance.   Surprise - look what that strategy is as an acronym  - TAX.  The exit strategy is not complicated - build in an automatic sunset provision.  This structure will terminate on Dec.31 and revert to the prior provisions in effect, absent further vote by supermajority.

        That gives time to show demonstrable results, and persuade for the supermajority to vote for a continuance.  Nothing indefinite.

        Private sector role.  It has or had its chance. If the private sector is not accomplishing the goals of fostering productivity of citizens, or it will not or cannot meet regional and national needs, government will. And must. Our choice which will do it, or a hybrid. For the good of our democracy.

        Tax has been so loudly represented as a way to "reward success," that it is becoming believed just out of repetition.  Good propaganda.

        But it is short-sighted, greedy in failing to recognize the contribution of those below, and the need for their productivity; and dysfunctional. It misses the point of funding and promoting national productivity, and misleads voters.

        Propaganda Labeling.  If citizens were educated (now, there is an indispensable government service) they would not even be call a restoration of a prior tax level 'socialist'. We need independent sources of information, and analytical skills, and many people don't have either.

        All the better to lead you with, my dear.

        D.  Implementation

        1. Reduce resistance to government interventions by specifying what is an essential service, and controlling expenditures for it: accountability and transparency.

        There is more to tax and government intervention than merely spreading stuff around. Educate the people as to what money really is. Money is a facilitator. So how does government use it, to facilitate what.

        Is tax to reward success, or to spread what money we have over the whole field for the sake of the whole crop.  Once that is done, and if their is surplus, than allocate the surplus as we like.

        Yes, money is very like manure.

        Of course we have to spread it around.

        Think what has happened, now that we let too much accumulate in one corner: acidic, toxic, badly aromatic, breeding disease, collapse, and the rest of the field, dusty. Better, don't.

        Government needs funding, and the citizenry must be productive. Moving money can do both. Look at all forms of boosts and taxation as a targeted stimulus plan, where and as long as needed. Taxes and other interventions are not to protect "wealth" or right wrongs.

        But we need a coherent concept for tax to be seen as reasonably fair. The "flat tax" fails - the rigid application up a rigid staircase. We have a graduated system, but it also fails. Starts tax at too low an income level. Too many people are in the deep hole at the bottom, and can't even get a leg up.

        2. Widen the reach of low or no tax until a basic disposable income level is reached.   
        Then tax that.  Not just "income" but "disposable income" as a concept.

        Define poverty level regionally as what it costs for that person or family in that region to meet basic needs. Food, clothing, healthcare, unreimbursed medicals, transportation, insurances, shelter. Where is daycare? Lost. But Legislatures set that. That poverty level amount represents the first "run" for people to be able to rest on, with the lowest riser in front of them to the next level.

        That group still pays social security tax, sales tax, property tax.  Just not "income tax."  But graduate up also more slowly, and increase it longer.  Increase the max until everyone is out of the hole at the bottom. This needs adjusting for the differently abled, the disabled, so please upgrade here.

         Even add a low-income matching grant -

        This gets back to the role of freebies. Perhaps "basic needs" measure is indeed the "welfare" amount in effect now. This is not our field. The suggestion here is to provide that for every $2 earned, the government will pay a further $1.

        And that stays in effect until the person, with their own earnings, is at some figure - say $5,000, or whatever.

        That is their 40 acres and a mule that Sherman provided for that one year after the Civil War for those on the coastal areas of Georgia.. Their "Sooner" head start in areas where people could line up for the land grabs in their wagons - once the Injuns were driven off.. No questions, no bureaucracy.

        What if people don't work? Ok. They can stay on that lowest run all their lives if they like.

        Would a government match encourage employers to hire and raise wages so the person earns more faster and gets out of the govt matching? Sure, if there were a credit for hiring. Those are on the table. The $5,000 is not fluff - it is needed for daycare ($150 per week per child?) or tuition, or a washer.

        This looks like an escalator form of the old staircase to susccess idea. No hole at the bottom, however, for people to stay trapped in before they can even get a let up on the stairs.  And keep the lower risers low. The way up is past a short, nearly level, riser to the next level, then very gradually increasing risers, to the stars. See FN 1 - Two risers and a run.  Ask your local builder.

        Use your own moxie to move up - no automatic elevations. Everyone has a basic floor as needed for full productivity. Does that mean some freebies? Why not. The current system is not providing funding and not promoting national productivity. Regroup. See FN 3 on the model idea.

        FN 1
        • Stairs. Ask your favorite builder.Stairs are made of risers - the vertical boards and the runs - the horizontal boards.
        See The ladder idea works against a fair allocation of disposable incomes. The nicest staircases are by formula - say, two risers and a run added up should equal 24" or 25" - so a run of 10" and two risers at 7" each would be fine. See "How To Build Stairs," at :// Can't do formulas with societies. Pay a flat tax and some people cannot help but have to run up credit cards, fall back. Others have so much disposable income they have more than entire countries, probably. Pay the current tax structure, same result. We rule out whole literal classes of consumers - then wonder why the economy fails.
        Stairs built badly, with unexpected differences in risers and runs make people fall; or, even keep them from getting to that first step. And worse - look at the foot of the stairs. There might even be a hole, by golly. Peer down. Go on your knees and look. Are there people there, trying to reach up to the rim of the hole and they keep falling back - the lobster principle in the cities?

        Builders say that a good staircase may follow a formula - two risers and a run should equal about 24" or 25." If you have a 10" run, then two risers at 7" or 7 1/2" each would be fine. Comfortable. That works when everyone on the stairs is equal, or at least is well out of the hole at the bottom.

        Make tax conceptually a disposable income tax. Everyone first retains the ability to pay the most basic expenses for food, clothing, shelter, medical care, insurances, transportation.


        FN 2
        Merely rewarding success fails. Rewarding "success" should not be the rationale for a tax policy. It leads to sloth at the top. Take inheritances, passing down virtually intact. How many heirs, two generations down, are really sharp? Deserve it?

        From menu for "celebratory" dinner, The Round Table Fellows, 1929, Kramer's Restaurant, Pittsburgh

        Our protecting wealth as an entitlement has gotten everyone in trouble, because it means if you get away with secreting it, no matter how ill-gotten, or whose administration gave you a free ride, you get it. Who should have just said no?

        No comments: