This page has been archived and commenting is disabled.
Thought Experiment: Why Do We Bother Paying Personal Taxes?
Submitted by Lucas Jackson
Thought Experiment: Why Do We Bother Paying Personal Taxes?
"Stupidity combined with arrogance and a huge ego will get you a long way.”
- Chris Lowe
I will admit right up front, I am not a fan of the views of Paul Krugman. If Paul Krugman was to be given his way - and by and large he is being given his way - my children and grandchildren will be burdened in the future with paying back untold amounts of public debt just so his life and the lives of countless other Boomers can remain comfortable and embarrassment free today.
This is the essence of his grand plan for a US recovery – MOAR and MOAR debt.
Wow. Genius. Why I didn’t I think of that? Just keep borrowing and printing, borrowing and printing. Got it. Now that I understand it, do I get a PhD?
Who’s going to pay the money back? How will it effect future generations? How will it effect the markets? What will this do to civil society?
Who cares. Or as another defender of the status quo, Hillary Clinton, might say, “What difference, at this point, does it make?”
Krugman has a reputation as a high priest of Keynesian economics and his adherence to these views, regardless of how broken they are, is way more important than the future of this country. But don’t challenge his credentials. He teaches at one of the Ivy League universities which automatically puts him in a rare air caste. Plus he writes for the NYTimes so he must be wicked clever. Oh yea, he also has a Nobel Prize which surely means he is more intelligent, wise and deserving than the rest of us, right?
Ok, perhaps the Nobel Prize bit is unfair praise after the dubious award was given to Barack Obama despite the hundreds or even thousands of innocent civilians he has killed globally and the EU for… well I’m not actually sure why the EU got it, but that’s the point. Since the Nobel Prize has become a joke, I suppose it’s fitting then that Krugman has one. But I digress…
MOAR debt, that’s the answer. Got it.
Turn That Frown Upside Down
But in the spirit of healthy academic debate, I like to consider the other side of the argument. So I got to thinking about things this weekend and said, “Self, what if ol’ Krugman is right?” To which my self replied, “What! Heresy! Unpossible!”
But seriously, what if he is right? What if there is no long term harm to running up ridiculously high public debts and monetizing them via the central bank? Of course, history at almost every point in time contradicts this ludicrous position, but what if this time IS different?
So I got to thinking, maybe this increase in debt and no cost monetization via the central bank thing will work. But if it does, let’s use this moment to really rid ourselves of the most pesky of income adjustments – personal income taxes.
The US government will take in about $2.5 trillion in taxes this year. Seems like a lot of money but when you look at what the Fed and US govt can do when they really wants to, $2.5 trillion is child’s play. The Fed alone has doled out trillions in USD to TBTF banks alone. Add in TARP and other bailout programs, the backstops on FNMA/FHLMC (still not counted on the govt’s balance sheet), the interest savings associated with ZIRP (to the borrowers, not savers), the FDIC insurance subsidy which accrues to the banks, the mortgage interest subsidy and financing provided to the real estate industry, the growing mountain of federally insured student loans fueling the bubble in education, etc. The list goes on and on but the point remains the same, when the govt wants to spend big, it certainly can.
Since Mr. Krugman tells us all this spending and debt issuance/guarantees are not only good and necessary but in the long run, painless, why are we bothering with personal income taxes?
The US government will collect approximately $2.0bn this year in Personal Income and Payroll taxes. But why? Why are we even bothering with this when today’s leading economists and politicians are telling us that debts/deficits don’t matter and running up astronomical debts is a long-term painless process? It’s practically patriotic. So why shouldn’t we just add our tax burden to the list of items the Fed should be monetizing?
Seriously. Why not relieve the burden on every tax paying citizen in the United States (about 53% of us according to Mitt Romney)? You want an economic recovery? Reduce my taxes to zero and see how fast I go out and start spending some of that extra income.
Since I reside in the wonderfully unbalanced city of Manhattan, my all-in tax rate including federal, state and city taxes combined with sales taxes, fees, the implicit property tax I pay in my rent, etc, is way north of 60%. If the Princeton duo of Bernanke/Krugman would only work with Congress and the President to eliminate taxes and allow them to unleash their Keynesian magic, I will become a consumer again. Big time. My animal spirits will return. Big time. My holdings of physical gold will increase. Big time. Oh wait, that’s another topic – ignore that last one…
Cui Bono
If Krugman is right, the debate right now shouldn’t be on the huge level of US debt or deficits, it should be on which group in society benefits the most from the issuance and monetization of this debt.
Currently, the undisputed champions in this fight for government/Fed largess are the TBTF banks. Hands down.
Coming in a distant second place are the large, global corporations able to game our deliciously labyrinthine tax system (looking at you GE) and fund at generationally low levels, credit risk be damned (looking at you HY market).
Coming in dead last are the savers, workers and regular taxpayers of this once great nation.
This is what has to change. Since the debate isn’t really about whether or not Krugman is right - we’re running up the debts and monetizing them apace anyway - we have to shift the thinking to whose benefit are we directing the pillage.
If we want to continue to allow the TBTF banks and large, global corporations to run roughshod over the American consumer, then by all means, continue the status quo.
But if there is serious discussion to be held about how we improve the plight of the average American, cut our personal taxes to zero and let the magic of Paul Krugman’s Keynesianism cum never-ending-debt growth cum Fed monetization without consequences save the day.
»
- 20968 reads
- Printer-friendly version
- Send to friend
- advertisements -
Bravo. I stand up and applaud you.
Though you are a few thousand years late in your discovery.
Indeed the US has no need of taxes of any sort.
It can just print its way to nirvana with zero percent interest rates for "borrowing."
Eventually, a loaf of bread will be $100 billion or more and then a debt jubilee will occur. Generally this means the old currency is simply done away with and a new one is created.
Usually holders of debt do very poorly during the transition. Some times it goes badly for the government too.
Holders of the old currency (savers) do poorly too. PMs, art, jewels, and real estate tend to do well.
"The US government will collect approximately $2.0bn this year in Personal Income and Payroll taxes."
Uh...does anyone have the correct number because $2.0bn does not seem correct. I thought it was somewhere between $500 bn and $1,000BN.
The correct number is 2 tn. It is just a typo.
So...
If you live in NJ....
And you have a petty staycheck job...
The federal govt takes a rake of the income.
Next NJ takes a rake of the income.
Then when you decide to spend that money, NJ takes another rake with sales taxes.
So I earn one dollar. Fedgov takes 0.28 immediately. NJ takes 0.064 immediately or 0.34 cents in total is gone.
I decide to spend my remaining $0.66 in NJ.
NJ taxes my spending at 7% so there goes 0.0462, leaving me 0.61 to spend of my original dollar.
Now, the person who sold me that good has to pay income tax to the fedgov and state gov as well? and when that person goes to buy more inventory, he's also subject to the same NJ sales taxes? Doesn't this mean that all the money earned goes back to the fed/state gov after just a few sales?
It's an infinite series that tapers out at around .61 or so after 50 cycles.
It's not a solid data point because your 28% taxation rate from the Fed is variable depending on the income actually collected along the way.
Dropping the .28 completely out after 3 iterations and reducing the burden only makes the collected number drop to .608 or so.
Dropping the state income tax of .064 after another two iterations drops the tax burden to .602.
It really is a vicious little bitch of a number series.
That's true, 1/n does not go to zero, 1/n^2 does.
The most insidious is the property tax.
You are forever a sharecropper...
http://www.justfacts.com/taxes.asp
The facts about taxes.
In federal fiscal year 2011 (October 1, 2010 to September 30, 2011), the federal government collected $2.30 trillion in revenues, which were comprised of 47% individual income taxes, 36% social insurance taxes, 8% corporate income taxes, 3% excise taxes, 1% custom duties, 0.3% estate and gift taxes, and 4% miscellaneous receipts.[4]
Havent paid taxes since 2006. I work odd jobs for cash only and live an invisible life.... under a mountain of unpayable and constantly interest accruing debt I went into hiding to stay out of jail a few years ago...
No car, no drivers license, no cell phone, no bills, no library card, renting a place in cash, dont travel anywhere unless I can catch a ride with someone or take the bus. I know if my name pops up then so do the blackhawk helicopters and po-po to lock me up for failing in business and paying my employees instead of paying the government when i went under.
looking into signing on with the french foreign legion and getting a new identity...
What a life....
You are obviously connected to the internet so unless you frequent anonymous (and always have) connections you're easily tracked. I'm not paranoid, you're being watched.
Welcome to Orwell's nightmare.
The thrust of this article is "why should we pay personal income taxes?"
The answer is obvious.
We shouldn't, because tax on one's labor is nothing other than slavery.
Besides, the 16th amendment was never ratified by the states.
Sooooo, play along, but use the tax code to your own best advantage.
Geez, I'm having a good day. Hope Obama gets impeached soon.
Our tax code isn't about revenues, its about punishment, reward and control, and who gets punished (citizens) or rewarded (immigrants).
Without the 16th amendment there is no opportunity cost shifting and no source of income for mass immigration.
economist karl smith showed that with interest rates as low as they are now, we could eliminate all federal taxes today & borrow 30 years out, & make a profit on that borrowing if the country grows 1.1% annually or more over that 30 year stretch...by not borrowing now, when the rest of the world is paying us to borrow, and investing in infrastructure, renewable energy, job training, and our youth, we are missing a once in a lifetime opportunity...it's not crazy or unprecedented; we had a higher debt/GDP ratio coming out of world war 2, and eisenhower ran deficits to send returning vets to college & build the interstate highway system, and the debt to GDP ratio came down during the 50s expansion anyhow (chart)...
"Reduce my taxes to zero and see how fast I go out and start spending some of that extra income. "
But, but, but where does the money come from THEN to pay the mounting interest on the deficit. Not gonna happen.
Just like we were told, the deficit doesn't matter. But by God, paying the interest on it does, is the whole point and is exactly why deficits do not matter.
Pay up chumps, its servitude for perpetuity. I knew it, lots of us knew it, when reagun first said it and again cheney repeated it. But the media spun it, and politicians prospered from it.
As many have said: "Taxes and Inflation make up the vice used to squeeze the middle class." On the one side we have the Fed creating inflation and on the other the government creating ever increasing taxes ... all for the purpose of transferring wealth from the middle class to the elitists and the uneducated nonworkers.
It is the way the incapable parasitic psychopaths control the capable value creating humans.
Taxation is game theory at work.
If nobody pays taxes, then taxes can't work. It's like that saying...what if there was a war, but nobody showed up?
But if just some people pay taxes, then they support a system that imprisons others for not paying taxes...which means you have to pay taxes too.
This is the only reason I pay taxes. Because there are other "responsible" assholes out there still paying federal taxes, and because of that there's still such a thing as federal pound-me-in-the-ass-by-a-big-buck prison for people (little people) who don't pay taxes.
This is the reason why the American system worked so beautifully well for so long. It's all game theory. Once enough people opt out the game ends. It just takes a critical mass of people to either become disability cheats on one side or "go galt" on the other, and the game is up.
Ran across this today.
Pretty much sums it up, I think.
I don't think pi$$ed really covers it!!!!
Actual names have been changed. (Legal reasons)
Jeff Smith, the Senator from Québec calls senior citizens
"The Greediest Generation" ~ as he compared "Social Security " to a Milk Cow
With over a million teats.
Here's a response in a letter from PATTY JOHNSTONE in Ontario ... I think
She is a little ticked off! She also tells it like it is!
Oh sooo true!
"Hey Jeff, let's get a few things straight!!!!!
1. As a career politician, you have been on the public dole (tit)
For FIFTY YEARS.
2. I have been paying CPP & OHIP for 48 YEARS (since I
Was 15 years old. I am now 63).
3. My Canada Pension payments, and those of millions of other
Canadians, were safely tucked away in an interest bearing account for
Decades until you political pukes decided to raid the account and give
OUR money to a bunch of zero losers in return for votes, thus
Bankrupting the system and turning Social Security into a Ponzi scheme
That would make Bernie Madoff proud.
4. Recently, just like Lucy & Charlie Brown, you and "your ilk"
Pulled the proverbial football away from millions of Canadian seniors
Nearing retirement and moved the goalposts for full retirement from age 65 to age, 67. NOW, you and your" shill commission" are proposing to move the goalposts YET AGAIN.
5. I, and millions of other Canadians, have been paying into
OHIP & CPP from Day One, and now "you morons" propose to change the rules
Of the game. Why? Because "you idiots" mismanaged other parts of the
Economy to such an extent that you need to steal our money from
OHIP & CPP to pay the bills.
6. I, and millions of other Canadians, have been paying income taxes
Our entire lives, and now you propose to increase our taxes yet again.
Why? Because you "incompetent bastards" spent our money so profligately
That you just kept on spending even after you ran out of money. Now,
You come to the Canadian taxpayers and say you need more to pay off
YOUR debt.
To add insult to injury, you label us "greedy" for calling "bullshit"
To your incompetence. Well, Captain Bullshit, I have a few questions
For YOU:
1. How much money have you earned from the Canadian taxpayers during
Your pathetic 50-year political career?
2. At what age did you retire from your pathetic political career,
And how much are you receiving in annual retirement benefits from the
Canadian taxpayers?
3. How much do you pay for YOUR government provided health insurance?
4. What cuts in YOUR retirement and healthcare benefits are you
Proposing in your disgusting deficit reduction proposal, or as usual,
Have you exempted yourself and your political cronies?
It is you, Captain Bullshit, and your political co-conspirators called
Parliament who are the "greedy" ones. It is you and your fellow nutcase
Thieves who have bankrupted the Canadian Pension, OHIP and stolen the Canadian dream from millions of loyal, patriotic taxpayers.
And for what? Votes and your job and retirement security at our
Expense, you lunk-headed, leech.
That's right, sir. You and yours have bankrupted our benefits for the sole
Purpose of advancing your pathetic, political careers. You know it, we
Know it, and you know that we know it.
And you can take that to the bank, you miserable son of a bitch.
NO, I
Didn't stutter.
P.S. And stop calling CPP & OHIP "entitlements". WHAT
AN INSULT!!!!
I have been paying in to the CPP system for 45 years "It's my
Money"-give it back to me the way the system was designed and stop
Patting yourself on the back like you are being generous by doling out these monthly cheques.
Patty is full of shit. She collects money for nothing in the form of OAS. While she could argue she pauid taxes we all paid taxes but what is fair about collecting money just because you turned 65.
Interesting point of view ... this will be the debate for the next 30 years
Patty has a point. I salute her!
The answer to the question of why we pay taxes....
"Income taxes on individuals are not needed to fund the federal government and I believe that they are not even intended to do so. Instead, the purpose of an income tax is to give the central government power over each individual citizen, so that its minions can reward who they wish and punish who they wish. Congressmen will have favors to sell with tax breaks. The executive branch can instill fear and silence people who get too far out of line. It is a tool of control rather than a necessary tool for funding the government. It is a way for them to put their finger on you."
Courtesy of The Localist
http://localismaphilosophyofgovernment.blogspot.com/2013/05/the-localist-solution-for-irs-and.html
This is Modern (sic) Monetary Theory (MMT)
http://en.wikipedia.org/wiki/Modern_Monetary_Theory
Taxes maintain the value of the currency. If we didn't have taxes, the USA would end up hyperinflating like the game bux one of those Diablo multi-player games. A stable currency requires both sources and sinks of currency to sort-of balance. (I say "sort-of" because real economies have means of moving money through time through bonds, etc... that don't exist in video games.) If there aren't enough sinks, hyperinflation is the end result. If sources are deficient, deflation is the end result.
btw, this has been tried before. The Continental Congress tried to simply print money to pay for the Revolutionary War. In the end, its notes were not worth a Continental.
I realize this article is in jest, however if we DID put a moratorium on all Federal taxes for a year, can you imagine the boost to the REAL economy? With more money to spend we might just jump-restart the economy. Sure is a helluva better plan than giving it to the banks so they can charge 20% on a credit card (and keep 19.5% + fees as profit).
I'm at the age where the kids are grown,, the mortgage is paid off and we own the cars.
I don't spend much because I don't need much.
Seems like I'm one of those bad baby boomers!
When will kookman come after me?
Lucas Jackson makes his proposal in jest, but in all seriousness I think the benefits of an expansionary fiscal policy should go to the citizens, uniformly per-capita. While monetary policy continues to hand nearly-free credit to the banks, fiscal policy should place money in the hands of each permanent-resident man, woman, and child. $2 trillion divided by a population of 300 million is $6,667 per head, or $26,667 for a family of four. The multiplier on this will be far greater than one, as we all buy that new big-ticket item we've been putting off.
Since the government is totally comprised of "public servants" as they incessantly remind us, what if we say that we rather keep our money than give it to them; I mean, after all, they are our servants......
"How will it effect future generations? How will it effect the markets?"
Run a grammar checker before publishing to the world my good man! Your point is diluted otherwise.
And 'MOAR'? Is this the LOL-cat econ POV?!
These are the impressions you are making as I read, regardless of how our thoughts may align...
we all know how to fight the system - stop paying taxes and get rid of fiat. Unfortunately that will end you in jail
It isn’t that they can’t see the solution. It’s that they can’t see the problem. ~ G. K. Chestertonhttp://ampedstatus.com/is-it-time-for-law-abiding-american-citizens-to-stop-paying-their-taxes-and-start-a-new-government/