Wednesday, October 14, 2009

Oh, that Dreaded Tax!

Greg Mankiw tries to do the VAT some justice, but the Value-Added Tax has too many pitfalls to be easily classified. It removes Business from the realm of taxation, which Business personnel and Economists think is great. The trouble comes precisely from this removal of Business from the Tax base. Business funds the greatest majority of Government lobbying activities, and Business-sponsored Government Spending ranks equally as expensive as the Business-derided Welfare payments. Always fear the political influence which gains from Government expenditure, but pays nothing for the privilege. How Greg relates the VAT to the Flat Tax I do not know, as it substitutes a constantly levied Tax for a singular Tax payment. I am not saying that it cannot be done, but I imagine that the logic is very convoluted.

The basic argument revolves around the composition of tax, and who it should impact directly. There is no question that the Tax revenues must be raised, and they must show some correspondence to Government Expenditures. Some say that the desired Solution is for every segment of the Population to pay for the Cost of their benefit from the Expenditure. This context would clearly establish that contrary to the wild proclamations of the Business world, Business gets many more dollars in benefit than they suffer in taxation. The Profits from Service contracts rival the Cost of any Department of Government, and affect probably less than 1% of the actual Population; not counting Workers and Stockholders, who receive payment only after Business management is satisfied with the payment system for the entire Business. Under the previous logic commonly supported by Business, such businesses should pay at least a hundred times what they do pay in taxes.

I could relish the replacement of the personal Income tax, if Capital Gains and Corporate Income taxation were maintained. This system would not only bring some 20% Tax break to Households, but also lower Corporate aggregation of Capital to some 14 year replacement, instead of the current 8-9 year match. Contrary to popular belief, this sustained level of aggregation is unnecessary for full employment, especially as 30% of said funds go to Stockholder Earnings, and 20% go to a Bonus program for high level Executives who have never proven their value to their organization as such level of Return. Simply because you can reward yourself with higher Salary and benefits does not mean you should. I would like to see the establishment of a Remuneration Court system, where all Wages, Salaries, Benefits, and Earnings must be approved before implementation; all such payments to be compared to other payment systems within the industrial sector, exterior to the industrial sector, and with comparison to foreign companies. Some systemic overview of the process could present great benefits. lgl

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