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Taxing my wits

First, a bit of an apology. Between being trapped in by The Blizzard Of Death, '05 Edition, some long-overdue cleaning and rearranging, and the arrival of a boxed set of all five seasons of Babylon 5, I've been neglectful of my obligations here. On the plus side, I'm almost done with the first season and my bedroom is getting closer and closer to being Fit For Human Occupation.

But I shouldn't procrastinate too long. Last week, I made a posting where I demonstrated how little I know about economics. In the comments section, I mused that if I were to post everything I knew, it'd be a nice, short post. So I thought I'd do it.

But this isn't really about economics, per se, but about tax policy. Most of what I know about it is from reading P. J. O'Rourke's Eat The Rich, one of the most insightful (and readable) pieces I've ever seen about economics. With that disclaimer, here's what I believe I've learned:

1) The power to tax is the power to destroy. In short, if you want more of something, you subsidize it; if you want less, you tax it.

2) The government has no money of its own. All money the government has, it has taken from us through taxes, fees, fines, licenses, and whatnot. Keep that in mind when people talk about "free money from the government" and "it's just the government's money."

3) Tax rebates aren't money from the government. They're just the government giving you back some of your own money that it already took.

4) Tax cuts aren't the government giving you money. It's just agreeing to take less of your money.

5) If you ever want to find the most expensive, least efficient, and least effective way to achieve a goal, have the government do it. It does a few things well, but for the most part success requires a personal commitment and investment on the part of those doing the work -- and that's damned rare in bureaucracies.

I know a lot of liberals agree with me. In Massachusetts, they have a two-tiered income tax. The standard rate is 5.3%, but taxpayers can choose to pay at the rate of 5.85% if they feel they owe the state more money. Last year, the rate of taxpayers who chose to pay the higher rate was less than .01% -- or less than one in ten thousand. Massachusetts' junior senator, Mr. Kerry, sided with the majority of his constituents and also chose to pay the lesser rate. It's one of the areas where I happen to agree with Kerry -- I'd pay the lesser rate, too.


Comments (14)

Massachusetts' junior se... (Below threshold)
LoneSome Journey:

Massachusetts' junior senator, Mr. Kerry, sided with the majority of his constituents and also chose to pay the lesser rate.

As with most lunatics of the far left, kennedy says he supports higher taxes for the rich, but given the opportunity to prove this by placing himself into a higher tax bracket, he declines. Of course, we could never expect the MSM to report this fact to the American public.

Your points on Taxes sounds... (Below threshold)

Your points on Taxes sounds awfully like what I've read in Mark Smith's book "Vast Right Wing Conspiracy" :0) If you want to educate yourself even more on economics read "Bullish on Bush" by Stephen Moore, President of the Club for Growth. I am reading it now, and it is filled with info. A great read. Oh yeah.. I survived the blizzard too! LOL No more snow!!



One of the nice things abou... (Below threshold)
Drew - Dallas, TX:

One of the nice things about Bush's tax relief plan is that from the way I'm understanding it, he's made a valid effort to simplify the entire structure.

Yes, sometimes less is more.

Large deficits are also ver... (Below threshold)

Large deficits are also very destructive.

A GREAT book on Economics i... (Below threshold)

A GREAT book on Economics is written by Q and O author Dale Franks. It's called Slackernomics - Economics for People Who Think Economics Is Boring. And let me say, this man knows how to make it interesting. For example:

Let's take petrolium, for example. People don't just need gasoline; they need plastics to make computer keyboards and ugly furniture for college students. Businesses need chemicals for industrial production and dyes. Textile companies need artificial fabrics that don't fade or discolor. Perverts need Vaseline.

After reading this book, my knowledge quintupled and I've actually a much better grasp of what to do with my money. Check it out on Amazon, as you can even download it via PDF for about $6.

Large deficits are also ... (Below threshold)
Drew - Dallas, TX:

Large deficits are also very destructive.

NU, is it also safe to say that a surplus is something that you don't want in the hands of your government. It often costs more to try to figure out where to spend it than it's worth. If they decide not to spend it, then it's worth more in the private sector's banks earning interest - even at the lowest of interest rates.

I would also contest that if the intent is to further Research and Development in the United States as the Bush tax plan involves, the net effect of this long term "investment" (lovingly referred to as "debt" by the left) is the relative and not so immediate return in the form of jobs here at home. Also, things like patents, software and other intangible products are a result of environments conducive to R&D ultimately contributing to our GDP.

This lift of R&D burden is actually taken from the European model - the difference, of course, being that instead of the Government actually financing the expense towards favored companies, the burden is lifted from ALL companies who choose to invest in R&D.

(I have no evidence of any of the above so don't ask, it's just my 2 cents)

Dear Sirs,I am tro... (Below threshold)
Roy Lofquist:

Dear Sirs,

I am troubled by the view that the "Government" is some kind of adversary. WE are the government; "of the people, by the people and for the people"; bought and paid for by the blood of patriots.

We have a spirited debate and pretty frequent elections of all kinds to sort things out. We have managed to do pretty well. As there isn't any evidence to the contrary I will state that we have done as good as can be done.

I agree that there are those who seek gain by currying influence with the powers that be. Always and forever. We do our best to curtail this. Believe me, things are much, much better today than in my memory.

But there is an existential need for community action. To approach this with the attitude that it is perforce and ipso facto a bad thing is to deny yourself a hearing by serious people trying to do the peoples' business.


Hello Roy,"Gove... (Below threshold)
Drew - Dallas, TX:

Hello Roy,

"Government" is some kind of adversary

I honestly don't think of our Government that way - it's just inefficient at times, particularly with our money. After all, when they take from our paychecks throughout the year - we are floating the IRS that money. It doesn't do anything all year but collect dust, not interest.

things are much, much better today than in my memory

Agreed - mine too. Whenever I ask someone who complains about the economy to explain the phenomenon of home ownership being at an all time high - they can't.

Saying the goverment has no... (Below threshold)
Scott Stark:

Saying the goverment has no money of its own is actually the opposite of the truth. The government has all of the money, you're just allowed to use it!

While I'm not big on paying those taxes, they do provide a benefit to our country. Without taxes and government control of the money supply, you and I would have to barter for everything and the country would never be able to build roads and other infrastructure. I think we receive alot of benefit from the tax dollars we spend - it's the "over spending" that kills me.

Roy Lofquist :"I ... (Below threshold)

Roy Lofquist :
"I am troubled by the view that the "Government" is some kind of adversary. WE are the government; "of the people, by the people and for the people"; bought and paid for by the blood of patriots."

You are wrong sir. You do bring up valid points later, but when you claim that "we are the government" you really are talking about on the small scale of in your local community when you go to your PTA meetings. The Federal goverment is a representative government, where the beaurocracy is a seperate entity from "the people". The people choose who sits in the "big chairs" to represent them, this is not a democracy, but a republic.

What is being argued by Drew and Jay, is that the government works in ways it thinks benefits you, which doesn't always work. That just means you have to contact your representative in order to get at least your representation right.

Governments are not just any sort of business. They are a business where their stockholders are every single American citizen. Try asking the average business how easy it is to appease the stockholders. Take the difficulties they encounter and raise it to the googleplex (1 followed by 100 zeros) power. That gives you an idea as to how difficult it is to work for the benefit of all the stockholders in the U.S. federal government.

There are a number of reasons that governments usually take more money and time it takes than an ordinary corporation to do the same job. Businesses are out to make a profit, so they invest in finding the cheapest, most efficient way to perform the work. Governments have no such quandaries, at best, they want to break even, but even if they go in the hole, they can always borrow more money. Another area has to do with overcompensation with civilian contractors who tend to go overbudget. The government used to make up the difference when it came time to pay the civilian contractor for their work. That's where the "$500 toilet seat" came from.

One could go on forever on this topic, but I'll end it here.

God bless the Republic of America!

You're dead on. ... (Below threshold)

You're dead on.

Drew made an excellent poin... (Below threshold)
Steve L.:

Drew made an excellent point about surpluses. Back when we ran a surplus, the belief was that this "extra" money would be used to pay down the debt. Instead, it is used to increase spending in pet projects. That's the reason so many politicians love the "you are not allowed to run surpluses" laws. It gives them an excuse to spend the extra money instead of returning it to the taxpayers.

Another factor that enters in to government spending is the method used by each side to calculate cuts in government spending. Traditionally, Republicans have believed that a 5% cut in spending means that you take the amount you are spending today and reduce it by 5%. Democrats tend to take a different approach. They believe that you take the amount of money you were going to increase the budget by and reduce that number. For example, if a particular line item was scheduled for a 10% increase next year, you only give them a 5% increase. Since you gave them less than they wanted, you have reduced the budget by 5% even though the total dollars spent is actually higher.

Henry's discussion of efficiencies is very good, but he left out one point. Some of the inefficiencies of the government comes from its "monopoly" on services. If I ran a business and wanted to sell a service for way more than it's worth, you could chose to go to my competitor down the street and buy the same service for less. Eventually, I would have to lower my price if I hoped to stay in business. Therefore, to cover my costs, I would have to become more efficient in my operations.

The government doesn't have that problem. There is no competition. Not only that, but they can send someone to your house and force you to "pay" their services whether you need them or not. Efficiency is right out the window. In fact, governmental operations are the antithesis of efficiency. The more inefficient they become, the more money is required to operate a particular agency. If it is an "essential" service, Congress just gives them more money by sending more goons to your house and demanding you pay for them. Therefore, the incentive is to become less efficient rather than more.

Amazingly, if you tell an organization that they must do the same work for the same (or less) money, they will actually become more efficient out of survival. People naturally want to be successful at anything they do, so they will work to achieve that.

Jay Tea, you say The pow... (Below threshold)
tee bee:

Jay Tea, you say The power to tax is the power to destroy. In short, if you want more of something, you subsidize it; if you want less, you tax it. and that's two-thirds right. taxation is a form of control; it is generally thwarting something to tax its activities, thereby reducing its ability to profit from success and continue growth.

but subsidies don't work that way. another form of thwarting comes into play - subsidies usually come with controls, such as the price you can get at market for your goods. the government also exerts limits over who can put such goods on the market. in Wisconsin, they are using subsidies and the accompanying controls to end tobacco raising with the Tobacco Buyout, which buys out existing subsidies. the farmers get a windfall at first, courtesy of the taxpayers, then they get nothing (the great part about this is that it extends to overseas farmers). there is also the famous New Deal commerce-clause case of the Ohio farmer (Wickard v. Filburn) who was fined for raising more of a crop than he was subsidized to. the additional wheat was for his livestock and his family's use. he sued and lost.

for the record, my son, an econ major, agrees with you that subsidies generally stimulate an activity, but at a greater cost by promoting inefficiency (and, I assume, paying twice for the good by paying for it and paying taxes that pay for it). the real problem, he says, is that subsidies distort the market by stimulating production when the market isn't asking for it, thereby flooding the market.

the second important point brought up here is about our relationship with the government. we should promote the realization that government is us, not some wise, all-knowing Nancy Pelosi taking care of us by decree. the government is people, who make mistakes, follow their beliefs, and were voted in on a platform/agenda. but they, and the bureaucracy whom we don't elect, have a job, and people generally work to validate their position so they continue to have a job. between platforms that may have significant opposition from a constituency and justifying their job (by staying busy and spending money) comes an oppositional relationship with people who pay the bills.

Thanks Steve L. I should ha... (Below threshold)

Thanks Steve L. I should have realized the monopoly thing, especially since I live in the great state of California, where we've had our own problems with 'monopolies'. I could go hours and hours about the damn power companies and what our completely incompetent and moronic ex-governor Gray F#@$in Davis did, but I'll let it slide so I don't give myself an ulcer.






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