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The problem with the current tax system.


Mongol Federation

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Long ago the once great Roman Empire collapsed in the West bringing over 800 years of darkness, anarchy and other Somalia-like chaos. During this time a new governing system, based on the nobility, came to power. To support themselves, the nobles created a tax system in which the peasants were ether tined to the land as serfs or owned outright as slaves. These peasants were to create wealth (food and property more then money at the time) which was then confiscated almost in it's entirety. Then civilization returned and the age of nation-states began. At 1st the old feudal system remained largely unchanged, the monarchs simply becoming the head of their nobilities de facto as well as de jour. Soon however the monarchs and their nobilities became, at best, figureheads and at worse, were wiped out by the new republics. The feudal economy began to collapse, displaced by capitalism at 1st and was finally wiped out completely by the successful overthrow of the Russian Empire by the socialists.

Still, 1 major feudal system remained in place, the taxes. Now the people as a whole, not just peasants, create wealth, that wealth is now counted as money for the most part and it's confiscated not by nobles but by central gov'ts. This system violates modern Western ideals of personal freedom and the individual sovereignty dictated, albeit with different interpretations, by the now dominant capitalist and socialist economic schools of thought. The result is systematic inefficiency, corruption and general populist anger.

We have an outdated tax system too slow to adapt to economic shifts and too damaging to the wealth of the workers and businesses. We need a new system not based on the seizing of personal wealth but on the idea of a self-funding gov'ts. We need gov'ts that don't deficit spend or even balance a budget but rather gov'ts that turn a profit. Such a system would allow for the financing of gov'ts without the need of the punishing taxes as they are known now while increasing the efficiency of gov'ts by inherently generating more funds then get spent. The more a gov't spends with this system (if spent wisely), the more funding it would receive as the investment payed itself back. An example, a multi-billion dollar power plant would pay for itself within a few years as it operated on a for-profit basis, the people freed from having to pay taxes to fund it and the profits allowing the reigning gov't to forgo taxation for other projects. This opposed to the current need to tax the people to fund construction, the profits going to the private business that owns the power plant and the reigning gov't needing to tax the people once more to fund itself.

Such a system, based on profitable infrastructure, would at 1st seem like the status quo but consider this: You currently pay your utility bills, as a result you lights stay on, the water keeps flowing, the garbage get's picked up and you maintain communications with the outside world. You then turn around and pay taxes to keep the roads paved, the cops patrolling and the firefighters keeping the flames at bay. In my proposed system, you pay the utility bills and nothing more as the profits pay for what your taxes do now.

Obviously it's far more complicated then this and I'll happily explain further to any that ask but to avoid a wall-o-text, I'll end this here with the basics explained.

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What it looks like you are forgetting (You do say it's more complicated, but I'm basing this off of what you've written so far) is that the utility bills you pay now are not simply profit for the utility companies; they also go into the maintanance and operation of the utility infrastructure and the company itself.

I don't see how the profit from utility would be able to pay for what our taxes do now, unless the utility bills were substantially higher. And that would, in essense, be a tax.

Edit: Maybe a better way of explaining what I'm trying to say: Unless I'm reading it incorrectly, the distilled idea of what you're suggesting here is that combined, utility companies should be able to fund our government. Is that mistaken?

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What it looks like you are forgetting (You do say it's more complicated, but I'm basing this off of what you've written so far) is that the utility bills you pay now are not simply profit for the utility companies; they also go into the maintanance and operation of the utility infrastructure and the company itself.

I don't see how the profit from utility would be able to pay for what our taxes do now, unless the utility bills were substantially higher. And that would, in essense, be a tax.

Edit: Maybe a better way of explaining what I'm trying to say: Unless I'm reading it incorrectly, the distilled idea of what you're suggesting here is that combined, utility companies should be able to fund our government. Is that mistaken?

Not at all. What you seem to not get (admittedly, 1 of the points I left out) was that this would require ether nationalization or at least a major gov't stake in companies that handle roads, communications, power, garbage disposal ect.

This wouldn't mean state-run collectives however. These operations would, as stated, continue to operate on a for profit basis, would sell stock to investors (so income wouldn't be totally based on bill payments and the stock would be privately traded to only employees and local residents) and run not by the gov't itself but by democratically elected infrastructure authorities. You also seem to have misunderstood profit. Profit is money after paying obligations. The money gained by the gov't would be after payroll, maintenance, ect. same as it is for the private investors and corporate executives now.

I might post a part 2 to this blog entry. This 1 to explain the concept, the 2nd to explain how it'd work?

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Profits are made primarily through selling a product; the higher the price charged (assuming static costs) the higher the profit. This of course means that suddenly roads all start charging tolls, you get charged when the police investigate your mugging, and so forth. This in itself is a horrifying prospect.

It also loses the potential for hugely popular and effective systems like the NHS, both because things could no longer be free at the point of delivery and because services could no longer be run on the basis of people's needs. As we always see in this shift towards profit services get worse, prices go up, and 'unprofitable' people suffer. Moreover, the government is not a business and cannot be run like one without completely changing the way society operates.

And it also means that Ktarthan is right when he says that you are really just shifting the method of collecting tax. But it is more than this, because with such a shift we also drastically shift the burden of who is paying. With the loss of the ability to create a direct and progressive method of taxation, we now rely on what is effectively a huge sales tax, which by its nature is regressive and falls disproportionately on the poor.

Also, the attempt to paint taxes as a specifically feudal mode of fund-raising is pretty silly and weakens rather than strengthens your argument.

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Profits are made primarily through selling a product; the higher the price charged (assuming static costs) the higher the profit. This of course means that suddenly roads all start charging tolls, you get charged when the police investigate your mugging, and so forth. This in itself is a horrifying prospect.

It also loses the potential for hugely popular and effective systems like the NHS, both because things could no longer be free at the point of delivery and because services could no longer be run on the basis of people's needs. As we always see in this shift towards profit services get worse, prices go up, and 'unprofitable' people suffer. Moreover, the government is not a business and cannot be run like one without completely changing the way society operates.

And it also means that Ktarthan is right when he says that you are really just shifting the method of collecting tax. But it is more than this, because with such a shift we also drastically shift the burden of who is paying. With the loss of the ability to create a direct and progressive method of taxation, we now rely on what is effectively a huge sales tax, which by its nature is regressive and falls disproportionately on the poor.

Also, the attempt to paint taxes as a specifically feudal mode of fund-raising is pretty silly and weakens rather than strengthens your argument.

I considered this. This is why I allowed for democratic control and ownership by the local population. They could charge more (How's that different then now?) but they'd risk getting voted out of power (unlike now wink.gif) unless the higher charges translate into more/better services in proportion to the increases and higher dividends.

For example my local (and I stress local) power company made a total profit of $761,000,000 last year. Florida is in the process of constructing a high-speed rail system that is expected to suffer coast overruns and is estimated to cost local gov'ts at least $7,800,000 per year once the Feds surrender control of the system in '13. Feared construction debts, low or negative profit-margins and a still suffering economy have lead many to fear it can't be funded. Now look at the profits of just my local power company. Problem solved (and that's profit remember, the power grid will still be payed for) and there'd still be $753,200,000 left over for other projects. Feared economic slump and tax shortfalls averted and with no need to raise taxes on the people. Hell you could run the system for free off power profits alone which would actually be higher as you'd have all of them contributing. Apply this across the bored and it becomes clearer.

Now I'll be the 1st to admit, I haven't crunched all the numbers as I've not taken the time to look them all up so I can't say how much this would generate or even claim this would allow for the total abolishment of taxes but alas we still have to pay these costs and our taxes under the current system. Frankly I wouldn't mind my power bill going to the gov't instead of my pay check. I wouldn't mind a higher bill ether if in addition to better services (and lower/no taxes) I also got a dividend.

Allow me to find all the numbers and I'll post an explanation of how I see this actually working.

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No, it's a bad post because it's a bad post. Try not to read too much into it.

And it's bad how? If you have nothing to say, why do you post? Ether offer a valid counter argument or frankly, GTFO.

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I have exactly as much to say as you do.

It's my blog, it's my topic, I've offered arguments, I've invited questions, I've answered said questions and I've offered numbers to prove a point. You've offered meaningless 1 liners with no relation to the topic. Get out or I'll report you from spam posts.

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Your also forgetting that noto all nations Governments are Capitalistic.

This has nothing to do with capitalism (a strictly capitalist gov't would fight this tooth and nail), this is about updating taxes so as to be more efficient and less burdensome.

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It's my blog, it's my topic, I've offered arguments, I've invited questions, I've answered said questions and I've offered numbers to prove a point. You've offered meaningless 1 liners with no relation to the topic. Get out or I'll report you from spam posts.

My one liners are direct responses to your blog post as well as your comments. You can report me if you wish but I don't think you'll get very far.

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"Still, 1 major feudal system remained in place, the taxes." This statement is false. The concept of feudalism as proto-capitalistic is an invention of Marx; and a particular failing of Marx's adaptation of the Hegalian Dialectic, and socialist thought, like yours that relies on it. Rather, taxes pre-date feudalism by approximately 3000 years. (http://www.upenn.edu/almanac/v48/n28/AncientTaxes.html) They are not an instrument of a repressive form of government, rather they are the instrument that defines a government. You cannot have a government without taxes.

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"Still, 1 major feudal system remained in place, the taxes." This statement is false. The concept of feudalism as proto-capitalistic is an invention of Marx; and a particular failing of Marx's adaptation of the Hegalian Dialectic, and socialist thought, like yours that relies on it. Rather, taxes pre-date feudalism by approximately 3000 years. (http://www.upenn.edu...cientTaxes.html) They are not an instrument of a repressive form of government, rather they are the instrument that defines a government. You cannot have a government without taxes.

Indeed but I'm not a Marxist, I'm speaking of feudal taxes and this isn't an argument for abolishing taxes but rather reforming them. Rather then spending money on infrastructure with no return and having to tax income and wealth to fund gov't, this system would allow infrastructure to pay for itself and allow for an alternate form of funding allowing for contemporary taxes to ether be reduced or eliminated, depending on how much money this generates (something that would differ from place to place based on population and level of development). As I sated before, you pay your utility bill and then you pay your taxes. Would it not be more efficient to pay your utility bill and have that be your tax?

I've already provided an example of how 1 piece of infrastructure can pay for both itself and another. All 1 must do is expand the concept.

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If the government started to make a profit, people would demand that taxes be lowered because of the idea that taxes should be held at the absolute minimum possible. That's how taxes have worked for the majority of modern western development; I fail to see how that is feudal at all.

Likewise, western ideals are self destructive in their own right. I don't think we need the governments to practice full fledged capitalism on their subjects, lest they become completely independent of the governed and work more for self preservation and personal motive rather than listening to the people, unless you think that supply and demand might take the place as the main democratic force of the people. That, in and of itself, would be terrifying. (Don't like your government? Well $%&@ you, you're going to have to go without power and water for a while, and god help you if you're alone in your quest)

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If the government started to make a profit, people would demand that taxes be lowered because of the idea that taxes should be held at the absolute minimum possible. That's how taxes have worked for the majority of modern western development; I fail to see how that is feudal at all.

Likewise, western ideals are self destructive in their own right. I don't think we need the governments to practice full fledged capitalism on their subjects, lest they become completely independent of the governed and work more for self preservation and personal motive rather than listening to the people, unless you think that supply and demand might take the place as the main democratic force of the people. That, in and of itself, would be terrifying. (Don't like your government? Well $%&@ you, you're going to have to go without power and water for a while, and god help you if you're alone in your quest)

Ugh, I already explained away all that but...

Yes it would be demanded contemporary taxes be lowered/abolished. That is in fact the goal.

Alas this isn't capitalism nor would these be gov't run entities. Rather these IAs would be no different then they currently are in regards to general operation. Rather their purpose would change: 1. They would be owned not by outside investors (or the gov't) but by their employees and the local population via privately traded stock. 2. Their profits, rather being pocketed by investors, CEOs, ect. would instead be transfered to the relevant gov't (this would be the gov't's tax), minus dividend payments. 3. These IAs would be overseen by democratically elected administrations, so your fear, "Don't like your government? Well $%&@ you, you're going to have to go without power and water for a while, and god help you if you're alone in your quest" is needless as any such action would result in ether that administration/administrator getting voted out or if truly as extreme as you put it, impeached for corruption.

These IAs would be independent entities answerable to the people. The gov't's involvement will extend strictly to the initial rationalizations and collection of tax. The people for their part will see their taxes lowered/eliminated as profits from the IAs would replace them and would even see some of that money returned in the form of dividends (unlike tax returns that are in fact simple change for over payment of taxes).

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I admire your desire to explore new ways to raise capital to fund a country. I can see you've given this considerable thought. Kudos to that.

I do see problems with this, however. I'll address the first problem by asking a simple question:

How much are dividend payments going to be? They need to be large enough to make people interested in investing in a company, but not so large as to take so much profit away from the company that it can't help support the Government in the way you suggest. This could be a very difficult balance to strike. People like making money and don't like giving money to the Government. Who's going to make this decision? The "owners" or the Government? This is a pretty large conflict of interests.

Another issue is if an economic slowdown occurs. In the current system we have, Governments will borrow more during times of economic slowdown and recession, to address the shortfall that occurs from reduced tax income. The "guarantee", if you will, that allows them to borrow such colossal sums of cash is the fact they will again earn it back through taxation. If a Government's sole, or primary, source of cash are private enterprises, it's much riskier for lenders to lend money to the Government in question and then you have very serious problems if they can't, for example, pay people their social security payments, or can't fund the military.

Finally, there's the dodgy issue of the Government being involved directly with business except in extraordinary situations (like the recent banking crisis). People generally want lower taxes and less involvement from the state, not more. Without trying to biased, this problem will be more present in the US due to the "libertarian" attitude a lot of Americans have. People in Europe don't generally stress over a large state, but they do in the US so, were this to work anywhere, it would be somewhere which is already at ease with a large public sector.

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I admire your desire to explore new ways to raise capital to fund a country. I can see you've given this considerable thought. Kudos to that.

I do see problems with this, however. I'll address the first problem by asking a simple question:

How much are dividend payments going to be? They need to be large enough to make people interested in investing in a company, but not so large as to take so much profit away from the company that it can't help support the Government in the way you suggest. This could be a very difficult balance to strike. People like making money and don't like giving money to the Government. Who's going to make this decision? The "owners" or the Government? This is a pretty large conflict of interests.

Another issue is if an economic slowdown occurs. In the current system we have, Governments will borrow more during times of economic slowdown and recession, to address the shortfall that occurs from reduced tax income. The "guarantee", if you will, that allows them to borrow such colossal sums of cash is the fact they will again earn it back through taxation. If a Government's sole, or primary, source of cash are private enterprises, it's much riskier for lenders to lend money to the Government in question and then you have very serious problems if they can't, for example, pay people their social security payments, or can't fund the military.

Finally, there's the dodgy issue of the Government being involved directly with business except in extraordinary situations (like the recent banking crisis). People generally want lower taxes and less involvement from the state, not more. Without trying to biased, this problem will be more present in the US due to the "libertarian" attitude a lot of Americans have. People in Europe don't generally stress over a large state, but they do in the US so, were this to work anywhere, it would be somewhere which is already at ease with a large public sector.

Indeed, but then do private companies give out all their profits in dividends? Same concept.

Which is why I based this off infrastructure. Everyone needs power, water, roads, ect. You may need to lower rates (better to make less money then make none because people can't afford it) but only a total economic collapse will prevent people from paying. This part of my plan, I admit, isn't totally thought out.

As I said, the gov't would nationalize (an unfortunate necessity) and take the profits as tax. The IAs themselves wouldn't be run by the gov't however.

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"Such a system, based on profitable infrastructure, would at 1st seem like the status quo but consider this: You currently pay your utility bills, as a result you lights stay on, the water keeps flowing, the garbage get's picked up and you maintain communications with the outside world. You then turn around and pay taxes to keep the roads paved, the cops patrolling and the firefighters keeping the flames at bay. In my proposed system, you pay the utility bills and nothing more as the profits pay for what your taxes do now."

You realize that this would just raise the cost of your utility bills until they cover the amount that is currently covered by taxes.

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Taxes are not an outdated idea at all. It's rather simple actually:

Money goes in, service comes out.

That's it. It's the same thing as buying something, except that you don't get as much of a choice is what you're paying for.

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