A Healthy Economy

Money as a moving fluid
Money (cash) that is buried or stashed in a cave somewhere isn't producing anything and will shrink in value due to inflation. The rich would never allow this to happen to their money. I'm sure they keep a petty cash fund, but they would never stash huge amounts of money for long periods.

To hold its value and generate more wealth, it must be fluid and moving through the economy. During the Great Depression, comparatively little money was moving in any direction.

Remember how President Rosevelt used government financial resources in "pump-priming" projects (public works, etc.) to get the economy going again. He knew that money had to be fluid and on-the-move to generate a healthy economy.

Now your talkin' -- a little Roosevelt priming could be in order now. Bush would turn a deaf ear to such a plan. He talks big but with little substance to actually back it up. Read my signature line and you'll get the picture.

You're moving from jars and mattresses to caves. How about one of my clients who was a big importer and had $500,000.00 in his floor safe? I was always kidding him about whether he paid taxes on it. Could haved turned him in and lost a big customer.

Amazing how the little people are naive and believe what the powerful tell them.

I don't think the wealthy are paying a proportionately higher rate with the so-called progressive income tax. Most wealthy people got that way the old fashioned way, they inherited it. They don't have enormous payroll income that would be subject to income tax. These trust fund babies get most of their income from investments generating income that is only subject to capital gains taxes, currently only 15%. This is less than the poor and middle class are paying.

Of course, there are some individuals making large incomes. The vast majority of these own their own businesses. And for these folks, there is no limit to the loopholes available to avoid taxes. Most of these people use their business to generate business expenses to reduce their income. Take a look at the best selling book, "Inc. and Grow Rich". It explains how to deduct almost everything. In addition, the rich business owners have other favors given them by our generous Congress. One on the most egregious loopholes given to business owners is something called the 412i plan. Look it up. It allows business owners to put hundreds of thousands of pre-tax dollars into retirement investments.

No, I think the most regressive tax is the one we currently have. You see, the current system insures a person cannot "earn" themselves rich. The only way to get rich is by investments. But, the income tax insures that we can't keep enough of what we make to make substantial investments. If a middle class person is lucky enough to get a higher paying job, the higher income tax hit will take it before they can invest it. It is a trap.

I think what most of us want is a simple system that the rich can't beat. I think that the rich will pay far more taxes with the sales tax than they do
now. We want a system that is fair. Maybe it's not perfect, but the sales tax seems more fair than what we have now. We want something simple that does not require a bureaucracy to administer and cannot be manipulated by special interests. The sales tax accomplishes that.

Is it perfect? No. But it's so much better than the mess we have now. The poor are virtually untaxed. The rich will pay no matter what favors they court with politicians. And, finally, the middle-class will have an opportunity to save and invest far more dollars than they can now. If they have the self-discipline, they can rise above the class they're trapped in now.

Is that so bad?

I can agree with most of that and I realize a "flat tax" would still have to have rules and regulations just like the "flat tax" known as sales tax. It would close some loopholes and open other loopholes. Where there are rules, the wealthy and their attorneys will always find a way to get around them.

How does a lawer or anybody avoid a sales tax???
Lightwizard,

With a sales tax EVERYBOBY pays at the check-out register. There is NO WAY out of that.

The only "way out" is to purchase only second-hand, pre-owned goods or do not purchase anything.

The Fair Tax is collected on NEW goods only.

Tax lawyers will be of no use, they can't help you or themselves avoid paying the Fair Tax.

No, you can also purchase out-of-state which is how I almost always save the California sales tax online. Wealthy people especially have no compunction about offering cash at no sales tax and smaller vendors will often accomadate them. There are a zillion more loopholes to sales tax and being in the art business, I've had people who I know have had expensive art shipped out of the state and then shipped back to them to avoid sales tax. You really have a lot to learn.

Where the average person believes there's NO WAY, that's exactly what the wealthy want you to believe. These day's there's a sucker born every second and the politicians, and their wealthy constutuents are counting on it.

Your proposal evades too many issues involving entitlements and various accepted levels of inequality. Not everyone is bent on levelling ranks.

Nor is everyone trying that hard to simplify what is a complex matrix of interdependencies. If your proposal seems mathematically elegant to you, and on your own drawing board it gives you some sense of satisfaction, congratulations.

The rest of us will have to settle for the genius of Keynes, Galbraith, Milton Friedman, Malthus, and Marx - considered and perhaps ignored by the dapper duff Mr. Greenspan.

In the mixture of Game Theory and Mathematics that we call economics, I think you will find a modicum of reason and more than a bit of acceptance of those aforementioned inequalities I was alluding to.

A multifaceted approach to raising revenues is what we have now. If you make a lot of money, you'd be well advised not to try to buck the system.

Sales tax in CA is %8.75 percent lately. That can hurt. And it gets calculated into every estimate that involves materials i.e. it is inflationary. Take money from the overpaid who squander it - that isn't inflationary. Au contraire - it's very hard to do - like deflating a bowling ball.

California tax here is 7.75% and materials bought for resale are not taxable. This doesn't cover contractors who do pay sales tax which they do, of course, pass onto the consumer as if they had purchased the material themselves. I save sales tax for my clients by charging tax only on the cost and adding a fee for services.

Otherwise, your points are well taken and welcome to A2K, padmasambava.

Re: A Healthy Economy


Would any current applicable Sales Tax (such as that for California mentioned by Lightwizard and others) be applied to foreign goods sold in those states?



VAT in the UK is not "revealed" to the end-purchaser, as such. It will not be shown seperately on goods on shelves, for exmaple. Companies providing services which charge by invoice will show any VAT seperately however, as a purchaser who is themselves registered for VAT can reclaim the VAT from the government.



Any goods produced within the EU are also tax-laden, as we have our own payroll taxes etc. to pay. Pure assumption on my part here, but surely the reason American goods are more expensive that EU goods when sold in the EU is because they have been shipped 3,500 miles across the Atlantic, rather than delivered by lorry from a factory in the next city?



In what sense would EU goods have no tax added?

So you are basically blaming the tax system of other countries for the economic problems of the US?

Often in the attempt to simplify something, the unknowing only succeed in making it more complicated.

You're obviously a clever bloke with a sound grasp of economics, Lightwizard, so I'd like to know if you think my points are valid. Cheers, much appreciated if you can!

Your points are well taken and only the tip of the iceburg. The wealthy are salivating over a flat tax. Any wonder why?

(Apprantly there are still some Steve Forbes wanna-be's who are in the middle class and will remain middle-minded).

It's just occured to me that if, for some reason ie. recession or economic slow-down, people buy less new goods and more used goods, or not at all, then the tax revenues will fall accordingly. This may mean less money for government investment and form a viscious circle. At least in times of economic hardship, people are always earning, if not always spending.

It's the middle class who will go out and replace their refridgerator and that's a lot of refridgerators. The 3% of the extremely wealthy do not need a lot of refridgerators -- maybe as many as three or four for multiple residences?

My vote goes with the graduated tax.

You have sales taxes state by state. And what loopholes that allow for unimpeded commerce to occur via the internet are compensated for by tarriffs that are already high on the use of communications technology which these days includes as much wireless technology as that which is connect to a permanent address.

The taxman will always get his share. Last time I checked the CA tax had increased from %8.25 percent to %8.75. I suppose some of that could be local Bay area tax to pay for earthquake fire or the new Bay Bridge.

One of my friends suggested that Bay Area locals should pay three bucks to go over the Bay Bridge but that the Governator should pay ten bucks.

That Hummer is likely to take up three lanes - and the extra buck is just for good measure.

I'm the taxman, ahh ahh the tax man. And you're working for no one but me.

here in canada we have BOTH provincial and federal sales taxes (plus income tax , plus ... tax, plus ... tax and so on). governments never have enough tax money coming in. remember, the money you earn is only on loan to you ! you are supposed to hand it over to the government, pronto! as i said, we do have sales taxes in canada, and if you want a good deal on a job, YOU PAY CASH and the sales tax isn't collected (and neither is the income tax; i know, i know, it's called tax evasion - it's what big business does all the time - they call it tax incentives). a fovourite trick of cheating the taxman out of the sales tax is through 'refundable sales tax' on exports. within in the last month several used car dealers were caught filing fraudulent invoices for cars exported for which they claimed sales tax refunds. this scam had been going on for several years and several million dollars of sales tax had been re-bated. by the time the mounties and tax inspectors caught up with them, the money had been spirited away - probably sitting in bank accounts in switzerland or the cayman islands. i don't think it makes much of a difference what kind of a tax system we have : the little guy(and girl) pays, the gig guy and the crook gets away without paying a fair share. (must be in the bible mentioned somewhere; it's been going on that long). hbg

The same kind of evasion goes on here, too, hamburger and there are business people including accountants who are very clever at it.