Taxes

[MountainDon]

Tomorrow I've resolved to begin the arduous job of getting the business income/expense info together for tax purposes. I hate doing it, but I hate doing it at the last minute even more. We've lost money the last couple years  , I wonder how this year will pan out?   


If I yell at anyone, I'm sorry, but you know why. 

[glenn kangiser]

A good businessman will always lose money.  Look at the banks and then... ask the IRS for a bailout.

[MountainDon]

Dang, I never thought of asking Obama for assistance; a bailout.   

Hope gleams eternal, or some such drivel.     

[peternap]

A good businessman will always lose money.  Look at the banks and then... ask the IRS for a bailout.

I must be a tycoon then!

[glenn kangiser]

Way to go, Peter.

[StinkerBell]

Ugh. I hate this time of year. Tax season. I get so stressed out. I have a healthy fear of the IRS. They are a entity that is not accountable to anyone or anybody of authority. I have seen the horrors of what they did when I was a bank teller in the 80's.

[glenn kangiser]

Fear can be overcome by knowledge. 

I was harassed by them in the 80's -- it turned into war.  I am not scared of them.  Fear of the IRS is not healthy Stink.

They are an illegal entity.  Unfortunately someone forgot to tell them that.

[StinkerBell]

It is moot if they are legal or not. They have all power and no one to answer too. That my friend is something to fear.

[glenn kangiser]

They annoy me...

[MountainDon]

It is moot if they are legal or not. They have all power and no one to answer too. That my friend is something to fear.

My thoughts too Stink. Similarly, it doesn't matter that the gang bangers in the south valley may be doing all sorts of illegal things; they do scare me.

Whether or not the IRS is illegal in one's opinion, doesn't really matter if you are being audited.

Once again I say the IRS should be abolished and the current taxation "system" replaced with a simple consumption tax, like the FairTax or the FlatTax.  Google if you don't know.

[StinkerBell]

I have always subscribed to the flat tax idea myself.

[MountainDon]

I could very easily go for that...

http://www.heritage.org/Research/Taxes/bg1866.cfm

http://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems

Darn near anything would be better than what we have now. So what if a whole buinch of accountants and tax lawyers would have to find real work!

[Squirl]

Even with a flat tax there will always be built in loopholes.  Even in a "fair" system people will always cheat. There will always be a need for lawyers, accountants, and the IRS.

[Sonoran]

Once again I say the IRS should be abolished and the current taxation "system" replaced with a simple consumption tax, like the FairTax or the FlatTax.  Google if you don't know.

I've heard about the Flat Tax and the Fair Tax...they are similar except one of them does not tax people who make under a certain amount of money.  It's a cool idea for both because everyone will be able to do their taxes on in one page I believe.

Not charging low income people seems like a good idea under the claim that: they will have more money and therefore will spend more money. (Which is good for the economy) But if you think about it that way it is very similar to the progressive tax that we have now.  We have a progressive tax system and people are allowed to write off stuff.  The people doing most of the write offs are generally people in higher tax brackets, the ones who own businesses.  The write off is like the no tax for low income people.  If the wealthy had to pay more taxes they would raise prices in their businesses and the low income people would end up paying more anyways.

The Flat Tax and Fair Tax do not allow write offs.  Which means that the wealthy will be paying a heck of a lot more money on taxes...trickle down economics or reagonomics suggests that they will just pass off the higher costs to the consumer.



ED: repaired quote for readability  - MD

[ScottA]

Taxes= fractional slavery

[MountainDon]

....trickle down economics or reagonomics suggests that they will just pass off the higher costs to the consumer.

I know more about Fair Tax than Flat Tax.

Under Fair Tax businesses do NOT pay taxes on their income, therefore there's nothing to pass on. The Fair Tax is collected at the point of sale of "stuff". Buy something you pay tax. Save money, there's no tax.

[ScottA]

I was grumpy earlier so i didn't bother to post the solution to the tax issue. So here it is.

Since the government has the power to create money all they need to do is print the funds they need to operate. Sound too simple? Won't work you say? They are already doing it and have been for years.

The problem is they can't seem to figure out when to stop spending money. They belive they need to fund every thing under the sun. Everyones pet project. Everyones wars. Free cash to the bankers who help get them elected. It goes on and on forever. It's not good to create too much money and there is the only hickup in my plan. There seems to be no way to force common sense on our leaders.

But taxes are not the issue. Income taxes and property taxes especially. The sole purpose of taxes is control of the people. All of the taxes we pay, every cent, only pays the intrest on the money the government had the federal reserve print for them. So all the actual money they spend is printed. Remove the intrest payments and the whole issue of taxes goes away.

Still think they need our money? What about all the assets the government owns? Why do they not use them for profit to raise extra cash? Millions of acres of land filled with natural resources, timber, coal, oil, minerals. The list goes on and on.

No the issue is not taxes, The issue is control. Think about it. 

[Sonoran]

Printing more money only creates inflation.  Look at Zimbabwe.

[ScottA]

Depends how much you print. Where do you think all this bailout money came from?

From the grace commision report under Ronald Regan
"100% of what is collected is absorbed solely by interest on the Federal Debt ...
all individual income tax revenues are gone before one nickel is spent on the services
taxpayers expect from government."

So if all the tax money goes to pay intrest where does the money come from that pays for everthing the government does? Gives away? Buys bombs with? Think they borrow it? Yes they borrow some of it but there's not enough money in the world to pay for all they spend. They print it or to be more exact they make an account entry on a computer. Why waste ink? Actualy the federal reserve creates the money from thin air then loans it back to the government at intrest. Thats where the debt part of the federal debt comes from. Where do they get the power to create money from thin air? From the government.

Do some research on the subject. You'll be suprised.

Zimbabwe has problems because more powerful intrests want to take over the governments power to create money. So they've arranged for their money to be worthless. Zimbabwe does not have the muscle to make it work. the USA does and has the assets to back it up.

But lets say it does cause inflation, which we already have btw. Can you think of a more fair way to tax than taxing every dollar the exact same amount?

[StinkerBell]

Kinda sounds like a Ponzie scheme.

[Sonoran]

We have inflation but it's not high. The current inflation is only 1.07%. Not like Zimbabwe's 2,300,000% inflation. 

"Depends on how much you print."   I never said it didn't.   

"100% of what is collected is absorbed solely by interest on the Federal Debt ...
all individual income tax revenues are gone before one nickel is spent on the services
taxpayers expect from government."

Government also earns money from social security, corporate income tax, indirect business taxes. Also, local governments make money on sales tax and property tax and so forth.

[Bill Houghton]

Google "money as debt."  There is a video (45 min?) that explains a lot of what you are saying.  Kind of scary, but too big for me to fully comprehed.  If you do check out the video, would you please post your comments to this thread? I would really like to read your views on the video. 

Bill in the U.P.

[muldoon]

I have some thoughts and opinions on this. 

scott - almost always agree with you on your economic posts, you have your eyes open for sure.  However I disagree with you on this one because I dont think the facts are exactly correct as you have written.

Since the government has the power to create money all they need to do is print the funds they need to operate. Sound too simple? Won't work you say? They are already doing it and have been for years.

No.  The government has the power to create debt, not create money.  Thus debt as money is the system we have.  The distinction may be minor in some opinion but I believe the distinction is critical.  Every dollar in existance is created by debt.  Money is not just created by the government.  It is also created in the economy in general.  Lets say you go to a bank, deposit 100 dollars.  The bank is free to take that 100 dollars (as a liability), take 10 and call it reserve, and loan out 90 of it, Those 90 go out and come back wher the same principle happens again.  your 100 dollars could generate nearly 3000 dollars in "money" as debt is continually created.  The government did not print those dollars, it is not cash in your hand, it is debt.  If everyone paid off their debts (or defaulted), those 3000 would go back to zero dollars. 

The problem is they can't seem to figure out when to stop spending money. They belive they need to fund every thing under the sun. Everyones pet project. Everyones wars. Free cash to the bankers who help get them elected. It goes on and on forever. It's not good to create too much money and there is the only hickup in my plan. There seems to be no way to force common sense on our leaders.

Not exactly.  If every dollar is created as debt, and every debt must be repaid in principle and in interest than by definition there is never enough money to pay everything off because the money to pay the interest was never created.  When we create more money we simpply increase the amount of interest that needs to be repaid again .. it is an exponenetial growth problem.  The pain is not that they do not know how to stop spending, it is that in order to continue we must constantly print more than before because the interest cannot be repaid.  Yes, they say inflation is roughly 3-4% and guess what our interest rate is generally?  We spend more and more and more because the system itself is dependant on perpetual growth.  socialism is great for fractional reserve banking because there is always something to spend the money on.  Communism even better.  If the amount must be bigger every year by definition or we implode then there is always motivation to spend more. 

Without growth, we implode.  See: current events for evidence of this in real life. 

Printing more money only creates inflation.  Look at Zimbabwe.

Expanding the monetary base creates inflation, and monetary base can include money in circulation and credit in this system.  Look in the rear view mirror to see this, expanding the credit available in the housing market create huge inflation to the cost of houses (100% appreciation in 2 years in some areas?).  Credit constriction has yielded deflation.  Houses, cars, stock markets, bond yields, all down across the board.  a deflating credit market is destroying money from the system in the same exponential fashion as too free credit created it.  Because of leverage, this money continues to be removed by this black hole.  exponential equations.  we are not zimbabwe. 

So if all the tax money goes to pay intrest where does the money come from that pays for everthing the government does? Gives away? Buys bombs with? Think they borrow it? Yes they borrow some of it but there's not enough money in the world to pay for all they spend.

Perceptive, this is why they are not borrowing with todays dollars anymore.  Note a tidbit from todays news:
http://www.forbes.com/feeds/ap/2009/01/06/ap5883877.html

"Those steps include borrowing against future Arizona Lottery revenue,"

And what was the bailout but to truly borrow from our own childrens future?  Is the national debt not mearly a representation of our governments ability to tax the productivity of its citizens?  We are no longer borrowing just from other countries, we are borrowing from "future projected earnings". 

...
But all of that is not the underlying problem today.  Nor does it necessarily indicate where we are going.  What happens when the US is unable to create any additional debt?  What happens when the us governemnt is unable to support or fund itself?  Understand that and you understand the motivation for the actions being undertaken now.  If I get more time tonight or tomorrow I'll write some more on this. 

Some call for a return to the gold standard.  Some feel being on hard money would eliminate these inflation risks.  I say why did we have a great depression in 1929 when we were on the gold standard?  What about the crash of 1913, 1907, 1873, 1857?  Monetary base is one side, credit boom and credit bust is another.  We cannot fix this with gold.  In fact, gold has some benefits on the monetary base side but it also woefully falls short in many areas. 

[ScottA]

The problem with a gold standard is that gold is a finnite resource. What happens when someone has all the gold? What will the rest of us use for money. Money can't be limmited to the amount of gold in the world. Money really represents the value of labor. Everything in the world is free. All the oil coal gold whatever it's all free it's the labor it takes to extract and use those resources that has value and that's what we trade when we trade dollars for stuff.

The problem with money as debt is that they take the value of labor and add intrest to it. There is no way to repay the intrest since we can't do more work than we can do. This is where the slavery aspect of taxes comes from IMO. So...

Back to my idea. We need the money so we can trade our labor in an easy convenient way. Why not just have the government create that money and spend it into existance. The congress does have the power to coin ie. create money. It's in the constitution. We use it to trade and there's no need for taxes because the money is created not borrowed. The elimination of the intrest coupled with reasonable spending by the government would limit the inflation the creation of the money would cause. So long as there is growth the demand for dollars would increase and limit inflation. if the goverment needed to reduce the money suppy do to negative growth they could do so by imposing fees on services, imports or luxury goods or even by loaning money out at intrest to business.

You seem to know more about it than me muldoon but I don't see why it couldn't work. Maybe I'm missing something.

[muldoon]

The problem with a gold standard is that gold is a finnite resource. What happens when someone has all the gold? What will the rest of us use for money. Money can't be limmited to the amount of gold in the world. Money really represents the value of labor. Everything in the world is free. All the oil coal gold whatever it's all free it's the labor it takes to extract and use those resources that has value and that's what we trade when we trade dollars for stuff.

The problem with money as debt is that they take the value of labor and add intrest to it. There is no way to repay the intrest since we can't do more work than we can do. This is where the slavery aspect of taxes comes from IMO. So...

Back to my idea. We need the money so we can trade our labor in an easy convenient way. Why not just have the government create that money and spend it into existance. The congress does have the power to coin ie. create money. It's in the constitution. We use it to trade and there's no need for taxes because the money is created not borrowed. The elimination of the intrest coupled with reasonable spending by the government would limit the inflation the creation of the money would cause. So long as there is growth the demand for dollars would increase and limit inflation. if the goverment needed to reduce the money suppy do to negative growth they could do so by imposing fees on services, imports or luxury goods or even by loaning money out at intrest to business.

You seem to know more about it than me muldoon but I don't see why it couldn't work. Maybe I'm missing something.

Well, I am not saying it wouldn't work.  And to be honest I am not saying our existing system wouldnt work either.   It was leverage and fraud that killed it by removing the confidence to keep the game running.  We have been using our "failing system" since 1913 to some extent in America and since the middle ages worldwide.  The Bank of England/ Mayer Rothschild roots back to 1760 (US independance time not long afterwards coincidentally perhaps?)   No system is perfect, and it's easy to point out flaws - existing system and new coming ones as well. 

Anyway, I am not saying that system would not work.  But it certainly falls down in some areas. 

Without interest in the private sector, people will not loan money.  By only allowing the government the ability to extend money and or credit, we effectively make the process of getting money a political event.  Only those that are inline with the political power in control would have access to money. 

If we open interest based loans in the populace, then we are still open to the credit boom bust cycle that leads to these events regarless of monetary policy.  For example, the crash of 1857 happened long before the federal reserve, it dates back to a crash in europe that devasted some new york banks which in turn caused the bonds on the railroads to crash.  It led to a credit contraction and we entered a civil war some 4 years later due to the extreme situation it created.  (They dont teach that part of the civil war in public school).  What I am saying is that while the government coinage could certainly control monetary policy, however it could not control credit policy without turning credit into law.  If you try to use the law to manage credit you invite much more serious problems.  (Hitler, Stalin, etc).  Less government is better in my opinion.

The crux also lies in maintaining balance.  For example, during the industrial revolution we were able to create far more goods and services, and especially agriculture than was previously possible.  With a flat money system, the amount of goods increased causing the supply demand curve to go crazy.  Thus using gold or silver did not do anything to stop inflation or deflation. 

It's a vexing problem, I'll grant you that one.