The Allegator

"I do not deny the allegation, I deny the allegator." – Jesse Jackson

Home Archives for Taxes

National Budget Vs. Personal Budget

• U.S. Tax revenue: $2,170,000,000,000 • Fed budget: $3,820,000,000,000 • New debt: $ 1,650,000,000,000 • National debt: $14,271,000,000,000 • Recent budget cut: $ 38,500,000,000

Got it?

OK, now let’s remove 8 zeros and pretend it’s a household budget:

• Annual family income: $21,700 • Money family spent: $38,200 • New debt on credit card: $16,500 • Outstanding balance on credit card: $142,710 • Total budget cuts: $385

I’ve seen the above posted on a number of sites recently. I think it’s valid to think of the budget in these terms.

Sure, there are differences, such as our government’s ability to legally launder money, but the basic principles of home finance do relate, and taking eight zeroes off helps make things imaginable.

Considering that there are approximately 300,000,000 Americans, around half of whom don’t pay income taxes, it isn’t even too far off for figuring your own percentage of the debt.

Gimmicks aren’t going to change this chart. You can tax the people to give out loans (more debt) to small businesses, but that is mostly zero-sum. You can tax the people to pay for unemployment to encourage the unemployed to spend money to stimulate demand for products and thus create jobs, but that is like buying your employer’s product on your credit card in order to keep them paying your paycheck; It gets you nowhere or worse. You can tax the rich dry and barely make a dent in that number.

Just like in your personal finance, if you want to gain wealth, you need to provide something that someone else needs. If we aren’t selling more to foreign nations than we are buying, we are losing.

This isn’t so much a supply or demand problem as it is a relative value problem. If we are going to be on the losing side of this equation, we need to be printing money rather than borrowing it. This may not be fair to the savers, but they will fail right along with the rest of us on the current course.

Printing money eventually devalues it. A devalued currency will make imports more expensive and exports more affordable, putting us to our rightful place in the market again.

I would also support an eye-for-an-eye tariff policy to prevent socialist nations from taking advantage of us. Until one or both of these things are instituted, our economy will continue to decline.

Even with those changes, we also need to reduce our spending on the military, foreign aid, micromanaging regulations, incarceration, social programs for non-citizens, and benefits for public employees.

Last Place Aversion

The poor often vote against their own interests. The conventional wisdom on this has been that they one day aspire to be rich, and they are empathizing with their future selves’ wish to have low taxes more than their present situation.

A new study by the national bureau of economic research shows evidence of a much more plausible explanation. Participants were given various sums of money, and an income distribution chart that showed where they stood in relation to the field of other participants. They were then given the choice between giving their money to those below them in the income distribution, or to those above them. Which did they choose?

It varied, but for those who were right above the bottom, they tended to give the money to people above them on the chart. Had they given the moeny to the person below them, then they would have ceded their position and fallen to the bottom themselves.

This theory of last place aversion will make sense to you if you’ve worked a low income job in the years when minimum wage increases have been mandated. Let’s say minimum wage was five dollars an hour. You toiled away at the company for a year and got a fifty cent raise. Now along comes a dollar increase in the minimum wage. After a year of training and experience, you find yourself making the same wage as those who are newly hired. Sure, the company could just raise everyone by a dollar, but that’s a huge expense, and if you’ve been there, you know it doesn’t tend to happen, and that there is plenty of grumbling in the ranks, even when they got a bit of a raise themselves.

Why can’t we just be happy for those who got a wage boost? Why must we look to everyone else to determine our own self worth? If you give one of your pets a bigger treat than the other, you will see that we don’t have a monopoly on the concept of fairness. It’s a survival skill. It drives us to stay ahead of the pack, even if it means keeping the rest of the pack down.

Those who complain one day that the rich are too rich, may the next day complain that the person below them got a bigger raise than them. Handouts to specific groups who are seen as lower on the social totem pole can cause enough resentment to more than cancel out their benefits. Fairness is not a universal construct. Where you stand depends on where you sit.

"When I give food to the poor they call me a saint. 
When I ask why the poor have no food they call me a communist." Camara, Helder

Kucinich on Wealth Redistribution,

Here we have a man, Dennis Kucinich, who is a contender for being the farthest left of center in our government, speaking out against the legitimacy of that government, its monetary policies, and the two party system. What surer sign can we have that the system is broken?

I’ve spoken of Dennis Kucinich before. I don’t always agree with him, but he has my support for one simple reason.  He’s one of the few honest politicians we have left who are willing to speak out against their own party, their own president, even be the only dissenting vote in the house, to set things right. Look at recent legislation, if you are in Congress and you haven’t voted against your party lately, then you have no ethics and no credibility with me.

When Will the Deal Happen?

Back of Mt. Rushmore - When will the deal happen?

It seems that these days, Congress takes a few breaks each year from legislating on important topics like who can marry who and baseball to bicker over some massive piece of legislation. This legislation is always claimed to be crucial to the continuation of society as we know it (sometimes it really is!), and has a deadline for doom avoidance. For months we see news anchors biting their nails over which side is going to win and whether it will pass in time to avert disaster. When will the deal happen?

The answer is always the same: It will pass. It will pass because if it doesn’t, the legislators will lose money like the rest of us, their constituents will abandon them, and the populace will make what remains of their now final term really unpleasant.  Sure, some will vote the other way, but all they need is a majority.

Why do they wait? Why not just make a deal early on and be done with it? Because somebody has to lose, in fact, most of us have to lose.

Our problems are too big to solve in a way that makes everyone happy.  Take the budget for example. Taxing the rich isn’t nearly enough (and it makes them not rich, so it’s a short term solution), reducing the military is slow and more expensive in the short term than leaving it alone, and the problem needs to be solved now. Raising taxes on the middle class just shifts the overwhelming burden to another group who can’t bear it, without fixing the core problem, and the middle class are the majority of the voters. Stimulus is not much more than smoke and mirrors, and costs money we don’t have. Spending cuts cause outrage among those who are being cut and their sympathizers.

So what’s a politician to do? It’s pretty simple really. Put on a good show. Bang your fist on the podium, cry, point the finger at the other guys, all the while drilling home the point that the deadline of doom is approaching. The most important part is that you don’t make a deal until the clock has nearly run out. If you wait until the very end, you can vote something in that appears to address the problem and helps out your biggest donors (you know, the insurance companies, banks, the unions, and the military industrial complex). Then you go to the American people and you tell them that the other guys put the bad stuff in there, but you had to pass it to avert catastrophe because the deadline was up. If you make the deal early, they will claim you should have kept fighting, and that you sold out.

How do we fix the system?

  • Take on problems in smaller bites. Deadlines should be staggered rather than overwhelming. Bills should be mandated to be short and legible.
  • Transparency. These people are public servants and we should be allowed to hear what they say on our behalf. All discussions should be on public record.
  • Our taxes are a percentage of our earnings, so funding should be percentage based as well. That way, when revenue goes down, spending automatically matches it without the need for an emergency vote.
  • Stop taxing the trade of Dollars for gold and silver. It’s Constitutionally legal tender and allows people to shield themselves from the toxic inflationary effects of Congressional irresponsibility.
  • If you want the money out of politics, take away the power from politicians to choose winners and losers. Take away the mandated insurance, the mandated union memberships, the private military contractors, and the corporate bailouts, and the money will take itself out of politics.
While we call ourselves a government by the people, we have to ask Congress to enact these changes upon themselves, and they don’t have to listen. The politicians are more afraid of losing the support of the party than that of the voters. Make sure that whatever party you are registered under realizes that your support is conditional.

“Son, if you can’t take their money, drink their whiskey, screw their women, and then vote against ’em, you don’t deserve to be here.” – Sam Rayburn, longst serving Speaker of the House

California Affiliate Tax

The helping hand of the law - affiliate tax edition

California’s latest budget deal continues their now-familiar trend of chasing small business out of the state. In a desperate and unconstitutional power grab, they are saying that any business that is even affiliated with anyone in California has to pay sales tax on everything sent to customers in the state. This affiliate tax is toxic to the digital economy.

I’m most often complaining about Congress overstepping their bounds in controlling the states, but this is a rare case (Like Arizona’s recent immigration laws) where the opposite is true. Interstate commerce is squarely under the jurisdiction of Congress. Let’s say that a product is manufactured in Texas, sent to Colorado to an Amazon distributor, and then shipped to a customer in California; what’s to stop Texas from saying they can charge sales tax on the item because they made it? Or Colorado to charge it because they are where the sale was shipped from, or every state in between because it passed on through? The Federal government is there primarily for two purposes, foreign policy, and making sure states don’t enact anti-competitive laws that interfere with the commerce between the states, thus, states were only allowed to regulate transactions from those companies which they have jurisdiction over because of a physical presence in the state.

California is now claiming that I, along with ten thousand others are ‘sister companies’ of Amazon, because we are paid to advertise for them. I’m nobody’s ‘sister company’. I have no Obligations to Amazon, they don’t tell me what to do, we don’t have any claim over each other’s assets, I just post a link to Amazon on my page, and Amazon reimburses me for doing so when paying customers arrive there through my sites. I’m no more connected with Amazon than television networks who advertise for them, UPS who carries their products, or Visa, who handles their transactions.

Living in an extremely liberal town, I hear a lot of people cheering this affiliate tax as somehow sticking it to the evil corporations and finally making them pay their fair share, but that isn’t what is going to happen out of this. Amazon has already announced that they will end their business dealings with everyone in California, which means not only are ten thousand more Californians now very suddenly out of work, but California won’t see a cent of it, since the companies won’t actually be taxed after cutting ties, and California will be out the revenue from those people and quite possibly paying to add them to its welfare rolls. Also, it isn’t legally Amazon’s responsibility to pay sales tax on your purchases, it’s yours, so if you aren’t paying taxes on your online purchases, then point the finger at yourself first.

I wish I’d seen that this ship was sinking before I bought a home here. If it were any easier to leave, I would.