The hidden connection between cutting your state & local taxes and growing America.

Twitter: @rodgermitchell; Search #monetarysovereignty
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Most state and local taxes have to do with education, support for the poor, and infrastructure. Instituting the Ten Steps to Prosperity (below), especially Steps #3, #4, #5, and #10, will cut your state and local tax bill.

Because the federal government is Monetarily Sovereign, and neither needs nor uses tax dollars, it could assume, tax-free, much of the spending by the (monetarily non-sovereign) state and local governments.

Less state & local spending; less state & local taxes necessary. Further, the state and local governments rely largely on sales taxes, which are highly regressive, and far more poverty-inducing.

(Yes, I know. Libertarians tell you the federal government is too big, thus requiring state and local governments to carry the burden of service to the public. It makes no sense, but it’s what passes for economics these days..)

Additionally, Steps #1,  #2, #6, and #7 would reduce poverty . And all ten Steps would help narrow the Gap between the rich and the rest.

So what is the connection to growing America?

NewScientist Magazine
Childhood poverty can be a life sentence – we must act
The science tells a clear story. Politicians now have a duty to do something other than pay lip service to the problem

It’s rare that scientists are moved to tears by their research projects, but for Harvard neuroscientist Charles Nelson, that was once a daily experience.

In the late 1990s he and his team set up a long-running study of children living in Romanian orphanages. What they witnessed was so distressing that they had to make a rule: if you couldn’t hold back the tears, make sure you didn’t let the children see you cry.

Nelson set up the study to find out what early adversity does to child development – especially cognitive development. Institutionalised children are in terrible distress.

A more recent project in the slums of Bangladesh is likely to reach a similar conclusion. Poverty and squalor in childhood can be a life sentence.

Children in the West rarely endure the desperate levels of deprivation seen in the orphanages of Bucharest or the slums of Bangladesh, but many do experience genuine hardship.

In the US, 15 million children live in households with an income below the official poverty line. For a couple with two children, that’s $24,036 – about $16 per person per day. For everything.

Children who grow up poor lag behind at school and have worse health than their wealthier peers.

But even Western levels of poverty can have detrimental and long-lasting effects.

Children who grow up poor lag behind at school and tend to have worse physical and mental health than their luckier peers.

That’s 15 million children who are more likely to lag behind at school and have worse health.

That’s 15 million children who are less likely to be educators, researchers, inventors, physicists, doctors, or economic leaders — 15 million children who are less likely to win a Nobel prize — 15 million children less likely to help America grow.

Instead, these 15 million children are more likely to be sicker and to need help rather than giving help.

The negative effect of poverty on children’s brains is well documented:
Poverty Stresses The Brain So Much That It’s Like Losing 13 IQ Points
Poor concentration: Poverty reduces brainpower needed for navigating other areas of life
Poverty shrinks brains from birth

Alleviating child poverty can be done, but it requires political will.

From 1998 to 2010, approximately 800,000 children in the UK were lifted above that poverty line, largely because of policies designed to do so. But progress is fragile. Over the past five years 500,000 have slumped back in.

The Institute of Fiscal Studies forecasts that by the end of this parliament the number will have climbed back to its late-1990s peak, despite legally binding targets to reduce child poverty.

That is a shameful statistic. Politicians paying lip service to the goal while spectacularly failing to deliver it might be jolted into action by the fact that their abject performance is costing the taxpayer huge sums of money.

According to one recent analysis, dealing with the consequences of child poverty directly costs the UK government £15 billion a year, £3 billion more than in 2008.

The problem is not the financial cost of dealing with poverty.  After all, the UK  and American governments, being Monetarily Sovereign (though pretending they are not), can afford anything — and without levying taxes.

Here in America, we are so proud of our accomplishments — our moon landing science, our wealth, our democracy. But how much more would we have accomplished if we had educated an additional 15 million young people, using their brain power to grow America.

Why aren’t UK opposition parties holding the ruling Conservatives to account for not just failing to live up to their own targets, but for letting the gains of the early 2000s be lost – and squandering billions in the process?

Why isn’t the Labour party trumpeting its own admirable record on this issue, if only to highlight the fact that it is possible to make a difference if you actually want to?

Pardon the generality, but conservatives and liberals seem similar everywhere, the former tend more toward selfish and tight-fisted, and the latter tending more toward meek and weak-willed.

The conservatives angrily brand the poor as lazy takers, who do not “deserve” government assistance. The liberals softly offer solutions as humanitarian charity.

But helping the poor is not charity. Helping the poor is national self-serving.

Lifting children from poverty enables them to become productive adults, using their born-with intelligence to strengthen America.

Bottom line: Those who oppose poverty aid because the poor “don’t deserve help,” are simply forcing economic suicide on America, and are harming our nation and themselves far more than could a foreign enemy.

Rodger Malcolm Mitchell
Monetary Sovereignty


The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


5 thoughts on “The hidden connection between cutting your state & local taxes and growing America.

  1. Who specifically creates the money out of thin air? Is it the Fed? Can you provide hard evidence that supports this?

    Is it accurate to describe the portion of the national debt that belongs to Social Security as an IOU?

    What happens to the dollar bills once they are used to repay a loan to a bank or to pay taxes to the Federal gov?

    I also remember seeing a document which shows the amount of money deposited at the Fed, but I can’t seem to find it now; do you or does anyone have a link to said document? A reader of elizabethharris001’s blog posted this document on her blog but I can’t find it.

    BTW, this is not me questioning the veracity of MS; they are simply questions that are lingering in my mind.



  2. Congress and the President create each department’s budget. Based on the budget, each department pays its debts by sending wires or checks. When the wires or checks reach each creditor’s bank, the bank creates dollars by increasing the balance in the creditor’s checking account.

    SS doesn’t “own” any portion of the national debt. SS doesn’t own anything. All of the federal government’s internal accounting is mere record-keeping.

    If you try to follow dollars within the federal government, you will find yourself in a meaningless labyrinth, a black box from which dollars leave and dollars enter.

    Banks either recycle bills back to the public or send them to the Treasury for replacement. Who pays taxes with dollar bills?


    1. Thanks for the response.

      I was merely wondering what happens with the bills since paying money to the federal gov destroys money.


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