Ten Steps to Prosperity: Step 7. Increase the standard income tax deduction, annually.

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders.
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We begin with four facts:

  1. Unlike state and local governments, which are monetarily non-sovereign, the Monetarily Sovereign U.S. government neither needs nor uses tax dollars. It creates all the dollars it needs and uses, ad hoc, each time it makes a payment.
  2. Tax dollars paid to the federal government disappear from the money supply. They effectively are destroyed.Image result for destroy money
  3. Smaller economies have a smaller money supply than do larger economies, so for an economy to grow, its money supply must grow.
  4. A large and growing Gap between the rich and the rest damages American democracy by allowing a select few to be masters of the vast majority.

The first three statements tell us federal taxes do not fund federal spending, and they inhibit economic growth. The fourth statement tells us the Gap is the single biggest economics problem facing America and the world.

Why does the federal government collect taxes?

History: Monetary Sovereignty is not an absolute. It exists in degrees. Our federal government has not always been as Monetarily Sovereign as it is today. When it put itself on gold or silver standards, it voluntarily limited its own ability to create dollars by the amounts of gold or silver it owned.  With dollar-creation limited, the government had to levy taxes in order to obtain dollars. Federal taxes are a relic of those days.

Economic ignorance: Virtually all governments, even those that are Monetarily Sovereign, levy taxes, because they always have, and so the populace’s understanding of Monetary Sovereignty is limited.

Control: The power to tax is the power to control. Tax laws help governments control the private sector, by favoring certain industries, companies, and individuals. The laws also favor the rich over the rest, for it is the rich who write the laws. Even though Monetarily Sovereign governments do not need to obtain their sovereign currencies from outside, the rich wish to continue taxation so as to retain control over the populace.

Since federal taxes do not fund federal spending, and they inhibit economic growth, do they have any economic value at all?

Some claim that federal taxes create a demand for U.S. dollars, because the federal government (and local governments) require payment of taxes in dollars. While this may have some truth, the real value of U.S. dollars does not come from taxes but rather from the dollar’s worldwide acceptability in the payment of all forms of debt.

This acceptability is based not on taxes but on the full faith and credit of the U.S. government, which includes:

A. –The government will accept only U.S. currency in payment of debts to the government
B. –It unfailingly will pay all it’s dollar debts with U.S. dollars and will not default
C. –It will force all your domestic creditors to accept U.S. dollars, if you offer them, to satisfy your debt.
D. –It will not require domestic creditors to accept any other money
E. –It will take action to protect the value of the dollar.
F. –It will maintain a market for U.S. currency
G. –It will continue to use U.S. currency and will not change to another currency.
H. –All forms of U.S. currency will be reciprocal, that is five $1 bills always will equal one $5 bill and vice versa.

Anyone can create money. You and I could create our own versions of money. The only problem would be our money’s acceptability, because our full faith and credit is limited.

Some also claim that federal taxes defend against inflation by reducing the money supply. However, taxes offer a very poor defense against inflation because taxes are far too slow to react (When will Congress pass a new tax law, when will the new taxes be collected?), far too political (Which taxes will be raised, lowered or newly created?) and not incremental (How much should each tax be changed?)

In contrast, the Federal Reserve controls the demand for dollars by setting interest rates, which it can do instantly and in small increments so as not to overshoot or undershoot its inflation targets.

On balance, federal taxes have very little practical value, and certainly not enough to warrant the massive damage they do to economic growth.

This leads us to the questions: Which federal taxes should be reduced and by how much? Our answer to the first question: Reduce taxes that do the most damage to our economy.

Step #1 of the Ten Steps to Prosperity suggests we eliminate FICA. It is the most regressive tax in America and as such, it widens the Gap between the rich and the rest.

Step #6 suggests we eliminate business taxes, because our economy is measured by business success, and businesses provide the populace with Gap-narrowing dollars.

As the next Step, we suggest #7, Increase the standard income tax deduction, annually.

When paying your income taxes, you can itemize your deductions, or you can claim a standard deduction of $6,350 for single taxpayers and $12,700 for married taxpayers filing joint returns.

The standard deduction reduces the income on which you must pay tax. It has risen slowly in the past 20 years, in response to inflation.  In 1997, it was $4,150 for single taxpayers and $6.900 for married taxpayers filing joint returns.

This brings us to the second question: How much should income taxes be reduced (i.e. How fast should the standard deduction be increased, annually?)

We can debate specific numbers, but some expertise in tax statistics would help. An instant suggestion would be to double the standard deductions every year for 15 years, and then increase them only in line with inflation. That would yield this table:

STANDARD DEDUCTION FOR: SINGLES || MARRIED
After five years: $200,000 || $400,000
After ten years: $6,500,000 || $13,000,000
After fifteen years: $200,000,000 || $400,000,000

At this point, only the very wealthiest few among us would be subject to income tax payments.

Summary: Federal taxes punish taxpayers and harm the economy. The federal government neither needs nor uses 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 (Step #1) and business taxes (Step #6) would be good early tax steps.

Annual increases in the standard income tax deduction (Step #7) would further narrow the Gap between the rich and the rest.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
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 A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) 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 EVERYONE Five 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 benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
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.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce 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 business 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.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
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.

MONETARY SOVEREIGNTY

8 thoughts on “Ten Steps to Prosperity: Step 7. Increase the standard income tax deduction, annually.

  1. One of your problems is guys like former senator, Dr. Tom Coburn , R-Okla. going around on TV (MSNBC-Morning Joe) saying we still have trillions of dollars of existing national debt and even hundreds more trillions of unfunded liability. This guy has no solution, except just be afraid. And I noted a chuckle and smile from the host telling him ” Yes we’ll have to visit that dilemma again in another show.”

    Obviously guys like that only reinforce to keep your message suppressed and at the same time try to make themselves appear smug, knowledgeable and responsible. If that much debt were really a future problem it would be like a real sci-fi movie with real dire consequences, such as a huge meteor or plague or alien invasion coming at us. And society would be scared crapless, panicking and marching all over the place, not smiling and chuckling on camera.

    I’d like to ask the fear mongers “how” they will solve the problem of the wolf at our door. Or are they the wolf?

    If Monetary Sovereignty can’t come to the rescue then, like in the sci-fi flicks, it’ll have to be scientific economy, which is my contention. Evolution will force society one way or the other to realize the truth.

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    1. Yes, I was the Banker in a Monopoly game, when the bank ran short of Monopoly dollars. It had an “unfunded liability.”

      Fortunately, the bank is Monetarily Sovereign, so we cut up some pieces of paper, wrote numbers on them, and continued the game.

      The federal government has the unlimited ability to do the same.

      (Oh, yes. The Monopoly game experienced no “inflation.”)

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      1. ….The federal government has the unlimited ability to ‘cut up some pieces of paper, write numbers on them, and continue the game.’

        I think the utter ease with which you present MS runs counter to the centuries of difficulty of trying to compete for limited amounts of money purposely held scarce as a means of retaining the gap and controlling the masses. Traditionally scarce money is simply not perceived to be a pushover as with the way you’ve rolled out Monetary Sovereignty.

        This is one reason why people who publically try to explain MS are met with smirks and head shaking. It’s not like sex or changing your clothes. Rather, it’s supposed to be a pain, because it’s associated with earning a living, pulling your weight, fitting in, giving up your individuality, and doing it all for the better part of your life with little or no guarantees as to your future security or happiness or longevity.

        Nevertheless you fight the good fight.

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        1. Every economic group wants to widen the Gap “below” them. They want the groups “below” them to struggle, so as not to get too near.

          No one wants “them poor folk” living next door, but it would be nice if a millionaire family moved in.

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  2. What you need is for some people to start making signs for their protests that say “Monetary Sovereignty Now” or words to that effect. If the media picks up on it you may get MS’s foot in the door. I see a lot of other clever phrases on those signs. Now’s a good time to go beyond merely being clever and get people thinking what the heck is –Monetary Sovereignty?

    Let the conversation begin ….IF the media so dares and isn’t a puppet of the ultra right, status quo.

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    1. That would help. Unfortunately, the progressive movements like “Occupy,” “Flip the Debt” and the Women’s March” have been unfocused demonstrations, with everyone having a different goal.

      I suggested to the Occupy people that they focus on Monetary Sovereignty, but seemingly they felt they knew what they were doing.

      But big crowds of angry people accomplish nothing unless there is focus.

      The leaders of movements first must be made to understand, then acknowledge, Monetary Sovereignty.

      First step: We all must phone (not Email) the Washington office (not the local office) of our Senators and Representatives.

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      1. Short run immediate gratification is what they seem to be enjoying, like taking a swing at an opponent & hoping to land a punch. Reminds me of a lot of boats all going in different directions.

        MS or any intellectual proposal is a long term appeal to the Mind, not the mindset of the mindless naïve who only want to let off steam (or look for a fight) without a long term plan requiring constructive thought. One quietly works behind the scene; the other makes one. The difference is frustration and impatience

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