It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.
First, we must acknowledge that there is not one GOP tax bill, nor are there even two GOP tax bills. There is a multitude of ever-evolving Senate and House tax bills, with features popping up, only to be knocked down, like “Wac-a-Mole” creatures.
Here then is a partial list of possible issues, after which I’ll tell you the single, most important, all-encompassing issue.
POSSIBLE TAX BILL ISSUES:
- The federal deficit
- The federal debt
- Tax rate brackets
- Tax cuts for the rich
- Tax cuts for the middle
- Tax cuts for the poor
- Business tax rate cuts
- Alternative minimum tax
- The standard deduction
- Child tax credit
- Personal exemptions
- Dependent exemptions
- Itemized deduction for state and local income and sales taxes
- Mortgage interest deduction
- Itemized deduction on property taxes
- Business interest deductions
- Excise tax on payments from U.S.-based multinational firms to their foreign affiliates.
- 529 Education Saving Plan contributions
- Alimony deductibles
- Political advocacy by churches
- Tax credits for adoption and for disabled and retired people
- Deduction of student loan interest by former students
- Inflation indexing of some provisions
Regarding the above list, there are two things of which I am sure:
*No one — not you, not me, not Congress, not the Congressional Budget Office, and especially not Donald Trump — can know the net financial implications of these issues
*Yet, to get you to accept the final bill, Trump and the GOP will assure you that it is good for you and not beneficial to the upper .1%. Those will be lies, but 35% of you will believe whatever they tell you.
There is one, most important fact not being discussed by the media, the politicians, or the economists::
The fact: The federal government has neither need for, nor use of, your tax dollars.
Unlike state and local governments, the federal government is Monetarily Sovereign and so cannot run short of its own sovereign currency, the dollar. It uniquely creates brand new dollars, ad hoc, every time it pays a bill.
The U.S. dollar is backed solely by the asset: The full faith and credit of the federal government, an asset of which the federal government has an unlimited supply. It never can run short of full faith and credit; it never can run short of dollars.
Unlike state and local governments, the federal government needs no income. It doesn’t need or spend tax dollars. It doesn’t need to borrow, and in fact, it doesn’t borrow. The federal government could collect $0 taxes, and issue zero T-securities, and still continue to spend, forever.
Thus, the entire tax bill is based on the false assumption that federal taxes are necessary, and not just necessary but in short supply.
False assumptions lead to false conclusions. If for instance, you begin with the assumption that the earth is flat, then all the ideas about how not to fall off the edge are wrong. In its essence, the tax bill is an exercise in finding ways not to fall off the edge of a mythical world.
Not only do federal taxes not fund federal spending, but the very existence of federal taxes skews the economy:
*Without federal taxes, religions and other charities would receive far fewer contributions. Is a public purpose served when the government provides tacit financial support to religions? Is it even Constitutional?
*Most charities provide services and support the government itself should provide. Would the economy be more stimulated if the government added dollars to the economy by paying directly for activities now supported by charities?
*Homeowners can deduct property taxes, but renters cannot deduct rent (The owners deduct the taxes.) Is this bias toward ownership fair and economically beneficial?
*Long-term capital gains, short-term capital gains, salaries, and many other kinds of income all are taxed at different rates. This difference affects the activities in which businesses are willing to engage. For example, why should taxes related to Research & Development — not just R&D goals — determine the kind and extent of R&D?
*Business expenses, but not personal expenses, are partly funded by the federal tax deductions. Is this economically fair and beneficial?
*Some states collect income taxes; some do not. To the degree state and local taxes are deductible, they can be viewed as funded by the federal government. Is this economically fair and beneficial?
Federal tax collections have grown massively. In 1967, the government collected $149 billion in taxes. In 2016, the government collected about $3.3 trillion, a massive amount of money taken from the private sector. Of that, about $1.07 trillion is FICA — more than triple the amount of income taxes paid by businesses.
To demonstrate how huge $3.3 trillion is, imagine the federal government tripling the budgets for Food & Agriculture, Transportation, Social Security, Unemployment, Science, Energy, Environment, International Affairs, Housing, Veterans Benefits, Medicare, Medicaid, Education, and operating the Government — and still having dollars left over from the $3.3 trillion.
That is how many dollars are taken from the economy and destroyed in a year.
Yes, destroyed, because once dollars reach the U.S. Treasury, they cease to exist as part of any money supply measure. (The reason is simple. Because the government creates infinite dollars by spending, it is meaningless to ask, “How many dollars does the federal government have?” It either has zero or infinite, depending on how you define, “have.” [Go ahead, try it.])
The entire discussion of federal taxes should devolve to just one, most important issue:
How much does the private sector need?
It’s a complicated issue, involving human needs, economic needs, and politically calculated needs. In any event, we should not debate federal deficits, federal debt, or federal taxes, but rather: How much money should the federal government spend on the myriad areas that benefit the people of America?
That is the most important, all-encompassing issue — the only issue, really. All else is political theater for your amusement and confusion.
The Ten Steps to Prosperity (below) mentions just a few of our many needs, all of which can be solved or at least ameliorated by federal money.
How much federal money? What is the limit to the federal government’s deficit spending? Functionally, there is no limit. The federal government has the unlimited ability to create dollars. It never can run short. It can “sustain” any deficit.
But there is an economic limit to federal deficit spending, and that is an inflation that can’t be controlled via interest rate control. Raising interest rates increases the value of the dollar, which is anti-inflationary, and is the method used by the Fed to control inflation.
We never have had such an uncontrollable inflation in our history, but that event — not false worries about “unsustainable” deficits — would mark the limits to federal deficit spending. If we were ever to reach that point, we would have to cut back on spending or impose new taxes.
Until then, we should grow our economy, and not hamstring ourselves with harmful limitations.
Bottom line: The fact that the government doesn’t fund an expenditure does not signify lack of affordability or the so-called “unsustainability” of federal debt or deficits. It merely means the government doesn’t want to fund that expenditure. It’s a political, not a fiscal, decision.
Keep that in mind as you watch Congress in its phony “struggle” with tax cuts. It’s all a Big Lie — a performance acted out just for you.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
The 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 (Economic Bonus)) 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.