–Closing the gap between rich and poor: Eliminate all local taxes

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Background: The politicians, the media and the old-line economists worry about how our Monetarily Sovereign federal government will pay its bills, despite the absolute fact the government can pay any bills of any size, any time.

Perhaps those same politicians, media and economists, rather than thinking of ways to support a government that needs no support, should worry about how the middle- and lower-classes will pay their bills. I don’t know whether to laugh or to cry when I hear our leaders insist that federal taxes must equal federal spending (i.e. a “balanced budget”), while doing nothing to make sure the people of America have balanced budgets.

Caring more for the financial health of our financially omnipotent government than for our financially suffering poor- and middle-classes, demonstrates uncommon ignorance. Even more remarkable is the acquiescence of the lower classes to this outrageous, Tea/Republicanism.

If Bill Gates and Warren Buffet refused to give a dime to charity, because they wished to run their own “balanced budget,” the world would be outraged at such meanness. Yet, even Gates and Buffet are not Monetarily Sovereign. So what should we say about our government, which unnecessarily wishes to balance its budget on the backs of the citizens?

In several posts I have explained that lifting the poor does not involve bringing down the rich. Very simply, lifting the poor requires lifting the poor.

On July 11, 2010 I posted
“A partial solution for the gap between rich and poor: Education.” The post suggested that fully paid-for education, not just K-12, but all the way through college and beyond, would be one step toward lifting the poorer classes. I also suggested that the government actually pay people a wage for attending college.

I also have suggested that eliminating FICA, the single most costly tax on working people, would help lift the lower classes. Now, in typical Obama style, we almost, but not quite, will eliminate FICA. We temporarily will eliminate half of it. That is the symptom of this administration: Always too little and too late

There is another tax, or rather a group of taxes, that powerfully affect the lower classes: Local taxes. Cities charge them. Counties charge them. States charge them. Even the federal government charges them. What if all local taxes were eliminated?

Though the federal government neither needs nor uses tax income, the states, counties and cities, being monetarily non-soveriegn, do. So how will these local governments be supported?

Here’s a “What if?” for you to think about: What if the federal government offered to support every state, county and city on a per-capita basis, if these governments voluntarily would forego collection of all local sales and income taxes?

Consider Chicagoans. They pay taxes to Chicago, to Cook County and to Illinois. Here are the taxes residents pay just to the state of Illinois:

Aircraft Use Tax, Automobile Renting Occupation & Use Taxes, Bingo Tax & License Fees, Business Income Tax, Charitable Games Tax & License Fees, Chicago Home Rule Municipal Soft Drink Retailers’ Occupation Tax, Cigarette & Cigarette Use Taxes, Coin-Operated Amusement Device Tax, County Motor Fuel Tax, Dry Cleaning License Tax & Fee, Electricity Distribution & Invested Capital Taxes, Electricity Excise Tax, Energy Assistance & Renewable Energy Charges, Environmental Impact Fee & Underground Storage, Gas Tax, Gas Use Tax, Hotel Operators’ Occupation Taxes, Individual Income Tax, Liquor Gallonage Tax, Manufacturer’s Purchase Credit (MPC), Metropolitan Pier and Exposition Authority (MPEA) Food & Beverage Tax, Motor Fuel Taxes, Oil & Gas Production Assessment, Personal Property Replacement Tax, Property Tax Information, Pull Tabs & Jar Games Tax & License Fees, Qualified Solid Waste Energy Facility Payments, Real Estate Transfer Tax, Sales & Use Taxes, Sales of Aircraft & Watercraft by Lessors, Tax Increment Financing (TIF), Telecommunications Tax, Telecommunications Infrastructure Maintenance Fees, Tire User Fee, Tobacco Products Tax, Use Tax for Individual Taxpayers, Vehicle Use Tax, Watercraft Use Tax, Withholding (Payroll) Tax

Not only are these taxes costly for residents (The payroll tax alone is 5%.), but they are costly to collect. What if the federal government said to Illinois, if you will forego your $25 billion in total annual taxes, we will give you $2,000 per person. Since Illinois has about 13 million people, that would come to $26 billion. If you consider deducting for collection costs, the state would come out millions ahead. What would the citizens say and what would the politicians say?

Then there is Cook County. It will collect $2 billion in taxes next year. With a population of 5 million, making the same deal with the federal government would require $400 per person.

Finally, Chicago: It collects about $3 billion a year in taxes. With a population of about 2.7 million, federal support would amount to about 1,100 per person.

So, replacing all Chicago, Cook County and Illinois taxes would amount to $3,500 per person. If every city, county and state in America opted to forego taxes, the federal government would supply a total of about $1 trillion dollars.

In 2010, the federal government spent about $3.5 trillion, so would an additional $1 trillion (29%) to eliminate all city, county and local taxes in America be “affordable”? Would it cause the inflation, the “inflationistas” always worry about? For perspective, 2009 federal spending increased 29%, and 2010 spending increased another 20% on top of that. Are they affordable? Do we have inflation? Have any federal checks bounced?

Admittedly, there would be many issues to consider, not the least of which is the probability that local politicians like taxes. They are a source of power. But what would you, as a taxpayer, think about the elimination of all local taxation and the associated budget (collection) savings? Something to think about.

The U.S. government is Monetarily Sovereign. It’s about time we make use of that asset.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

–A timely reminder: Here is the cause of recessions and recoveries

Lest we not forget:
When do we have recessions and what causes recoveries?

Reductions in federal debt growth lead to recessions. Increases in federal debt growth cause recoveries.

Think of this graph the next time someone tells you the federal debt should be reduced.

Oh, and by the way:
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

Show this to your Congressperson and your favorite columnist.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

–The end of the euro as we know it. Greece, Ireland, Portugal, Italy, Spain too.

The PIIGS are monetarily non-sovereign, which means they cannot control their own money supply. One of the PIIGS, Greece, soon will leave the euro and re-adopt the drachma. It must.

As I said way back in 2005, “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”

The euro is a failed system. Long term, all monetarily non-sovereign entities require money to come in from outside their borders, either via money imports (exports) or via assistance from another government. There are no exceptions to this.

The U.S. became Monetarily Sovereign in 1971. It can create all the money it needs; it can pay any bills of any size, any time. But, you and I, the states, counties and cities all are monetarily non-sovereign. You and I receive income – i.e. money coming in from outside our “borders.” The states and counties receive money from exports, tourism (a form of export) and aid from the federal government.

My village, Wilmette, receives income from our neighboring big city, Chicago. Many of our residents work in Chicago and are paid by Chicago firms. We then take some of that Chicago money and pay taxes to Wilmette. That is how monetarily non-sovereign Wilmette survives.

Which brings us to Greece. Here are some excerpts from the excellent blog, “naked capitalism”

. . . Germany is activating “Plan B”, telling banks and insurance companies to prepare for 50pc haircuts on Greek debt. . . Germany is “studying” options that include Greece’s return to the drachma.

German finance minister Wolfgang Schauble . . . said there would be no more money for Athens under the EU-IMF rescue package until the Greeks “do what they agreed to do” and comply with every demand of `Troika’ inspectors.

Yet to push Greece over the edge risks instant contagion to Portugal, which has higher levels of total debt, and an equally bad current account deficit near 9pc of GDP, and is just as unable to comply with Germany’s austerity dictates in the long run. From there the chain-reaction into EMU’s soft-core would be fast and furious.

Let us be clear, the chief reason why Greece cannot meet its deficit targets is because the EU has imposed the most violent fiscal deflation ever inflicted on a modern developed economy – 16pc of GDP of net tightening in three years – without offsetting monetary stimulus, debt relief, or devaluation.
[…]
The Eurozone is addicted to a failing remedy. Even if it could get its integration act in gear, austerity, as we predicted, is only making matters worse.
[…]
So much for the idea that economists had learned from financial crises and developed better reflexes. Economics has to an increasing degree become an exercise in promoting ideologies to defend the privileges of the rentier classes. They look to be about to be hoist on their own petard. Unfortunately, a very large number of innocent bystanders will suffer along with them.

Though the PIIGS are monetarily non-sovereign and the U.S. is Monetarily Sovereign, there is at least one parallel: Austerity breeds austerity. Tax increases and federal spending decreases reduce economic growth, increase unemployment, and reduce the quality of life for all residents.

This is a lesson not yet learned by the Tea/Republicans, old-line economists and the media. These slow learners, by demanding a reduction in the federal deficit, effectively will make the U.S. monetarily non-sovereign, and will guarantee a return to recession if we are lucky and depression if we are not.

Greece is the bellwether. That nation demonstrates what happens to monetarily non-sovereign entities, long term. Though it is the Tea/Republicans who strive to make the U.S. monetarily non-sovereign, perhaps these politicians can be excused their ignorance. They are, after all, politicians. The economists cannot be so excused. They should know better.

Austerity breeds austerity, in the PIIGS and in America. Unless we see a dramatic change in economics understanding, the last chapters of the Age of America now are being written. These chapters will describe a life of misery for you, your children and your grandchildren.

It’s not to late to rewrite this ending. The first necessary step is to understand that a growing federal deficit is necessary — today, tomorrow and forever.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

–The next speech a courageous President Obama will give

This is the next speech President Obama will give — if he has courage:

My fellow Americans,

You have been told monstrous lies – by the media, by the Tea Party, by the Republicans, by the Democrats, and yes, I’m sorry to say, by me. And all these lies chipped away at our great nation. They led to the recession, to the non-recovery, to the unemployment – all unnecessary, all preventable and all curable. We, in Washington, have preached austerity, when we should have preached prosperity.

Well, the lies stop right here, right now. During the next 25 minutes, I’m going to tell you exactly how we’re going to get out of this mess and return to prosperity – and it all will happen within 12 months. No more austerity; from now on, think prosperity.

I am so confident in this plan, that if we adopt it, and do not return to prosperity within 12 months, I will tender my resignation. But more on that later.

First, we’ll rid ourselves of that ridiculous, deficit-reduction, super-committee. Forming this committee made as much sense as punting from your opponent’s ten-yard line. There simply is no way – I repeat, no way – to grow an economy by increasing taxes or with reduced federal spending. Cutting the federal deficit is the sure way to sink the economy. That is true today, tomorrow, and for all time in the future.

Our federal government is what’s called Monetarily Sovereign, meaning it has the unlimited ability to pay any debt of any size. There is not one reason – not one – to reduce the deficit or the debt, and plenty of reasons not to. Consider that deficit-reduction committee gone.

Second, we’ll get rid of FICA. No more lies. Here’s the truth: FICA does not pay for Social Security. FICA does not pay for Medicare. FICA does not pay for anything. It is nothing more than a useless – no, harmful – tax on the working class. Before 1971, when we still were on a gold standard, FICA was needed. But that need ended. Our government now has the unlimited ability to create dollars. FICA is an obsolete carbuncle on the neck of our economy.

Medicare and Social security are federal agencies. Like all of the thousand federal agencies – like the Department of Defense, like the Supreme Court, like the White House, like Congress itself – all federal agencies are supported in exactly the same way – by federal spending.

There is no FICA for the military, there is no FICA for Congress or for the courts or for the White House. There is no FICA for the CIA or the FBI. And starting now, there will be no FICA for Social Security or for Medicare. Like every other federal agency, they simply will be supported by the federal government.

What will this accomplish? Not having to pay FICA will put money in your pockets, so you’ll be able to save more and spend more. Not having to pay FICA will put money in the pockets of businesses, large and small, so they’ll be able to invest more and hire more. And when you spend more, that will stimulate business to hire even more. And all those new hires, will spend even more – and the economy will grow toward prosperity. Consider FICA gone – one less burden on your shoulders.

Not only will FICA end, but Medicare and Social Security will expand. Every year, the qualifying age for Medicare will be reduced by one year, until in the future, every man, woman and child in America will covered by Medicare – and not just today’s Medicare, but an expanded Medicare, with fewer holes and better payments do doctors, nurses and hospitals. That not only will save you money, but increase the number and quality of doctors, nurses and hospitals. Millions of American lives will be saved, extended and improved. You’ll live longer and healthier lives, as will your children and your grandchildren. Isn’t this what we all want?

And Social Security – it once again will begin at 65, and we’ll raise those pathetic benefits so that our older citizens actually could live on them.

Third, we’ll begin to increase the standard deduction on income tax, by $10,000 each year. This means, fewer and fewer people, in the lower income groups, will have money taken from their pockets. Today the standard deduction is about $5,000. Next year it will be $15,000. The following year, $25,000. Within ten years, no one earning less than $100,000 will pay any federal income tax at all. You’ll keep all the money you earn. The federal government doesn’t need your tax money, so it won’t take your money. Remember, since 1971, the federal government has had the unlimited ability to create dollars. So, why would it need your tax dollars? It doesn’t.

I know what you’re thinking: Inflation. Don’t worry about inflation. I’ll address that in the next couple of minutes. Think only about the money you’ll save and how that will grow our economy – and what prosperity will mean to you and to your loved ones.

Fourth, the federal government will send every man, woman and child – every American citizen – a check for $5,000, to do with as you choose. Pay your rent or your mortgage. Buy food. Make a down payment on a car. Pay a college tuition. Buy some clothes. Take a vacation. It’s your money. This will give the economy the powerful kick in the butt it needs.

And don’t worry; the government can afford it. So, consider your $5,000 check a down payment on your prosperity – your reward for putting up with all the lies, the compromises, the politics the recessions, the unemployment your government has foisted on you.

There will be other parts to the plan, the details of which I don’t have time to discuss, now. The federal government will help the states – which by the way, do not have the unlimited ability to pay bills –get out of their financial problems. And the government will increase support for road and bridge repair and building, transportation, research & development, education, policing, food and drug inspection, and many other important functions on our march to prosperity.

What will all of this cost? I estimate about $4 trillion the first year, and even more in succeeding years. Can the government afford it? Yes, the government could afford ten times that amount. There is no limit to what the federal government can afford.

And that brings us back to the subject of inflation. Visualize this: Say a fire has started in your house. You worry that if you call the fire department, and they pour water on the fire, the water could get into the carpets, and at some time in the future, mold could grow, and if it does, you might be allergic to that particular strain of mold. So what do you do? Do you call the fire department to put out the fire, or do you wait for fear of a possible mold you possibly could be allergic to, some day in the future?

Well America, our house is on fire, and that fire – that recession and unemployment — needs to be dealt with now. Not tomorrow, not next week, but now. We’ll take care of this immediate problem first, and if – big IF – if we have mold, that is if we have inflation, we’ll deal with that too, and here is how:

Tomorrow, I’m going to call Mr. Ben Bernanke, Chairman of the Fed, into my office and say to him, “Ben, you have one assignment. It’s not to regulate the economy; it’s not to stimulate bank lending; it’s not to cure the recession. Those are my jobs. Your one assignment is very simple: Do exactly what you’re best at: Control inflation. That will be your sole focus.

“If you see inflation going above your target, do what you do – raise interest rates, buy T-bills — do what you always have done to prevent and cure inflation. And if – another big IF – if despite all your best efforts, you still can’t control inflation, we simply will cut back on spending. But we’ll keep that in card our back pocket, to be used only if – big IF –if all the other methods you successfully have employed over the years, somehow stop working this time.”

So that’s a brief outline of my plan for prosperity. Within two weeks, I will present to Congress, the details of the plan, along with a simple choice: Accept it or reject it. Vote for prosperity or vote for austerity.

There will be no more compromises. No more chipping away at this corner or that. No more delays, no more lies, no more politics. Take it as is, or leave it. If Congress takes it, I guarantee we will have prosperity within 12 months. If I am wrong I will tender my resignation, so sure am I of its success.

If Congress rejects the plan as is, I also will tender my resignation, because I refuse to be a lame President, trying to work with one hand tied and with plans I know will not work. The focus has changed. I don’t care about re-election. I care about you; I care about America. And I expect every member of Congress to feel the same way.

I’d much rather leave the Presidency, and write books, and travel the world with my beautiful family, and give hundred-thousand dollar speeches, and live the life all former Presidents live, than to sit quietly in the Oval Office, suffering in frustration over a failing economy I know I could cure, if only I were allowed to.

So there are the broad strokes, and soon you will see the details. Congress can accept the plan, and we will have prosperity, or Congress can reject the plan and we will have austerity. No more lies. No more compromises. No more politics. The choice is theirs, and the choice is yours, America, because ultimately you tell Congress what to do.

Contact your Congressperson and tell him or her what you want. Prosperity or austerity. Prosperity or austerity. That is your choice for yourself, your children and your grandchildren. Prosperity or austerity.

God bless you and watch over you as you and Congress decide.

That is the speech a courageous, dedicated, honest, sincere President Obama will give.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

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