–Online sales taxes: The five issues and the one solution to all five

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Online sales taxes involve several issues. The proposed solutions make the situation worse, not better, and new thinking is needed.

States, Congress rallying for an e-sales tax
Washington Post, By Amrita Jayakumar, Published: July 8, 2012

A wave of states have passed laws that will require consumers to pay sales tax on all Internet purchases as soon as next year.

For states struggling in the troubled economy, this could mean $23 billion in new revenue each year. The movement in state capitals is driving newfound support for a proposed bill in Congress that could make collection of sales tax a standard practice on the Web, no matter where a consumer logs in to shop.

Bricks-and-mortar retailers are cheering the moves. For years, their online rivals have resisted charging sales tax, giving them a price advantage. They have cited a 1992 Supreme Court ruling that let online companies off the hook if they didn’t have a physical presence in the state where the customer lived.

A Web trade association that includes eBay, Overstock.com and Facebook is fighting the new bills. But notably, Amazon.com appears to have waved the white flag and supports the sales tax measures.

Prices are so low online that retailers have long decried what they call the “showrooming” effect. Customers visit shops, try out different products and then buy them cheaper online, sometimes on their smartphone while they are still standing in the store.

On the other side is Net-Choice, the trade association of e-commerce companies. Its argument is that tax calculation for thousands of jurisdictions country-wide is an impossibly complicated task.

“The burden falls disproportionately on a small business,” said Steve DelBianco, executive director of NetChoice. The new bill exempts online businesses making less than $500,000 a year from collecting sales tax. NetChoice says that threshold is too low.

Buried in this article are at least five issues. Let’s briefly comment on each:

1. The states need the money: Unlike the federal government, the states are monetarily non-sovereign. They cannot create dollars at will, so must rely on income to pay their bills.

For long term survival, a monetarily non-sovereign entity must have income from outside its borders. Some states rely on a positive balance of trade — exports such as oil, agricultural products and tourism — and most states enjoy income from federal spending.

Because state taxes are internal, they merely recirculate dollars within the state, and do not provide long term, financial support. A portion of online tax dollars would come from outside the state, so would provide needed support, while negatively impacting other states’ economies by taxing their citizens.

Online sales taxes are a “beggar-thy-neighbor” strategy.

2. Collecting online taxes will burden the lower income 99% (who spend the largest portion of their income on purchases of goods). This tax will increase the net income gap between the 99% and the upper 1%.

3. Retail fairness: “Brick-and- mortar” stores have an advantage, too. They allow people to handle merchandise and be helped by in-person representatives. Is this “unfair” to online retailers?

On the other side, brick-and-mortar store require people to travel to the store, to see the merchandise. Is this unfair to them? States tax some in-store merchandise, while not taxing other in-store merchandise. Is this unfair to some manufacturers? Some states tax more than other states. Is this unfair to the taxing states?

It is not the role of the federal government to support various definitions of retail “fairness.”

4. Complexity: A retailer in my town collects Illinois, Cook County and Wilmette taxes on every purchase. Multiply this by thousands of taxing bodies in America, and you have massive complexity.

Yet, a computer program — probably an inexpensive app –could handle this complexity easily. In today’s computer world, complexity is not a valid excuse for non-compliance.

5. Would the counties, villages et al receive their fair share of online taxes? Each state would handle this differently, but I suspect that for the most part, the counties, villages et al would be screwed. The states would keep all the money.

The federal government should not step into state internal business and address this “unfairness”.

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So there are at least five issues:
–State money needs
–The gap between the 1% and the 99%
–Retail fairness
–Complexity
–Intra-state tax allocation fairness

All of these issues could be resolved by the simple expedient of federal, per capita support for the states.

Recommendation:

State and local government tax collections totaled $1.4 trillion in the 12 month period ending March 2012 (U.S. Census). This approximates $5,000 for every man, woman and child in America.

What if every state, county, city et al gave up the costly, arduous and economically unfair practice of levying, collecting and adjudicating myriad taxes, and instead received from the federal government, $5,000 per capita.

There would be no local income taxes, no sales taxes, no property taxes — no lost time filling out tax forms, no non-productive cost of tax collection, no non-productive cost of prosecutions for tax avoidance, no unfair burden on the lower 99%, no burden on businesses, in fact, no tax burden at all. It would be pure economic stimulus.

The whole, local tax payment/enforcement process, as it currently exists, is the most monumental waste of human resources in America. We need new thinking.

Instead of that waste, each year, the federal government should provide America with a $5,000 per capita stimulus, benefiting not only the national economy as a whole, but individually, the economies of every state and local government.

Rodger Malcolm Mitchell
Monetary Sovereignty

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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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports

#MONETARY SOVEREIGNTY

–No, it’s not your imagination. The upper 1% really are screwing you more.

No, it’s not your imagination. The upper 1% really are screwing you more.

The Gini ratio measures income inequality. A Gini of zero would show perfect equality where everyone has the same income. A Gini of 100 (percent), would show maximum inequality, where only one person receives all the income.

Here is what has happened in the U.S.:

The above graph shows inequality in the U.S. has risen dramatically during the past 45 years.

Here is how we compare with other nations:

(From Wikipedia)

Income inequality in the U.S. is greater than all nations but Brazil, and essentially the same as Mexico and China.

Here’s a more complete view:

(Wikipedia)

The only nations with greater income inequality are shown in orange, red and brown.

Specific numbers for Europe are:

Not one European nation is as unequal as the United States.
.

Advice to the upper 1%
Ten suggestions about how to screw the lower 99% even more, and increase the income gap

1. Maintain or even increase the FICA tax. This tax directly punishes lower salaried people. Institute a national sales tax or VAT. Poorer people devote a greater percentage of their income on consumption.

2. To “save” Social Security, tell the 99% it’s insolvent, so you must reduce benefits and continue to increase the SS starting age. Also, continue to tax SS benefits, as these benefits are most important to lower income people.

3. To “save” Medicare, tell the 99% it’s insolvent, so you must reduce payments to doctors, hospitals and other health care providers. That way, more of the best doctors will opt for “boutique” practices that only the 1% can afford. Don’t pay for expensive procedures (that only the rich can manage).

4. Cut military spending. The military employs the 99%. Military equipment production companies provide jobs to the 99%. Keep cutting postal and other government employment. Also cut domestic spending, as the vast majority of domestic spending benefits the 99%.

5. “Broaden” the income tax base by increasing the number of lower income people forced to pay taxes. Continue the Alternative Minimum Tax (AMT); it catches more of the 99% every year, and the 1% know how to avoid it.

6. Cut federal spending to reduce “big government.” The reason: Most federal spending creates jobs for the 99%. Especially cut food stamps, unemployment compensation, Medicaid, aid to education, job training and all other federal aid programs. The upper 1% don’t use them.

7. Cut financial assistance to the states. Virtually everything the states do benefits the 99%, and since the states are monetarily non-sovereign, they only can get money by taxing their own people, tourism or exports. The rich know how to avoid taxes. Tourism and imports mostly are inter-state money transfers.

8. Continue to spread the myth that the U.S. government is, or soon will be insolvent, like Greece, and that federal taxes pay for federal spending. These ideas confuse the 99% and give you a good excuse to cut anything that benefits them. Continue the federal debt limit exercise. Pretend federal finances are the same as personal finances.

9. Continue to allow banks to trade for their own accounts, and always bail them out when their investments go sour. Never accuse any banker of criminal activity. Banks are special.

10. Nominate more arch conservatives to the Supreme Court. Scalia, Alito and Thomas are good models. The “Citizens United” decision was an excellent step forward in providing the rich with greater power.

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

–Under the title, “Any Idiot Can Express An Opinion,” here is the opinion of Washington Post’s Jonathan Rauch

You cattle can moo all you want. You don’t understand what’s going to happen to you, and no one is listening, anyway.

A plan that offers Obama a fighting chance
By Jonathan Rauch, Published: July 5, 2012

Obama should draw a map and send it to Capitol Hill in the form of a bill — a president’s strongest statement that he intends action. A big legislative proposal can frame the issue and paint Obama’s intentions in bold colors. It should include three elements:

1) Long-term fiscal retrenchment. The easiest and best way is to adopt the Simpson-Bowles deficit plan.

2) Short-term economic stimulus. Republicans will howl about more spending. Let them. Stimulus measures make sense when unemployment is high and the world is teetering on the edge of a second recession.

3) A two-year debt-limit extension. Declare that another debt-limit fiasco is unacceptable and demand that the issue be taken off the table. Let Republicans explain why they want to hold a gun to the economy’s head.

For those who may have tried to forget that ill-fated, ill-considered Simpson-Bowles plan, here is a summary from the New York Times:

—Deep cuts in domestic and military spending starting in 2012.
–Overhaul the tax code, eliminating or reducing the $1 trillion a year in popular tax breaks for individuals and corporations and using the revenues mostly to slash income tax rates but also to reduce deficits.
–To make Social Security solvent for 75 years, raise payroll taxes for the affluent and reduce future benefits, including by slowly raising the retirement age for full benefits to 69 from 67 by 2075.
—Reduce deficit spending by about $4 trillion over the coming decade.

So let’s add it all up. Mr. Rauch would adopt a plan that cuts federal spending, increases federal taxes and thereby, reduces federal deficits. It would take money out of the pockets of the poor and middle classes, not only by increasing FICA, but by reducing Social Security benefits.

But, Rauch also says (his words), “Stimulus measures make sense when unemployment is high and the world is teetering on the edge of a second recession.” Huh? Is this man daft?

How (and for that matter, why) does a nation simultaneously cut spending and increase taxes, while instituting economic stimulus? Shall we also give a left-arm transfusion to someone who has lost blood, while we drain blood from his right arm? Is this what passes for intelligence in today’s media?

Bottom line: Money is the lifeblood of our economy. GDP is a common measure of the economy. And:

GDP = Federal Spending + Private Consumption and Investment + Net Exports

So, for you media writers who do not understand algebra, to grow GDP, it’s necessary to increase Federal Spending and/or Private Consumption and Investment, or Net Exports.

But a tax increase reduces Private Consumption and Investment. And a spending cut reduces Federal Spending (as well as Private Consumption and Investment). And there is nothing mentioned about Net Exports.

Everything in Simpson-Bowles is designed to reduce GDP. That plan is just another name for “austerity,” which has destroyed the economies of Europe, and which presumably makes it attractive to American media.

Finally, as for the two-year debt-limit extension, any economist worth his salt will tell you the debt limit is obsolete, nonsensical, unnecessary and overall stupid. It effectively limits yesterday’s budgets (Think about that), and is meaningless for a government that became Monetarily Sovereign on August 15, 1971.

Sadly, the Jonathan Rauch’s of America (prime candidates for the flat-earth society) have the public’s ear. Voters do not realize what the media/political establishment is doing to them, in the name of the upper income 1%, and nobody with a voice is talking.

We voters are cows being pushed into the slaughter house. We go where we are prodded, mooing loudly and ignorantly, not understanding what awaits us, while the upper 1% just laughs.

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

–A helpful message from a real Medicare expert: AARP’s Patricia Barry

This isn’t news to you. Readers of this blog know the American Association of Retired People (AARP) is a shill for the upper 1% income group.

But I continue to be impressed with the cleverness of their anti-99% message. They pretend to offer a helping hand, while the other hand stabs you in the back. Here’s an example.

According to AARP, Patricia Barry is a “Medicare expert.” Read this direct quote from the AARP website:

medicare expert
PATRICIA BARRY

Patricia Barry, senior editor of the AARP Bulletin and its online Ms. Medicare columnist, is a recognized authority on Medicare and Medicare Part D prescription drug coverage. She has written extensively about Medicare and other health care issues for consumers and is author of the book Medicare Prescription Drug Coverage For Dummies (Wiley, 2008).

They even provide a photo of Ms. Barry, a kindly, grandmotherly type.
Really, would this sweet, honest, “Mayberryesque” face ever lie to you?

At What’s in Store for Medicare? gentle Ms. Barry pretends to evaluate several plans meant to “save” Medicare.

She lists the pros and cons of each plan, but these pros and cons are a decoy. They are not the real message. The real message to AARP members is: Medicare will run out of money unless taxes are increased or benefits decreased.

That is the myth with which the upper 1% income group indoctrinates the lower 99%. The purpose: To spread the income gap between the two. The greater the gap, the greater the power the 1% has over the 99%.

In the guise of being helpful, AARP hides the fact that Medicare cannot run out of money unless Congress wants it to run out of money.

Here are a few excerpts from Ms. Barry’s article:

Changing the way Medicare pays for benefits: Under the Ryan plan — known as “premium support” to its proponents and as a “voucher system” to its critics — the government would allow you a certain sum of money to buy coverage from competing private plans or from a revised version of traditional Medicare.

This would put Medicare on a budget to hold down spending and reduce the tax burden on future generations.

Of course, no Medicare plan can “reduce the tax burden on future generations,” simply because there is no relationship between Medicare benefits and Medicare taxes. Medicare taxes could be zero, and Medicare still could continue as always — even increase benefits.

In a Monetarily Sovereign government like ours, federal taxes do not pay for federal spending. The government actually creates dollars by spending.

But the upper 1%, with AARP’s connivance, want you to believe the 99% must sacrifice for the sake of “future generations.” (Never mind that cutting benefits is guaranteed to burden future generations.)

And then there’s this:

Raising Medicare eligibility age to 67: Eligibility for Medicare has always been at age 65, except for younger people with disabilities. This proposal aims to gradually bring Medicare in line with Social Security, where full retirement age is now 66 and set to rise to 67 by 2027.

With more Americans living longer, and health spending on older people rising, we can’t afford Medicare at age 65.

Oh, kindly Ms. Barry, who is the “we” who can’t afford Medicare at age 65? Surely you don’t mean our federal government, which being Monetarily Sovereign, has the unlimited ability to create dollars.

And note the subtle message — “bring Medicare in line with Social Security.” See, it really isn’t a benefit reduction; it just brings Medicare “in line.” Doesn’t everyone want things to be “in line”?

Raising Medicare premiums for higher-income people: Most people pay monthly premiums for Part B, which covers doctors’ services and outpatient care, and for Part D prescription drug coverage. People with incomes over a certain level — those whose tax returns show a modified adjusted gross income of $85,000 for a single person or $170,000 for a married couple — pay higher premiums.

For: The easiest way to bring in more money for Medicare would be to raise the premiums even more for higher income people — so that the wealthiest older people pay the full cost and receive no taxpayer-funded subsidy. Another option is to lower the income level at which the higher premium charge kicks in, so that more people have to pay it.

By pretending the tax hits “wealthiest older people,” angelic Ms. Barry neglected to mention two details: Medicare taxes are paid against salaries, not against other forms of income. But for the 1%, salaries are a minor part of income. Raising the tax rate would affect salaried workers — the middle classes, while leaving the upper 1% largely unscathed.

And Medicare costs are a much larger percentage of the 99%’s income than of the upper 1%’s income. Any tax increase or benefit decrease hurts the 99% while barely being noticed by the 1%.

And, of course, there is no need to “bring in more money for Medicare.”

Changing medigap supplemental insurance: About one in six people with Medicare buys private supplemental insurance, also known as medigap. It covers some of their out-of-pocket expenses under traditional Medicare, such as the 20 percent copayments typically required for Part B services. This option would limit medigap coverage, requiring people to bear more out-of-pocket costs.

People buy medigap to limit their out-of-pocket spending in Medicare. But because they pay less, they tend to use more Medicare services, increasing the burden for taxpayers.

Ms. Barry suggests another clever way to cut Medicare benefits: Make benefits more expensive. Force people to pay more out of their own savings, a true burden on the 99%, though meaningless for the upper 1%.

Adding copays for some services: Medicare does not charge copays for home health care, the first 20 days in a skilled nursing facility — rehab after surgery, for example — or for laboratory services such as blood work and diagnostic tests. Several proposals would require copays for one or all of these.

Added copays would discourage unnecessary use of these services. Over 10 years, copays could save Medicare up to $40 billion for home health, $21 billion for stays in skilled nursing facilities and $16 billion for lab tests.

Subtle and clever, too — discourage “unnecessary” use. Of course, it would discourage necessary use, too, further burdening the 99%.

At no time has Ms. Barry or any voice of AARP expressed even the slightest skepticism about the need for increasing taxes or cutting benefits. Rather, by various “helpful” means, AARP spreads the myth that the 99% must sacrifice more.

This is what we see happening in Europe, with ever more future austerity being promoted as the solution to . . . well, to current austerity. Europe is the model for America’s 1%, where the middle- and lower-classes are being subjugated by the upper 1% class.

AARP, a private organization run by wealthy people, is a perfect propaganda arm for the upper 1%, in that it masquerades as an ally of the 99%. It’s like having your own grandma steal from your retirement plan, while she tells you how much she loves you.

Anyway, the real solution for Medicare is this: The federal government should eliminate FICA and provide free Medicare to every man, woman and child in America. Period.

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

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