Jlknapp505's Blog

We’re really going to have to do something about the overall tax structure. None of the approaches put forward by our political leaders will do enough, so I’ve been considering non-standard approaches.  I think this is what is necessary.

I’ve advocated a gross-receipts tax, which forces companies to absorb all the costs of such things as corporate jets and business lunches rather than charge them off to taxpayers. Current tax policy actually reduces efficiency by reducing competition, something that the capitalist economy claims to love but which capitalist companies do all that they can to reduce. I’ve also allowed for deductions from company tax liabilities for salaries and benefits paid directly to American workers, but only if such were available for ALL employees. Anything paid out in bonuses or stock options to executives would not be shielded from tax. And what’s paid to workers, whether in the form of direct salary or bonus or health insurance or company car, would constitute income that would be taxed to individuals. Equally, if it’s investment income or capital gains, that would constitute income to be taxed, whatever the individual tax rate would eventually be.

So long as all income is considered to be taxable, actual tax rates could indeed be lowered. Our current system taxes only a proportion of income from a narrow range of sources, and this turns out to fall heavily on the middle class and the poor while being a shield for the wealthy.  A shield which allows them to acquire and sequester wealth by selecting whichever source of income will reduce their taxable income.  It’s why there was so much effort by Mr Romney to hide his taxable-income information.  It’s the mechanism that allows certain individuals with multimillion dollar incomes to pay little or even NO tax at all.

Inevitably, our current system leads to more and more inequality and reduces social mobility, a major problem for democracies.

It’s led to a USA which has a few, the new nobility who lack only titles to be considered such, and the many, serfs in effect who are slaves to corporate rule. Who do not even have the traditional rights of serfs who were tied to the land; the new enslaved class can be dismissed through layoffs, ‘turfed out’ if it appears that managerial elites might realize a slight gain in profit by doing so. In such a system, the employee who’s worked faithfully for a corporation for 25 or 30 years has no rights and can now be dismissed, to attempt to make a living when they’re in late middle age, no longer able to start over in a new career.

The Constitution was written to protect citizens from the excesses of government.

There is nothing to protect us from the unrestrained greed that has become the hallmark of the new nobility.

A REAL tax overhaul might the first step in that effort. And along with it, government programs that provide more protection for citizens than is currently available from Social Security or Medicare.

A best approach might be to start with a commission that included not only the members of the new nobility but also representation from the middle and lower classes.  Such a commission would look at what’s fair to those lower classes as well as what benefits those elites who have a system that they can exploit differentially to gain ever-greater wealth.  Such a commission would consider where society should go, and would have the best interests of all American citizens at heart.

It would do what Congress was supposed to do, but what Congress has failed to do.  Our system of laws is in large part a listing of failures by past Congresses.  Failures patched here and there, but with ever more failures tacked on top of past failures and patches.

Perhaps it’s time to consider a real rewrite of the Constitution.

I won’t see any of this in my lifetime. But maybe, if we think about it and force our elected officials to represent VOTERS rather than those who bribe them with ‘campaign contributions’, something like this might be possible in your lifetime.

Written in answer to a friend; political, but not party-political. Instead, it’s economic theory applied to tax structures.
Ruth, I’m not advocating a flat-tax, although that would be much more fair than the system we’ve now got. Cain wasn’t wrong in his overall idea.
But we’ve ended up with a progressive, then regressive, tax system.
I believe that the best system is a corporate tax system that’s lower than what corporations now pay, but based on gross receipts. And I believe that any company doing business in the US should be susceptible to that tax on a proportional basis. If they sell a million dollars worth of goods in the US market, then they should pay the same taxes to the US government that a company doing business in New Mexico pays. I would have one deduction from those gross receipts; money paid directly or indirectly to employees. Any money remaining that goes to building the corporation or increasing its wealth or assets would be taxed as gross receipts. No more jets for executives or 3-martini lunches as ‘deductions’ and ‘business expenses’. Corporations could still DO those things, but not deduct them. These are all ways that corporations/companies reduce competitiveness.
As for what gets paid to individuals: salaries, retirement benefits, health care, perks, all are income. And all income of any kind forms the tax base. Speaking of health care and retirement accounts, they would be paid into a federally-supervised fund. No more of this situation where a corporate raider can come in and take funds that were intended to pay for employee healthcare or retirement because the investor acquired 51% of the company; that’s one of the things that Bain and Romney did. A better approach would be to increase Social Security and Medicare and make them available to all, despite the howls of the wealthy who would have to help pay for it.
Lots of benefits here; no longer would American companies have to support salaries, health care costs, and retirement costs, and then pass all that on to the consumer. Instead, it would be paid into funds that would be protected possibly by Constitutional amendments.
Individuals would be taxed on a progressive basis just as has been the case since our tax system was adopted. Probably at slightly lesser rates for some, more for the wealthiest. They have more to lose, after all, and American society protects their wealth. So it’s appropriate that they pay into society on a commensurate basis. And income is income; no difference from an hourly wage or a dividend from investment. And no more hiding income by calling it ‘health care’ or ‘retirement accounts’.
So how could one accrue wealth in such a system?
No so easily, for sure. But it would be possible. The guaranteed way would be to invest in growing companies. Currently it’s possible for a wealthy person to buy into GE, say, and wind up paying only 10% of dividends. GE has paid NO taxes for several years, despite profits of billions. Apple too hides much of it’s income from taxation by shuffling it around from corporate entity to corporate entity. Bain Capital did that, too, and Romney directed the operation.
But if you invest in a growing company, then the company will pay out taxes on a gross-receipts basis, but the investor won’t pay any taxes at all on this. So that maximum gross receipts tax, say 15 or 20% as a beginning point, is all that would be paid.
One additional point: the neo aristocracy. We’re going to have to tax estates just as Britain found it necessary to do. Otherwise, the Waltons or their equivalent can sequester giant amounts of money and wealth from the system. That money must be returned to circulation if society is to prosper.
Ideas; what do you think of them? You can post replies to jlknapp505@msn.com or find Jack Knapp on Facebook. I welcome dialogue and constructive criticism.

We really don’t have a good economic model for what’s happening now. I’ve got my own, but I doubt that I have all the facts. I’ve taken some of the things that Krugman has written about and some that Stiglitz has written (actually Stiglitz quoted ME once; I had published a paper dealing with economics on the International Mensa Forums two years ago), and there are a couple of other economists. But there’s no real consensus.
I’ve come to believe that the root problem is capitalism itself. Let me defend that before you scream too loudly.
Capitalism seeks ever higher profits, ever greater efficiency. That’s what the ‘market’ requires. If efficiency lags, then the capital flows elsewhere; Krugman would agree with this, I think.
What this really means is that human labor is first depressed in value by exporting of jobs, then by the ultimate export, having the jobs done by machine. Even China, home of cheap labor for a generation, is now mechanizing factories.
This puts people out of work. Where do they go?
Historically, when the Industrial Revolution began, they left the land and took jobs in industry, manufacturing goods. When mechanization hit the remaining farms (in the US, as an example), farmworkers left the land and moved to cities and worked in industry again.
But now the industrial jobs are rapidly disappearing. There are service jobs, but they pay little, in most cases not enough to live an independent life.
The few jobs left in manufacturing are increasingly high-tech, many of them involving computer control or robot maintenance and engineering. Not for the uneducated, in other words.
Even construction, long a place for unskilled labor, is changing. Where once half-a-dozen men with shovels and rakes and tampers filled potholes, now three men in a machine do ten times more potholes and do them better.
Force all those former employees to find work in domestic service-industry jobs and all you do is depress labor prices even more.
What to do with our excess labor? I’ve said that it can only be employed in making items for trade, and that will work for a time. What isn’t made for the domestic market can be made for the export market.  But the trend is clear: humans are being forced out of the labor market.  That’s the real economic problem.
And we don’t have any place left for them to go and nothing for them to do.  And no idea among politicians or even economists that this is the early stage of a trend that will only get worse.
There’s a real shortage not of managerial talent or clerical support; that group is overstaffed. The shortage is in engineers and scientists and technologists who can work with the engineers to build their designs. There are jobs for such right now…but colleges aren’t graduating enough of them. Instead, they concentrate on things that may make the student feel good, but without requiring the sheer work that a degree in math or science or engineering entails. Ethnic studies? Even education as a major? Not much work required. As an example, note that many education majors take classes that are deliberately dumbed down; math for education majors, science for education majors, etc. Education departments encourage this; it requires a Dean’s approval to count a MAJOR course toward a degree or teaching field instead of the ‘for education majors’ courses. I know…I did that. I took the full-on biology, physics, and geology courses. I didn’t go beyond second-year physics classes, essentially still elementary level but different, astronomy instead of physics II. At that point the math requirements would have meant dropping other things, biology or geology. And the GI Bill wouldn’t have paid for classes that weren’t required for me to graduate within 4 years, so I went with the broad education approach rather than the concentrated approach that would have led to a physics or math minor.
So economists and universities and politicians aren’t really addressing the trend. Industry is taking the first steps to do this; they’re offering training courses to prep people for unfilled jobs.  This isn’t yet widespread, but I suspect it will grow.  Meantime, some foreign specialists are immigrating to take the jobs that Americans aren’t qualified to do because of lack of education.  China and India and even Japan and Korea are providing the MD’s and the engineers and scientists that our universities aren’t providing.  And, since those divisions are expensive, universities continue to emphasize ethnic studies and gender studies and social studies…cheaper; more grads.
Comments?

Fix the tax laws, Congress. That should be job one. Do that, then with the additional income, put people to work. Infrastructure needs investment, and it’s easy to make it domestic-only. American firms, American workers, no outsourcing or offshoring.
Dump all of the tax laws, all the thousands of pages, in favor of a revised tax on businesses and individuals. Instead of 39% (only the simple-minded ever pay that), reduce it to, say, 15%…but make that a gross-receipts tax. And tax anyone doing business in America by requiring merchants selling foreign-produced goods to collect the tax.
Real competition; no more deductions for the jet the executives use or their cars or spectacular salaries and bonuses or golden parachutes or business lunches. Loopholes only allow creative accountants to hide anticompetitive measures that protect big business. Compete, GE, and Caterpillar and Big Oil and Big Pharma and Big Agriculture, or go under.
And for income taxes, a small tax for the poor, a bigger one for middle class people, a larger one for the wealthiest…and no loopholes. If it’s money, it’s income. All loopholes were put in because of bribes paid to congresscritters; throw them out. This is necessary because not everyone is a stockholder, hence subject to the effect of the ‘business taxes’.
It’s not that 9-9-9 nonsense. But it would work.
For anyone hiding assets offshore, put in a real penalty: say, 150% of the hidden assets. Pay part of that to people who report the hidden assets. And any American company doing business offshore, require that they bring those profits home within a year. For Google and similar who establish ‘Home offices’ overseas, consider them foreign companies and establish a tax basis for them; say, 25%, which is about the average collected by foreign governments. But keep the gross-receipts standard. And watch them move back home quickly. In most cases, it only means acknowledging that the home office was always in America; only a tax shelter was ever overseas.
But no loopholes. For any exceptions to tax law, require that a separate bill be introduced in the House and passed by 70% of the Senate. Sixty-five percent? OK; but make it a separate law that every legislator must vote on and the vote must be public.
See how easy that is? It increases participation, increases competitiveness, streamlines business, puts everyone in the game of government;.
And if I can think of this, why can’t Congress?

I read an article in this morning’s NY Times that suggested the housing crisis might be over, and that housing might now begin to recover. That article inspired the following:

I disagree with the content of this article. I think this is a temporary rise that will be overwhelmed as phase two of the foreclosures kicks in.
Banks are just as predatory as they were before; a temporary reprieve came to pass while they got their paperwork in order and shrugged off the criminal robosigning of foreclosure papers. But they’re now poised to resume the foreclosures because the jobs market still hasn’t recovered. Affecting this is the continuing layoffs of public sector employees that the private labor market simply can’t absorb. A few promising trends are visible; some manufacturers are returning the offshored jobs to the US. But only a few, not enough to reinvigorate the shrunken middle class. The trend is toward fewer homeowners, more renters/leasers of property owned by the wealthier people.
Families that were movin’ on up began movin’ on down; and that hasn’t stopped. So foreclosures will continue, and pressure on the home market will increase as foreclosed properties once again begin to become common.
Something to consider: if Republicans gain power, the banksters that have been paying them will continue to receive favorable treatment. But if the Democrats get in, the consumer might get a break, for a while. But don’t count on much from Democrats; all are politicians, and ideology is trumped by cash. After a settling out, banksters will switch to buying Democrats and the evil process will continue.
Unless we get a determined group of politicians who insist on change, nothing much is going to occur.
People need to become aware that government isn’t your friend; only you can ultimately protect yourself. Social Security under Republicans will push toward ‘privatization’, or in other words the money will go to the stock market.
We can trust market traders, right? So when they get all that retirement-fund money, they’ll take care of citizens, won’t they?
NO politician can be counted on to care for ordinary people. They only interact with us in any meaningful way when they begin running for office. And even then, they soon begin delivering rehearsed speeches with no opportunity for discussion; it’s all one-way, not true communication at all.
The next generation needs to adopt the old slogan: Caveat emptor, buyer beware. And add to it, voter beware. Educate yourself. Take back politics from those who sold it and those who bought it.
Middle class housing is going. Middle class expectation of a good education is going. Upward mobility is fast disappearing. The American Dream is dying, turning into a nightmare, as the middle class lifestyle that was the strength of a nation is slowly being destroyed. Our ‘leaders’ give us platitudes instead of leadership, empty referrals to a time when the nation was strong instead of action to restore that strength. And no real leadership from either party.
Caveat emptor.