What is the big deal between a fair tax code and our current socially engineered reality? Is the difference really about who pays how much tax? Or is the difference related to the increased freedoms and responsibilities we would enjoy under a fair, simple and understandable tax code? Or is the basic question do you want to live in a socially engineered micro managed reality versus living in a reality with the freedoms our nation was founded and prospered on. What is the difference you might ask?
Assume you have two companies each with five workers -- Steve's Widgets in FairLand and Bubba's Widgets in Taxland. Each has 100 dollars in profits from selling Widgets. For the sake of simplicity assume whatever basic living exemption is offered in the tax code is nullified by basic market place economics. (i.e. The higher taxes paid by those with higher incomes is passed on to everyone as higher prices in the market place).
Let's first look at Steve's Widgets in FairLand. Steve pays himself $30, $20 goes to the shop manager, and $10 for each worker. With a flat 20% tax rate, the workers each pay $2 of taxes to Uncle Fair, the manager pays $4, and owner pays $6 for a total of $20. The workers net $8, Sally nets $16, and Steve takes home $24. No one is unemployed, everyone is doing just fine, everyone can fend for themselves. The economy takes care of itself, almost everyone prospers and feels secure. There is little need for big government programs to help people fend for themselves.
Now, let us jump over to Bubba's Widgets in progressive Taxland. Back a decade ago, Bubba paid the same wages as Steve's. Back a decade ago there was a reasonably flat tax code with most paying about 20% of their income in taxes. Bubba's was competitive with Steve's and everyone was prosperous. In steps some "progressive" thinking politicians who see a future with big government programs to help people fend for themselves. President HilBil, never at loss for something to tax, comes up with a plan to "tax the rich" until they pay their "fair share". Bubba's tax rate jumps to 33% ($10), the manager's taxes go up to 25% ($5) and the workers' rates (HilBil supporters) stay at 20% ($2). HilBil is happy and the workers are happy they really socked it to Bubba, their employer. Life couldn't get any better.
One problem... Bubba isn't one to take a pay cut because of some silly tax code. He increases his pay to $36 (to net the same old $24), and he increases the manager's pay to $22 so he takes home pretty near his old $16. Problem is, what happens when it comes time to pay the workers? Bubba's Widgets can't pay everyone -- Bubba is $8 short, only enough for 4 workers. Time to "downsize" -- Bubba lets Bobo go. Bubba gets a stock bonus for streamlining operations, using the extra two bucks left over from laying off Bobo.
This goes on nationwide. CEO stock bonuses become a big deal. This creates an artificial scarcity of stocks, helping to drive the stock market higher to the delight of anyone with an IRA. Even HilBil likes it as a sign of prosperity.
However, what happened to employment in Taxland, land of compassion for the everyday worker? It is a total mystery to President HilBil, but somehow it must be Bubba's fault. 'This is a highly complex problem' thinks HilBil. What is the solution? HilBil checks into the Book of Reich. According to Reich, the solution is unemployment benefits.
Of course! Economics isn't so complicated after all. HilBil takes two bucks taxed from Bubba and hands it to Bob. Of course this is done with appropriate PRESSidential fanfare. Long after the PRESSident leaves, one might ask Bobo now get a job? No. Bubba still has no money to hire anyone. HilBil's progressive tax program took it from Bubba and, after taking its cut, gave some to Bobo as an unemployment benefit.
How about Job training! Oh yes! That's the ticket! HilBil waves his magic wand and, using Bubbas taxes, opens a new school for Bobo. A few weeks later, Bobo proudly walks out of school with a diploma in Advanced Widgets. Where does Bobo get a job? Bubba's Widgets still has no money to hire anyone. Of course Bubba could hire Bobo and let someone else go and the charade would continue on.
Is this scenario sounding familiar to anyone out there? Downsizing, stagnant wages, low job security, lots of government programs popping up? What is the problem? Is it because the rich Bubbas and Bubba's Widgets aren't paying their fair share? No. The problem is the progressively punitive tax code and Mandated Employer Subsidised Socialism (MESS) mentality. Workers can't fend for themselves simply because government has been doing too much fending for itself to support its 'compassionate' programs to keep 'compassionate' politicians in power running the MESS. Government fending (taxes) caused the problem for workers and society in the first place!
Remember Steve and his workers in Fairland? Do they have any of these problems? Not really. Do they have job security? Yes. Do they need government to fend for them? No. In fact, Steve and workers are putting in overtime to produce more widgets to compete against Bubba's. Meanwhile Bubba talks to HilBil about protection against Steve's Widget taking his business away and threatens to move Widget's overseas. HilBil says maybe the government can arrange to invest in Bubba's to help them compete on the global market. "Buy a ticket on my plane and we can talk about it". Still not sound familiar?
One thing for sure, there is plenty of mud in the MESS to keep Taxland Politicians busy entertaining Taxland Bobos with more progressive government "solutions" to Taxland follies. Is it any wonder that people can't hardly fend for themselves with so much 'help' from HilBil?
Now you know what I think, what do you think?