One of the better articles I'v read this year. To the point, no BS and a frank view of what needs and what can be done as opposed to ongoing stable rattling between two camps that belittle one another for what purpose? To divide an already divided nation? To confuse, anger and distract people? There are solutions. We just care little to actually explore them for it tilts the balance of power. Change is possible. Some just care little for it. The U.S. Tax System Is An Admission Of Failure Why do we have an income tax again? The United States had already become the largest economy in the world and then some, at the very peak of the global industrial revolution, before the income tax came about via Constitutional amendment in 1913. No need for it to assist the economy into prominence. We have it for another reason, to raise revenue for the government—right? Actually this makes no sense. The United States, since 1913 (when Europe was about to mutilate itself in World War I), has been the issuer the world’s dominant currency, the dollar, for about 100 years now. When you have the world’s dominant currency, it means you can produce it and people will give you non-currency stuff (the goods and services that they produce) for it to quite a degree. So why do we need a tax system? The government can issue money and get stuff for it, easily. In economics jargon, this curious phenomenon is called “seigniorial privilege.” Some currencies have the monetary function more than others, because of their reliability or whatever, meaning that their issuers can get rich. Not rich in terms of piling up more currency, but specifically in terms of piling up more stuff, of having the ability to issue currency for non-currency things. “Money is that commodity that is readily exchangeable for any other commodity,” as Carl Menger put it over a century ago in his classic definition. Where’s the tax system supposed to come in here? The yearly seigniorial privilege of the United States probably runs about $1 trillion. The U.S. can produce that much cash every year, and people the globe over will volunteer to take it in exchange for their own products. You see the implication. If the federal government could somehow keep its budget to that level, $1 trillion, all forms of taxation could be wound down and the government kept solvent. This is the low-end estimate. For if the United States cut tax rates, the after-tax rate of return of all enterprises and investments in the country would go up. This would increase global demand for the dollar, in that the dollar transactions area would be a more profitable place to do business. The level of seigniorial privilege would rise, past $1 trillion. This virtuous cycle would proceed apace until serial tax-rate cuts brought the marginal rate to zero. In this scenario, the world’s dominant currency would reign in a transactions area so valuable and so growing that its issuer (the government, though it need not be) would be able to purchase new goods and services at some healthy fraction of the new global demand for currency every year, some healthy fraction of world GDP growth. This amount could be upwards of perhaps $5 trillion per year. You could say that that would be too much money for the government, too big a budget. Hence in this case, we would have the opportunity to consider negative tax rates, in that the seigniorial privilege of the United States would be so great that to spend all the currency issuance on government purchases would be gross. A good part of the money would have to be dished out to the people. Sort of like Alaska does with its oil receipts. There is, in short, an inverse relationship between the market demand for the dollar and the extensiveness of the American tax system. Clear out the tax system, and the demand for the dollar powers up. Why do we have a tax system again? The reason appears to be to undermine, to sucker-punch our monetary system. There is no revenue reason for the U.S. tax system. The revenue-raising abilities of the United States decline with the growth of the tax system. The inner logic of the Laffer curve (named after economist Arthur B. Laffer and which proposes that tax-rate cuts can bring greater receipts) is relentless. Effective federal receipts—via seigniorage—stand to increase via every tax-rate cut, ultimately sending optimal tax rates below zero. And yet here we are with a tax system, quite a big one. We also have an absurdly slow-growth economy and tens of millions of un- or under-employed. Tax day is a good time to realize that the existence of the tax system is an admission that the United States is botching its phenomenal fiscal and monetary policy opportunities. People talk about abolishing the IRS. It’s a start. It actually would be nicely positive to lay off the entire staff at the IRS, along with a great part of the government workforce (as taxation is drawn down), even if these people were still paid. Give them Emancipation Day, Juneteenth, all the federal holidays and then the whole rest of the year off. The great harm in government employment lies not in the resources devoted to it, the basis of the budget deficit and so forth. The great harm is that it sequesters human capital in counterproductive or useless purposes. Government employment takes the working days of the year away from theoretically productive people. If we eliminated taxation, not only would the real demand for the dollar go way up because of the greater after-tax rate of return, but people who had been working for the IRS (and, one hopes, other places in the government) would be freed to devote their talents and energies to the real economic sector. This would prompt ever more investment in that sector (to take advantage of the new human capital coming to it), more real demand for the dollar, and more siegniorage via the monetary system that would have to be returned to the people. It’s a beautiful opportunity. Great things are in the offing, if we only made a move. So let’s get going. Let’s laugh off Bernie Sanders and his 91% tax rate, Hillary Clinton and her Buffett rule. Send these dear addled people off to prosperous and amusing leisure. Let’s start eliminating taxation and getting set for an American Century like we really mean it, the 21st. http://www.forbes.com/sites/briando...em-is-an-admission-of-failure/2/#6e80d98e3bf4
Nobody hates high tax rates more than me, but do people really think a country can just indefinitely print the money it needs to finance the government? At least with QE it was obsufacted. Why not just print the money to pay of our debt as well? If the country can handle 1 trillion in printed money a year with no consequences on the low end of estimates, then surely we can squeeze out 2 trillion if we put our minds to it and use the extra trillion to pay of our debt in 20 years.
appreciate it guys! it seems the safety trades are all rebounding today, TLT, NUGT, T , SO etc are all up pretty nicely today, very interesting even though we are all the way up here on the S&P , people dont want to let go of those trades....will be very interesting to see how those trades play out for the remainder of the year.
Thus article ignores the immense cost of protecting our border and defense. One can make the argument these things dont require the budgets currently allocated but I wonder how effective a 1T budget would be?
#ES_F $ES_F #SPY levels to watch 2174.50 / / 2162.75 / / 2151 #CL_F $CL_F #crudeoil levels to watch 46.47 / / 44.76
man you can sense the FOMO in this market, crazy. everyone is going crazy, these IPOs flying, markets flying, it feels like almost whatever you buy will go up, this is a new experience for me, lol. of course except for biotech, cause apparently people still hate biotech, it has been a pretty mixed bag even though the markets as whole have been so bullish. was going to enter the Line IPO hype, but it opened 30% higher than its initial pricing 0_o
