Topic: Taxation
Challenge to Ron Paul Economic Revitalization Plan There is an uncanny silence about the Economic Revitalization Plan published by Ron Paul on January 24th. Neither MSM nor the "top tier" candidates have pounced on it as voodoo economics or what-have-you. But it has caught us off guard too.by Larry Ward
(libertarian)
Monday, January 28, 2008
There is an uncanny silence about the Economic Revitalization Plan published by Ron Paul on January 24th. Neither MSM nor the "top tier" candidates have pounced on it as voodoo economics or what-have-you. I suspect the cat's got their tongue because they don't have analytical competence to understand it. It talks about issues that are not in their script. But it has caught us off guard too.
Finally we have a rational, grown up proposal for specific action to improve things. Media and the "top tier" puppets aren't fatiguing us with demands to defend against foul play and adhominem attacks on this issue. The internet has opened wide the doors of opportunity for debate and we, the people actually have a chance to debate an issue on its merits.
On a straight yea or nae vote on the plan today, given the alternatives, I'd vote you bet your life. But I also think we can do better and we have one of those miracles of the Ron Paul Revolution, an opportunity for the first time in decades to forge political policy in the furnace of serious and constructive, public debate. The pundits have stepped out of our way on this one. And it is very much the message of the founders that such debate refines and perfects policy and legislation because, as Ron Paul reminds us often, our knowledge is imperfect, even, for example, if we are that giant of the Revolution, Mr. Jefferson. We are not infallible pontiffs or divine right kings. We are just honest and diligent men.
One of the great, and therefore unheard of women of American letters, Catherine Drinker Bowen, writes a wrenching description of Jefferson fidgeting in his seat while the Continental Congress of 1776 made deletions and revisions to his draft of the Declaration of Independence. Franklin, glancing at him quizzically thought he might feint. Jefferson was unthrilled with the Congress's intervention and thought they were butchering his draft. But Mrs. Bowen argues convincingly, that in all instances the Congress's interventions improved the document.
So with that said and in that spirit and at the risk of getting avalanches of angry email for pinckin' on Ron, I have a few objections and a suggestion for revision to the plan. Here goes.
Argument: The seven provisions of the tax reform point of Doctor Paul's economic revitalization plan are, like so many bound and gagged lawyers, a good start. But they are reactionary. By that I mean that they react to particular tax lunacies that are already in place. They let the tax lunatics of congress set the agenda and they offer no protection from the tax lunacies that politicians will invent and put in their place in the future. Tax lunacy A can be easily resurrected in the next session of congress by renaming it tax lunacy B.
Also, if we are to have self government we must have common sense laws that the people can know. No one, including the authors, knows what the so-called Patriot Act or so-called Civil Rights act mean. They can mean just about anything you want them to mean so we wind up with laws that are improvised, as in German in the 1930s and we can never be fully in compliance with the law because lawyers and politicians change the law's meaning to suit the needs of the moment. And, clearly, bureaucrats improvise the meaning of vague and labyrinth tax laws. Because the seven provisions in question are reactionary, they require people to be acquainted with the nonsense of recent tax legislation to which they react. This is a proper duty of a Congressman but an unreasonable imposition on ordinary citizens who are just trying to obey the law. I propose an alternative that requires understanding of only one brief and simple common sense alternative.
And finally, the Paul plan obviously soars ahead of anything of it's kind coming out of Washington or the political establishment by being brief, clear, specific and concrete. But what comes out of Washington is not a very demanding or admirable standard of review. The language of the Constitution however, is. It too, is brief, plain spoken and specific- but not particular. It is not married to any long since irrelevant legislation or event. And I'll tack one other concern at the end of this paragraph. The seven points back away from the dramatic and exciting proposal of abolishing the infernal revenue service.
So I offer the following alternative to the seven points of the Paul plan as it stands. Are you ready? Revenue to pay for the legitimate activities of federal government shall be raised exclusively, from sales tax imposed on manufactured goods at the wholesale point of sale and from import tax at the point of entry on imported goods. This statute supersedes all previously passed tax legislation.
Now as an act of mercy to the server that delivers my email, I would like to defend a few of the objections that can be easily anticipated. These 47 words do not in any way depart from the Paul plan. They accomplish all the cuts, eliminations, repeals, accelerations and supports in the seven points of the Paul Plan and more. They also block politicians from introducing any new tax by stating that the one allowed tax shall be the sole and exclusive tax. So the question is, is the the wholesale sales tax and import tax one that we can live with.
Again, this does not depart from Ron Paul's stated tax policies. He states repeatedly that we have revenue sources other than income tax and while he is, I think slyly vague on what those other sources are, he has from time to time mentioned import taxes, sales taxes and highway taxes. This merely consolidates all those other sources into one, uniform and and manageable tax that we can keep and eye on.
That statement, the we can on this tax needs to be defended. Politicians will be quick to note that the proposed, 47 word tax bill allows them plenty of room to do mischief. It empowers them to punish selected industries and nations with higher taxes and line the pockets of their pals with preferential tax treatment. The wholesale sales tax needs to be one, invariable percentage for all manufacturers and importers. We can still let congress have a yea or nae vote on the percentage amount from time to time. But that's it.
Ah, the politicians will say, but if we tax diaper manufacturers at the same rate as booze manufacturers, we are punishing, perhaps even murdering babies, while rewarding filthy rich distillers and rummies and winos. Therefore, government has to decide for us which products are good, meaning tax exempt products, and which are bad, meaning taxable products. Incidentally, this tax legislation makes it a moot point but churches and philanthropies should be subject to the same tax laws as any other business. But I digress.
Manufacturers will increase the price of their products by at least the amount of the tax and pass the new cost along to consumers who will decide for themselves whether, for example, they are willing to pay the higher price for disposable diapers every week or exercise thrift by buying cloth diapers once and washing and reusing them. No babies need die. Individual thrift decisions are the foundation of a free market.
There are politicians of course, who for a price will pass legislation saying, for example, that automobiles are not manufactured and are not, therefore taxable and that the air we breath and the water we drink are manufactured and are therefore taxable. For the moment, let me try to say what is manufactured by way of examples. Are medications manufactured? Yes. Are eye glasses and durable medical equipment manufactured? Yes. Is produce manufactured? No. Are farm tractors manufactured? Yes. Are frozen and canned foods manufactured? Yes. You can grow spinach in your garden and prepare it in your kitchen but canned and frozen spinich come from a factory. Are car's manufactured? Yes. Is a second hand car manufactured? Yes but the manufacturing tax has already been paid so no federal tax may be imposed on resale of the car- or house or boat or jewelry or any other capital asset.
It may be argued that this imposes an unfair burden on manufactures. They have to keep a new set of records and act as unpaid tax collectors. Nonsense. First of all, all manufacturers keep track of sales. The addition of one column in a spreadsheet is all that is needed to calculate the tax due on those sales. Compare this to the overhead of keeping track of the income, tax bracket, dependent status, social security number, addresses and other information about all employees that is required by the current infernal revenue system. Second, employers are already unpaid tax collectors. The only difference is that they will now collect the tax from a relatively small population of wholesale customers instead of individual employees. It is a blessing for any legitimate employer and makes it infinitely more possible for small businesses to employ workers and that means more jobs and more competition and productivity. The jobs will be needed since swarms of former IRS employees will be looking for work.
Since consumers will no longer be hemorrhaging money into the blood banks of the IRS, they will have more discretionary income to deal with the increased cost of manufactured goods. It will of course, then be argued that this tax policy returns money with one hand and takes it back with another. That's true but, as Ronald Regan used to say, not quite the whole truth. I can escape the manufactured tax by not buying the product. I can buy a Ford Sedan instead of a Hummer and I, for one, have way too much stuff anyway. The only way to escape the IRS tax is by paying a tax lawyer or going to jail.
But something else happens with the manufactured tax. Our 4th Amendment right to security in our papers against unreasonable search has been restored. If we ask a merchant what an item costs and he says, "that depends. How much have you got", the sane among us go to another merchant. Any time anybody or agency wants to know about your income or assets it is because they want to get their hands on your income and assets. You may chose to disclose that information, say to a bank for personal reasons that make it seem reasonable to you. But compulsory submission of financial papers to any government agency is illegal under the 4th Amendment. Period. End of Sentence. End of paragraph.
And one final point. It may be argued that we have first to repeal the 16th Amendment. Again, nonsense. That Amendment says that, "The Congress Shall have power to lay and collect taxes on incomes, from whatever source derived ....". It does not compel Congress to exercise that power any more thant Article I Section 8 which gives Congress power to declare war compels Congress to declare war. The 16th Amendment does not legislate income tax. Congress does.
The real objection that libertarians will raise is the suggestion that there are legitimate activities of federal government. But that's a whole n'other can of worms.
All comments and challenges are welcome
Larry Ward Las Vegas Nevada
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Congress has, more than adequately, demonstrated the inability to resist the power to lay and collect taxes on incomes, from whatever source derived. The founding fathers knew this would happen and that is why they specifically excluded personal income tax. Unless you want your great great grandkids to have to go through this again, the 16th Amendment must be repealed.
Super analysis! See there is no reason to fear us Paulites.
In a "more perfect union" your tax plan would be ideal, but as it stands RP's is the best first step. It appeals to targeted groups of people, and is easy to understand; I mean, it is easy to understands that one's tips won't be taxed, but not easy to understand the nuances of the tax code. It is in line with RP's style as well. He has always aimed to start by removing specific taxes. This sets the mood for future, more severe, measures. Lets get him elected and stop the War and dismantle our empire. Then, we can elect a bunch of congressmen under the RP banner two years later and get some major changes made. Step-by-Step has to be how it done for the time being, unless the dollar crashes tomorrow and we have a real full-blown revolution on our hands.
I think you are making the false assumption that Dr. Paul would stop at the points made in his proposal. The points made in his proposal are the starting point, they are the bare minimum working within the current framework to shore up our economic policies. And if enacted they would lend further credence to his ideas, hopefully clearing the way to complete the goals he has talked about in his Presidential plank. Dr. Paul knows that even if he was elected tomorrow it would take time to change our foreign policy, it would take time to cut the costs of intervention both overseas and at home. But the points listed in his 4 pronged attack would restore consumer confidence and be the fastest way to end the recession/depression that we are in the early stages of. ..................................................................................................................................................................... Point 1 is all about leaving more money in the market, which can then be reinvested, used to buy goods, or otherwise used by consumers and businesses to turn the economy around. This will on its own create an improvement in the market which will actually wind up helping to bring in more taxes. ..................................................................................................................................................................... Point 2 is about controlling government spending so that the debt doesn't skyrocket when we cut out the taxes in point 1 ..................................................................................................................................................................... Point 3 is about creating a situation where our money isn't being secretly manipulated by "the man behind the curtain" and is instead done openly where theoretically everyone can react to changes in the monetary market. ..................................................................................................................................................................... Point 4 is about freeing industry from regulatory reform which is crippling their productivity, wasting their capital on burdensome reporting schemes, and driving their investments overseas. ..................................................................................................................................................................... These are all methods that can be relatively quickly put into place, while we all want more, this is a good start for fixing our economy. Lastly, the idea that we should have a national sales tax has a big problem with it. Largely that no matter what government will not keep its hand out of the cookie jar, and will be monkeying with it. Even without that, a massive black market would develop to relieve us of a 30% tax. The goal should be the stated goals of the campaign the whole time, eliminate unneccessary spening, and eliminate the IRS, but intermediary steps have to be taken because that cannot occur overnight.
Snooze fest - I got knocked over by a big wall of text and couldn’t bring myself to finish - I'm sure you made good points all I got to say is...Ron Paul 2008!
For those of us who think the I.R.S. actually collects money for anything OTHER than to fund itself and pay back the federal reserve the interest we owe it for purchasing all those US treasury bonds so that it can "inflate" our economy with all those worthless greenbacks it prints, I have 3 words: GRACE COMMISSION REPORT
Posted By: Walt Thiessen
Date: 2008-01-28 07:09:58
I don't think there's any need to think up reasons why opponents might oppose the proposals. They're more than capable of doing that themselves without the help of Paul supporters, and they can be countered as necessary when the time comes.
What's far more important is to discuss reasons why the proposals are so good for America. That's the kind of thing that Americans can latch onto.
I don't think you get it. The idea is to eliminate the income tax and replace it with NOTHING.
Dr. Paul explains that it is necessary to shrink the government in order to do this and, for most of his supporters, this is an added bonus. Your idea is basically to give them a different revenue stream and allow Congress to continue stealing our wealth and liberty by different means.
I think your idea is actually being promoted by Huckabee.
Your best argument is that these things should be debated.
There are several ideas which might work.
How about repealing the 17th amendment so individual states actually have power in the federal government again. Then, apportion needed federal taxes among the many states. Let each state decide the best way to tax their citizens. That way when congress starts exceeding it's bounds, the Senate would reign in the excess because it is not in their state's best interest.
But for now, I like Ron Paul's plan. It is the only viable plan on the table.
Congress has shown that, regardless of the party in power, it will spend every dime it can tax, borrow, or steal. If nothing else, if you just cannot stand the idea of living without the IRS, then at least CAP (via amendment) the maximum tax rate (for ANY and EVERY type of federal tax) at 7%, CAP the debt to revenue ratio, CAP growth in M3, eliminate double taxation, and require a supermajority to tinker with any tax code thereafter.
Seven percent is lower than any other OECD country, or India, or China or Russia, and, incidentally, it is the *maximum rate* under the original 1913 income tax act. Back then, it only applied to people earning $500,000 or more, an amount roughly equivalent to $20 million/yr today. I think we can all live with the old sock-it-to-the-millionaires' rate.
A flat tax isn't as progressive as our current system, and it's not nearly as regressive or bureaucratic as the "Fair Tax" being pushed so hard by Chucklebee. Most importantly, it would be stable, induce the return of capital to the territories, and keep a class of people (let's call them entrepreneurs) from emigrating en masse after this sorry election cycle.
I can't think of any better inducement to becoming a smuggler than passage of the Fair Tax. Thirty friggin' percent of *revenue* and a welfare check for all-- and they call Paul supporters crazy!? Look up "VAT carousel fraud" on your favorite government-monitored search engine, or, for a more local flavor "Medicare fraud", "Social Security fraud" and or "Tax Refund Fraud".
Very thoughtful article, Larry. There's a lot of tax relief that Ron Paul can accomplish simply in the role of Commander in Chief, like pulling our troups out of places we don't belong.
He has some very convincing points in his economic policies, and I believe Congress will incorporate some of his suggestions once Ron gets in there and cleans house. (pun intended) He will veto anything he feels is unconstitional, a Federal abuse of power or unfair to the American people, so Congress will have to be pretty convinced to over-ride his veto by a 2/3 majority.
I am an American presently in Europe and have seen the tax model that you described, which is similar to the the European VAT. The VAT can become very complicated especially when there are several steps in the manufacturing process. What about a retail or "end consumer" tax? I haven't really thought it out, but it seems that might be a little less complicated as we already pay sales taxes. Imports could pay the same sales tax, which would level the playing field for "Made in the USA" products and services.
The "wholesale" vs "retail" catagories are simply fiction. What is "wholesale"? To the wholesaler, its a retail sale. Indeed, if we place the burdon of taxes upon the "wholesaler", the definition of what it is to be a wholesaler will be looked at in detail, and adjustments will be made quickly to NOT "be" a wholesaler.
A better way would be to identify the Federal Service we all get. Then charge citizens at the point of "sale" or "Service". If we agree on what the Service is that we get from the Federal Government, then we can get into how it should be paid for. Ayn Rand suggested the proper role of government is Police, Courts, and Military--- at each level. That was a step in the right direction and the idea needs to be fully vetted. If the consensus locally is the people want more than these three functions, then so be it. Say they want Police, Courts, Military, Prisons, Rehab Centers, Half-way drug clinics, Hospitals for the poor, and public food & housing for the poor. The citizens of that city will be the ones paying for these "services", so be it.
Lets just say they want 3 services to keep it simple. Now lets start at the top. Federal Courts, Federal Police, Federal Military should all be paid for at the point of service rendered. But who recieves the Federal service? The States. So then the States have a State Courts, State Police, and State Military (National Guard). But who recieves that service? The Counties and the cities... thus the bottom of this chain is the incorporated city, incorporated to perform services. Thus payment, all payments, should be made at this level, at this point. Cities have court cases that need to go to the County level, county thus charges the City, that is how the City knows how much to charge you and me for Courts. The City has police cases that go out of the city and goes County wide, thus the County charges the cities within, thus the City knows how much to charge for Police Service. Sometimes the Police goes beyond city boundries, to county boundries, to State Boundries, to National Boundries....thus each level can be seen as charging down to the other, down to the "point of Sale". Osama Bin Laden and Transnational Criminals... National Police do have and international Police organization, this organization works this way. A criminal, say an arsonist, burns city blocks in Brazil and travels to Berlin Germany and does the same thing there. Both Brazil and Germany send their police working on the case to Interpol, international Police, where upon these police work with those in the USA and Canada (if they think the arsonist may be there). Those National Police in USA and Canada follow the leads and info from the Brazilian and German police working on the case at Interpol, and track down the criminal inside their country, even though the Brazilian arsonist has done nothing inside the USA or Canada. That is indeed how Interpol works. That is indeed how we must catch international criminals, even arrest them for intention to commit a crime. Back to my point, Interpol charges back to the countries that use them. In this case, US and Canadian national police would charge interpol who charge both Germany and Brazil who where after this arsonist. That is by the way, how it does work. In the case of Bin Laden, the USA has made it a military matter, and has not funded Interpol or empowered them to do the investigative police work internationally to track down these criminals. Yet it has been and remains esentially police investigative work, something Interpol is much better at than the Pentagon.
So, as a citizen getting taxed on the RETAIL end, the tax rate in my city will be different than that in yours because locally we may have more court cases, want more judges, more police, etc. We also may have more court cases go to the County and the State, so get charged from these two more money.
By tying together the SERVICE of Government locally, we can link the COSTS and the payment METHOD.
Posted By: mike montagne
Date: 2008-02-05 14:46:26
Dear Larry,
Congratulations on a generally fine article. While I would like to debate you on a few of its points, even in disagreement I commend your thoughts as excellent starting points.
One of our supporters sent me to your page in response to my own criticism of Ron Paul's "Comprehensive Economic Revitalization Plan."
I hope it's OK if I post the URL for reference, particularly if we are to have a constructive debate. You are certainly welcome to comment on my critique and post a URL back to these pages. (In fact, I suppose I will blog this response in our pages, linking back to your article from moment one.)
As a student of Jefferson, and even much moreso as a student of mathematics, I would first like to challenge your re-assertion that, "because, as Ron Paul reminds us often, our knowledge is imperfect, even, for example, if we are that giant of the Revolution, Mr. Jefferson. We are not infallible pontiffs or divine right kings. We are just honest and diligent men."
Yes, we are fallible; but this does not mean that "economics" cannot be resolved into a true, infallible science, quite unlike what we are confronted with today. Jefferson himself postulated about the perfection of economics. There are cases where he all but arrives upon the true form of theorem which present "economics" is wholly bereft of.
In any discipline subject to finite elements and operations, not only can we know all outcome, we can even readily determine (therefore) the scope of possible outcome. The Austrian School however, which Dr. Paul is so fond of, is disposed against all such thinking, because it wholeheartedly rejects the application of mathematics. It assumes wrongly that mathematics must only or can only be applied to *human behavior*. And in many cases where mathematics cannot rightly claim to account for human behavior, indeed Austrian School thinking may be correct in their assumption.
But in alternate cases, where human behavior is not estimated at all, Austrian School zealots still coldly reject math, as if they are adhering to a sacred principle of Mises or Bohm-Bawerk.
A vital example of the latter, and an issue I believe Jefferson was working on, was a fitting analysis not of human behavior, but of the *environment* which a monetary system comprises, to which all human behavior is subject. If a person or persons were to engineer a perfect economic system, this of course is the first issue we must tackle, for what is money to represent to us; and how is it to represent whatever we intend of it?
Most people, and certainly the supporters to now of the Ron Paul Revolution, would desire that money represent a handful of just properties; and certainly Dr. Paul's initiative seems to pursue these objectives, but on certain other planes it obstructs us from achieving them. Most of us desire for money to retain its value, or vital saving is defeated. Most of us desire that our money not be subject to involuntary servitude, or our commerce will cost more to us: Money therefore must be *only* a medium of exchange; it cannot involve unassented processes; and particularly it cannot involve unassented, unearned profit taking from us.
Here too, Austrian School economics thus swerves from solution, because it embraces interest and purported "markets" which are means of taking from, and thus impeding, real industry. We can only begin to appreciate these detrimental effects therefore when we evaluate the ramifications of privatizing the currency for the sake of unearned profit, for it is the nature of the currency which predicates the environment which is produced by any currency involving the inherent processes of interest.
Thomas Jefferson said, that "If the American people ever allow banks to issue their currency, first by inflation, and then by deflation, the banks and [bank owned] corporations which will grow up around them will deprive the people of all property, until their children wake homeless on the continent their fathers conquered." It is my presumption that he was thinking what I am about to present regarding the environment a privatized currency comprises. Certainly his observations can only concur with true observations of the present, for his prophetic projection is on the verge of completion.
In any purported economy where the currency is subject to "interest," it is mathematically impossible/impractical to maintain a circulation without suffering inherent, irreversible multiplication of debt in proportion to the original circulation. This is the most critical issue Dr. Paul fails to address, because it is the issue which ultimately terminates the purported economy. Ultimately the process engenders a sum of debt so great that we can no longer afford to service debt and sustain commerce.
The process is simple. To maintain a circulation, we must perpetually re-borrow whatever we pay against principal and interest obligations. Subsequent sums of debt therefore equal the previous sum of debt plus so much as periodic interest. It is impossible to pay down the sum of debt, because, to maintain the vital circulation, we must re-borrow principal payments as subsequent debts equal to the former. Because we must likewise re-borrow what we pay against interest obligations, thus as we maintain a vital circulation, what we borrow back in the way of servicing interest comprises the increment by which debt increases.
Thus, the sum of debt increases by ever greater increments of greater sums of periodic interest on an ever greater sum of debt. The sum of debt increases by ever escalating increments then, until an eventual sum of debt is so great that we collapse under the weight of it.
In the early 1980s I provided the Reagan Administration with mathematic proofs that his proposed 10% per year, 3-year tax cuts would even offset double-digit inflation, much less solve it; and that he would impose the greatest multiplication of debt so far seen in the history of our country (after denouncing Carter's $150 B accumulation of federal debt as "unforgivable"). I also provided the Reagan Administration computer models which calculated the future accumulation of debt by said process, and which therefore forecast the maximum possible lifespan of any purported economy involving a currency subject to interest.
The collapse projected from the first years of the Reagan Administration is now upon us.
So this brings me full circle to what is *definitely* wrong with the Paul plan. It shows no engineering at all; and it is a huge mistake for Paul supporters (of whom I am one) to presume it is "good" because of the modest steps in a direction it may purport to take. By the time it gets there (if it ever gets there), further multiplication of debt may already have consumed the "potential" benefits.
I formally proposed solution to these issues in 1979 (morphallaxis) in what we now call mathematically perfected economy™. Mathematically perfected economy™ is the singular integral solution to inflation and deflation, intrinsic (systemic) manipulation of the cost of value of money or property, and inherent, irreversible multiplication of debt by interest.
We have a shot (possibly) of getting the Paul Camp to pursue mathematically perfected economy™. It is a shame we haven't succeeded in doing so already. But if you want our candidate to succeed, he can only do so with a real solution. As you will see if you visit the furnished URL, we can shoot holes in his plan. If you would like to try to shoot holes in ours, you are welcome to visit our forum and blast away.
But, like you Larry, I present these issues with a positive attitude, hoping that in the very nearest future Ron Paul's supporters can and will influence him to adopt a truly comprehensive plan.
Great presidents, like a great republic, must recognize sound principles. I'm just trying to save my country.
Regards,
mike montagne — PEOPLE For Mathematically Perfected Economy
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