Tax the rich, don’t tax the rich. Give tax credits to the poor or to the middle class. And the list goes on. Today’s budget deficits were not created by the collapse of the real estate market of the starting in 2007 or the stock market / hedge fund collapse. It was not even brought about by the collapse of the manufacturing sector, like GM, Ford, and Chrysler unable to sell their vehicles. All of these factors certainly contributed to the problem but the real problem with the budget deficit was formed from our tax policies, both at the local, state, and federal levels.
Those policies came down to something very simple. Tax expensive items, but don’t tax everyday items, like food. Also give tax refunds, credits, or rebates to people so they can get some of their tax money back. That may be politically viable, but the fact of the matter is that in our tax revenues are coming from only half of the people in the country. How’s that? If a person worked last year and filed their tax return, chances are that the person received some tax credit, and may have even received money back from the government. The bottom line is that if you received any money back at all, or didn’t have to pay any additional tax dollars by April 15th, then you did not pay any taxes to the US government.
What do you get when you steal from the rich and give to the poor?
You remember the Robin Hood mantra. Take from the rich…give to the poor. However, you do not know if the rich worked hard and honestly to earn their money. Nor do you know if the poor squandered their money through drugs, alcohol, or gambling and are there because of their own bad judgment calls. But take from the rich and give to the poor has a nice ring to it. At worse, you get North Korea, Cuba, or Venezuela, because you create the conditions for poverty. At best the economic fiasco besetting the capitalist world occurs. Government handouts, not just to the rich, but also to the poor in the form of tax relief or welfare checks create an atmosphere of entitlements. The rich create jobs, so the story goes, so they should get a tax break. And on the other hand, the poor cannot help themselves, so they need welfare.
Not Everybody Works…But Everybody Buys
If governments insist on providing the minimum safety nets, to both the rich and the poor, through tax breaks and welfare checks, can we get to the state of a balanced budget? It would be hard, but start with the idea that government would have to tax every purchase made in the economy. No exceptions. This includes food and medicines, which are not normally included and are off limits. Then, you do not need a high tax amount, say between 2% and 5% max. In addition, eliminate the income tax, or reduce it substantially for everyone. This will eliminate the notion that the rich and middle class are paying double. If you have one tax scheme, without deductions, this treats everyone fairly.
Can the rich afford the tax? Sure. How about the poor? Those already on welfare? They can pay the tax as well. If so, how? If they receive a welfare check, take the tax out of that when they use it for goods. Now, still think this is unfair or unworkable?
Do we need taxes at all?
Ah, that is the question is not it. The US and almost all capitalistic countries have been running budget deficits for years even decades. In some cases, like Europe the situation has gotten desperate. There is talk about Spain, Greece, and Italy going under, and maybe taking a good portion of Europe with them.
In the US the talk has not subsided just put aside temporarily about how to deal with the shortfalls. Nevertheless, in both sides of the Atlantic, the problem is that governments do not generate enough tax revenue. It makes no difference to say that the Tea Party is holding the Republicans hostage or that the Democrats do not know how to control spending. There is not enough revenue.
So then, if the government agencies and the government itself cannot come up with ways to solve the revenue problem, do we need to tax anything at all?
Do Government Economies need to run on the traditional Business-Capitalist Model?
Budget deficits and the national debt originate using the business – capitalist model. That model says that if you run a business, you control costs, generate revenue, and make a profit. That is simple. This is a private-business accounting model. However, do governments need to run on that model? They have not reached balanced budgets for decades. The US government, at least, and most European governments have not either. Nevertheless, governments continue to perform their regular duties. Defense, infrastructure, monetary policies seem to work as needed because governments generate money to pay for the systems and the workers. This applies to private and public sector employees.
Why does it work? Because the one thing that the US government has that gold or any other precious metal does not have is stability. Right now people trust the US government. It will endure. It is not like Libya or Syria, or some other country that runs by fiat. The US government runs by the mantra of law and order. This sets the economic stage, not Wall Street or Main Street. Trust covers everything. So, it is important to ask whether the US Government needs to follow the business model at all and instead create a new government economic model.
However, if taxation can act as an anchor against wild spending, and an inflation killer, then it can be justified. Because as it stands, if the government cannot tax everyone, then maybe it should not tax anyone and a new way of dealing with wealth and poverty is in order and needs to be looked at.