government

Justice for All Starts with Smaller Government

Justice for All Starts with Smaller Government 150 150 JP

While there is no greater evidence of the ineptitude of big government than the current concurrent crises, the one thing I don’t see or hear are cries to limit its power overall. Instead we just need the right people in charge! I am not hopeful that we will ever get a smaller government without an absolute collapse. That is not likely to happen in my lifetime barring some miracle where foreign governments decide not to print money when times get tough.

Good luck with that.

The larger the government, the worse off the people of that nation are — plain and simple. The reason is that there is far less value in a monopolistic entity with zero competition than one that has to compete with others. In a weird way, the guys who put the United States together figured it out. They wanted small government with limited powers at the federal level, mainly just to protect the states and leaving them to compete for citizens so to speak.

Pay Your Fair Share

Pay Your Fair Share 150 150 JP

Taxation is always a huge topic on the political agenda. That alone should make you uneasy. This year’s election is no different. If Biden (probably will) wins, taxes across the board will rise with corporate taxes being jacked up the most. You wouldn’t be able to tell by how the major stock markets are trading, they seem fine, even dislocated from the broader economy.

What is a fair share?

Tax fairness is something that we do not have here in the United States. The rich are taxed more on a percentage basis across the board and burden a higher share of taxes than any other social class. Sure, Warren Buffett pays less (percentage wise) on his capital gains from investments than his secretary does on her earned income, but that comparison is truly apples to oranges.

A catch phrase employed by President Obama was the rich need to “pay their fair share” which was a great slogan to push tax and healthcare policy. The US tax code exceeds 70,000 pages. It takes Americans more than 3 billion hours a year just to comply with the tax code. It doesn’t have to be that way.

Some think that taxation is theft.

Maybe it is, maybe it isn’t. We are a nation of laws. Either way, the government commands a part of your income (at the state and federal level) and owned property (at the state and municipal level) every year. Governments are also part owner of every business in the country, at least for those that produce earnings. That may be why so many organizations try to scale without profits for so long. In any event, if you believe we live in a capitalist country, think again. There are very few parts of society that are voluntary, none that I would describe as actually capitalistic.

Taxation is why we revolted from the British.

It wasn’t taxation without representation. It was continued encroachment with new taxes. After the foundation of the United States, we didn’t have personal income taxes until the Civil War, which maxed out at 5%, and could arguably have prolonged the war. This tax was repealed in 1872, but finally came back for good in 1913 with the 16th Amendment.

Before that time, the United States Constitution specified that Congress could impose a “direct” tax only if the law apportioned that tax among the states according to each state’s census population. In other words, it would have to be paid equally by all — say $0.05 per person per state. However, the new amendment allowed Congress “to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

The first permanent federal income tax was levied in 1913: the schedule consisted of seven brackets, with rates ranging from 1%, on the first $20,000 of income, to 6% on income exceeding $500,000. That raised a total of $28.3 million. Even then, it wasn’t fair, but it was low enough not to be burdensome on anyone. Fast forward 107 years and the total amount of taxes collected exceeds $3.4 trillion, 120,000x the original amount raised… and we’re not even going to get into the property tax rates, sales taxes, and other taxes that are hidden fees stripping more capital from the people who need it most.

Where is the fairness to the American people?

I still can’t tell you. This topic is right up there with abortion in terms of not having a clear cut winner. There will always be good arguments on both sides. We need government to do certain things at scale that we (the people) may not want big corporations to do. But, big corporations supply the government with many of the products and services it has to run these endeavors at scale. On the other hand, the end user is rarely protected to the extent that regulation pretends to help, and in recent times even harmed when certain organizations are not allowed to go out of business, hiding behind the guise of “too big to fail.” No company or government is too big to fail.

If we wanted to have people pay their fair share, it would be a flat tax at most and a flat fee rate at best.

Verizon doesn’t charge me less for the same exact service it provides to my neighbor with the bigger house. The reason the high earners and rich get taxed at higher rates is because they foot the bill of government. And, what do they get for doing that? Plenty. But that’s the subject of another post.

Take care.