4. TIMELY TAXATION
Review of Original Premises for Tax Reform
Ever since the first legisflator passed the first unjust, unfair, destabilizing tax law, America has been ripe for tax reform. The economic stability of America is more burdened by unjust and unfair taxation than ever. The time is now for the American people to democratically and capitalistically organize themselves for tax reform. To fail or to delay is to ensure the collapse of the American economic system of production.
Only the American people can determine a viable "ecos nomos." As detailed earlier, our politicians and necronomists are failing more acutely each day. Reaganomics created a most vicious form of legalized thievery for a special few. Supply-side necronomics is the latest debasement of basic ecos nomos. Only democracy (people divisionally ruling themselves) can organize and integrate a coherent, cohesive and cogent approximation of ideal ecos nomos. The present garbage dump complexity--grounded in corruption and incompetence--can be repealed only by collecting, filtering, percolating, and honing the people's concerns and consensus.
As with nearly all of our laws, the politicized writing of tax laws has not provided the leadership that America needs for economic stability. Counterproductively, political leaders have been competing to see who could get the most for nothing. Their tax laws directly (through tax supports) and indirectly (through tax exemptions) abuse the tax system. These abuses increase wealth for a select few of their constituents without producing more real wealth--legisflation. This competition has defeated the uniting purpose of the U.S. Constitution and has reinstated the Articles of Confederation as a political reality.
A nation cannot last if its policy-makers compete in trying to give their special interests something for nothing--the system becomes bloated with consumers instead of producers. How should politicians lead? The clue lies in the strikingly similar derivations of "to lead" and "to educate." In general, America needs leadership that "leads" people to a new understanding of their world; we need educators in leadership roles. America needs a President that will "preside" over a democratic organization of the people, so that they, and not he, can rule on the problems that are filling their lives.
Specifically, leadership in tax reform must be based on educating people to recognize the "something-for-nothing" trap. When approached for tax exemptions by those wanting a free ride, the politicians should have led by educating these special interests to the unavoidable consequences. If too many people are exempted from their fair share, economic instability occurs.
Limited gains of additional wealth through tax exemptions is self-defeating since the resulting economic instability threatens one's total wealth. This is what the politicians should have said; this is how they should have led. They did not.
Our politicians act like irresponsible parents. They try to buy their dependents' affection with counterproductive, short-term gifts. As a result, the productive spirit is lost. In the end, the "children" lose and so do the politicians.
Principles for Productive Reform
A number of principles must be observed if tax reform is to be productive. The principles for tax reform are also the goals of taxation. Foremost is the pursuit of economic stability. Second is fairness in taxation. In fact, if taxation is pragmatically exacted to fund economic stability, fairness will follow. One should not attempt to reform taxes based on "fairness;" the present system reflects how many people have pursued their sense of fairness with disastrous results.
The present mess can be ascribed, in part, to arbitrary distinctions developed by necronomists to describe different segments of the working population. There are hourly and salary people, producers and distributors, skilled and unskilled, and management and managed, etc.. While these distinctions do exist, using them to formulate tax laws is counterproductive; they are irrelevant factors in the problem-solving process.
Ultimately, we are all merely producers who are converting our time into some good or service under the aegis of America. The extent to which we can produce our wealth (as a good or a service) depends on the stability of the American economy. One's moral and practical fair share in funding American stability corresponds to how much one's produced wealth depends on the whole. Thus, if economic stability allows me to produce an amount that is equal to 1% of the total wealth, my fair and pragmatic share is 1% of the total cost of funding economic stability. To evade payment of my fair share is to risk losing all my wealth because of an underfunded, unstable economy. Determining one's productive tax share involves figuring the Transacted Gross National Product and what portion of the TGNP the government takes. A later section elaborates on the TGNP.
The pragmatic basis behind one's moral, fair share of taxation is but another example of how all morality can be reduced to some practical consideration: Pragmatism begets and sustains morality. The human dilemma with taxation is not so much accepting the practical benefits of fair taxation, but devising and implementing a mechanism for collecting the taxes fairly. Tariffs, excise, and sales taxes are relatively fair taxes, since they tax each transaction that benefits from the total economic stability. An income tax can be fair if it is a set percentage. In principle, a progressive income tax is unfair and self-defeating. Progressive taxation prompts people to circumvent taxation, as history has shown. The only pragmatic tax reform is one of product transaction; simply revising the existing tax laws will not provide a true, lasting reform.
What America needs is a simple "product transaction tax." A product is a good or service. We are all producers who convert our time into some good or service. Each transaction should be taxed at a set rate which will, when summated, cover the cost of funding total economic stability (the cost of government). Instead of income tax rates that range from 14% to 50% or 70%, America needs a set income tax rate with no exemptions. This tax rate should be applied to all product transactions. The vast and confusing mess of sales, real estate, barter, and other taxes should be replaced by a single tax rate.
General Reform: Product Transaction Tax
The establishment of a product transaction tax involves the problems of rate and collection. The initial rate would be, by necessity, an educated estimate. Monthly or quarterly revision would occur based on whether the revenues covered the costs. Any change in rate would be approved through the colfilperhone* legitimization process.
The collection of the tax could be a bigger problem. Using the colfilperhone process would also aid tax collection. The Internal Revenue System would be supplemented and finally replaced by a NUSA organization. This locally based enterprise would not only collect taxes but would monitor individuals and industries to ensure that everyone paid his pragmatic share based on the extent that they benefited from economic stability.
A product transaction tax is similar to a value added tax (VAT). In principle, a VAT is a tax on each stage of wealth creation, that is, each stage at which a product is transformed and transacted. With a product transaction tax, the determination of where each stage of product transaction occurs would be democratically decided by the people of America. Some very obvious stages are the commercial sale of goods and the various forms of compensation for one's time (wages, salaries, and bonuses).
A product transaction tax would be neither a sales nor a purchase tax. Rather, it would be a tax on the interface of sales and purchases. As such, it would be a tax on neither production nor consumption, but on their common denominator. Rather than taxing just the producer or just the consumer, both should be taxed by taxing the action common and beneficial to both--the exchange.
Benefits: Direct and Indirect
Many benefits would arise from establishing a product transaction tax. Foremost would be the insuring of economic stability for one and all. When everyone is taxed according to how much he benefits from using the American economic system of production, then the economic stability of America will be guaranteed.
Another benefit of a product transaction tax would be a reduction in the direct and indirect cost of collecting taxes. Presently, a massive public bureaucracy (the IRS) must be maintained in order to assess and collect taxes. Similarly, a massive private bureaucracy of accountants and lawyers must be maintained to assist people in understanding and avoiding the taxes. Directly and indirectly, these two bureaucracies are a massive and counterproductive waste of human time.
This waste of time is not confined to the public and private bureaucracies that have sprung up as a result of the tax mess. Individually, Americans waste a lot of time collecting, arranging, and counting pieces of paper for their tax returns. This personal bureaucracy is unavoidable under politicized taxation. In addition, the present taxation system is a waste of energy; people get bent out of shape and emotionally drained when confronted with the headache of taxation. A simple, fair, and automatic product transaction tax would eliminate this aggravation. Many goods and services are absent from our lifestyles because of the tax mess. Think of the potential improvement in the quality of life if the human intelligence and time now devoted to taxation were redirected into solving the natural problems of living (health care and energy resources for example). Think of all the raw intelligence wasted on solving the artificial problems of illogical taxation. One benefit of simplified taxation--based on product transactions--would be a redirection of these human resources into solving the problems that nature creates for man.
Another benefit would be a boost to America's shaky moral foundations. For others, economic instability creates a hopelessness that breeds desperate acts of theft and violence. A fair and just tax system would improve the moral caliber of America.
Enforcement: Moral and Mechanical
The enforcement of a product transaction tax can be divided into the moral enforcement and the mechanics of collection. The two are required to fund a stable government and economy. If the mechanics are not in place, taxpayers will not be able to collect and organize their taxes for their benefit. Also, as the IRS shows, the existence of a tax collecting mechanism is useless if people feel compelled to avoid paying their taxes. Between education and the efficacy of a NUSA organization, the moral and mechanical means of collecting sufficient taxation will occur naturally.
Presently, many people see big corporations legally avoiding taxation and this obvious inequity tempts many to cheat. With a product transaction tax, all corporations will pay taxes on all transactions. When people see that the "big boys" are not above taxation, they will no longer feel it necessary to avoid taxation themselves.
When it becomes part of the public consciousness that tax cheats result in all taxpayers having to carry larger tax shares, people will more readily report tax cheats. This public policing is not so much "tattling" as it is preventing ignorant people from harming themselves and others. Not only does a tax cheat increase the burden on others, but if tax cheating is widespread, economic instability punishes one and all. For this reform to be truly effective the Oval Office occupant in particular must be above suspicion. When it becomes public policy that all will pay their fair share, it will become patriotic once again to pay taxes. Presently, the avoidance of taxes is sometimes publicly advertised as "patriotic," as in an advertisement described earlier.
The mechanics of collecting the NUSA use tax (product transaction tax) will draw upon many of the existing forms of tax collection. Central to all collections will be the responsibility of both parties to pay the tax. For example, employers must send in taxes on wages and salaries for income tax; however, that does not relieve employees of their responsibility to ensure that their taxes are in order. This direct collection from wages will continue under the tax reform with no deductions allowed. Every dollar of earnings will be taxed at the set transaction rate, no more and no less.
Similarly, merchants collect sales taxes and send them in. The product transaction tax will be applied to all vendors, commercial and private. The latter category includes private individuals who sell or buy a personal article such as a car, a rug, a home, or a dog. With a product transaction tax, the "underground" economy will be eliminated.
As noted, it will be the responsibility of both parties to ensure that a tax is paid on any transaction. Penalties for failing to pay the tax could involve a fine equal to the total amount. Another deterrent penalty would be to ban the individuals or industries involved from using any energy (gas, oil, or electricity) for a period of days; the power companies would simply cut them off.
Divisional Apportionment of Tax Revenues
An integral part of the tax reform process is the apportionment of the taxes. Under NUSA, all taxes will be divided in a 50/50 split. Half of the taxes stay in the taxing unit and the other half will be passed on to the next level. A NUSA tax unit will collect the product transaction taxes on all the transactions within a Zip code area. The Zip area will retain one half of its tax revenues for its executives to direct toward services of the various local municipal and state government systems of which it is a part. This apportionment will replace the concept of block grants to the state; the people will have direct control over revenues from their respective areas and realize true "re-presentative" taxation.
Half of the taxes collect at the Zip level will be forwarded to the Congressional District of which it is a part. The democratically elected executives and directors at the district level of NUSA will determine which public functions to fund according to their ability to improve the quality of life within the district. Half of the taxes received at the District level will be apportioned to the national and regional levels, respectively.
There are several benefits to vesting the powers of collection and apportionment of taxes at the Zip level. One is that the Zip tax collectors will be more knowledgeable of the product transactions within the geographical confines of the Zip code area. Presently, some very obvious tax avoidance occurs with federalized tax collection. Secondly, since the Zip level gets the biggest chunk of the tax collection, the "anti-federal" motivation to avoid taxes will wane.
This apportionment of taxes permits the funding of all the economic units of which one is a part and a beneficiary. Presently, the politicians in Washington collect taxes nationwide and then fight to see who gets the biggest piece of the pie. Invariably, the incumbent senior legisflators get to subsidize their particular constituents by diverting large, unfair shares of tax revenues to their districts or states.
Politicized apportionment of tax revenues is not democratic; it does not automatically benefit the people from whom the taxes were collected. America has a despotic, over-centralized apportionment of tax revenues. Democratic apportionment of taxes by the 50/50 factor will keep more of the economic blood (taxes) in the economic bodies where it originated.
This democratic apportionment of taxes applies not only to the indirect symbols of people's time but also to the proposed direct taxation in time. Under a National Universal Service Act (described later), people will be required to pay a certain amount of their time each year by solving common, public problems. Democratically apportioned, these taxes, in lifehours*, will be divided among the levels of the government.
NUSA Proposition #3: America needs a simple, just, fair, and automatic product transaction tax.
Only a product transaction tax will bill people for their fair share of maintaining the economic stability from which they benefit. Producers should be taxed at a set rate each time they transact a good or service.
If in any one year, quarter, month, or day, the government consumes 25% of the national wealth, then each person should give 25% of his wealth as his fair share of funding economic stability. This percentage may sound high, but is not as high as the 40% figure that results if one compares total tax revenues with the standard Gross National Product.
The standard GNP is computed by necronomists. The present method of measuring the GNP is useless and insufficient. The measurement does not contain the value of every product transaction that occurs as a result of the American economic system of production.
The estimate of the standard GNP in 1981 was about $3 trillion. It would be a reasonable guess that the size of the TGNP (Transacted or Total Gross National Product) for that same year was in the double-digit trillions, probably $50 trillion. This figure is much higher than the reported $2 to $3 trillion of the GNP. The TGNP figure is not that high if one considers the value of certain product transactions that are not considered as part of the Gross National product. Recall that the third largest brokerage firm in America at the time (Solomon Brothers) transacted about $4.6 billion in securities every day. On an annual basis of 250 trading days, this would be about $1.1 trillion, or half the GNP reported by the necronomists for 1981.
Presently, many parties conduct product transactions that benefit from economic stability without paying a tax to support that stability. The majority of such transactions are not recorded as part of the Gross National Product. If a TGNP figure of $50 trillion has been used, the $1.1 trillion tax cost of running all levels of government in 1981 would have been only 2% of the TGNP. For that year, a national product transaction tax of 2% would have covered the cost of all government. Taxes on income could have dropped to 2%. Since taxes would be levied on many transactions that presently escape taxation, governmental units would not suffer a decrease in revenues from a decrease in the income tax.
Once instituted, this product transaction tax would result in the elimination of all other forms of tax collection and their accompanying bureaucracies. A NUSA operation would collect taxes at the Zip level on a weekly basis. It would be easy for the government to match revenues against outlays. If the 2% figure were low, the people could increase the transaction tax rate to 3% until deficits were eliminated and a surplus was acquired. Once the surplus was sufficient, a return to a lower rate would be legitimized. The tax rate in all cases would be in whole figures in order to ease computation. Furthermore, changes in the rate would be on a quarterly basis. Tax revenues would be divisionally apportioned as described earlier.
Special Taxes for Economic Stability
As a general tool of tax reform, a product transaction tax would initiate a return toward economic stability. To insure and speed this return, certain additional taxes would have to be enacted. Basically, these special taxes would be enacted as a form of financial interdiction against those who personally gain by destabilizing the American economic system of production, knowingly or unknowingly. Examples of these taxes would be
an inflationary returns tax,
Let the punitive tax serve warning on all who would seek a quick buck at the expense of the whole economy. Punitive taxes would not be a vindictive matter but a pragmatic, preventive measure. Like locks on doors, they wouldn't deter determined criminals but they will discourage the weak-willed and ignorant.
The whole process of undermining stability can be given a specific name. When people gain by undermining stability they are essentially cheapening or inflating the value of stability. This general process can be called "stableflation." Punitive taxes on destabilizing activities would be regarded as stableflation taxes.
Inflationary Gains/Return Tax
For the sake of economic stability there should be a special tax on inflationary returns or gains. Inflationary returns destabilize an economy. They are instances of people getting something for nothing--an increase in personal wealth without the creation of any new wealth. Inflationary returns cannot occur without inflationary losses and suffering.
As inflationary returns increase for a fewer few, the inflationary losses mount for the many through price inflation, unemployment, taxation, and crime. These aspects of inflationary suffering force production to regress to lower levels. They also indicate a less stable economy, since the population's needs have not changed. Inflationary returns cheapen an economy and return it to a lower level of existence ... as the name implies.
A prime example of inflationary returns is price-gouging. Price-gouging usually results from contrived shortages that artificially inflate prices. Such shortages are the product of the monopolistic and oligopolistic practices tolerated and encouraged by politicians (e.g., deregulation of the oil industry).
Ironically, if people are increasingly price-gouged, their disposable income dwindles to the point that they cannot stimulate the economy as they previously did. With unstopped price-gouging, the economy shrinks as individuals and industries drop out. This scenario is occurring in America. As inflation, partially brought on by price-gouging, decreases people's disposable income they are unable to support industries like construction and car manufacturing.
Even price-gougers do not escape the consequences of their inflationary actions. Eventually, their inflationary returns drain too much income from the consumers and the consumers cease to buy the overpriced product. Price-gouged people change their lifestyles; consider the relationship between the evolving consumer and the oil industry.
Between OPEC and the unregulated oil companies, energy consumers were price-gouged out of their disposable income. Unable to support their expensive habit, people decreased their usage of this over-priced product. The 1980s witnessed a decline in the use of petroleum and a subsequent glut. Unfortunately, all industries suffered a return to lower levels of production due to the price-gouging in the oil industry. Clearly, price-gouging must be taxed out of existence.
In taxing inflationary returns, however, an enlightened policy-making process must be careful to tax the perpetrators and not their victims. A prime example of failing to tax the price-gougers was the windfall profit tax on oil companies. This taxed the consumers of oil energy not the oil companies.
To be effective, an inflationary tax has to attack the personal finances of those responsible for the price-gouging. Executives, directors and shareholders should not be allowed to hide behind the corporate structure by simply adding a tax or fine onto their already inflated prices. One simple solution would be to declare a moratorium on all bonuses and dividends for a period of time in conjunction with a forced issue of new stocks. For the given period of time, an amount of money on par with the bonuses and dividends of the previous period would be paid out of the company coffers into the Social Security fund. In other words, the usual bonuses and dividends would not be paid; they would be diverted to Social Security. In addition, prices for the company's products would be rolled back and ordered held at that level for a judicious period of time. The newly issued stocks would be publicly auctioned and the proceeds would also be diverted to the Social Security fund.
In this simple, but effective way, price-gouging executives and directors would be denied the bonuses that are usually paid for effective price-gouging. In addition, the shareholders who (actively or passively) endorsed stableflating business practices would be doubly punished. Their dividends would be diverted to the Social Security system and their ownership of the corporation diluted by the auction of new stock issues. This proposed, punitive price-gouging process will be called the price-gouging stableflation tax.
The following ballot issue seeks to develop a national consensus on stableflating price-gouging. In the meantime, any judge reading Noble Reforms can take the process to heart. If price-gougers themselves are not held financially responsible for their actions, they will not only keep their inflationary returns but also use their profits to protect themselves as they always have--by buying politicians.
This is no empty accusation as the quotation below reveals. If the American people don't act to stop price-gougers, corrupt and incompetent politicians will sell out the victimized consumers for bribes and campaign contributions:
The article quotes a group of opponents to this 1981 bill who said that "Price-fixers [turned] to Congress to accomplish what they couldn't accomplish in courts." If price-gougers remain unpunished, politicians will continue to dispose of the American dream by selling legislation to the highest bidder. In 1981, one retiring congressman said, "Congress is more bought than it ever has been." (Sadly, but not unexpectedly, the pressure from special interest groups is no less of an issue in 1991.) Without a tax that effectively punishes price-gougers, the stability of the American economy will suffer under the weight of inflationary returns.
NUSA Proposition #4: America needs a tax on inflationary returns.
Inflationary Tax and Inflationary Suffering
If inflationary returns are taxed out of existence, there will be less inflationary suffering. Every dollar of inflationary gain for one person is a dollar of inflationary loss for another; it is a zero-sum world. However, taxing inflationary gains out of existence will not totally eliminate inflationary suffering. Inflationary suffering also has an element of ignorance. People suffer inflationary, time-wasting problems because they ignore the relevant education that would help them solve or prevent the problems that cheapen their time. To reduce or eliminate inflationary suffering necessitates not only an inflationary return tax, but also an ignorance tax.
A lot of people believe that ignorance is bliss. Ultimately, however, ignorance generates economic instability. When people ignore opportunities to educate themselves to better ways of solving or preventing problems, those problems become the source of much turmoil. For example, because the American people have chosen to largely ignore the long-term ramifications of the actions of politicians and economists, they now bear the burdens upon them by legisflators and necromonists. Since inflation indexes the cost of unsolved problems (wasted time), it also reflects and acts as a tax on people's ignorance. Passive coping is no substitute for active problem-solving.
A formal ignorance tax should be enacted in place of the more expensive, informal ignorance tax called inflation. The simplest way to institute an ignorance tax would be to require people to spend a portion of their time in some education relevant to solving human problems. Both the amount and field of prescribed educational time would be democratically colfilperhoned. Just as minors are required to achieve a certain level of education that prepares them to be productive citizens, adults would be required to educate themselves as problem-solvers to insure a steady increase in the stability of America and the quality of life.
For those people who refused to fulfill their annual education requirement, an ignorance tax of 200% their hourly wage for each ignored hour of education would be exacted. For instance, if you failed to fulfill your required education by ten hours, your savings account would be taxed an amount equal to your hourly earnings times twenty.
Such an ignorance tax would quickly lift the educational level of the nation. In essence, the ignorance tax would result in all Americans acquiring high school and college degrees in gradual steps. The degrees would not be pieces of paper purchased from mail order firms but symbols of each individual's investment of time in education.
Already, Americans are taxed by inflation, unemployment, overtaxation, and violence because of ignored relevant education. To prevent these costs, we must choose to tax and prevent ignorance directly. Since unsolved problems continually sap time and intelligence, a tax on those who refuse to solve problems is the most economical way to meet the cost of unsolved problems and encourage an enlightened pursuit of relevant education.
The term "stockflation" has been coined to describe the cheapening of stocks as tools of capitalism. Stocks originated as a means for several people to pool their resources. Through stocks, production ventures can be jointly initiated which individuals alone could not capitalize. Stocks so issued are best qualified as "fresh stocks."
As a tool of capitalism for increasing production per capita, stocks can be cheapened if productive rules are not legislated and legitimized. Historical (e.g., the Great Depression) and contemporary events show that those who handle stocks cannot be trusted to regulate themselves. Worse than trading on inside information for inflationary gains is the unregulated hustling of old stale stocks which does not put a single cent into production.
The production validity of stocks is cheapened if their use negates their purpose of raising funds for increasing production. Would you say that the following example of a stock transaction (quoted earlier) is productive or counterproductive?
Some [stock traders] have turned today trading, buying or selling shares in the morning and closing out their positions in the afternoon, an activity only slightly more glamorous than scalping, in which a trader may hold a position for as long as forty-five seconds or so before closing it for an eighth or sixteenth of a point.
On the surface, nothing seems to be particularly productive or counterproductive. However, if one person can make a living doing nothing more than buying stock for a few seconds, other people will be inclined to give up their more productive enterprises and join this person. In addition, currency is involved in these transactions.
Currency is the blood of an economic body. As with a biological body, if the blood is suddenly removed, the economic body will die. A major factor in the onset of a depression is the withdrawal of economic blood as depicted in the following account.
Many nervous depositors withdrew currency from American banks--thereby helping to generate a wave of bank failures. Bank reserves plummeted by over a billion dollars (an enormous sum in those days) in just six weeks. Spasms of hoarding set in. The credit structure became more paralyzed than ever.
The same series of events occurs if the blood is slowly drained over a period of time.
If the government encourages people to pursue income (currency) in nonproductive and symbolic ways, the body of the nation will suffer from this diversion of its economic blood. There is only so much economic blood at one time. If blood is diverted for nonproductive activity, the economy becomes anemic.
The above example of "scalping" stockflation results in economic instability because it drains money away from production loans, bonds, or fresh stocks. Similarly, but on a much larger scale, all the "megamerger" activity (Dupont-Conoco; Mobil-Marathon) drains money away from production. Production becomes anemic. Without corrective regulation, the counterproductive use of stocks will increase.
Do not expect the Security and Exchange Commission to correct the situation. Consider the implication of the following.
BROKERAGE HOUSES will be required to keep on hand a net of 2 percent of customer claims beginning May 1, instead of the 4 percent now required, rules the Security and Exchange Commission.
Now, remember the lesson of 1929 when people were encouraged to buy stock on credit. Of course, it should come as no surprise that the government agency entrusted with productive regulation of the stock exchanges took a step back toward the conditions of 1929. The head of the SEC at the time of this change was John Shad, a recent vice chairman of E.F. Hutton.
Brokers were clearly aware of the similarities to 1929. However, the concern was not for self-regulation and stopping the parallels. Consider the course chosen by John Shad's former firm:
E.F. Hutton coaches brokers in the fine art of coaxing customers to borrow .... Wall Street marketeers worry, though, that the term "margin" evokes images of risk, bursting bubbles and the like; a saleable euphemism is sought.
The wolves were guarding the sheep and thanks to the Shads of the 1980's the shadows of 1929 are now darkening our economic future.
E.F. Hutton was not alone in resurrecting the credit buying that fueled the inflationary bubbles of the late 1920s. In fact, the leader of the brokerage pack went one step further:
Last week, Merrill Lynch & Co. announced what could become one of the largest sources of consumer credit to date: a revolving-credit account secured by a borrower's equity in his home. If the concept succeeds, it could unleash as much as $1.5 trillion in new credit that Americans could tap with their credit cards or simply by writing checks.
Many people in the 1920s lost their homes because they borrowed against their equity. Some attempted to pyramid the equity of one home into a real estate empire. The Great Florida Land Bust of the 1920s illustrates the effects of borrowing against home equity in expectation of inflationary gains. History is being repeated.
Stockflation will increase for many reasons. One less obvious impetus, however, is the misuse of telecomputation: "Computer Linkups Letting Traders Start Up Securities Firms at Home." One "benefit" cited within this article is how the in-home broker doesn't have to worry about "the current deterioration of mass transit." Is it any wonder that our basic, essential services have deteriorated when our political policies tax basic industry workers and allow manipulators of symbols to escape taxation? Stocks are products just like corn, highways, and sewers. If government policy does not tax the transactions of stocks, people will gravitate toward transacting stocks instead of producing essentials.
Increasingly, telecomputation has been used to tantalize people with "more income for doing nothing." Consider the inflationary implication of the following 1982 report on the use of microcomputers.
Now a small, Columbia, Md., company, Urban Aggregates, has come up with an alternative that enables microcomputers to read printed stock-price charts. The company has written a $175 program called Stock Forecasting System for use with Apple Computer Inc. computers and an electronic pad known as a graphics pad. By placing a price chart on the tablet and touching a special pen to the high, low and closing prices, two years of weekly market data can be put into a computer in about 10 minutes. The program also makes buy and sell recommendations.
For the price of a microcomputer ($2,500), one can play a sophisticated game of blackjack. Using the computer, one can plot certain variables and the computer will say whether to stand or ask for some more paper assets. Some companies are so sure that you will benefit from their computer programs and stock information that they will buy you a computer if you use their services. However, gambling risk and productive investment are not interchangeable.
The amount of money tied up in stock transactions is not small. For example, one firm handled $4.6 billion dollars a day in securities which was more than twice the $2 billion handled by the federal government within the same time frame.
A lot of bloodsucking stock transactions occur on Wall Street that do not capitalize one iota of production. Less than 5% of the stock transactions are capitalistic. Wall Street is not the center of capitalism; it is the center of decapitalism.
Would it be safe to say that there is an inverse relationship between the turnover rate of old, stale stocks and economic stability? Probably. Which comes first, increased stock turnovers or economic instability? If there is a feedback relationship, which can be stopped overnight to deflate the vicious cycle?
Consider the effect of a governmental decree requiring that all stocks be traded once a day versus a decree that stocks must be dated and cannot be traded more frequently than once a decade. Which decree would engender economic stability? Which way are professional stock handlers taking America? Look at their actions:
Investors must hold stocks, bonds and most other property at least a year to get favorable tax treatment for long-term capital gains. Last year, Congress cut the capital gains tax rate but brokers lost a hard-fought battle to persuade lawmakers to lower the holding period to six months. Now brokers plan another try, and some think they have a chance despite skepticism among many members of Congress.
Hopefully, the reader recognizes the instability toward which the stock brokers of America are directing the economy. This recognition should be based on the fact that brokers are not talking about actual capital gains; they are talking of inflationary returns. If they have their way, stock brokers will return America to ever lower levels of production. If stockflation were stopped, however, economic stability would quickly follow. The politicians will not stop the use of stocks to cheapen production. We, the people, must stop stockflation.
NUSA Proposition #5: Stocks should not be used counter to production.
The purchase of old stale stocks does not put one cent into production; in fact, the transaction of stale stocks diverts money from new production and is an example of stockflation. The national stock exchanges should be reformed to eliminate the cheapening of stocks as tools of production and capitalism.
History shows that economic instability also occurs with despotic rulers. Despotism places too much power in too few hands. When the responsibility to rule is overcentralized, a nation's problems remain largely unrepresented and unsolved. As the number of unsolved problems increases, economic stability decreases.
It is a logistic impossibility for a person with all the power in the world to respond to the problems of all the people. Even an "all-powerful" ruler can be in only one place at any given time; he cannot "know" the problems of those outside his immediate environment.
Unfortunately, humanity does not recognize the losing proposition of giving too much power to a fewer few. The masses have repeatedly fallen for the false hope that one person, if given more power and trust than any previous leader, will solve their problems. The extended honeymoon of the Reagan Administration can be attributed, in part, to many people adopting this hope. How many people thought that Reagan would move mountains if they had enough faith in him and gave him more power? Poor fools--no one but the people themselves can know and solve their problems. To give another person more power is to give up power over oneself.
Opposite despotism is democracy. A true democracy allows people to rule on their own problems with optimal divisions of policy-making power. Problems are best addressed by those who are able to understand and respond to them directly. A truly democratic society has fewer problems and is more stable than a collection of people under the indifferent thumb of despotism.
Despotism can occur in both public and private decision-making hierarchies. For example, the megamergers that occurred in the 1980s are a form of despotism. In effect, they are resulting in the private nationalization of America. Private nationalization (privatization) has all the pitfalls of public nationalization. One need only look at the poor performance of the oil companies in managing the corporations that they acquired and to which they have thrown their windfall "profits."
One example is Exxon which has mismanaged its office product subsidiary and Reliance Electric. Exxon has done no better with its Vydec office equipment. Another example is Mobil and its acquisition of Montgomery Ward. Both of these oil giants should be lambasted for their price-gouging habits. They have attempted to nationalize private industry. Like so many corrupt and incompetent politicians, the oil companies have thrown money, rather than real solutions, at the problems they generated with their over-centralized, despotic decision-making. Bigger is not necessarily better.
Is it any wonder that Marathon wanted no part of Mobil Oil? The people of Findley, Ohio, resented Mobil Oil trying to buy Marathon. They know what happens when a local concern becomes an outpost for a larger corporation which is distantly headquartered. Local problems will not only be ignored, but in some cases worsened. Perhaps some of them read a summary of the economic and political pitfalls of megamergers which appeared in the Wall Street Journal around that time.
The trend toward private nationalization with power in the hands of a fewer few is despotism. Despotism, private or public, leads to economic instability, because problems increase. Privatization through megacorporations means private nationalization and public disaster. Big is not bad if it is based on democratic teamwork. Most of these mergers are a refinement and pyramiding of despotic teamwork. With despotic teamwork, a individual's personal power and wealth is not based his ability to solve the problems below him; instead, it is based on the individual's ability to obey superiors and respond to problems as they see fit, regardless of how isolated the superiors are from the problem.
Democratic teamwork is the promotion of decision makers by equals or subordinates based on the relevancy of their problem-solving ability. The democratically chosen leader is given power from beneath for as long as he is clearly the best problem solver. This is not true in the corporate world where despotic teamwork has institutionalized the Peter Principle--people rising to their highest level of incompetence. Of the two kinds of teamwork, which will induce a more stable economy? Which will result in fewer problems? If democratic teamwork is taught and encouraged, people will prosper. On the other hand, the tolerance or stimulation of despotic teamwork (in public or private) results in an unstable economy; the "yesmanism" has people responding to the whims of superiors instead of the problems of the total human environment. With democratic teamwork, viable "ecos nomos" results; with despotic teamwork, necronomics destroys the human environment to benefit a fewer few for a finite period of time.
An enlightened polity would enact laws to promote democratic teamwork and organization within the private sphere. Existing anti-trust laws are not enough; they lack the rational backing for effective enforcement. The public needs to be able to discern the difference between despotism and democracy. Private despotism should be taxed. Private citizens should have the right to enter a colfilperhone process and therein propose a higher taxation of despotic corporations that actively ignore the problems of the many to benefit a fewer few.
NUSA Proposition #6: For the sake of a more problem-free society, America needs a special tax on despotic activity.
Nonmanufacturing Corporation Tax
Too many people have incorporated themselves to take advantage of lower corporate tax rates. As corporations, they can write off many personal expenses that the unincorporated person cannot. However, if a nation is to have economic stability and prosperity, it must stimulate those who create actual wealth (industries and individuals) not those "serve" the wealth. Giving greater tax breaks to the service corporations is a step backwards for our imbalanced, problem-plagued economy.
Many individuals have incorporated their services to reduce their tax burden. This has forced an increased tax burden on the nonservice, manufacturing industries and individuals. The most rapid way to reverse this counterproductive trend and promote permanent economic stability (grounded in the creation of wealth) is to distinguish between manufacturing and nonmanufacturing corporations.
NUSA Proposition #7: Nonmanufacturing corporations should be taxed at a multiple of the rate for manufacturing corporations.
Tax Exemptions as Retroactive Loans
A government should allow tax exemptions only for productive enterprises. Clearly, the opposite should never occur. A government that subsidizes counter productive activity is self-destructive. Furthermore, if a tax exemption is for a productive activity, then the recipient should be more productive and, as a result, be able to repay the money.
In one sense, a tax exemption or tax support is actually a loan of money forcefully borrowed from the people as a whole and lent (transferred) through the taxing agent. Logically, the American public should have the right not only to declare an end to certain tax exemptions but also to declare that certain exemptions are retroactively governmental loans. In other words, we the people have a right to call due those governmental loans that are parading in the form of tax exemptions or tax supports.
The honest person who has used his tax exemption or support to increase his wealth will not object to repaying his fellow taxpayers by subtracting from his wealth the amount of the original tax exemption or support. On the other hand, if an unproductive person has been milking the Treasury and bilking the people, that person will not be able to repay the Treasury. Such people should lose their exemptions and supports as well as some of their personal assets for repayment of funds fraudulently borrowed.
The following ballot proposal is not a call for repayment of all tax exemptions and tax supports. To do so would be to require that military and governmental personnel repay their wages. No, the following proposal is a call for the right of the people to colfilperhone the retroactive assessment of certain exemptions as governmental loans. Keep in mind that any proposal for a retroactive assessment must be colfilperhoned and then legitimized by the people using modern telecomputation.
NUSA Proposition #8: Tax supports and exemptions are, in one sense, a loan of the people's money.
Some of the existing tax supports and tax exemptions should be declared retroactive loans requiring repayment to the Treasury. Such declarations should come through the colfilperhone process.
Summary on Special Tax Levies For Economic Stability
All of the proposed special taxes are intended to speed up the establishment of economic stability by punitively fining counterproductive individuals and industries. By eliminating counterproductive activity, the business of producing a wealthier America can go forward. Central to the enactment of the levies is the role of the American people in colfilperhoning democratic (not demolectic) taxation. Through the colfilperhone process, political corruption and incompetence can be negated.
Problem-Solving Tax Credits
So far, the promotion of economic stability has centered around two tax reform proposals. The first proposal called for a "product transaction" tax to tax each producer according to how much he benefits from the stability of a well-run American economy. The second proposal focused on punitive taxes on destabilizing, counterproductive, and inflationary activities. Another needed tax reform is to reward those who participate in problem-solving to create a more stable and productive America.
Does it make sense to give people tax credits for solving problems? Existing tax cuts blindly reward both productive and destructive activities. If tax credits, cuts, supports, or exemptions are not specifically targeted to solve the people's problems, then the tax action may actually increase problems.
One example of tax credits for specific, productive activities would be reading certain materials. The NUSA books offer insights and methods to solve problems. In reading these texts, a person becomes aware of the problems, which is the first step toward stopping the problems. The proposed tax credit for reading varies depending on how soon one reads and supports the NUSA books and their proposals. The proposed tax credit is detailed in the appendix. This tax credit, like all the other proposed credits, will be paid when the Democratic Capitalists have recalled and replaced enough politicians in Congress.
In addition to tax credits for reading, other tax credits can be earned by joining the Democratic Capitalists to create a New United States of America. Still more credits can be earned by participating in the growth of NUSA through problem-solving activities as a NUSA executive, or a colfilperhoned law proposer for example. ALL the dollars spent in buying material will be a direct, total tax write-off. Thus, if you paid seven dollars for your copy, you will be able to write it off. Any additional money that you wish to donate to NUSA will be credited to your tax account.
The valid date of these tax credits will be when the Democratic Capitalists control Congress. Presently, you help create a better world only by investing your time and money in NUSA. All this effort will be quantified in the form of tax credits for solving America's problems.
NUSA Proposition #9: Tax credits should be given for all the time and money that one invests for a New United States of America (NUSA).
Tax credit will be given for any documented dollar amounts. Tax credit shall be given for one's time in the executing or colfilperhoning legislation of, by, and for the people.
Offering future tax credits should not be construed as the actual levying of taxes, for only Congress has the "power to lay and collect taxes." This tax credit program is akin to politicians promising tax relief upon election. As has been shown, most of them merely shift taxes from one constituent to another. They do represent and solve the problems for all constituents.
Whereas politicians are nebulous in their promises, which allows them to escape later, NUSA spells out specific quantities of future tax relief if you help solve the problems of today. Promote Democratic Capitalism and NUSA, and ye shall inherit a more problem-free, tax-free world.
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