Shackling The Raging Capitalist Economy

I've promised to put it out there on this blog about how to fix our economy and this is it. I've talked about wealth inequity before and even talked about what to do in many other places, elaborating on it in news posts and such, but I've yet to discuss our economy in detail addressing the objections that would be raised by my plan.

The plan's been laid out and explained before, but here's a synopsis: Shift the lion's share of the tax burden to the wealthy. And in a slight elaboration from previous plans I've mentioned, maintain the tax burden by percentage based on a person's wealth. That is to say, you most tax the wealthiest and least tax the poorest based on how much wealth they actually have compared to the total wealth of the coutry.

Today, the wealthiest 20% of Americans control 93% of the country's wealth yet only pay 75% of the taxes. The lower 80% pay 25% of the taxes but only control 7% of the entire wealth of the country. It seems to me there's a discrepancy here of some 18%. Let the wealthiest 20% pay 93% of the taxes. If they divest themselves of wealth (thus getting it back into SOMEONE’S economy) to lower their tax burden it will help stimulate the economy. So your taxes would be based less on income and more on your wealth. It will balance out as the lower income people save money, they become wealthier and are taxed more.

There would be a multiplier, of course, but a person's total wealth would be determined - say 0.0002. This is the amount of the country they actually have financial ownership or control over. In this case, the person is worth 31.4 billion dollars. (Total worth/total worth of the nation owned by non-government individuals). Then the multiplier would be factored in to determine the actual income tax rate based on the worth of that person. All income from all sources (Capital gains included) would be considered income.

The objections to it are (not in any order):

1. The wealthy will leave and take their money with them.

2. If you do this, no one will want to get wealthy.

3. The wealthy are the ones doing the hiring so if you tax them, they won't start businesses and won't hire anyone.

4. It will hurt business growth because no one will invest in businesses anymore.

5. It's socialism! It's Communism! It's Anti-American!

Okay, now, let's start deconstructing these myths rationally.

1. The wealthy will leave and take their money with them.

Not only is this laughable, it's ludicrous. Every other first world country on earth taxes MORE than we do. Especially the wealthy. Great Britain taxes upwards of 50% for its wealthiest residents. With the exception of about six countries (Mexico, South Korea, Australia, Japan, Iceland, New Zealand and Ireland as of 2005, personal income taxes are higher than the U.S. on average. Toss in sales taxes and VAT's and you get almost every major country worth living in charging their citizens considerably MORE than the United States does. And this is for their citizens. What they charge for non-citizens - even in those few countries out there that actually offer immigrants a path to citizenship - varies.

Where else can they go that offers anything resembling a decent standard of living, and security, where they can keep as much of their money as they do in the United States?

Nowhere.

Myth # 1 is now dead. There's no place to go that allows them to keep as much of their wealth as the United States - especially in light of their long-term investments in the U.S. Congress keeping their representatives well paid for their special services and consideration (Read my book for more on that).

2. If you do this, no one will want to get wealthy.

Of all of the objections, this one struck me as the funniest. Not only does it defy human nature, it defies the facts. There wouldn't BE tax rates for the wealthy if there weren't any wealthy people to be taxed. They'd all be paying the same amount in taxes. The fact is there are wealthy in EVERY country, regardless of the tax rates.

People want wealth. They're willing to work hard for it. I have no objection to hard work to accumulate wealth. But there needs to be some way to ensure that wealth doesn't STAY accumulated in amounts so vast, it hamstrings and cripples the economy - which is pretty much what's happening now. Taxing the income (and by income, I mean ALL income, including capital gains) seems the only truly equitable way of doing that. It's simply the government taking more from those who can most afford to have it taken and taking less from those who can least afford to have it taken. 

Oh, and if the government ends up with more taxes than they need, they return it based on the percentage that was taxed.  Those who overpaid get that overpayment back.  It's not like that money would be used for hand-outs.  They earned it, they keep it.  If the scale is applied properly, using the federal budget as a key to taxation rates, the budget would be balanced (with some left over to pay down the debt) while setting the scale in the first place.  The trick would be to keep the budget balanced based on anticipated revenue plus a slush fund in case of economic down-turns.  One should plan for these things, after all.

Taxes today don't make rational people STOP earning money. If taxing the wealthy the most  (which does NOT happen today, by the way) actually stopped people from earning money, then no one would get wealthy anywhere and people get wealthy everywhere.

But let's look at the numbers if you think this is wrong.

Let's say you earn $10 million dollars. If you're taxed at a 90% tax rate, that means you bring home a paltry million dollars.

Let's say you make $250,000 dollars. You aren't taxed at the highest rate, of course, but still high. You are taxed at 50% (as an example). You have to figure out how to slide by with a mere $125,000 take home.

Let's say you make $25,000 dollars. You are taxed nothing. You take home a whopping $25,000 dollars.

Which is going to have the most financial difficulty? It's STILL the poor. Who has the most take-home? It's STILL the wealthy. And keep in mind that none of these amounts includes state taxes, sales taxes, county taxes, city taxes and other things that everyone - even those on "welfare" - have to pay (assuming, of course, that there isn't some break offered to the wealthy in the form of incentives for investing). All of those will adversely impact the poor far more than the wealthy.

Myth # 2 debunked. Even if you tax wealthy people heavily, they're still going to take home a shit-ton more money than those who make less. By human nature, people would rather take home a shit-ton of money than not.

3. The wealthy are the ones doing the hiring so if you tax them, they won't start businesses and won't hire anyone.

The fact is the wealthy almost never invest money in a start-up. Venture capitalists aside (Because most of them are LLC's that spend a lot of time and energy making sure investments in things pay off before they even invest in them), the overwhelming majority of money from start-ups comes...

… wait for it...

...the pockets of the people who do the starting up.

And they AREN'T wealthy people.

By and large, the people who start businesses are just regular folks with an idea or a dream and with almost no funding. They borrow from family and friends. They take out small business loans from banks.

(Least you think the wealthy investing in a bank's stocks is what allows these businesses to get loans in the first place, think again. The idea behind a bank originally was to pool community funds and loan them out, charging interest on the loan which would be paid back to those doing the loaning - the people who deposited their money in the bank. It worked this way quite well for decades before banks started selling stocks and bundled sub-prime mortgage investments.)

Almost without exception, these small business owners are not wealthy. And virtually none of them actually get to the level of wealth that a Jobs or a Gates gets to. They may get a higher standard of living and that's the reward for their hard work. Most go bust in the first three years.

These are NOT the wealthy. Not even close. But they employ more FAR MORE people than the larger firms do.

Yes, some wealthy people do start businesses with their own money, but even then, they tend to not use THEIR money. They use their friends money or sell stock in their company to raise capital. The wealthy have more connections and opportunities to do that kind of thing which the overwhelming majority of ordinary entrepreneurial wanna-bes do not. Wealthy owners of start-ups are the incredibly rare exception rather than anything even remotely approaching the norm.

Starting a business in America today is harder than ever. Called "bootstrapping" this difficulty is because of many reasons, but the chief one is that the opportunities that once existed for chasing the dream of small business ownership are slowly being choked off. Large corporations can undermine and undercut the smaller business. If you have ten stores with ten employees in each one all being closed by a mega-store with 75 employees and lower wages, you have 25 people out of work and 75 making less than they did before. It's not the wealthy who provide the vast majority of jobs in America. It's regular people like you and me. And we are dwindling in both numbers and opportunities.

Myth #3 is debunked. The wealthy aren't the ones hiring the vast majority of people. It's regular folks like you and me who are increasingly being hindered in the chasing of our dreams.

4. It will hurt business growth because no one will invest in businesses anymore.

This is pure bullshit for the simple reason that people want to get richer. Investment returns are FOUND MONEY. The investor did no work to get that return on their money. They give some money to someone who does the actual work, who then pays back the investor with dividends and other financial rewards for giving the money in the first place. It may have taken some effort to get the money to invest in the first place, but when it comes to the wealthy and investments, most of the wealthy get a more than comfortable income from capital gains alone.

But the down-side of taxing capital gains applies mostly to the wealthy. Remember, under my idea, capital gains will be viewed simply as "income" which will be taxed as part of the total income received. While it would seem to be a disincentive for the wealthy to invest a lot, this is an incentive for those who don't make much money to invest. They won't get taxed at the same rate as the wealthy will. They'll keep more of their returns.

Remember the basic tenent of capitalism is financial reward. If someone making $25,000 manages to invest, say $1000 in a company and gets back 4%, it's 40 bucks they wouldn't have had and the taxes are zip. If a wealthy person invests $25 million and gets back 4%, they've made $1 million dollars, and if taxed at 90%, they still take home an EXTRA $100,000.

And neither had to lift a finger to get that money.

Throw in a few million investors of that $1,000 and you get a few billion dollars worth of investing. That may not be a lot for a gigantic company, but as has been pointed out, there aren't nearly as many large companies that need start-up capital and the the wealthy who start those things have their own avenue to financial backing small businesses don't have. A small amount of money in a large number of hands adds up to quite a bit. The wealthy aren't going to stop investing in businesses because they still get financial rewards far greater than anyone else for doing it.

And least it need be pointed out here, this is NOT talking about business taxes. This is taxing the individual. Business taxes aren't something that tangibly affects the economy in ways that help the average person. Almost no corporation actually pays dividends to their employees - putting them in the management chain and making their contribution to the company pay off when the company is doing well - so lowering (or raising) corporate taxes won't have any effect on the concept of bottom-up spending to create demand, increase new job creation and by doing so improve and maintain the economy.

I'm all for making small businesses easier to start up, but when it comes to large corporations, it makes little difference if you tax the crap out of them or not. If you don't tax them, the money will be given to investors and they pay more in income taxes. It gets taxed one way or the other or it goes into making the business more efficient. I've never really understood why we tax businesses in the first place because that money goes SOMEWHERE and that somewhere can be taxed on arrival if needs be.

Myth # 4 is debunked. People will still want something for nothing and no matter how you slice it, investments are a way to earn money without actually working for it. Businesses wouldn't fall under this plan at all. It will be taxed if it leaves the business through income regardless of method (payroll or capital gains).

5. It's socialism! It's Communism! It's Anti-American!

Socialism:

1: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

2 a : a system of society or group living in which there is no private property

b : a system or condition of society in which the means of production are owned and controlled by the state

3 : a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done

Taxing the wealthiest isn't socialism because the government doesn't own anything or administer the means of production or goods. In fact, hands off business is my idea here and tax the crap out of income for the wealthiest. That's not socialism.

Private property isn't being touched, either. This is tax on income - all forms of income. It is a form of wealth redistribution, but not one that applies to people who don't WORK. In order to benefit from the tax cuts, you have to have a taxable income in the first place.

Duh.

As for #3, one COULD make an argument that our CURRENT arrangement is ALREADY socialism through transition since there is an unequal distribution of goods and pay according to work done. The Small Business owner works VERY hard for only very modest rewards while those who have huge wealth do not need to work at all to get a very comfortable income for the rest of their lives - and the lives of all of their living relatives. But we'll clear this up in the next definition, and keep in mind, this is how things are NOW and NOT what I'm proposing.

Communism:

1a : a theory advocating elimination of private property

b : a system in which goods are owned in common and are available to all as needed

2 capitalized

a : a doctrine based on revolutionary Marxian socialism and Marxism-Leninism that was the official ideology of the Union of Soviet Socialist Republics

b : a totalitarian system of government in which a single authoritarian party controls state-owned means of production

c : a final stage of society in Marxist theory in which the state has withered away and economic goods are distributed equitably

d : communist systems collectively

Alright, we have arrived at a communist point and I see NOTHING here that even REMOTELY describes what I'm talking about. The government is only shifting taxes. It's not seizing property or businesses (if anything, it's hands off business). The state isn't withering away. There is no totalitarian system of government. But let's look at the word totalitarian for those of you who may think it means something it doesn't

Totalitarian:

1 a : of or relating to centralized control by an autocratic leader or hierarchy : authoritarian, dictatorial; especially : despotic

b : of or relating to a political regime based on subordination of the individual to the state and strict control of all aspects of the life and productive capacity of the nation especially by coercive measures (as censorship and terrorism)

2 a : advocating or characteristic of totalitarianism

b : completely regulated by the state especially as an aid to national mobilization in an emergency

c : exercising autocratic powers

Now, depending on your point of view, this sounds much like what the right-wing has been trying to do. Especially 1b:of or relating to a political regime based on subordination of the individual to the state and strict control of all aspects of the life and productive capacity of the nation especially by coercive measures (as censorship and terrorism).

Every heard of Todd Akin? How about Richard Mourdock? They want to ban abortions in the case of rape. Akin says that a pregnancy due to a "legitimate" rape is impossible despite the fact rape results in about 25,000 pregnancies EVERY YEAR in the United States. Mourdock says that pregnancies from rape are a "gift from God" or something that was intended to happen, making the rape "God's Will". He, too, is against abortions resulting from rape. That sounds like strict control of aspects of the life of the nation - at least female life. It seems to me that the right-wing is more interested in becoming totalitarian than the left wing at least on the same personal level as we are discussing here. And these aren't the only examples of that attempt to gain control over people on the part of the right-wing. The left wing's issues with businesses - which are not included in this idea of mine - needs to be addressed in another post.

Speaking of which, back to what we're talking about. Communism, my idea is not. Nor is socialism. Not even close. Not even in a transitional stage. So those who claim it is don't know what the fuck they're talking about.

It's un-American!

What about it is un-American? Defend that accusation. Here's how I see it.

The United States of America used to be a place of opportunity. The poor could move up the social ladder by dint of hard work and the sweat of their labors. It's happened hundreds of millions of times in our history. But it's happening less today than ever before. The power brokers have created a chasm between the wealthy and the poor that is unprecedented in our history and are choking off the opportunities to move up the social ladder.

THAT is the result of unfettered capitalism and a lack of regulation. The wealthy have too much power and too much influence over our political system. It's estimated that the total amount of money being spent on the presidential campaign is over 2 BILLION DOLLARS! That's TWICE what was spent in 2008. And that doesn't include Super PAC's.

It's un-American to buy elections, but the wealthy do it more than the poor do it. It's un-American to take money from the poor and give it to the wealthy, but the wealthy do that to the poor. It's un-American to block off opportunities for others to advance while simultaneously advancing one's self.   But the wealthy do that, too.

My plan is so fucking American, it should come with a Star Spangled Banner soundtrack and a Stars and Stripes forever motif.

What is more American than creating greater opportunity? What is more American than providing improved means to get ahead? What is more American than trying to build your own dream by the sweat of your labors and the love of the dream? We can't do that now because the wealthy have too much and the rest of us have too little. Wealth redistribution may sound like a bad thing, but it's the only thing that will stimulate the economy. Today we have a kind of socialism and a kind of communism.   Both of those are things I want to see GONE.

We have a cabal of wealthy dictating terms in our country - and around the world. They have the power and the influence and the wealth to do it. The cards are stacked in their favor - thanks to their influence. They choose who will and won't run for political office. They choose what will and won't be done to keep them in power and pay to ensure their will is carried out. THOSE are the wealthy we hate. Those are the un-American - hell, the anti-American - pond scum who are destroying the country. They control who gets what, making it harder for the little guy to move up and keeping those who are up from ever going down. They stack the deck against everyone else, ensuring they stay in power and on top.  THEY ARE THE SOCIALISTS AND THE COMMUNISTS simply because they control who can get access to what, even if they don't fall into the specific definiont of either.  But they do fall into one definition: Totalitarians.  They seek to control everything.  Frankly, I find that worse than communism or socialism.

The commonality between them is money. They have it. 93% of the nation's wealth, with a gigantic chunk of that concentrated in the top 1%. No matter if you taxed their income at 100%, they will never run out of money. The point isn't so much to bring them down as it is to elevate the chances for the rest of us. Money is the key. If the rest of us have it, and spend it, we create an economy where opportunity can thrive. The wealthy will always control us. But at least with more green in our pockets to seek our dreams, we'll have more opportunity to do it.

If they move to stop opportunity in a more egregious manner, people will react - badly.

And on that note, I don't expect my plan will ever be implemented. Even if it is, I expect the power-controlling wealthy will exert even more influence to cut off opportunity, and people will eventually see this and react badly to it and there will be another war in the United States. Unfortunately, while the puppet masters remain behind the scenes, nothing will get done to address this. Fortunately, the puppet masters have fucked up.

They don't seem to realize that if you feed bullshit you don't ever want to eat yourself to people long enough, those people will expect everyone to eat bullshit, including those dishing it out. In this case, the social agendas that the right-wing (you know, the lap-dogs of these power-controlling wealthy) has been using to stir up the electorate for the last thirty years as a way to get their support are not being adopted not as a means to an ends (to get elected then do the will of the wealthy), but as desireable goals against which rational-thinking people will fight.

Additionally, the scapegoating of "liberalism" has caused increased polarization to the point that even a former Republican turned militant moderate like me is considered a flaming liberal by these fringe elements. This creates hatred and intolerance to the point of violence.

"Don't retreat - reload!" - S. Palin (who is one of the violent, extremist fringe)

All of this has been encouraged by the powers that be as a means to an end in order to get into and stay in power. But people aren't that controllable. They don't get that these means aren't supposed to actually HAPPEN.  If they did, that fringe element would have noting to focus on to distract them from what the right-wing does to them behind the scenes.  That distraction is VITAL to the continuation of the rightist agenda (the fiscal one, not the social one).  This was all explained in my book.

But because this has been drilled into right-wing followers for so long, they've raised a generation of people who don't get that it's all a smoke screen.  These single-issue voters want these things to happen.  They're taking the reins in their teeth and running with the idiotic idea that these things are good and should be done whether a majority of people want them done or not. The scapegoating has turned them into haters of their fellow Americans.  The violence and violent imagery associated with this frings makes violence more thinkable, and more acceptable to them.  In short, the power-controlling wealthy have inadvertantly created the exact atmosphere and environment needed to start another civil war: A lunatic fringe willing to be violent to the "enemy" created by incessant scapegoating started by people who want to put what was supposed to be a distraction for them into the law of the land.

No one has ever accused the right-wing of being smart, after all.

It likely will start out with left versus right, but those like me in the middle will be targeting the puppet masters rather than the puppets. Let's face it, once you have lost control over your puppets, they may get ideas of their own. All you need to do is show them who's pulling the strings and the puppets will take care of the rest.

Because the bottom line here is that the accumulation of wealth is NOT the American way. Not even close. It's being given the opportunity to chase the American dream without anyone deliberately and systematically standing in your way. Not a hand out or even a hand up, but an open door that is available for anyone with the moxie to go through it.  It's long past time the impedement to that door ended, and if a war is how it has to happen, then so be it. I'm not going to start one, and I don't advocate one being started. But we need to do something, preferably non-violent, to open up opportunity for the average American again. Civil war is next to impossible in a good economy. This may not fix the power brokers, but it will stave off war for a time.

This is the only way I can think to do it, and even then, it's only a bandaid.  War will come, sooner or later.  Pardon me if I prefer Americans to be killing Americans again to happen later than sooner.