FUNDAMENTALS OF TAXATION 101

 

This essay will examine the various taxation schemes governments have devised to fund their parasitic existence, and to fund their operations, both desirable and undesirable. In addition we will examine who pays for this largess, and show that with little exception all taxes are paid by the consumer.

To begin with it is desirable to categorize taxes into two groups, direct and visible taxes, and indirect and invisible taxes. The first group includes, among others, point of sale taxes, title taxes, excise taxes, real estate taxes, property taxes in general, and of course income and payroll taxes. The second group includes inflating the currency, tariffs, sales taxes that are embedded in the price, and oddly also all of the direct taxes, including income taxes. This latter point is little appreciated and the major impetus for this essay.

The fact that virtually all of group one taxes directly affect the price of goods and services purchased in the market leaves little doubt that these taxes are paid by the consumer. They either reduce the amount of money that the consumer has to spend in the market place, or they increase the price of the goods and services the consumer buys. The direct taxes are plainly visible and can be understood by every consumer that is affected.

On the other hand the indirect and invisible taxes require considerably more time and thinking to appreciate how much is paid and by whom. These taxes deserve a more thorough discussion.

Inflation of the money supply is only possible in the case of fiat currencies. Unfortunately virtually all of the major currencies in the world are now fiat currencies and can be increased at will by the controlling governments. In the case of the U. S. and the dollar, this is accomplished by the Federal Reserve, which is supposed to be independent of the government but is in fact a creation of the Federal Government and therefore ultimately under its control. Thus creation of more money by the U. S. government is not only possible but has been used more and more to cover deficits between income and spending. This is a tax on everyone that uses dollars in that the extra money created and spent by the government drives up dollar prices for everyone else.

President Trump has reintroduced tariffs, i.e. taxes on imported goods, both for income for the government and as a economic weapon against foreign countries. Tariffs can increase prices of imported goods to compensate for the increased prices of domestically produced goods due to various taxes paid by domestic producers, but in that case tariffs are paid by the U. S. consumer. However, if the foreign importer has enjoyed a windfall profit by pricing his goods the same as the domestic producer, he can eat some or all of the tariff. Unfortunately the American consumer still pays the same elevated price, but in a real sense the importer is paying the tariff.

In the U. S. most sales taxes are only applied on final retail sales, so the embedded sales tax is mostly irrelevant here. However, ALL the direct taxes – real estate taxes, retail sales taxes on capital expenditures, income and payroll taxes, etc. – that are paid by every U. S. entity involved in getting the goods and services to the consumer are also embedded in the price and are therefore paid by the consumer both in and out of the country.

This last point is the main takeaway from this essay. Every American that contributes to making goods and services available to the market has to include all the taxes he pays in his price for his contribution to net a desired or necessary profit to support his existence. Thus the fundamental fact is that the consumer pays virtually all the taxes, not the worker making the product, not the corporation he works for, not the rich ;individual who owns the corporation that the socialist claims will pay, not even the trucker who delivers and the retailer who sells the product. All of these pay taxes only to the extent that each of these consumes the goods in the marketplace. The consumer pays either by sales, excise, tariffs, etc. taxes embedded in the prices of the goods and services he buys, or by losing buying power with the income, real estate, personal property, etc. direct taxes he pays. Even the parasitic welfarite that lives off of government largess has his or her consumption reduced by the price increases representing the taxes added.

The principle presented in the last paragraph is why the Income Tax is such a bad idea, and why replacing it with a National Sales Tax is greatly preferred. Even if such a tax would be at a rate to replace the Income Tax revenue to the government, the consumer would not be paying more that he does now since he pays it all anyway. In fact, by eliminating the gargantuan IRS empire and the indirect costs to business of complying with the insanity of the Income Tax code, one would expect that effectively the consumer would pay less. It is almost impossible to put a number on the indirect costs referred to here, especially since currently every business decision is made worrying about the tax considerations. No wonder Marx listed a graduated income tax as a major tool in destroying a country.

One last consideration as to why the Income Tax is a terrible idea. The contribution of the Income Tax to the price of all goods manufactured in this country makes a major contribution to why American exports are non-competitive in world markets. This burden cannot be offset with tariffs or the like, and the elimination of such would go much further than tariffs to make the U. S. a dominant economic player in the world markets.

Years ago Milton Friedman stated the principle that the total taxes that a government takes in must equal the total expenditures. The U. S. government does not really operate with a 'deficit'; it just collects that part of its income from the indirect and invisible taxes. This author would add the principle discussed above that all taxes are ultimately paid by the consumer. These two principles should allow taxes to be understood in spite of all the noise surrounding the subject.

THE LEFT AND CHARLIE KIRK

In 'Language and Human Development' (1), I argued that the child from age 2 to about 12 is in an information absorption state, or in more modern jargon, is programmable. Even though, as I then argued, the adolescent teenager becomes somewhat rebellious and a know-it-all, what he or she thinks they know is mostly what has been programmed during the learning period. In mature homogeneous societies this programming of the religious and cultural mores, and the general knowledge of the society, plays a major role in its stability.

Unfortunately, this programmable aspect of the human child plays a negative role in the current battle between the political Left and Western Civilization. In a democracy the majority of voters determine what the government does. Since by definition a half of all voters are below the median in intelligence, co opting the support of the lower half can be a winning strategy for controlling the government. This is the bread and butter of the Left, which these days is the Democrat Party.

The founders of our government knew this and alluded to 'Qualifications' to vote for the only direct representatives of the people – the House of Representatives. Presumably they hoped that even the lower half of the qualified voters would be intelligent and knowledgeable enough to make reasonable choices for their representatives. But inexplicably they left it up to the States to determine these 'Qualifications' for even the Federal elections. This is the Achilles Heel of our Constitution. In the last two centuries Constitutional Amendments have not only resulted in the Senate and even the Presidency determined by the popular vote (with a minor peculiarity resulting from the Electoral College), but in addition the States have eliminated any semblance of qualifications for voting. The current crop of elected Democrat politicians leave little doubt that, without 'Qualifications', the lower half of the electorate is not competent to vote for their government, or even their representatives.

The Left's Marxist movement is now over a century old. Its strategy at first was to co-opt the blue-collar workers by infiltrating the labor unions. This was less successful than they had hoped, perhaps because Western Civilization workers were reluctant to cede total control to the government. It helped that the rate of collapse of communist experiments across the globe woke up too many 'low information voters' (Rush Limbaugh's favorite term).

During the mid 20^th century the success of several despots in co-opting the youth – Hitler's Brown Shirts, Mao's Red Guard, etc. – led the Left to change their focus to the educational systems. This approach has the advantage that, as described above, the child is innately programmable until puberty, and that programming is almost impossible to undo.

Using the educational systems to program the youth is almost perfect, but a problem remained. The nuclear family can, if aware of the problem, block the ideological programming of the schools. Thus the Left launched a parallel effort to augment the takeover of the educational systems with the destruction of the nuclear family. Feminism pushed the married female to get a job and let professional baby sitters raise the young. This effectively blocked most efforts by the family to interfere with the programming of the young by the Left. The degree of support of socialism by the younger generations is testimony to the effectiveness of the Left's current game plan.

Charlie Kirk was a serious threat to the Left's indoctrination of the young. Charlie had to go. However, assassinating Charlie may have been the wrong strategy for nullifying his efforts. By making him a martyr they have lost significantly more ground with the young than they have gained. Fortunately, intelligence has never been the long suit of the Left. 

 (1)   Musings and Rants - 1985-2016,  Marcus Everett,   CKCPC3 Publishing, Nowata OK 

Income Tax Burden

     

The fact that a large number of current jobs are directly the result of the Income Tax is NOT a good reason to retain it. The argument that it provides work for these people is the same as the 'broken window' theory - that it is advantageous economically to have windows broken because it makes work for glaziers. Although a work force repairing windows that are accidentally broken is necessary, breaking windows to create more repair jobs is obviously insane. But that in effect is the Income Tax. There are several alternatives to the Income Tax to finance necessary government, and the gargantuan army of 'window repairmen' servicing the Income Tax monstrosity could be employed in much more productive efforts. The deleterious burden on business of the Income Tax is so great that putting the Federal Bureaucrats, lawyers, CPAs, bookkeepers, etc. that are required by the Income Tax on welfare and eliminating the Income Tax would be an economic gain for the country.

The total effect of the Income Tax on the economy is virtually impossible to determine. The word insidious is defined as working or spreading harmfully, subtle but treacherous, gradually but secretly causing harm. This describes the Income Tax, in that a graduated Income Tax appeals to the lower classes because it looks like it can tax the rich and not them. This is the sinister aspect of the Income Tax, in that the cost to the consumer of all the Income Tax paid by every worker and business in this country that is involved in bringing the product to the American consumer is included in the final price of the product. This includes not only the workers and businesses that contribute to the production and delivery of all goods and services bought by the consumer but also all those parasites that are required to do all the necessary bookkeeping and other paperwork involved in determining and remitting the Income Tax. In addition there is the completely indeterminate cost of the many economically negative decisions that are made because of the arcane Income Tax rules.

A word in passing on a related subject. There are morality aspects to the many forms of taxation that seem to be given little consideration in modern America. In particular, Income Taxs are essentially a statement that an American citizen is in fact a serf of the Governments, Local, State and Federal, that he/she lives under. The situation is no different than that of the King in medieval times requiring a percentage of the productivity of each peasant to support his opulent living style.

Replacing (absolutely NOT in addition to) the Income Tax with tariffs, sales taxes, excise taxes, etc., should be a no-brainer. The problem is to educate the public to the total cost of the Income Tax, direct and hidden, and thus to the resulting loss of competitiveness of American made goods in both domestic and foreign markets. Adding tariffs on imports to offset the embedded cost of the Income Tax may help domestic producers for sales in this country (mostly paid by the American consumer), but it does nothing to make American goods more competitive in foreign markets.

Lastly, the fact that citizens of the U.S. are no more free than the medieval peasant should be galling to every hard working American. We fought the Revolutionary War in part over a tea tax. Let's hope we don't have to repeat over a serf tax.

1942 VERSUS 2023

My father, born in 1901, was too young to be in WWI and too old to be in WWII. Living on the Atlantic coast during WWII he was involved in coastal watch efforts, but as far as I know that was the extent of his participation. In the late 40s and early 50s I don’t recall my father talking much about the war, with the exception of one comment that I retained. That was his observation that we didn’t out fight the enemy in WWII as much as we out produced them. In retrospect this was almost an understatement.

The war materials production effort in the U.S. during WWII was literally incredible. In addition to a large manufacturing base that was totally re-purposed for the war effort, we enjoyed the fact that the enemy could not get to us because of the two oceans that separated us from the two theaters of war. We bombed the enemy’s production facilities into oblivion but ours remained untouched. Our enemies were never able to establish bases from which they could attack us.

The difference between the situation in the U.S. in 1942 and the U.S. in 2023 is night and day. In 1942 our economy was slowly recovering from the depression of the 30s, but our industrial base was sound, we were not dependent on others to any real extent, and our citizens were patriotic. Today we are on the verge of either a government default on its debts or a currency collapse due to runaway inflation; a large percentage of our industrial base has been moved to other countries, mostly because of stupid tax laws; we are dangerously dependent on others including those that should be considered enemies; and our citizenry have been turned against the country to an extent that may in fact be fatal. To make the situation much worse, modern weapons can reach us from anywhere in the world, so we're a lot more vulnerable to attack on our soil.

The point of all this is that the U.S. is in no condition to fight any wars or even fund and support others in wars that we have no direct interest, and certainly would not be the untouchable powerhouse that it was in WWII. The stupidity and greed of too many Americans that has permitted the political Left to destroy our country from within may be irreversible, but identifying and correcting the problems that have brought us to this state of affairs is our only hope. Continuing to concentrate the National focus on the Woke insanity, the Green Energy stupidity, the fiscal debacle of the Welfare State, maintaining a world wide military presence when we can't afford it, trying to export democracy which doesn’t even work at home and a myriad of other distractions will guarantee an early and complete collapse of the U.S. nation.

Many in the chattering classes like to refer to the United States as an ‘experiment in democracy’. Although the founders never envisioned the Republic they created as a democracy, the more democratic it has become the faster it has headed toward complete failure. The ‘experiment’ has been run, and the unvarnished reality is that it has failed. Democracy is basically allowing the inmates to run the asylum, and is just not a workable concept.

 

GENDER STUPIDITIES

Finally! A lady on the Fox News program Special Report, presumably speaking on behalf of a national sorority that had been forced to accept a 'trans' male as a sister, noted that there is little to no ambiguity in determining one's sex: every cell in your body knows the answer. If your 23rd chromosome pair of your DNA has two X chromosomes then you are a female. If you have one X and one Y then you are a male. Period.

However, to give some credence to the claims of many individuals that they 'feel' like they are in the wrong body, it is true that in the development of the person from a fertilized egg to an adult human, many things can go wrong. As the initial fertilized egg splits again and again cells in various parts of the body begin taking on specific characteristics to form the many parts of the finished body. This process is known as differentiation, and depends on the chemical signals from adjacent cells. In a contaminated environment errors in development may result from interference in the signaling from cell to cell. This seems to be particularly critical in the later development of the brain, where external influence from the wrong sex hormone, estrogen or testosterone, can affect the wiring of instinctive behavior for the sex of the individual. It is interesting to note that the brain cells that may be improperly wired still have or don't have the Y-DNA that fundamentally determines the sex.

Given the realities of the last paragraph and any other errors in development that might occur, it is more than reasonable to cut some slack for the affected persons. This can easily be overdone, and certainly does not give those persons the right to demand that society as a whole conform to their peculiarities. Accommodation must be limited to restraint from harassment and persecution. As long as such individuals lead their lives in a manner that does not negatively affect others in the society in an unreasonable way they should not run afoul of the law.

Legally, it is obvious that rather than a criteria such as 'sex assigned at birth' determining compliance with privileges and constraints in a society, it would make much more sense in the modern world to use DNA to answer once and for all what is a man or a woman. This is especially true now that such a test can be made with something as unobtrusive as giving a sample of saliva. Surely the Legislative bodies of a society can use something as simple as that to write meaningful laws on the subject.

Lastly, it is obviously insane to think that one can 'transition' from one sex to another by cutting and pasting body parts or intentionally interfering with proper development of a child with chemicals. The degree to which this stupidity has permeated our society does not provide much hope for the survival of America. As Mark Stein observed, "[America has become] too stupid to survive".

 

GREEN ENERGY ON THE CHEAP

 

Back about 1981 one of my fellow engineers and I got the urge to try to get a little 'free' energy from the sun. He found a source of glass panes at a good price, so together we purchased about 2 1/2 tons of glass panes. At the time I owned a brick Cape Cod in Maryland. It faced a little west of south with minimal shading on the front side, so I built a removable set of large glass panels that basically covered the front of the house. I could remove them in the summer months and enjoy some free solar energy in the winter. I learned later that my abode became known locally as the 'glass house'.

When the sun was shining in the winter the panels gave me a 'low tech' solar collector of about 250 square feet, with the brick walls acting as the absorber. The temperature behind the panels would climb into the 70s even for outside temps in the 20s, which meant that about 30% of my exterior walls thought it was summer. In fact, if I was home I would open the windows behind the panels and enjoy the warm air heating the front rooms.

Of course, even though I got an encouraging return on my fairly low cost investment, I only gained when the sun was shining. To be useful as a primary source of heat, it would be necessary to store the energy for retrieval during nights and cloudy days. So before expanding my system, I did a little research on energy storage systems.

My crude low cost system used the low tech approach of storing the energy in the thermal mass of the masonry walls of the house. If the sun was not shining some of the energy from a sunny day was still warming the front wall, but most was lost. To make such a system a primary heat source it is necessary to transfer the energy during sunshine to a large thermal mass such as a basement full of rocks or a large water tank. This is usually not too practical an approach because of the amount of material needed as the thermal mass.

The next better idea is to use a material that has a phase change (solid to liquid, usually) to store a much higher amount of energy for the same mass. Water has a great latent heat of the water to ice phase change, but it occurs at much too low a temperature. Fortunately some salts have a solid to liquid phase change at temps of about 70 degrees, so a basement full of salt would work better than a basement full of rocks. But you still have to get the energy in and out. When melted salt solidifies in the basement, the heat would warm the house from below, but transferring the energy from the solar panels to melt the salt is a challenge.

The best way to store energy (short of nuclear processes) is in chemical bonds. This is why fossil fuels are such a great source of energy. So I wondered what would be a good way to store the solar energy in chemical bonds to be retrieved later. It dawned on me that the simplest way to do that is to grow trees. You don't even have to build solar panels. Just cut down the trees and burn them in a stove.

At this point I lost interest in the whole affair. I realized that I had re-invented the wood stove.

Although growing trees for low cost - low tech solar energy collection may be a more reasonable alternative to high cost - high tech solar collection, there are other reasons why tree farms are to be preferred over large areas of solar panels. Trees not only efficiently harvest sunshine, but also absorb the dreaded carbon dioxide gas that climate change doomsayers fear will destroy the planet. In addition, in the process of cleaning the atmosphere of carbon dioxide, trees produce the oxygen that we air-breathing critters need to function. Cheap fuel, carbon dioxide removal and oxygen to breath - what's not to like about that. And growing trees is minimal effort farming - just plant seedlings and forget about them for a few decades.

There is at least one more important reason to grow more trees. Whether forests are clear cut for roads, parking lots, or other building development including solar panel farms, the solar energy falling on such cleared areas is absorbed during the day and heats the atmosphere before finally being radiated to space. If you fly a small plane over West Virginia where I live, the fact that the majority of the area of the state is wooded means that there are few thermal updrafts and your flight is smooth. Over urban areas, desert areas, and even to a lesser degree agricultural land, there are significant thermals in sunny weather and a low level flight gets very bumpy. Furthermore, such thermal atmospheric activity creates violent storms such as thunderstorms and tornadoes. The relatively tree-barren midwest is a hot bed of tornado activity, but they rarely maintain their organization into West Virginia. The fact that West Virginia is so wooded is the main reason why tornadoes and t-storms tend to dissipate over the state. The trees absorb almost all the solar energy and there is little left to fuel the storms.

Forbidden Planet Syndrome

 

In 1956 we were between two milestones that the human species had fantasized over, probably for most of its existence as an abstract thinking animal. We were about a decade past the mastery of physics that had culminated in exploiting potentially unlimited nuclear energy, although unfortunately initially as a destructive device. We were also less than a decade away from man's initial leap into space (a year from Sputnik) and less than one and a half decades from actually venturing to another world, although one near home.

1956 was also the year of one of the best science fiction movies to that date. Forbidden Planet not only had some great special effects for that time, it had a plot that was centered around the two physics subjects mentioned above. Cast a couple of centuries in the future, the remains of an advanced civilization had been discovered on a distant planet. The aliens of the planet, the Krell, had engineered an infrastructure that provided virtually unlimited energy (nuclear, obviously). They had also developed the ability to control all that energy by just thinking about it. The plot twist was that their subconscious also had access to the energy, and they unwittingly destroyed each other in an apparent orgy of subconscious rage.

Now any intelligent species anywhere in the universe would have to have evolved to the level of intellectual sophistication that permits the development of nuclear energy, including the human species here on Earth. But on the way up, so to speak, the species must survive through a continuum of ancestors that had to fight and defend their existence in a harsh and unforgiving world. The primitive emotions that allowed that survival are still resident in the brainstem of the human species, and can be reactivated any time there is a threat or other such stimulus to an otherwise civilized being.

With more and more nations on Earth having an arsenal of nuclear weapons, it would not take subconscious control of them to submit the human population to an extinction event. All it takes is the reactivation of the brainstem emotions of one or more hotheads with access to the launch buttons. The fate of the Krell is now within the reach of humanity and may indeed be unavoidable because of the role of the brainstem in evolution.

The relevant question of the day is whether mankind has in fact reached the point in evolution that cannot be passed by any species in the universe. The kill or be killed past in such evolution will still be lurking in the brains of any such advanced species. It may be inevitable that we succumb to the ultimate self-extinction that nuclear energy provides. In fact, maybe the lack of concrete evidence of alien UFOs visiting the Earth is because no species can make it past the Forbidden Planet Syndrome.