Thursday, April 7, 2011

Tom Kratman Guest Post on Tax Frauds

Regular readers of this blog will recall that I plugged Colonel Tom Kratman’s excellent and scary book, Caliphate a couple of weeks back. It deals with an all-too-possible future that none of us want to see. But may.

I’ve just finished his A Desert Call Peace, which translates our present “long war” to a distant planet 500 years in the future. In addition to being an exciting and well-crafted read, with accurate and nerve-jarring descriptions of close combat and the moral challenges of fighting a ruthless enemy in a war of insurgency, it’s a fine textbook on leadership, and should be required reading for serving officers. Kratman will be appreciated by SF fans, by military types and by everyone concerned about the future of freedom here on Earth in the 21st Century.

I’m looking forward to reading others in the series, including the latest, The Amazon Legion, which deals with the very timely issue of women in combat.

Colonel Kratman sent me the below in response to my “Coming Collapse” essay, and has kindly agreed to let me share it with blog readers. The book plugs above were my idea. ~Bob Hall

Taxes, the Rich and Tax Frauds
Tom Kratman, LTC USA (Ret)

I'm not an economist. I'm not at all sure that this debars me from commenting on matters economic. Paul Krugman's lunacies suggest pretty strongly, in fact, that a PhD in economics is what should debar a person from commenting on economics.

However, I was a tax lawyer, so I'm not entirely ignorant of the subject of taxes.

Let me suggest something, an idea, that is really radical. We already know that, as a practical matter, the truly poor don't pay tax. That's not radical. The radical idea is that neither do the truly rich. I'm not speaking of the guy (or gal) making a quarter of a million a year, nor even a million or two. They're not truly rich, but more or less the high end of the upper middle, which is our working, class.

No, I mean the genuinely and fabulously wealthy. I don't think that the effect of the progressive income tax is to squeeze so much as a penny out of them. Nor do I think it has much to do with their ability to hire the best in tax lawyering and accounting. Those merely adjust, to the limited extent they do, how the truly rich do among themselves.

We already know that the corporate income tax doesn't really operate as an income tax on "rich" corporations, but acts as a sales tax on consumers, from the working poor to the very upper middle class. It's a kind of a fraud. Somewhat similarly, the employer "contribution" to SSI and Medicare merely means that said employer can and must make up what he pays in higher prices and lower wages. The employer isn't paying; consumers and workers are. That's another fraud. These things are, I think, either obvious or at least provable.

What isn't provable is the idea that the rich don't pay tax, that their real position is not taxpayer but tax farmer.

But, consider, once upon a time Sweden had an income tax over 100% for certain high levels of wealth. Yet the rich did not become poor, nor even less rich. Consider, too, that if there is one thing the rich, as a class, would agree upon it's that they should not ever become less than rich. Consider that they have effective control of much or most of the economy. Those last two mean that they will a) demand return on investment, if only by moving their investments, to make up for any excess tax and b) they can do so. Consider, also, that the estate tax almost never managed to touch the rich, but only hurt the upper to very upper middle class. This is yet another fraud.

If we've got four main streams of revenue to the government - Income Tax, SSI/Medicare, Estate Tax, and Corporate Income Tax - and three of those are frauds, we can perhaps suspect that the fourth is, as well.

Imagine a country where all of the tax is paid by the rich. In that circumstance, they must, as a matter of survival, pass on the tax. Moreover, it is easy to do so, because the people who consume have more money in hand, chasing the same amount of goods and services, which drives up the price naturally. So who would really be paying? The middle class. Imagine a country where the rich pay nothing. Suddenly the middle pays it all, has less money chasing the same amount of goods and services, which drives the price down. And the rich still aren't paying. I believe that, despite the fraud in the way it's presented, that second country is the one we live in.

This isn't a conspiracy theory, by the way. The uniformly applied tax acts in lieu of a conspiracy - no collaboration required.

Liberals, of course, are behind those four frauds. Conservatives, however, tend to gloss over that the rich pay essentially nothing no matter what the tax rate is. Unfortunately, conservatives are stuck with the argument that the rich already pay most, because admitting the truth, that they pay nothing, would just feed the left ammunition to entice the ignorant masses to demand more taxation of the rich, which those same ignorant masses would never realize was coming from their own pockets.

1 comment:

  1. This is an interesting way to look at the current system of taxation. We already know this is the effect of “corporate” taxes.

    When we were younger, the talk was of “flat income taxes” where everyone pays the same percentage, but that leaves open the question of exactly what constitutes income—or what the meaning of “is” is.

    The last few years, I’ve been leaning in the direction of a universal national sales—NOT value added—tax combined with repeal of all national income taxes. It would be equally onerous to everyone and every corporation at all levels within the authority of the USA, so every purchaser would have a vested interest in keeping the rates low. It would eliminate the need for all sorts of beancounting and finding creative ways to shelter income. It would reduce the bookkeeping function of tax collecting by at least two-thirds. It would provide a continuous stream of government funds that exactly mirrors the economic health of the country in real time (screw around with the economy and the government gets less money to spend, surely a desirable result). And, the necessary percentage of the sales tax would be low since absolutely everyone without exception would pay it.

    As to arguments about “progressivity,” people who have more money spend more money and thus would pay more taxes; but, everyone has a stake in the game. “Regressive” is when supposedly equal citizens are treated differently.

    Ron Pittenger

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