Asymmetrical Information

Congress has been offering tax subsidies to big contributers for a very long time, and they're not likely to stop. James Madison thought that having many different corrupt factions would prevent the looting of the public till because each would stop the other from profiting. It was an interesting idea, but it hasn't worked out that way. It would require a constitutional amendment to fix our broken tax system, and that's a long shot. Former federal reserve chairman Paul Volker says we're headed for a fiscal crisis in the US.

Shamus, it doesn't take a weatherman to see which way the wind blows. And Paul Volcker doesn't add any more gravitas to the declaration. Simply put, we ARE IN a fiscal crisis. Have been for a long while. Where have you been? Further, you are naive if you think a constitutional amendment will fix the situation. Study France under Richelieu and you will see why we will be bankrupt.

For those of us with day jobs... what did France's experience then have to do with why will we be bankrupt, Jack? Genuinely curious.

The pork rider and killer amendment problem is because Congresspeople can only vote YES or NO on each version of the bill separately. If Congress used IRV or Condorcet instead, then all versions of a bill can be put up for vote all at once, and the best one of the pack would be chosen, which would most likely be the one without the riders. This is discussed further at Accurate Democracy.

Today's closing yield on 10-year Treasuries: 4.078%. Another decade or so of this terrible fiscal crisis and we'll be set for life.

I agree wholeheartedly with you Jane that we should end the fiction that corporations actually pay taxes.

Try getting that logic past your typical big "L" liberal though.

I read the Galt Tax Plan and its precursor diatribe on the "corporate" income tax with some interest. Apart from the proposed treatment of business income (which seems to be equated with "corporate" income in the Galt tax universe), I think the other six elements have great merit. In fact, one of them was (and another partly) achieved in 1986 by the bipartisan tax reform effort led by Bill Bradley and Bob Packwood, both now sunk to more or less ignominious obscurity. (That shows what thanks you can expect for advocating good policy.)

The GTP seems to equate "corporate" income with business income because the arguments advanced in its support turn on the disadvantages of calculating and taxing business activity. Business activity, however, is undertaken by individuals, either singly or jointly, in a number of legal forms apart from corporations. I do not suppose that the GTP intends to discriminate between them simply because of the legal form of the business entity.

The problem is that if we are to tax income (rather than expenditure or consumption), as it seems we should for the reasons Jane has outlined, then we must calculate business income, and the only way to do that is to somehow determine the difference between expense and revenue. Taxing only income flows to natural persons would lead people to accumulate assets in corporations, publicly held or otherwise, until they are used for personal consumption. (That was what happened before 1986, when the marginal corporate tax rate was lower than the highest marginal personal rate.) Another likely result of the GTP would be the further exploitation of corporate expenditure for personal pleasure, thus assuring that neither the income nor the consumption will ever be taxed.

Eventually, we would find that every person would have a corresponding corporation and all contracts would be between that corporation and some other corporation. The personal corporation would (at best) pay "dividends" whenever its owner wanted money for personal expenses. In that way, the GTP would boil down to a pure consumption tax, with ample room for evasion.

In short, there is no way to avoid the difficulties of calculating business income. What should be done is to conform the concept of taxable income to GAAP, and ensure the better enforcement of GAAP overall. That would lead to better investment decisions, greater economic efficiency and more equitable tax treatment. And it would not be inconsistent with allowing a deduction for dividends paid out of accrued earnings, either.

Jane,

I just read your tax plan - great ideas, well thought-out.

my only question is why not just tax all inheritence at the same rate that income, dividends, capital gains are taxed at? After all, a windfall from a dead grandmother is income to that person receiving it, and based on your idea of no special treatment (which you seemed to have backed-off with regards to home ownership) for anything it seems to me that is should also be taxed.

This is the sort of thing that caused the new Republican representatives first elected in 1994 a lot of heartburn. They were revolutionaries who wanted to come in and correct the evils that were built into a system of professional politicians. Needless to say, the professional politicians prevailed. I used to get to hear Sue Myrick at least quarterly talk about the challenges they faced (but have not had the opportunity, post-economic downturn). That had been my one conduit to what is happening in the background, beyond the MSM.

"Ensure the better enforcement of GAAP overall". I was with you until that point, Michael. In theory, this goal sounds good in those last semester ethics classes in graduate business school, but in the real world, it ain't happpening.

I will be the pessimist here and point out that my fellow bean counters can overcome any barrier if it is their intent. One of the industry's longest running scams was outed big-time by Nortel recently. I'm not saying you have to be an accountant to know how level the playing field is but in the world of double-entry bookkeeping, anything is possible.

Michael Wasserman states many of the points I was going to make. I agree with his post.

It is the business and investment-related deductions that are the source of many of the problems and complications. Most of the ordinary itemized personal deductions - mortgage interest, contributions, medical expenses, etc. are fairly straightforward. But when you get into business expenses, or expenses for rental properties, things get messy. Are you going to tax only revenue in these areas?

For public companies you might calculate the corporate income tax based on earnings reported to investors. That would eliminate some of the maneuvering room, and simplify compliance by eliminating the need for a set of tax books. You might also simply tax share holdings in lieu of corporations.

I agree with Gary Owen's point that GAAP is hardly a panacea. But, as Bernard Yomtov implies, at least a publicly-held company would have the competing goals of reporting high profits to investors and also seeking to minimize tax. Under the present system of different books for the tax man and the shareholder, we simply have distortion and outright cheating in both sets of books. If there were only one set, then the conflicting incentives, combined with criminal penalties, might result in a more honest application of GAAP to more closely reflect economic performance.

Of course, what constitutes "economic performance" is a subject of reasonable debate and permits a range of choices. That's why accountants study long and what they should get paid well to do. If corporate management were compelled to trade-off between share price and tax burden, then it might be more likely to leave the matter of measuring economic performance to trained professionals.

There is no more legitimate reason to eliminate corporate income taxes than there is to eliminate natural persons income taxes. In fact, with all the advantages corporations have over natural persons, advantages granted and protected by the state, at taxpayer expense, one could argue that corporate tax rates are actually too low.

3rd Party Presidential Candidate Jail Debate: Round 2
http://www.thepriceofliberty.org/04/10/13/ward.htm

Jail Debate: Round 2 is here. Difficulties in finding the correct prison facilities are making the debate itinerary hard to finalize. So many prisons, so few 3rd party Presidential Candidates (PCs). By publication time, a hearing will have been conducted in the case of the Arizona Libertarian Party v. the Arizona State University and the Commission on Presidential Debates. This attempt was to shut down the Bush - Kerry debate, scheduled for Wednesday or allow access for 3rd party participation.

"Do not separate text from historical background. If you do, you will have perverted and subverted the Constitution, which can only end in a distorted, bastardized form of illegitimate government." James Madison

One has to wonder what good it will do for the Honorable Judge Pendleton Gaines, Superior Court of Maricopa County, to dispense another Order, unless of course it is in favor of this government and against the Constitution. It appears as though only favorable decisions for this government are carried forward and actually served. An issued Order to Show Cause was simply not served previously. Why will this time be any different? What makes this judicial paper any different than the previous one that was simply left to sit in a file on a desk. This government is refusing to serve this government. The judge seems to be impotent in power and authority unless this government does it's Constitutional Duty. One would have to think this judge could do something regarding those in this government under his jurisdiction that need to be held accountable. Or the judge needs to be judged.

"[The legislature] are bound to leave this particular right untouched and sacred, [or] we must say, that they may control freedom of the press, may abolish the trial by jury, may swallow the Executive and the Judiciary Powers of the State; nay that they may despoil us of our very right of suffrage." James Madison

The National Press is Officially AWOL. (Absent WithOut Leave)

"If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be. The functionaries of every government have propensities to command at will the liberty and property of their constituents. There is no safe deposit for these but with the people themselves; nor can they be safe with them without information. Where the press is free, and every man able to read, all is safe." Thomas Jefferson

There is no longer a national press after 2 Presidential Candidates are arrested via Constitutional Rights violations without any coverage to the general public and will henceforth be called the 'corporate mess press'. Don't worry, the corporate press will have clear orders from their corporations and government to stay clear of the courthouse and jail debate areas. Rumor has it, there was a Restraining Order granted the corporate press, because they were 'afraid' and fearful of harm by PC Badnarik's and PC Cobb's platforms of government. If either, PC Badnarik or PC Cobb get within 500 yards of any corporate press member, their home, work, places they might frequent (the butts of the democrat and republocrat political parties), any family members of the corporate press or their corporate bosses, there will be a 'Rounding up of the usual suspects...' and the Jail Debate will be held prior to the standard 'on the day of the fascist parties debate'. If any corporate press do happen to wander by, the debate will be stopped and moved to a prison at least 500 yards away. This will cause serious prison transportation problems for both PCs as there are many in the corporate press, their habitats, etc., but, this government is determined to make sure corporations and government power are safe from corporation and government fear. Hopefully, the most viable 3rd Party Presidential Candidate will get a chance to put a Restraining Order on this government. Only time will tell.

"Since the general civilization of mankind, I believe there are more instances of the abridgment of the freedom of the people, by gradual and silent encroachments of those in power, than by violent and sudden usurpations." James Madison

One has to admire these two fine patriots. Volunteering for oppression by this government for the sake of their beliefs and their constituents beliefs. These are not 'kissin' cousins'. They are rivals. Neither was afraid to become a soldier for their cause. They joined together for their rights against a government restraining those rights. They make a nice team, a dynamic duo for a Constitutional Republic. Rivals, yet, comrades in arms. Fellow patriots addressing a Constitutional cause was their only combined statement.

"With earnest prayers to all my friends to cherish mutual good will, to promote harmony and conciliation, and above all things to let the love of our country soar above all minor passions, I tender you the assurance of my affectionate esteem and respect." Thomas Jefferson

Some of the people will learn of the outcome of the Debate Debacle. Based on the government and corporate press suppression of information, things do not look good for a meaningful debate. If a worst case scenario evolves for the fascist political parties requiring a 3rd party 3rd debate, they cancel the last debate, or the court document just sits waiting to be served, or the judge will over-rule the Constitution, or whatever. But, the fascist's parties can not allow a 3rd party debate. It would be political suicide for the public to become aware of the rights of the people and the Constitutional restrictions on this government that need to be returned to America. If this denial of rights continues, what then?

"How soon we forget history... Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action." George Washington

This country is 20 days away from a presidential election without national exposure of the 3rd party candidates platforms. The time is brief for the task at hand. The numbers of both informed constituents 3rd parties is less than either major party. Another arrest is not going to get corporate press address any more than the first. The platforms are still without exposure to the general public. It would seem that extraordinary measures will need to be taken by the 3rd parties. Word of mouth, home printers and the disassociated internet groups are all that is available at present. Something besides the 'Jail Debate' needs to be done to get the people to spread the word of a true Constitutional Republic. TV ads and 60 grand will not go far in that media. Wouldn't that money go further in Newspaper ads? Others are usually around where newspapers are found. And the interested readers already have something to copy or distribute. The viewers aren't left with much after an ad on TV.

"The firmness with which the people have withstood the late abuses of the press, the discernment they have manifested between truth and falsehood, show that they may safely be trusted to hear everything true and false, and to form a correct judgment between them." Thomas Jefferson

There seem to be two 3rd parties that are symbiotic and work well together. It would seem the perfect blend. More numbers are needed. Since a Badnarik/Cobb ticket is not possible now, the most viable candidate needs to stay in the electon. With 48 state ballots in his pocket, that would be Badnarik. There seem to be few differences in the Green and Libertarian parties' platforms. All the environmental issues should easily be adopted by the Libertarian party as they are well within the Constitutional platform of the Libertarian party on basic inspection. The limited publicity by withdrawal of the Green party now, would certainly help viability of a PC that has aligned with the acceptable and needed Green party platforms. It would be a sacrifice for the Green party, but, the viability of their platform could be maintained. The Green Party's stance on women rights should perfectly acceptable in the Libertarian view as long as those rights are not "more equal" than any other's rights. It's the rights of families and individuals, subverted by this government, that needs to be addressed. Not making one gender "more equal" than another. As long as ANY individual has the rights of ALL other individuals under the return of the Constitution to America, there is no need for 'gender tissues', which divide the public against itself, when there are Constitutional rights issues denied by a government of tyranny.

"Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety." Benjamin Franklin

The other semi-similarly platformed party seems to have 2 problems with unity. The Reform Party is heavily endorsed by NOW (National Organization of 'Womyn' Women). Their views are contrary to the Libertarian Party platform in that NOW needs rights that make them "more equal" than other people and have consistently presented false information toward that end. Two problems the Libertarian Party can not abide.

"Every citizen should be a soldier. This was the case with the Greeks and Romans, and must be that of every free state." "I think with the Romans, that the general of today should be a soldier tomorrow if necessary." Thomas Jefferson

The other problem is Nader. While he is most likely fit enough for the Presidency, I doubt he is fit enough for the "Jail Debates" that seem to be required in this oppressive and suppresive government. It appears there could only be unity in the Libertarian and Green parties. The so called Reform Party would need to do some reforming to distinguish itself from the other fascist 'crat parties. The same is true of the Constitution Party. They could use a little more Constitution in their Constitution Party. Their stance on abortion is not compatible with the Constitution, and therefore, incompatible with the Libertarian platform. Unfortunately, the Reform and Constitution Parties only value to a true Constitutional Republic is to draw votes from the fascist 'crat parties.

"Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost." John Quincy Adams

With 160 million eligible voters, or even the 40 million active voters, the chances of casting the deciding vote in any national election are infinitely less than the chances of picking the winning lottery numbers. On the other hand, James Madison has stated, "Do not separate text from historical background. If you do, you will have perverted and subverted the Constitution, which can only end in a distorted, bastardized form of illegitimate government." James Madison. That's good enough for me. Government case and vote discussion closed. I claim the rights to America's Constitution by Heritage. The principles of this Constitution of America as Originally Interpreted, the only ratified interpretation, are the Rights I claim from America's Founding Fathers. The fascist 'crats of both the major parties are nothing but tyrants & fascists.

"The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny." James Madison

Who am I voting for? Michael Badnarik. The only Viable Presidential Candidate aligned with the Constitution and on 48 state ballots. I am voting for 'people rights' and 'government's Constitutional restrictions'. No other man has the right to tell me what to do with the life granted to me by God, Nature and Evolution. He is nothing more than me, and I am nothing more than him. No other man has the right to take God's, Nature's and Evolution's Rights from me. "Throw my vote away?", you say. ROFL, Roll on the Floor Laughing, I will vote for Right, Rights, Peace, Property and Prosperity. To do other is to promote the current tyranny in cowardice.

"I have sworn upon the altar of God, eternal hostility against every form of tyranny over the mind of man." Thomas Jefferson

Portions of the above article were written in satire. The entire article is nothing more than my, Thomas Jefferson's, Benjamin Franklin's, James Madison's, George Washington's and John Quincy Adams' Opinion. The views expressed are not necessarily the views of any others, except those demanding the return of the Constitution to America in all US government applications.

To preserve the freedom of the human mind … and freedom of the press, every spirit should be ready to devote itself to martyrdom; for as long as we may think as we will, and speak as we think the condition of man will proceed in improvement. The generation which is going off the stage has deserved well of mankind for the struggles it has made, and for having arrested the course of despotism which had overwhelmed the world for thousands and thousands of years. If there seems to be danger that the ground they have gained will be lost again, that danger comes from the generation your contemporary. But that the enthusiasm which characterizes youth should lift its parricide hands against freedom and science would be such a monstrous phenomenon as I cannot place among possible things in this age and country. Thomas Jefferson

Ed Ward, MD
http://www.thepriceofliberty.org/04/10/13/ward.htm
http://thepriceofliberty.org/ward.htm

[poor man's ping]

Jane, I like this tax plan, especially in regards to the death tax, deductions and the AMT.

Ed, here is an article with a mention of the arrests: http://www.washingtonpost.com/wp-dyn/articles/A37110-2004Oct15.html

Also, I apologize if this comes through twice, but it didn't look like the first time registered.

Comments are Closed.