Blog Posts

Corporate Tax Cuts

2/8/2018

The dominant question in the debate regarding the corporate tax cuts of 2017/2018 was who was going to get the money corporations ‘saved’ by having tax rates drop from 35% to 21%. I believe it is the wrong question. However, it does deserve an answer. How that ‘savings’ is distributed does not relate to stimulus.

Stimulus effects come from a higher percentage of businesses being viable. Roughly 20% more businesses make sense when tax rates drop 14% from 35%. That is manifested in fewer business contractions and closures. It is also manifested in more start-ups, and expansions. Some people would take leisure hours instead of starting a business when they can only keep 65% of their earnings. Retaining 79% changes the equation and will incentivize a start-up.

Within a month of the tax cut, reports are coming in fast that significant money is being invested in this taxing authority of America that was held overseas for many years. All countries compete for businesses. There is a whole industry within accounting, built on avoiding higher tax rates by doing the economic activity outside the taxing authority and that avoidance is reduced when the tax rate is reduced.

The only place corporations get money to pay taxes is by selling their product. The competition will force some of their tax savings on product price reductions to try to gain market share. If a corporation does not follow suit, sales will drop, and many bad things happen when sales fall.

There are good reasons why every company does not pay every employee minimum wage, only a few percent of employees receive the minimum wage. There is an open competition for useful labor. Better compensation packages yield higher quality employees. To retain their good employees, businesses are announcing raises and bonuses on their employees based on projected growth and tax savings.

Companies always look at the return on investment of new or improved equipment. Are you going to get better quality or faster output with a new machine? Can you improve safety? Can you give your employees an enhanced work experience? Savings from any budget line item, including taxes, can push the answer to a yes. On average, tax savings will partially go to capital equipment.

A corporation has a budget. Every part of that budget is scrutinized. Every part of the budget can be reduced or increased. Reducing a part of the budget has bad effects, while increasing has positive effects. The amount going to each part of the budget has a bell curve where disastrous results happen when funding gets very low.

On the other side, increasing any budget item way over necessity has large diminishing returns on the positive side. There is a sweet spot at the top where the job gets done, and you avoid the downsides. A good CEO and the board of directors’ responsibility is to find that sweet spot on every budget category. That sweet spot is often controlled by competition on many fronts.

Every budget line item is in competition with every other budget line item. If expenses can be saved in any line item without a downside, then it frees up money for other categories. Tax savings does this. On average, every category will see part of the increase created by tax savings.

If a corporation does $100 million in sales and has $90 million in expenses, their tax liability drops from $3.5 million to $2.1 million with the tax cuts taking the rates from 35% to 21%. The $1.4 million in savings will be swallowed rapidly with customers, and business needs demanding parts of the $1.4 million.

It is claimed by the Left that directing money from the rich to the poor will stimulate the economy because the poor will spend the money faster. That is misguided on many fronts. Saved money is a very valuable part of the economy. Saved money is lent out, usually meaning building capital goods that hold worth and potential.

Therefore, saved money does get spent, thus going to paychecks. Spending and savings both result in the money being spent. Spending is consumption resulting in depletion while saving is spending that results in a valuable asset. Both are necessary, and the level of each should result from billions of decisions from millions of people.

Who Should Control the Demand for Labor Hours?

10/20/2017

In every type of economy, there are people that control labor hours. In communism, fascism, and socialism, herein called statism, the government leaders control where people work and what they do. In capitalism, individuals manage their own labor hours, creating a system of interdependence.

Statism

In statism, government leaders demand all the labor hours. The percentage of labor hours controlled by government is the percentage level of statism. Government spending is one measure of the degree of statism; however, regulations also means that the government is controlling private spending and demonstrating the level of statism.

Some government spending heavily controls, and different government spending lightly controls labor hours. Food stamps is an example of light control. Food stamps allow people to buy whatever food they wish thus has low control over food producers’ labor hours. Government schools are an example of substantial control by the government. Government administrates the vast majority of the education system, thus having significant control of labor hours surrounding education.

Some regulations heavily control, and other regulations lightly control labor hours. Regulations around making t-shirts are few and non-intrusive. Regulations in medicine are highly controlling. Some regulations state a few things a business cannot do, and others state things the business must do, thus eliminating all other options and often business models.

In statism, government officials control the labor hours, regardless of whether people felt that they were being serviced well. It is one-sided. There is not a good system to let the government officials know if you were serviced well. You were given bread, and if you did not like it, you just did without.

When the government spends, it controls as many labor hours as the money will buy. It does not matter whether it was taxed, borrowed or monetized, the spending is controlling a certain percent of total labor hours. This demonstrates that spending is the true tax. Taxes are not a two-sided agreement, you are forced to buy the services the government provides. The higher the percentage of statism, the greater control the state has over your labor hours and your choices. Your satisfaction with being served is reduced as statism increases.

Free Enterprise

The genius of free enterprise is that both sides must agree on a trade. Both sides of the trade will be better off because of that two-sided agreement nature of this system. If many people agree that you are serving them by turning over their money to you, then you will be able to continue demanding more labor hours compared to the business owner with few sales.

Under free enterprise, you must let others demand your labor hours in exchange for you demanding other’s labor hours. Under simple barter, you exchange labor hours with another person. Currency allows the buying and selling portions to be separated by many people and by time. Currency allows for the division of labor of big projects where millions of people are involved at different levels. Each person must agree to their portion with the two-sided agreement.

The smaller the percentage of statism, the more control you have over your life and the more people must serve you to your satisfaction. In turn, you must always be seeking to serve others in more efficient ways to their satisfaction. Capitalism and free enterprise is a system where there is heavy competition to increase how well people are served. This continuously increases your living standards.

Why do the rich get to control so many people’s labor hours?

If Taylor Swift serves 3,000 people by entertaining them with a few hours of work, those 3,000 people must serve her as well. Most rich people became rich because they can take their talents and serve many thousands or millions of people at once. In return, those thousands or millions will agree to serve the person that just served them. They must acknowledge that they were served by turning over money.

One might cut her grass, one grows her food, one drives her, and the other 2,997 people will serve her as well for several hours each. Bill Gates provided hundreds of millions of people an excellent service of making their computers much more useful. In exchange, hundreds of millions are serving Bill Gates in every conceivable way. Everyone has the option and opportunity to offer to serve millions at once; however, those millions of people must accept your offer.

If you earned a million dollars, does that mean that you serviced your fellow man more than the man making $50,000? Yes, as defined by all those that decided to trade their service/currency for the millionaires’ service. As long as both sides agree to the trade, the dollars ‘earned’, does demonstrate the value of your worth to others.

Rarely, can someone serve thousands or millions without a team of people. The athlete entertains millions; however, it takes team owners, stadium workers, trainers, broadcasting companies, advertisers, among many more to create a system that allows the athlete to entertain so many. Tom Brady on his own does not have the talent to entertain so many, the division of labor is crucial and profound to pull off multi-billion-dollar companies.

Key leaders get paid so much money because of their talents of directing that division of labor. However, that money and that power to direct millions of labor hours is the result of dozens of high-level two-sided trades and millions of smaller ones. Those decisions come from past results and confidence of people controlling capital. Capital is the result of previous success in making great decisions on the control of labor hours as defined by those being served.

Few people can entertain on their own and make millions. However, the business models surrounding YouTube and Facebook is changing that. Some people are producing videos with just their labor and making millions; however, these social media platforms are crucial in distributing these videos to consumers with advertising business models.

Who controls the business leader’s labor hours? Who controls the rich? A business leader’s hours are controlled by his customers. If the business leader wants to control the labor hours of his employees to build a product that consumers do not want and will not buy, then that ‘rich guy' becomes less wealthy and unable to control as many labor hours in the future. However, if consumers believe that they are being served by the business owner and pay him well, then that business owner will have the money to control more labor hours in the future.

Buying a Home

If you buy a house, you pay the labor hours of every laborer that is building the home and all those that shipped and supplied the material for the house. It goes all the way to those that mined the Iron for the steel and collected sand to make the glass and so on. If you paid $300,000 for the house, you paid for and justified the control of $300,000 worth of labor hours.

Only a few dozen people were paid over $1,000 or over 30 labor hours for their labor for that house. The vast majority of the labor hours were under an hour per person. The division of labor for a house is profound and often over a long period of time. When you sign a contract to build a house, you set in motion a demand for about 5,000-10,000 labor hours. That contract connected to your mortgage contract is an agreement that you will work about that same 5,000-10,000 hours in exchange for those millions of people serving you for that total of 5,000-10,000 hours.

While the homeowner did not witness and was not included in the vast majority of the two-sided trades that decided who and the value of all the labor hours going into building the house, his decision on what house to buy and at what price, determine the full collective value of all those labor hours. Of course, there are many buyers with different tastes, but without the final buyer for a house, labor hours cannot be demanded for long.

A signal is sent of what works and what does not. If the house does not fetch a price that pays for all the labor hours needed for that house, someone takes a loss, and the business model needs to change. If the profits were good, the signal is sent that the business model and how the builder demanded labor hours served people better than those builders taking a loss. Profits often indicate that the builder continues demanding labor hours and the builder taking a loss does not.

The Future of Work with Increased Technology

8/3/2017

Future technology worries many people because they believe it will take a high percentage of jobs. Let us all hope that is true. While it is stressful to lose a job, the great benefits of lower prices to everyone outweighs those lost jobs. Labor hours freed up in one industry creates opportunities to start or expand new or existing industries. While technology advancements over the centuries happened very slow, the last two centuries have shown rapid increases. Going forward, the pace will increase, and people need to learn to rapidly adjust with it.

In the 1980s, I was told in high school that the job market was changing, and we needed to prepare to have multiple jobs over our lifetime. I suspect that was said to the youth since the 1800s industrial age. Most likely, throughout history, there was this theme at some level. Indeed, since the 1990s computer and internet boom, it became apparent that the pace of change was accelerating. Everyone is on full notice that it will take fewer labor hours to produce the same product or service every year.

As markets open up around the world, people also need to know the division of labor will take certain jobs outside America's borders. People need to likewise understand that this is good overall for everyone collectively; however, change always comes with struggles for individuals. Sometimes the transformation can be anticipated, and others come suddenly without warning.

However, without that change, we all would be much poorer and still doing back-breaking hard labor just to survive. Life expectancy would not have increased. Over 50% of the people would still be on the farm or in food-related businesses. Currently, there are fewer than 5%. Those labor hours were freed up to do more things. Over 50% of the products and services most of us currently enjoy today, we either did not have at all or only a small percentage of the people could afford it.

Technology might speed up that change and people will need to plan on changing with it and not putting all their human capital and hopes in one career. Until everyone is getting weekly massages, personal chefs, personal live entertainment, chauffeurs, butlers, maids, pool boys, gardeners, landscapers among other services, additional job opportunities will not go away. Until everyone has 5,000 square foot homes loaded with everything they want, and 5 luxury vacations a year, there is still a lot of bandwidth of job opportunities.

Too many people claim that all the benefits of technology will go to only a few people that own all the robots. They need to learn better economics. Technology always drives the cost down, and that helps everyone. However, the poor achieve the most benefits when they can enjoy more services and products due to the lower price. Some people claim that the rich will just keep all the money from the advancements. While some of that is true for a short time frame, the rich are not benefited from money they just keep. They have to offer that money to others so they can be served or acquire products.

Some people will claim that robots will take over all the possible jobs including making, programming, and servicing robots. Those people need to realize if that happens then the cost of living will approach $0 a year and we would all have all our needs and wants acquired. That will not happen. There will always be the desire from some to have a real person to interact with versus robots, and that includes within the business. There is a strong desire among people to create new things, to start a career, and to be worthwhile to others. People will always find a way to serve others. A large part of a man's pride and worth is his career.

If a new discovery happened tomorrow that allowed a small box to safely generate enough electricity for your home with very little and inexpensive fuel. Cold fusion, apprehending the pull of gravity, a way to capture the strong or weak force of the atom, converting gamma rays flying through space or some other way to achieve energy that is out there, might happen. That box could be put in a car to power vehicles.

Let’s say the box can be manufactured in mass production at $300 apiece. Would that make everyone in the world better off? Yes, however that will cause dramatic changes in employment. That will free up 6-12 million people in the USA to do other things. That would also change many business practices that factor in energy cost. Over a short time, the price of everything would likely drop 5-20% with energy cost falling over 99%. That savings would create an increased demand for additional products and services.

If this happened, the worst thing that the government could do is to try to ‘fix it’ or ‘help’ those losing their jobs. We would be wise to encourage the government to transform welfare quickly so as not to trap a lot of these people in the means-tested welfare state. It would be wise to let the invisible hand of prices and free enterprise, work out the significant adjustments. Current government regulations are a real problem and taking that monopoly away from the government would be vital in transferring those labor hours to expand existing industries and starting new ones.

The economy has plenty of growth potential in industries that currently exists. Most people do not have the money or the willingness to earn the extra cash to take advantage of 99% of what is out there. They currently decide their leisure hours are more important than those things. However, if one desires to put in 40 hours a week of labor and those 40 hours of income can buy more stuff as productivity increases, they will choose to take advantage of more of what is out there.

How many people have the best furniture, the best vacations, the pool guy, the maid, the gardener, the clothes, the entertainment, the number and quality of nights on the town? The list of items that you would like; however, the extra labor hours are not worth, is endless. While there will always be new sectors of products and services popping up as they are developed, the vast majority will be greater access to current products and services that also increase in quality.

This is where all the new jobs will come from to employ all the out of work energy workers, the displaced factory worker, and the data entry employee that was replaced by an app.

Let’s remember that if you replace a person with a robot, that robot cost money. That money is paying for labor to build, power, program and maintain that robot. The money for the total cost of the robot is meant to be less than the money for the employee that was replaced, therefore saving money; however, rarely reducing more than 50% of the cost to the business.

That money saved is manifested in higher payroll for the remaining employees, lower cost to consumers, better work conditions, better benefits, and more capital to reinvest in other ventures. The companies that most effectively bring down the cost to produce the product or service will gain market share and likely employ more people. Yes, that does mean that other companies losing market share will lose employees for a net loss. The magic of the free enterprise system is that poorly run businesses lose their ability to command labor hours to better run companies.

As labor hours are saved with productivity gains, people are always trying to figure out what people might want to spend their extra money on. This extra money came from increased pay or reduced cost of goods, due to productivity gains. The reason for high business failures is because people often pick wrong. The people who choose right, receive the money from sales to command more of the newly freed labor hours, those that choose wrong don’t get enough sales to command those labor hours. Business failures are vital to free enterprise so that labor hours serve the highest desires of the people who put their money behind those desires.

Separating Employment from Benefits

Whether someone is working in the gig economy or transitioning between many jobs over time, they should not be forced to switch health insurance and possibly their network of doctors every time they change jobs. Pensions among other retirement plans should be transitioned to extra pay or just having the company pay into private retirement plans. It is vital that employees control these critical issues of retirement and health care planning.

The Universal Basic Income: Issues to Consider

7/27/2017

This first box is a 1,200 word brief of the much longer article. Updated 7-16-2019. There is a lot to consider. I expand most sections in the full article.

First, what is the Universal Basic Income (UBI) and how does it work. There are many variations of the UBI. However, the basics are that the government gives everyone, versus just the poor, regular payments. Although the idea is to make the payments high enough to live on, the amounts suggested are all over the board. They are as low as $1,000 and as high as $30,000, a year per person in the USA. Roughly $10,000- $15,000 per year is the norm. Another basic concept is that it takes the place of current welfare programs; however, that also varies widely from all to none. It is unconditional cash versus government paid-for services.

Copied from the website on 7-27-2017

Currency is a service from free enterprise’s invisible hand keeping a ledger that facilitates one-sided provisions, yet two-party trades at different times, at different values, and the services provided going to and from the universe of all traders. An economy is everyone serving others and asking to be served in the same amount. There is a two-sided agreement, including yourself, on the amount of worth you provide and the amount of worth you are provided.

The UBI destroys the notion that people need to serve others at the same amount as they are being served. There is a senseless notion that if Person-A works for sixty hours serving others and Person-B works twenty hours serving others, we should take a percentage of the value of person-A’s work to allow Person-B to demand services. Is Person-A supposed to be happy that Person-B is demanding more of Person-A’s labor hours using Person-A’s money? If Person B wants to request more services, they can work more hours and increase the worth of their service.

The proponents from the Left of the universal Basic Income have economic theories that are erroneous and need to be challenged. The proponents from the Right concentrate on eliminating all the harmful programs that the UBI will replace; however, miss the significant damaging effects of higher tax rates and the harmful effects of giving people money they did not earn. There are positive effects of people earning their own living and debilitating effects of being dependent.

Most welfare programs concentrate benefits to the bottom 5%-20% of income earners and non-earners. Expanding the benefit to 100% of the people dramatically increases how much is needed so as not to spread the benefit too thin.

High Progressive Tax Rates Bans the Rich from Serving the Poor

Is It Socialism?

The proponents try to stay away from the word socialism. There are two parts to socialism if done in conjunction with the free enterprise system. First acquiring the money and then providing for the people. The UBI is socialistic in acquiring the money, yet not so much in providing.

Socialism takes a certain amount of income. That is undoubtedly part of the UBI. Where it differs from socialism is the distribution side. The UBI does this with cash to everyone without requirements. Socialism tries to own, control, manage, produce, and distribute what they give out. The UBI’s cash system is better than the substantial control of socialism.

Future Technology

Future technology worries many people because they believe it will take a high percentage of jobs. Let us all hope that is true. While it is stressful to lose a job, the great benefits of lower prices to everyone outweighs those lost jobs. Labor hours freed up in one industry creates opportunities to start or expand new industries. While technology advancements over the centuries happened very slow, the last two centuries have shown rapid increases. Going forward, the pace will increase, and people need to learn to adjust with it rapidly. We should not give up on people by just giving them subsistence living.
The Future of Work with Increased Technology

BLOG: Universal Basic Income and the Laffer Curve

The notion of double taxing a robot is foolish. All robots are bought. Buying robots means people building robots earned money. Earned money is taxed. If a company bought a forklift for $75,000 and saved $100,000 in labor of its employees, the company still paid for $75,000 of labor hours, just not with their own employees. The other $25,000 is spent elsewhere in the company or manifests in lower prices to consumers. That $25,000 now funds labor hours doing new things that increase everyone's’ standard of living, including greater leisure hours.

Living Off the UBI

At $10,000 to $15,000 per person with roughly half that for children, innovative people will learn to live off that money. A mother and father with four children will be receiving $40,000 to $60,000. Many families are living off that amount right now.

Both parents staying home would allow many cost-saving measures of no daycare expenses, no work clothes, no work travel costs, and couponing. Many families could make that happen. Four friends recently out of high school rent a small home comfortably on the UBI with plenty of money left for food and video games. Pooling their money together could enable the youth to ‘waste’ the most valuable years of their lives.

A big part of the problems of welfare and the UBI is that it enables people to live a destructive lifestyle. The need within the free enterprise system causes people to straighten-up their lives. Charities within the Haley2024 system allows help to those on hard times or those doing the right things. However, the most important part of charity is the ability to say ‘NO’ to those going down wrong paths.

Making It Easy to Quit a Job

Many among the UBI advocates claim that the UBI would allow people to quit low paying or unpleasant jobs. They claim that those businesses would have to increase their wages to attract employees. They are certainly correct. However, they claim that is a good thing. It is not! The negative consequences would be more damaging than some possible benefits.

In conclusion, the UBI does inordinate damage in the effort of collecting the funds. The UBI does excessive injury to job opportunities for the inexperienced. The UBI does unnecessary harm to the work ethic. The UBI does needless destruction to the many aspects of the role of prices. The UBI enables destructive lifestyles and enhances a dependency mindset. The UBI advocates erroneously believe greater prosperity requires increased socialism. The UBI would foster irresponsibility and entitlement; whereas, the free enterprise system challenges everyone to increase their efficiency and productivity of serving their fellow man.

How Does the government Pay for the Universal Basic Income?

It is an economic truth that people stop doing an activity that is taxed when the tax rate increases to a certain level. That tax percentage level is different for everyone. All taxable activity stops when the full amount is taxed at 100%. Therefore, the government revenue drops as well, reaching $0 at 100% tax rates. The lower range of $8,000-$10,000 UBI proposal ranges from $2 -$3 trillion or roughly 10% -15% of GDP.

The Laffer Curve demonstrates that $1.5 -$5 trillion of GDP will be lost depending on many factors by trying to collect the $2-$3 trillion. (the full GDP is about $20 trillion) Losings 10%-40% of GDP means higher tax rates and lower GDP. This catch 52 spirals out of control and sledding down the bad side of the Laffer curve/slope.

If the government gives everyone money, they first have to take it from everyone. That fact is not totally absent in the proponent’s advocacy; however, it is underappreciated. The biggest tax is the economic activity not engaged in, as stated above, and that harms the poor the most. Second, 100% of taxes collected from the business owner come from consumers, so at best; taxes are at even percentage rates.

If a tax is collected from a transaction, it does not matter who officially pays the tax, the role of prices ensures both parties to the trade share the tax burden. Those higher tax rates from businesses manifest in lower payroll budgets, more business failures, higher consumer prices, lower job opportunities, and lower wages.

Carbon Taxes

Carbon taxes are a common additional tax that is proposed by advocates of the UBI. That very directly adds to power bills, and while the rich use more power on average, they pay a smaller percentage of their income on power, thus making this tax harm the poor the most. Carbon taxes also push high energy businesses outside the taxing authority, thus pushing those businesses overseas. A side note: China has much lower environmental controls and creates much higher pollution per item compared to producing in the USA; therefore, carbon taxes harm the environment as well as jobs.

Let’s say a USA company creates a widget with three units of pollution and a company in China produces that same widget with ten units of pollution, and both sides had a 50% market share. If regulations forced USA companies to reduce to 2 units of pollution per widget and the increased cost gave China 60% market share, the overall pollution would increase. The carbon tax would yield a 20% reduce tax base as well in that sliver of the economy.

Just Create More Money

Some proponents of the UBI call for creating money as part of the funding of a UBI. That would be devastating to the economy and hitting the poor and low-income elderly very hard. Money can be understood as proof you did work for somebody else and you offer that dollar to somebody to do work for you. Every time that dollar changes hands, service was done by the receiver of that dollar for the giver of the dollar. The monetary system breaks down rapidly if people are just given new money without that needed element of service for another.

The value of new fiat currency that is created out of thin air takes its value from the existing currency. Imagine if a small group of ten people brought their goods to trade every Saturday. Everyone brought ten items and had $10. Every item was $1. Everyone came with ten items and left with ten items. If the money creators gave all ten people $1 from thin air at the start of trade, everyone would have $11 thus 110-dollar bills will be trying to buy 100 items.

The following week, 120-dollar bills will be chasing those 100 items, and so on. If one does not raise their prices 10% a week, then they will be bringing ten items and walking away with 9,8,7,6,5… items every additional week. If one held that currency in saving, they would be losing value rapidly. Capitalism takes capital, which is savings. Nobody will want to save if the value of their currency is reduced every week. Without saving, many bad things happen. Savings is proof you served your fellow man in the past and have not demanded service in exchange yet.

The notion that those extra $10 would increase the demand in this small economy is foolish. Anybody that wanted to demand more products and services could work more hours without extra dollars in the system. If 5 of the 10 people worked more hours and brought 11 items; 105 items were brought to market, and everyone walks away with the number of items that match what they brought.

A Value Added Tax (VAT)

A Value Added Tax (VAT) is often cited as a source of funding the UBI. The VAT is one of the fairest ways to collect taxes. The VAT does not add price to products; the VAT is an additional cost on top of the price of an item. Often the VAT is mixed up in inflation numbers. If someone walks into the store with $100, they can only buy $90 of products and effectively pay $10 in VAT taxes; although, the taxes were paid throughout the product’s lifecycle.

In conclusion, if the politicians want to give you $1,000 a month, the government must first take the money from you. The politicians will try to convince you that they are taking the money from other people to give you; however, remember the politicians are telling other people that they are taking money from you to give to them. If politicians state that they will take it from the rich, remember that you voluntarily ask the rich to serve you in exchange for your money. The only place the rich can get the money to pay taxes is from transactions with you. In a real sense, the rich will pay more taxes than the poor: however, the act of taking the money will make everyone much less wealthy.

The Universal Basic Income Related to each Welfare Program

There are many that state the UBI will eliminate ALL government welfare programs, including those within the tax code. To that ultimate end, we would end up with a head tax versus a tax rate. In that case, it would not matter what the UBI was because the head tax would take 100% of the UBI to fund the UBI, plus administrative costs. The government could have a $1 million UBI per person per year, and the only place to tax that much is a 100% UBI tax.

While that is not a real proposal, it shows the UBI cannot eliminate proposals that take from the rich to fund the poor such as the progressive tax code. However, one tries to look at it, the government has to take the money from the people to give money to the people. The Left will always propose ways to make the tax code as progressive as possible, not realizing that a progressive tax code ultimately does great harm to the poor.

A big part of ‘paying for it’ is eliminating certain welfare programs. That is a mixed bag, and each program needs to be looked at and evaluated on its own merit. Housing, cash welfare, food stamps are easy to transition; however, transitioning health care would create many problems. The left will state that some of the current welfare benefits will roll into the UBI. However, they will see a great need by some and add those welfare programs back into the system.

The Left will claim that some parents will not feed their children and renew student lunches and food stamps. Of course, pregnant mothers and infants should not be denied good food, and WIC will return. The Left will claim that people will not have enough for medical insurance, deductibles, or doctor visits, and Medicaid will return. The Left will see housing prices too high for the UBI and claim the need for the return of HUD. Many will use the UBI for wants, and the Left will demand the return of government provided needs.

Cash or Service

There are good reasons why some benefits are given in cash and others in services. Cash works well in food aid; however, in medical, it does not. Aid for medical given in cash without strings will lead to many issues.

Most will be responsible, and some will become burdens on society when there is a medical need. The laws that disallow a hospital to deny care to someone needing emergency-care or really any other care is not going to be repealed. If the hospitals get to garnish the UBI for unpaid bills, those people relying on UBI will not have money to live defeating the purpose of the UBI. Very soon the benefits will be added back into the system in addition to the UBI.

The Public-School System

Replacing the Public-School System with a UBI would be a tremendous improvement. Government control of education is one of the significant harms done to the people. Of course, everyone should also be able to exempt themselves from the benefit side AND the tax side of education.

Colleges and other forms of higher education should also go in this direction with the option of being out of the tax AND benefit side of higher education. Moving to a UBI for education would solve the control issue. Allowing people to take care of education on their own would take care of the massive tax disincentive issues. Yes, those outside the education tax and education UBI benefit would still have to pay for their own education; however, they eliminate the government taking the money from you and giving it back to you as part of the UBI.

Social Security System

One of the best parts of the UBI is the elimination of means-tested benefits. However, those two things do not need to be linked. Social Security should not go into a UBI. Social Security is already very socialist. Switching it to a UBI only makes it more socialist and creates many problems. First, switching means that the government pours the funding and the benefits into the UBI.

The benefit will go from those in retirement to everybody, thus thinning out the benefit or substantially increasing the taxes. Means-tested Social Security will be a disaster. People will not save for their own retirement so they can qualify for means-tested benefits.

Second, the benefit under the current Social Security System bases benefits to some extent to money taxed over the years, meaning the more money earned and taxed means higher social security payments. The UBI gives the same amount to everybody, thus moving away from a program resembling a retirement plan.

Eliminating Means Testing

One of the best parts of the UBI is the elimination of means-tested benefits. However, those two things do not need to be linked. The government can stop means-testing without going to a UBI.

Means testing creates high marginal ‘tax rates’ for the poor. If you are receiving means-tested welfare benefits and increase your earnings over a certain point, you lose those benefits. Many programs work in many ways from a gradual loss to benefit cliffs. However, many poor get caught in this trap of not working to get the benefits, and that lack of work harms future work hiring opportunities.

Tax Deductions, Exemptions, and Credits Are Bad Economics

Many people try to help the poor with welfare in the tax code. This type of ‘help’ harms the poor. All deductions and exemptions from taxes push up tax rates because of a smaller taxable base. Higher tax rates discourage taxable activity; thus, lowering people’s level of serving their fellow man.

Tax credits act just like government spending. The level of government spending determines the tax rates. Increased government spending pushes up tax rates. The low tax base created by higher tax rates create a need to increase tax rates again. Chasing tax revenue up the good side of the Laffer Curve often takes the one over the hump and down the losing the tax base and tax revenue side of the Laffer Curve.

Why Are You (the Reader) Not Paying Them More

7/27/2017

There are people that are not part of a trade stating that the trade is not ‘fair.’ That is fine if it is just your opinion; however, when they want the government to stop the trade, bad things happen. First, if you are not part of the trade, keep out of it.

Sure, you can give advice on how they might make a better deal or otherwise inform them of other options; however, once advise is provided, one should let others make a trade if they wish. If you state that someone is not being paid high enough wages or that the employer should be paying for more benefits, you have to ask yourself if you are willing to pay the higher amount.

Are you willing to start a business and hire that person at the wage you advise? Are you ready to include all the benefits? Are you going to cover the costs of all the safety features you command them to have? Are you going to give them paid time off? Are you going to pay all the taxes, fees and other expenses involved in employing people?

If the employee is really ‘worth’ the salary, benefits, and expenses that you claim other should pay them, then you should be able to get that worth out of them as well and pay all those expenses. The excuse of ‘I don’t operate a business that can employ them’ is likely true; however, it is likely their current employer cannot either.

In fact, their current employer pays them more than any other employer in the city, in the state, in the country, and in fact more than anybody else in the world. It is likely the employee is ignorant about better opportunities open to them; however, that is a function of the inordinate value of information about what opportunities are out there.

It is often valuable to use your labor in searching for better jobs even when you have one. There is great value in learning more about your opportunities. You can compete with your current employer or search out for higher paying professions. Are you learning how the business makes money? Can you find ways to increase your company’s earnings and show your extra worth?

When somebody runs a business, they try their best to reduce their cost of every part of the production, delivery, and sales of their product. That means labor costs as well. The employer must pay enough to acquire an employee that can accomplish the job.

If they attempt higher wages than necessary, they risk becoming uncompetitive. The employee’s needs are not relevant to the employer. The employee certainly should concern themselves with earning enough to take care of their needs and can choose to set their own minimum wage. They can establish their own benefit requirements.

They can inform the potential employer of their minimum requirements, and the business will make the decision on whether to hire them. That decision happens now with government labor law; however, the employee is barred by law in bidding down their labor costs under the floor the government sets.

Universal Basic Income and the Laffer Curve

7/23/2017

There are many variations of the Universal Basic Income (UBI); however, the basic notion is that it is a government welfare program that adds to or replaces some current welfare programs.

One striking point is that it gives to everyone in the effort to rid the current system of the problems relating to means-tested benefits. Most proposals add tax money to the system, so the same dollar figure is not spread thinly over all the people versus being concentrated on the poor.

Seldom do the UBI proponents talk about where the extra taxes are being acquired. They are not silent on the issue; however, most do not address the tax rate increases needed to achieve the necessary funds. Many people concentrate on ending basic welfare cash payments, food stamps, housing allowance, among others, and transferring the money to the UBI.

The current system focuses those benefits on a small percentage of the population 10%-30%. The government would need to increase tax revenue significantly to keep the same amount per person and bring that percentage to 100% of the people.

The basic notion of the Laffer curve is that as tax rates increase, people’s willingness to work the next hour is reduced. The big point is economic activity is reduced when people choose not to work those extra hours, thus higher tax rates create disincentives from serving your fellow man. The Laffer Curve is demonstrated by the tax revenue not received by hours not worked.

Whether it is a faster loss of GDP, a steady loss or a quick loss, the end result is that taxable GDP needs to drop to zero as the tax rate reaches 100%. It is an economic truth that as tax rates go up, taxable GDP goes down. The Laffer Curve just tries to graph it out dealing with how the taxable GDP slopes down to $0.

Marginal tax rates from means-tested welfare mean that welfare benefits are reduced as you earn money. This says if you increase your earnings, you lose benefits; thus, your work brings in the difference between increased earnings and the value of the benefit loss.

Taking the high marginal tax rates away from those with lower incomes by eliminating means-tested welfare will be an increase in work from those with lower incomes. Ending means-tested welfare is a positive idea.

It is hard to demonstrate or comprehend how powerful ending that destructive idea will be. However, the UBI is not the only way to eliminate means testing. The UBI replaces a bad system with another inferior policy.

Government giving money to everyone means that the government needs to tax everyone to acquire that money. The major disincentive of doing an activity that is taxed, is the reduced overall economic activity, thus doing significant harm.

Universal Basic Income and the Laffer Curve

Most serious UBI plans put the price tag at about $2 Trillion, which is about $10,000 per adult and exclude those on Social Security. While some money might be diverted from other welfare programs, I will use the full $2 trillion because all government spending raises tax rates. That is 10.4% of GDP.

I will use 19.1619 trillion GDP (mid-2017) at the current 36.4% government spending to GDP. Government spending going from 30% to 40% (factoring in about 60% welfare replacement) on my slow, average and fast loss of taxable GDP chart, shows that taxable GDP drops 7.7%, 14.3%, or 26.5% respectfully, because of the increased tax rates going up from 30% to 40%.

These numbers come with dozens of asterisks because all the changes occur with human reactions to the change. Government spending at 30% of GDP (meaning without the UBI or some of the current programs) would likely yield a GDP between $20.04 trillion to 22.2 trillion. This increase would not be overnight but would be demonstrated by higher economic growth rates over several years.

Government spending at 40% of GDP would likely yield a GDP between $17.15 trillion to 18.4 trillion. This decrease would not be overnight but would be demonstrated by lower economic growth rates over several years and massive inflation. The government must lose about $1.5 to $5 trillion of GDP to tax the $2 trillion for the UBI.

An important factor with the Laffer Curve is that when taxable GDP drops, the tax rate needs to chase the rates up creating even higher GDP losses and again higher rates. While the slow decline of GDP chart will likely stop at about 45%, the faster decline of GDP chart is likely to go over the edge and down the bad side of the Laffer Curve, which means there is no reaching the amount needed.

People will stay working even at higher tax rates if they really need to feed their families. However, after needs are met and the choice of work is just to achieve wants, the higher tax rates will result in more people picking greater leisure hours over the next hour of work. That yields less money because it results in lower taxable labor hours. The UBI's purpose is to take care of needs; thus, the more generous the UBI is, the more the Laffer Curve moves towards, the faster-loss of GDP chart.

The elimination of means testing which lowers marginal tax rates for the poor is a help; however, the UBI is not the only way to end means testing.

Just to be clear, any changes of this magnitude will result in massive changes in the behavior of everyone that is difficult to predict. When doing the math, I used basic tax rates without additional or reduced exemptions, deductions or credits.

Issues of income inequality: capitalism creates the most wealth and results in the most equal distribution of that wealth

7/13/2017

Indeed, free enterprise has income inequality; however, all other economic systems have more extreme inequality. The more critical issue is that the highest wealth production comes from free enterprise. Not only does socialism produce much less wealth for everyone and more extreme poverty for the poor, but it also comes with the added disadvantage of lower control by the individual.

In the free enterprise system, it is helpful to understand how income is distributed. Everyone distributes the money they have to the people they buy things from, and money is distributed to you by you working for someone or market your products and services to the public. If you want more money allocated to you, then work more hours, add a useful machine, work more productively, and examine different areas of work at higher pay rates.

The wealthier among us usually find a way to make a high-quality product that is in high demand and can be mass produced or replicated at lower costs than making one at a time.

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If you are concerned about income inequality, are you examining how YOU distribute your money? Do YOU distribute it, by way of spending it, evenly to everyone in your neighborhood, city, state, country or even the seven billion people around the world? Do you look for those earning nothing or very little and concentrate your spending with them?

Why do YOU distribute YOUR money to the Billionaires at Wal-Mart for milk, clothes, sporting goods and the thousands of other items they carry? Why do YOU buy your car from companies that make Billions versus the typical guy?

The guys making the most substantial incomes deserve that money because a lot of people are freely choosing to give them the cash versus someone else for the service they are providing. If you stop or heavily tax someone making ‘too much,’ you are stopping or at least disincentivizing them from serving others.

Many will try to play tricks with the tax code to try to partly even the inequality. If the government needs $100 X in a 100-person economy, they should take 1X from each person. To try to even things, they switch it to a percentage of income. Mixing a head tax with a simple percentage tax is a real practical necessity. They further do tax deductions, exemptions, and credits. These do harm to the economy, and the poor always do worse in a weaker economy.

The rich have no power to make you serve them. The rich have to offer you enough money that you take the deal. If you serve others, then you have the money to offer others to serve you. God warns us with the Tenth Commandment about the dangers of coveting.

If you concentrate on your income and not covet the salaries of others, your attitude and life will improve. It is perfectly fine to see what others with higher incomes are doing and learn from them; the sad part is the resentment of others, trying to take their money, or using the law to punish them. Remember the rich cannot make their money without serving you and others.

There are not any two jobs that are the same, likewise there are not two employees that are the same

What a Dollar Represents and those that possess million$

Minimum Wage: the tale of two apple farmers

A simply, yet typical business model made illegal.

The role of prices are highly valuable to achieve the proper levels of goods and services. Prices are also the best way to distribute the goods and services.

All Taxes Harm the Poor the Most

The Value of Your Labor verses the Value of Your Leisure

A Scenario All Economics should be Viewed

Why Tax Deductions, Exemptions, and Credits Are Bad Economics

7/2/2017

Everyone should recognize the main lesson of the Laffer Curve. That lesson is that higher tax rates create higher disincentives to do the taxable exchange. A taxable exchange means the government takes a portion of an exchange between two people or businesses. Higher tax rates result in decreasing collective incomes. A complete understanding of the Laffer Curve should compel everyone to keep the tax rates as low as possible.

Let’s look at a small community of 100 people of varying incomes, resulting in a $1,000 economy at a 20% tax rate. If the Government needs $200, they do not do a head tax of $2 per person, they do a 20% tax. Now if government exempts $200 of the income (collectively) and allow $200 of deductions (collectively) and gives everyone a $.50 tax credit (collectively equaling $50), then the tax rate of 20% will only result in $70. Government services still require $200, so the tax rate would have to rise to 41.66% in the static analysis.

The Laffer Curve teaches that a 27% lower GDP (average loss of GDP) would result. The 41.66% tax bringing in $87 of tax revenue. ($730 GDP minus $400 exempt and deductions equals $330 taxable income times 41.66% equals $137 minus $50 of credits equals $87. Higher tax rates have worse results.

Let’s look at the math on smaller deductions, exemptions, and credits. Let’s half the previous example at $100, $100, and $25. At 20% rates, the results are $135 of tax revenue. ($1,000-200) x 0.20 = $160 -$25=$135 of tax revenue. Doing the math with the Laffer Curve logic, the tax revenue maxes out at 40% with only $195 collected. 40% versus 20% tax rates drops GDP by 25%. $750 minus $200=$550 x 0.40%=$220 minus $25= $195 in tax revenue.

Let’s reduce the deductions and exemptions to a total of $125 and keep the credit at $25. Doing the math, the tax rate needs to go up to 30%, dropping the GDP 12.5% to $875. The taxable income is now $750 ($875-$125). At 30% that is $225 then take away the $25 credit to equal the $200 needed for the government.

This means to just get 12.5% of GDP worth of deductions and exemptions, and then 2.5% of GDP of a tax credit means a reduction of overall collective incomes (GDP) of 12.5%

To get the 20% of GDP worth of deductions and exemptions and then 2.5% of GDP of a tax credit means a reduction of overall incomes (GDP) of 25%. (Tax rate increasing from 20% to 40%) and we still were a little shy of the tax revenue needed and higher tax rates cause tax revenues to slide down the bad side of the Laffer Curve.

To get the 40% of GDP worth of deductions and exemptions and then 5% of GDP of a tax credit means never coming close to being able to raise rates enough to reach the $200 or the tax revenue at 20% without the deductions, exemptions, and credits.

The only place a rich man can get the money to pay taxes is from his many exchanges including exchanges with the poor. The attempt to only tax the rich always affects the poor with the greater cost of goods.

If the government NEEDS a certain amount of money, the best practice is to take the amount needed and divide it by the greatest possible tax base with a percentage coming from a head tax. This broad tax base results in the lowest tax rates and the lower disincentive of taxable transactions. If there are current deductions, exemptions, or credits, eliminate them and lower the tax rates to match.

Over time, the GDP growth rate will increase, allowing further rate decreases. Indeed, we need some government, however, after a 20% tax rate, the negatives of decreased GDP certainly outweigh the extra government revenue. Total of all government tax rates, meaning spending should max out at 10% of GDP.

There are not any two jobs that are the same; likewise there are not two employees that are the same

8/7/2016

In the political discourse of the day, the arguments about equal pay for equal work are annoying. No two jobs are the same; likewise no two employees are the same. Sure, some are very close, however never the same. The differences matter.

When you go to work, your pay is one of the many factors that keep you at your job. Many would LOVE to work in a job where they saw their favorite pop star or athlete on a daily basis. A young man would really enjoy a job assisting with a photo shoot for the Sports Illustrated bikini edition. The same pay as an assistant to a septic tank cleaner is not the same.

Nobody has the same coworkers as you do. You do not have ‘you’ as a coworker, for the good or the bad. Your coworkers and the general morale of your workplace can have you pleased or looking for other job opportunities. This is all to say that no two jobs are the same. Employers have long understood that bad morale requires higher pay to keep good employees. Employees with higher morale are more productive, thus bring greater worth to the company.

Understanding that no two employees are the same should be easy. Everyone’s productivity is different. Their contribution to morale, while subjective, is distinct. Each employee brings a wealth of knowledge and experience that is different from others. Knowledge and experience on issues outside of their current job could bring better ideas on improvements in their current occupation.

Some people naturally are leaders and other people are followers. Some are willing to go the extra mile, and others are not. Everyone has different lives outside of work that could affect work schedule flexibility. Some are willing and able to train others, and others are not. Some are eager to be trained, and others stuck in their ways.

One could like one sports team while the workplace is overwhelmingly in favor of another; thus animosity can enter. Some have strong personalities, and others are meek. Some need to be managed and others are self-governing. Some have a greater aptitude for the job, and others struggle.

All this to state that no two employees are the same. Government regulations that try to demonstrate discrimination miss the massive subjective determination necessary for a business owner to use the role of ‘price of labor’ to attract and retain better employees.

Most employers find it helpful to have a pay structure that most will fall into, however often they find ways to promote or benefit those that bring more value to the business. Often government labor law restricts beneficial trades of labor for currency. Businesses often negotiate with employees to work around restrictions.

What a Dollar Represents and those that possess million$

7/22/2016

A dollar represents service (anything of worth) you did for another. You can use that dollar to request services from others. Whoever owns that dollar is due the other half of a trade of service for service. You have that dollar because you already did your service. When someone does service for you, you give up that dollar and the trade is complete.

Both sides of a trade, the buyer and seller, must decide if the trade for the currency is WORTH IT, meaning, is your service worth the currency you are getting or is the currency you are giving up worth the service you want.

If you earned a million dollars, does that mean that you serviced your fellow man more than the man making $50,000. Yes, as defined by all those that decided to trade their service/currency for the millionaires’ service. As long as both sides agree to the trade, the dollars ‘earned’, does demonstrate the value of your worth to others.

Often times, to make millions, your services need to be bought by millions. Also, to make millions, others in business make tens of millions. As a million-dollar athlete, the others include many in the TV industry, those businesses that buy ads, those that build a stadium, those that maintain the arena among millions of dollars for others.

A million-dollar CEO, of a multi-billion-dollar corporation, has the jobs of thousands directly and indirectly affected by his decisions. Often, billions of dollars of the common man’s investments, are also greatly affected by the CEO’s decisions. The skill, talent, experience, wisdom, humbleness and incredibly hard work of a CEO is SERVICE to millions. The worth of a CEO is defined by the board of directors.

Too often, people begrudge a millionaire’s wealth. They don’t ‘think’ they earned it and covet the millionaires’ possessions and lifestyle. If done in the free enterprise system and without fraud, the millions represent service done for millions and a business that produces hundreds of millions for others.

Every person has the right to offer their services for $1 million to take the place of a CEO that is making $10 million. You could offer your Quarterback services to the Cowboys for $1 million instead of the $10 million star. There are very good reasons why the board of directors or the owner of the team does not save $9 million on hiring you. Unless you have profound talent in these areas, hiring you could lose billions of dollars for millions of people.