Reasoning Behind Eliminating Business Tax

Whenever elimination of corporate/business taxes are mentioned, people get excited. People have been conditioned to see corporations as greedy entities. We see this conditioning happening all the time on television and in movies where CEOs are seen as Scrooge types who care more for profit than human lives. There are some who might be much like the Scrooge character, but there are many more who care for their employees. What we can't forget is that the CEO's primary obligation is to the stockholders. Sometimes it's hard not to hate a corporation when you have to deal with tech support or try to solve a simple billing problem. I sometimes feel like punishing them myself, but I know taxation should never be about punishment.

Government Command and Control Farming

Belgium dairy farmers dumping milk in protest.

As Europe clawed its way out from under the ravages of World War 2 the one thing they desperately needed was food. Farmers had to reclaim farm lands and put it back into production. In an effort to speed the process European governments began giving financial support to farmers. Their plan worked and they managed to rapidly end hunger.

Seventy years later, and long after formation of the 27 nation European Union, the practice continues. Through subsidies and tight regulation the EU has been able to produce cheap affordable food. Enter 2013 and we find Belgium farmers dumping milk on fields in protest of too low milk prices. Unless something is done many EU farms are threatened by bankruptcy.

By the 90's EU farms were over producing. Reports of wine lakes and mountains of butter – as described by the EU press – made some think it was time to have a more free market approach to agriculture. When the world wide recession hit, and driven unnecessarily deeper by the US government created housing bubble, world food prices dropped dramatically because people were buying less.

Progressive types believe they can control the economy by thinking they know what's best for everyone. Simply because someone is elected to office doesn't make them effective economists. It is only when faced with disaster such as the one in Europe will government back away from certain practices. A looming disaster is forcing EU officials to rethink their policies and follow a more free market approach.

A command and control economy has never worked. It was this command and control thinking that created the housing bubble, which resulted in the 2007 recession. Recessions are a normal part of a free market economy. You will always find up and down turns in an economy. Many times attempts to control an economy out of a recession only extends the down turn. The Great Depression is a prime example, as is the 2007 recession.

A command and control economy is based on one thing – a consistent government. Government is always in a state of flux. It is never a single mind. With each change comes a different way of doing things. These changes can be a result of cronyism or simply a lack of knowledge. When you live in a region where everyone has exactly the same government controlled education, thinking will tend to follow a narrow path.

Europe is often amazed by political differences in the USA. They don't understand why so many are constantly talking about politics. The reason is simple, education is a local decision. Each region typically teaches a variety of ethics and pushes the mind in many directions. For good or bad this allows people too look at a single problem from many different perspectives. The more possible solutions the better chance of finding one best suited for that situation.

Each day situations change, especially in economics. The simple trip to work can often require many different decisions each day. Traffic is always in a state of change. The government sets speed limits and lines the roads with signs in an effort to direct traffic flow. A roadway is probably the single thing in the country that has the most government control. Despite that control there are massive traffic jams. You can travel that same route the next day and traffic zooms along normally.

An economy is much the same as a road system. Farm production varies greatly from season to season. The farmer makes many decisions based on weather and what their neighbors grow. Farming is maybe the most unpredictable market supplier. It is usually impossible to predict accurately the annual yield. For something to be tightly controlled results must be fairly predictable. Traffic counters predict road use. Crop history is used to predict outputs. On roadways a traffic jam is typically simply annoying. When agriculture hits a jam it can affect the lives of millions.

We then have another variable and that's the consumer. One season beef can be in vogue and it seems everyone wants red meat. The next year something happens that causes people to become a little more health conscious and they switch to chicken and fish. One year green beans might be in huge demand, while the next it's spinach.

The producers must be free to change direction quickly to supply the variable market. Government is much like an aircraft carrier, it takes a long time for it to change direction – only with government it can take years or even decades for these changes to come. There is no problem when government builds a road on which the economy can travel, but if they clog it with signs and traffic lights it tends to slow. If there is an exit only every 100 miles it can take too long for the economy to correct course.

It's easy to have the European and progressive attitude that everyone has a right to food. Food and water are requirements for sustaining life. People will find food no matter if it's through natural economic action, by theft, or salvaging food discarded by others. It would be wonderful if all food was free – such as a place where rich and poor alike could walk in and take all they want. We know in such a scenario there would be hoarders and those who waste enormous amounts, which would create shortages. It would be impossible for government to predict behavior on that scale.

We could simply have government distribute food according to need. Government is supposedly doing that now with food stamps. How many times have we been in the grocery store to see those with far more food than you could afford and then pay with a government EBT card. In other cases government will allot a family far less than is needed. History shows us that a central government is a poor distributor of goods. If food was to be distributed, it would have to be on a more local level. We also know there is a black market for food stamps. Too often government control creates a black market that often comes with a criminal element. Alcohol and drug prohibitions are great examples.

The economics of food, because it's a necessity, is one with which we must give the most trust. Food prices vary according to the local economy and the distance it must travel from point of production to the consumer. This applies to all goods, but with food much of it is perishable and must – at least more desirable – be produced close to the market. Food is also the only commodity that an average American or European can produce themselves. Kitchens all over the world have herb plants within reach. A patio can contain a single tomato plant. In summer it's impossible to predict the number of home vegetable gardens.

Family farms in American are disappearing because of government control and taxes. Each year there is some new regulation that can increase the cost of farming, but controls on production don't allow for these added expenses. Because of federal crop insurance some risk is negated. But this doesn't offset all the other cost of government encroachment onto the farm. This article cannot end without mentioning what's maybe the most destructive force on the family farm, and that's the death tax.

Economic Truths

Today we hear a lot about economic and social justice. There seems to always be talk of raising the minimum wage in order to have it keep up with inflation. We hear about the great wealth divide where the gap between wealthy and poor widens. This is spoken as if there is a limited numbers of dollars and if one person gets wealthy they must be taking it from someone at the bottom. This is a fallacy.

Today we have a global market. There is massive trade between countries. Goods and services are exchanged between countries. I could give you the total global accumulated wealth, but that changes daily. The amount of a country's currency changes daily. The USA is creating $84 billion a month. This doesn't include dollars created out of thin air that is loaned to banks. Even if that currency is temporary, it becomes temporally a part of total currency. Gold and other commodities are converted to cash through Rehypothification in the form of bonds.

Each day wealth is taken and returned to the government. Currently the death tax (estate tax) is 40% of assets above $5.5 million. When the government takes that money it's often returned to the economy in various ways. Eventually that money becomes available to be earned once more. To be sure, this isn't in support of the death tax, but just an explanation of how currency moves. This does show, especially under the current taxing system, rich cannot accumulate wealth to the point that the poor can have no chance of moving to the middle class.

Death isn't the only way that wealth trickles down to the poor. Much of the wealth lies with business – be it small or large. Most businesses are always looking to expand. They will spend money on building facilities in which to produce more products or services. When expansion happens more workers are hired. Careful thought is given to the number of employees needed. In order to make that decision they must look to see how much of their budget can be set aside for labor. They then look at the labor market and decide what is the lowest wage that can be offered and attract the necessary labor. Skilled labor always comes at a premium, while manual labor is usually easier to find.

Winning America through education

Too frequently I find myself in debates with the typical Democratic voter and they will repeat the same rhetoric they get from peers and the 6 pm news.. Five minutes into the conversation they have the doe in the headlight look. Once I begin explaining basic finance and use words like Quantitative Easing and Rehypothification, they run away.

If they do stick around past that point, the moment I mention the free market they point to what they believe are faults in capitalism. They tell me how it was capitalism that caused the crash of 2007, and how the greedy bankers are taking people's homes. They tell me how companies like Monsanto are poisoning everyone. I could go on, but you get the message. Everyone knows all the arguments.

I must then explain to these people we have not had a free market in modern history. Not since Wikard versus Filburn have we come close to a free market. This opened the door for federal regulation of almost everything produced in America. All the problems mentioned above, and then some, are done with cooperation from the overseer government.

The Not so New Deal

I recently came across this image and text on Facebook. I found the image to be over the top and the accompanying text interesting. I decided to take each bullet point and add my commentary.

(name removed) did a little research and came up with the following about Franklin Delano Roosevelt:

1. Brought the country back from financial collapse.

2. Established and protected Social Security.

3. Worked toward ending a war.

4. FDR was completely opposed to everything Hitler stood for - the biggest threat to national security. Hitler died on April 30, 1945 by taking poison and then shootin

g himself with a pistol. (corrected)

5. Wife was an advocate of the disadvantaged

6. Invested in jobs and the nation's infrastructure.

7. Spoke to the people not at them.

8. Strong advocate of the military and its soldiers and sailors.

9. Strong foreign policy record in the presence of tyrants.

10. Established and sustained regulation of Wall Street.

11. A champion of minority groups.

12. Ended discrimination in the military.

Sound familiar?

FDR is consistently considered one of the top three Presidents in history but the Tea Party consider him a dangerous Progressive much as they have maligned Obama.

Warren Buffet and the Death Tax

Warren Buffet and the Democrats tell us they need to take property from the greedy rich people when they die. The Democrats have decided that you don’t deserve any money or property in which you didn’t earn. They decided the government has the right to redistribute that wealth

On the surface, all this might sound good to those that believe in wealth redistribution. Once you begin to dig into estate taxes, things may not be what you believed. Warren Buffet pushes hard for the estate tax. There is a good reason he does this, and it’s not that he has a kind giving heart. The very wealthy have a way around these estate taxes. They put money into huge insurance policies worth millions. Insurance money isn’t taxable through the estate or income tax.

Warren Buffet coincidentally owns many of these insurance companies. As long as there is a death tax he is able to sell these massive policies, which without an estate tax they wouldn’t be needed.