Tax Day is past

[LCC]

http://groups.google.com/group/misc.invest.marketplace/browse_thread/thread/e557bb977e028a7d/e037243d0460eb76?hl=en&lnk=st&q=tc5526#e037243d0460eb76
is the source for the following:

In my opinion, there are some major policy changes which would have to
accompany the monetization of the US federal debt. “Sin no more” - a
Constitutional amendment to :
a) Deny the government the power to *issue* debt instruments,
including “money”. 1997CRH1901 implies that “money” is already out of
the hands of treasury and firmly in the grip of the federal reserve
anyway. Notice that this would also require a budget surplus to stay
ahead of the current account or a large government reserve of past
surpluses, preferably both. Notice that I said *issue* not *hold*.
Implicit in the notion of a reserve is the right of the government to
command a transfer of value from one party to another through an
exchange of debt instruments (held by the government) for goods or
services.
b) Deny the government the right to *guarantee* compensation of one
party when another party fails to honor a debt obligation. Notice that
I said *guarantee* not *enforce*. The objective is to avoid nonsense
such as the savings and loan bailout. Deep pockets Uncle Sam is no
more. Let business judgment be based upon close scrutiny by both
parties in any financial transaction.
c) Define the qualifying characteristics of “money”, by which I mean
any debt instrument for which *enforcement* of debt obligations is
guaranteed. Rather than specifying a commodity of intrinsic value
(such as gold standard etc.) this might be a specification of how the
issuer of a debt instrument must own and control a commodity reserve
backing the value of any debt instruments issued. The “commodity”
might be anything from fresh water (think about California and
Arizona) to computing resources (think about internet file server
dynamic loads). Have I beaten the horse to death with my examples ? If
not, then one more time around the mulberry bush. As I see it the role
of the government should be enforcement of the implied exchange
contract as the “money” changes hands (moving through the economy)
rather than any judgment of the intrinsic value of the commodity
reserve. In a broad heterogeneous market the various “brands” of
“money” will compete in a manner similar to the international money
markets today. The transition phase from “funny” money to new money is
the tricky part. No doubt there are thousands of economists and
millions of lawyers eager to suggest ways and means, not to mention
the folks at the fed.
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Based upon prior experience my notions regarding taxation and
representation go over like a lead balloon, but I will give it a whirl
and depend upon the courtesy of the long suffering public to ignore
what they consider beneath 
contempt. T A X A T I O N (first published
Jan 20 1992 in “PD News”)

Proposition 1 :
1) The survival of the nation is desirable and depends upon its
wealth.
2) The wealth of the nation always needs to be increased in
competition with other nations, who in turn seek to gain advantage.
3) The wealth of the nation is the cumulative result of economic
activity, with economic activity determining the rate at which wealth
increases.
4) Anything which directly inhibits economic activity reduces the rate
at which the wealth of the nation increases, ultimately threatening
its survival.
5) Economic activity is inhibited by increased costs.
6) Sales taxes and income taxes directly tax economic activity,
increasing the cost of the product and production labor cost etc.
which ultimately threatens the survival of the nation.
( Let me add a 1997 economics translation of 5-6. The opportunity cost
for a seller is the sum of
a) the basic overhead and capital equipment costs amortized over units
produced plus
b) the basic materials cost per unit plus
c) the basic labor cost per unit. Draw a bar on the left hand side of
the page representing the seller’s value range based upon competitive
market conditions and volume sold. Now draw another bar beside it
starting higher and extending further upward to represent the value
range after adding in all effects of regulation and taxation - the
government mandated revised cost. On the right hand side of the page
draw a bar in the appropriate position to represent the opportunity
cost for a buyer to exchange money or something else of value for the
seller’s product as a function of volume sold. Better yet, show the
bars as a set of curves. When the buyer will not purchase the product
at the government mandated revised cost for a given volume then there
is a market dislocation - nothing gets sold unless the seller is
willing to perform the unnatural and irrational act of selling at a
loss below unit cost. For example consider the possibility of an
absolutely enforceable luxury tax on a product placed at ten times the
price at which the most eager customer would be willing to purchase
the product.
Due to business debt costs, regulation, taxation, and government
mandated overhead mature businesses in the US suffer from an excessive
component a) above even when components b) revised and c) revised do
not bankrupt them. They cannot compete with new foreign businesses
producing the same products unless product distribution and tariff
barriers make the government mandated revised opportunity costs equal.
The death of a company and industry may be slow but it will surely
come. As I pointed out above, taking a loss on unit sales is an
unnatural and irrational act. This is economics 101 as I learned it in
74-75. Perhaps someone will post a note on this thread giving URL and
book references for those unable to follow my explanation. A scruffy
stumblebum like me cannot convince those who require a string of
credentials to validate an opinion. )
Proposition 2 :
1) Everyone wants wealth, whether great or merely sufficient for
survival.
2) Holders of wealth want to keep it. This requires a secure
environment.
3) Government provides security to the citizens and businesses of the
nation through its laws, personnel, and possessions. One which does
not will fail.
4) Those who derive a benefit from a system should pay in proportion
to the benefit they receive. If they do not, then the system is
inequitable and will ultimately fail in competition with other systems
which are equitable.
5) So the government should support itself through direct taxation of
wealth and user fees for the services it provides.
I reckon the howling starts at 4) and rises to a screech at 5). Let me
add 1997 perspective.
1) Taxation without representation is theft. A citizen has an
obligation to the *nation* of citizenship, but no obligation to
support a tyrannical *government* - see The Declaration of
Independence “For imposing Taxes on us without our Consent” among
other notable (and familiar) offenses. I reject the notion that I have
a *unilateral* and *irrevocable* duty to the *government*, but accept
the responsibilities of citizenship in the *nation*. If you cannot
recall the words of the “Pledge of Allegiance” then I suggest you look
it up. The definition of “Republic” may also give you some helpful
insights into my point of view. Prohibition was repealed due to
popular demand. If the American *nation* yells loud enough then just
possibly Congress can be taught the economic facts of life. My
personal opinion is that we have the technology to run continuous
referendums, and the cost of adding this direct feedback is far less
than the cost of economic ruin. Let the American people vote on
anything, and I will abide by the judgment of the *majority of
American citizens*. It is interesting to note that the federal
government demands that its employees (particularly the military)
swear to uphold and defend the Constitution (and by implication the
government) but so far as I know (correct me if I am wrong) does NOT
encourage them to make any oath of obligation to the American
*nation*. They salute the flag but their lips are sealed.
2) Representation implies accountability to those “represented” by the
incumbent of a legislative office. Regardless of theory, practical
experience shows that an incumbent who *runs* for reelection is almost
certain to be reelected. Furthermore (regardless of theory) the only
opportunity available for the vast majority of constituents to affect
the voting of those legislators occurs at fixed term elections, and we
all know the value of campaign promises. Due to the “party” system of
politics (somebody should add a URL link to this thread telling how
much the founding fathers despised political parties) the choice of
“representatives” is limited to Tweedledum or Tweedledee. Since voters
usually do not want to vote *for* someone, they stay home on election
day. Representation by geographical district (rather than at-large)
practically guarantees that the “representative” will actually
represent a constituent minority. Somebody please add a graph showing
total votes received by the elected members of each Congress over the
past 100 years superimposed over the census bureau data for citizens
entitled to vote.
3) From 2) above and the problems noted in the current debate over
campaign finance reform, it should be obvious that a revision to make
America a representative democracy is needed. If you eliminate the
campaign financing then the problem of bribery/influence may be
reduced to a manageable level *if* legislators are made subject to the
penalties of RICO. If you eliminate the campaigns then there is no
need for financing at all. If you eliminate the elections then there
is no need for campaigns. You can eliminate elections by converting to
a system of representation by proxy similar to what is used in
corporate stockholder meetings. Every citizen of voting age has one
vote and can allocate that 
vote (at his or her option) by assigning a
proxy to a person trusted to represent the interests of that citizen.
Eliminate geographical allocation and periodic elections. A proxy can
be changed to a different person at any time, with no upper limit on
the number of legislators. It might be a good idea to put an *upper*
limit on the number of proxies which a single representative
legislator can vote. If you keep the fixed term election system of
government, try adding “None Of The Above” as a choice in the ballot
box. That will bring the voters into the polls! By the way, this form
of legislature is something I read in a book in 1980. Ask a
Libertarian familiar with science fiction to tell you the name of the
book.  I am confident that the American people can come up with some
better legislative system than what we have now. I am confident that
when (not if) another “recession” a.k.a. depression hits there will be
a serious effort to call a Constitutional Convention. We Baby Boomers
can solve these problems if Depression Generation just cannot muster
the energy and intellect to clean up its act. Move over gramps, you
sorry old sad sack.....
4) Suppose we had a proxy representation system as outlined above. The
legislative representatives actually represent 100 percent of the
voting age constituents. One proxy one vote is used to pass policy
legislation (*NOT* one representative one vote). There is still a
problem with 1) taxation without representation because about one
percent of the proxies are held as representative of just about all
the wealth of the nation. The legislators need to have two faces - for
policy purposes one proxy one vote, but for *allocation* purposes one
*tax dollar* voted equals one revenue dollar allocated. The tax
dollars paid to the government by the constituent go into a government
managed account to be dispensed at the discretion of the proxy holder
of that constituent. No tax dollars paid equals no money in account. A
million paid minus 100,000 voted/dispensed equals 900,000 in the
account. Is there anybody in the world too stupid 
to understand
that ? Okay, around the Mulberry bush again. As an example 99 percent
of the proxies held by legislators vote to give a loaf of bread and a
ticket to the circus to the citizens every day at a cost of 200
billion dollars. The representatives follow up on this nonsense by
voting as one tax dollar one vote, pass the hat and collect 2 million.
All watch with interest to see how fairly the proceeds are distributed
while bakers and clowns riot to protest lost revenue opportunities.
5) I do not think that anyone should be *forced* to receive the
“benefits” of government simply because they happen to be a citizen of
the nation managed by that government. Proposition 2 item 4) and
conclusion 5) should make it clear that I also do not think anyone
(notice that I did not say “citizen” here) should receive a benefit of
government unless there is a fair exchange of value resulting in an
equitable distribution of benefits. I think that most of the
“benefits” of government should be divested into the private sector
where more rational management will occur. The remaining fall into two
categories - those whose use can be denied to an individual and those
which cannot. Offhand I would say that about the only thing which
cannot be denied on an individual basis is national defense. It is
just not practical to tell an invader that he can shoot Curly but not
Moe. The benefits which can be denied fall into two groups - those
where access to the benefit can be denied, and those which are
community wide and not noticed until you need them. If access can be
denied then a fee should be collected on a subscription basis or at
point of usage. All the remaining "benefits” should be funded by a
***voluntary*** wealth tax whose proceeds go into the government
accounts voted by the proxy representatives. Recall the presumption
that proxy representatives really and truly represent the constituents
and you will notice that “benefits” get funded only to the extent that
they are desired.
6) How do you persuade the population to pay a *voluntary* wealth
tax ? A couple of simple statements of constitutional law should just
about cover it. No doubt the experts can suggest more elegant wording,
but here is my suggestion. “Value shall have legal standing in civil
law only to the extent that applicable fees and taxes have been paid.
Value shall have legal standing in criminal law according to
applicable statutes and schedules.” In other words, if you pay a
wealth tax declaring that your home insured for 100000 has a value to
you of 20000 dollars and your home burns down, then the insurance
company is only obliged to pay the legal value of 20000 rather than
the policy face value of 100000. You have no legal recourse to recover
the other 80000 in civil court. From my college days I recall an
insurance business which had a big sign across the building face “What
if YOU had a fire tonight ?”. Somehow I think that 
people would pay
those “applicable fees and taxes”. For the remainder who just cannot
remember until too late - “Think of it as evolution in action”.
7) Recall that “fair exchange of value resulting in an equitable
distribution of benefits” in 5) above ? That covers the case of
unproductive/unemployed persons. Some provision needs to be made to
allow *any* person to exchange value with the government in order to
earn benefits. I will leave the specification of such programs to
liberals and others concerned with such agendas. No doubt whenever the
hat gets passed for their favorites they will empty their cash boxes.
The “fair exchange” is booty swapped for the doubtless indescribable
warm and fuzzy feeling resulting from giving money away.
8) Recall “no upper limit on the number of legislators” ? Let all
legislative business be transacted on-line in the light of day. If
somebody wants to hobnob face-to-face then he/she should make suitable
arrangements and pay own expenses. So much for the smoke filled rooms
of past generations, which we are told causes cancer on a secondhand
basis anyway. It would probably be a good idea to put in a time delay
on effective date after vote tallies  to give constituents a chance to
jerk proxies away from misbehaving legislators.
9) It would probably be a good idea for the new legislature to
acknowledge facts of life from its inception. Provide a mechanism for
auctioning dollar transfers from the accounts representing affluent
taxpayers in exchange for proxy vote agreements in the accounts
representing less affluent legislators. Anybody who buys influence
using any other procedure gets his/her head chopped off, or whatever
may seem appropriate to the constituents affected.

Lonnie Courtney Clay Laughing Crazy Coot TARZAN Chic Logo Guy