. . . just not for the reasons you (or he) might think. A few days ago, everybody’s favorite (or at least best known) freshman representative, Alexandria Ocasio-Cortez, said that the top marginal tax rate for the “ultra rich” should be raised to 70%. This would allow the government to fund research into “green” alternative fuels with the goal of weening the U.S. off the fossil fuels by 2030.
|"Any idea that's not mine stinks."|
Alan Greenspan thinks it’s a bad idea. His reason? Aside from the fact that he repeated several times that it would be a bad (okay, “terrible,” “disastrous,” and probably a few we missed), the former chairman of the Federal Reserve seems to believe it’s a bad idea because it’s a bad idea. He’s a little vague on the subject. From all we can tell, he thinks that taxing the rich is a bad idea, therefore taxing the rich is a bad idea.
(If you think that is a cop-out argument, take a look at the exchange Representative Benny Thompson had with Greenspan when Thompson wanted to know why Capital Homesteading reforms could not be implemented. Greenspan’s answer in brief: the “production possibilities curve” says it can’t be done because there’s only so much credit to go around. And what is the “production possibilities curve”? It’s a theory that you can’t produce more than you can finance. Greenspan’s answer, therefore, was that you can’t finance any more than you can finance because you can’t finance it.
|Bet you never saw a picture of a Treasury Note of 1890 before!|
(By the way, we disagree with one comment by Dr. Norman Bailey in his commentary. He said that the Federal Reserve Act “had forgotten to forbid it to buy government ‘financial’ paper.” No, the framers of the Act didn’t forget. The loophole was intentional to allow the Federal Reserve to purchase the government bonds backing the United States Notes — the “Greenbacks” — the National Bank Notes, and the Treasury Notes of 1890, retire the debt-backed, inelastic reserve currency, replace it with debt-backed inelastic Federal Reserve Bank Notes, and then as the debt was paid down, replace the inelastic government debt-backed Federal Reserve Bank Notes with indistinguishable elastic, private sector asset-backed Federal Reserve Notes, and then terminate the power of the Federal Reserve to deal in government bonds.
(Then again, maybe it’s just easier to say they forgot. . . .)
Meanwhile, back at the ranch:
|Socialist known for cigars and confiscatory taxation.|
Representative Ocasio-Cortez actually has a good idea, in essence, anyway. What we disagree with is the financing plan and the assumptions behind it.
First, there is only one legitimate purpose for taxation: to raise the wherewithal to run government. That’s it. Using taxation for “social purposes” is a purely socialist idea. It assumes that government’s role is so great as to have the ultimate, even total control over every aspect of life. This has been the overriding principle of all forms of socialism from the very beginning, to take control (power) away from actual people and give it to some form of the collective. As Henri de Saint-Simon put it when delivering the doctrines of his “New Christianity” in the 1820s,
The whole of society ought to strive towards the amelioration of the moral and physical existence of the poorest class; society ought to organize itself in the way best adapted for attaining this end. (“Saint-Simon,” Encyclopedia Britannica, 19: 14th Edition, 1956, Print.)
|Saint-Simon, democratic socialist.|
Yes, we are fully aware that Ocasio-Cortez calls herself a “democratic socialist.” That’s okay. Socialism was originally known as “the democratic religion.” It doesn’t change anything to put an adjective in front of it. Nor does it change the fact that using the tax system for anything other than to raise funds for government is a really bad idea, as it puts government in charge of whatever the government is funding . . . just as taxes are supposed to ensure that the taxpayer stays in charge of government. (That’s right . . . if the rich are paying all the taxes, guess who is controlling the government?)
That brings us to the second reason we disagree with Ocasio-Cortez’s financing plan: it puts (more) control in the hands of the government . . . meaning the rich. Do you really want that?
So what’s a better way to do it?
· Reform the Tax System. Have you seen the Internal Revenue Code recently? How about the Regs? Why don’t we really simplify matters, which means stop using the tax system to do anything other than raise money for government? Period. Have everyone pay exactly the same rate on ALL (that’s “all”) income of any kind whatsoever after exempting enough from ALL taxation to meet common domestic needs, including education and healthcare, adequately (and make dividends tax deductible at the corporate level so they get treated the same as ALL other income). A rough guesstimate would be $100,000 for a “typical” family of four. And, yes, we mean ALL income, not taxing Social Security or anything else (Medicare, welfare, or any other entitlements or transfer payments, etc., etc., etc.) until a family hits the $100,000 threshold. As part of an overall reform, Social Security, etc., would not have a special tax, but be funded out of general tax revenues. Ultimately, of course, Social Security & Friends would be phased out as people were able to replace labor incomes and redistribution with ownership incomes (see below), but the point for this point is that the tax system itself needs to be grossly simplified. Even Adam Smith said so.
· Reform the Money System. Just as you shouldn’t use the tax system to finance growth, you shouldn’t use the money system to finance government. All government operations should be funded out of tax revenues. All private sector operations should be funded using the financial system, including widespread capital ownership (next point). (There is, of course, a LOT more than that to it, but that’s the principle.)
· Reform the Ownership System. Face it. People are being replaced by machines. What’s the solution? Make it possible for people to buy the machines on credit, pay for them out of the earnings of the machines themselves, and thereafter use the income from ownership for consumption. No more need for redistribution by government except in a real emergency.
|"When do we tell the crew we're, like, totally lost?"|
· Fund an Alternative Energy “Manhattan Project.” Using tax revenues, not government debt, launch a project to make alternative fuels economically feasible as soon as possible. Once alternative fuels are cheaper, people will switch on their own. This could even be done in the private sector by offering a prize for whoever comes up with an economically viable way to replace fossil fuels. (The British government did this to solve the problem of calculating longitude, disbursing more than £100,000 — about a gazillion dollars today — in prize money by the time the contest was over; it went from 1714 to 1828.) Of course, whoever came up with it could not patent it, but the prize could be big enough that it wouldn’t matter, say $1 billion?
So while we agree with Greenspan about Ocasio-Cortez’s financing plan — although not his “reason” for his disagreement — we agree with Ocasio-Cortez that there should be a plan.