Donald
Trump's Tax Plan and Trench Economics
No
doubt you've heard party-machine pundits, and talking heads on both
the left, and right, condemning Donald Trump's tax plan. Some condemn
it because they're opposed to Liberty, and other oppose it because
they don't understand it. One can easily dismiss the foolishness of
the leftists who oppose anything that even remotely resembles
Liberty, let alone economic empowerment of the individual; thus, in
this post we're only going to look at the arguments that at least
have the appearance of reasonable concern.
Based
on what I've heard in the media, the most prevalent argument against
Trump's plan concerns the “zero percent bracket” for individuals
making under $25,000 or $50,000 for married. People who oppose this
fail to understand that these low-income people are not currently
paying any income taxes, yet the majority are getting refunds of
money they never paid. Therefore, under Trump's zero percent bracket,
these people would no longer be getting refunds, they will just be
allowed to keep what they make.
The
biggest problem demonstrated by the opposition is that they simply do
not understand how economics work down here in the trenches, because
they have never built a business from the ground up. No one can build
a successful business from nothing, without understanding what I call
“trench economics”. Trench Economics are how things work down
here in the trenches of day to day life for the majority of society.
The trenches are where you find the primary producers, the butchers,
the bakers, the candlestick makers, and everyone else who plays a
part in making society function as a unit.
The
second most prevalent opposition argument is that the zero percent
bracket limits will be an incentive for people to not exceed the
income limits. While this argument may sound nice, reality proves
that it is complete nonsense. No matter what the incentives, or
disincentives, every society is going to have a slacker class. All
societies that have come before ours, and all societies that come
after ours, are all going to have a slacker class. There is no amount
of incentive you can give a slacker to cause them to have the desire
to be productive; they will only do what is necessary, and no more.
People in the slacker class will always have below average income,
and most will not even consider the consequences if they exceed the
limits, because they're typically more interested in watching TV or
playing a video game.
Trench
Economics 101:
The more money the slacker class has in it's
pockets, the more money they will spend on goods and services. The
slacker class does not consider economics, nor much of anything else
for that matter. Most live paycheck to paycheck, and the vast
majority typically have a whole lot of month left at the end of the
money. The slacker class hasn't changed in thousands of years, and
these people are never going to change until society as we know it
comes to an end. If you give them all the money withheld from their
paychecks at the end of the year, they're going to blow it as soon as
possible. If the slacker class does any thinking at all, the only
thing they're going to think about is what they're going to buy with
their tax refund money. While they're not going to pay any income
taxes either way, under Trump's zero percent plan, all of that money
is going right back into the economy.
In
certain circumstances, a small minority of people may benefit by not
exceeding the income limit for a particular year, but people in this
category will typically exceed the limits in subsequent years. Simple
fact of the matter is that anyone having the intelligence to apply
such careful consideration to tax law, will certainly have the
intelligence and drive to better themselves by being more productive.
Even if these people carefully plan to remain under the tax liability
limit, history shows that they're going to either save or spend what
money they have. If they save it, they'll usually invest it and
therefore lessen the future burden on the taxpayers because there's
less people trying to get a handout from the government.
Trench
Economics 102:
The up and coming class may play the tax liability
avoidance game for a time for a year, or even a few years, but in the
end they're not going to deny themselves any longer than is
necessary. They're going to want the fancy car, fancy house, and
other things that feed their lust of social status more than they
want to avoid a tax liability. Greed and lust are very powerful
economically motivating factors; people will pay whatever it costs to
feed these addictions.
Trench
Economics 103:
Applying
taxation as a penalty does nothing more than increase people's desire
to avoid paying all taxes as much as possible. Things like the
Alternative Minimum Tax, Marriage Penalty, Death Tax, Capital Gains,
and so forth, are all looked upon as “punishments”. When a tax is
viewed as a punishment, it gives people more incentive to avoid the
taxes altogether. If you want to increase tax revenue, don't use
taxes as fines.
Trench
Economics 104:
Business
pays no tax. That's right, when you hear about government sticking it
to a corporation, understand that the tax liability is added to the
price of the product or service. No matter if it's the local
craftsman working alone in his own shop, or the mega corporation,
their tax liability is viewed as any other businesses expense and
added to the consumer cost. Politicians try to hide behind the smoke
and mirrors, but despite the attempted deception, consumers are
paying for all the taxes levied on businesses.
Trench
Economics 105:
The more money people have, the more money they
will spend. The more money they spend, the more products and services
they purchase. More demand, creates more jobs. More jobs reduces the
number of available workers, which makes businesses offer higher
wages in order to get the best employees. The lower the combined tax
liability, the more the economy grows. Tax revenues will necessary
increase proportionally to economic growth. This is a vicious cycle
we call “capitalism”, and it works every time it's tried.
At
this point I must digress to comment on a key point that is not
currently a part of Trump's plan, and that is the necessity of
eliminating the rewards and punishments associated with one's marital
status. If we must insist on punishing achievement by fining people
for productivity, then all such taxation should be applied equally.
Married or single, taxation should be applied exactly the same to
every individual such that even married people will file individual
returns. Give people a standard deduction for themselves, and each
dependent they support. Simple enough plan whereby people are not
punished for being single, and they are rewarded for supporting
someone else rather than making the dependent, along with a host of
bureaucrats, a giant burden on all the other taxpayers. Rewards
should be giving to one who is single, but chooses to support a child
in an orphanage, or foster home. Rewards are a great productivity
incentive, while punishments stifle productivity.
The
ideal tax system would be based purely on consumption. All people
would be free to make as much as they desire with being punished,
because the more money they make, the more money they want to spend.
Thus, if one chooses to be frugal, they can put a whole lot of money
into savings or investments, either way, they're going to be
self-supporting rather then becoming a burden on the producers.
Others will choose to buy things and pay the sales tax. Just the same
as an income-base tax, the playing field of a consumption-base tax
system must also be level via a fixed rate. Under the current sales
tax system, the higher the cost of a product, the lower the
percentage of tax; therefore, the lowest income brackets are paying
the highest percentage of consumption taxes. Under a flat-rate
consumption tax system, one buying a two-million dollar yacht, would
pay the same percentage as one buying a two-thousand dollar bass
boat.
What with all the fuss these days over 'equality' …
isn't it about time we have equality in the tax system?
Blessings!
