How does the economy work?
Yesterday, I went over to Publix (the local grocery store) and picked up some frozen yogurt for dessert and a few other items. I paid $72.93 for the groceries, $1.82 for sales tax, which totals $74.75.
That $72.93 is the only money that goes into the private economy.
It filters through Publix along with the money paid by thousands of other consumers. All that money pays for the employees, store rent, suppliers, trucks, advertising and everything else Publix spends money on so I can walk into their store and buy groceries.
From that money, Publix pays federal and state taxes.
Their landlord takes the money paid to it, and they pay tax. As does all the suppliers and everyone else who gets paid by Publix for whatever Publix buys.
Everybody up the line pays a sliver of tax out of that little bit of money I paid for groceries.
Tax is paid in cash. And everyone needs positive cash flow to stay in business. Whatever amount of taxes they have to pay out is just another cost item making up their purchase price.
The $72.93 reimburses the costs, expenses, fees, and taxes paid by everyone in the long line of supply logistics for the frozen yogurt and other stuff I bought.
All taxes are ultimately a sales tax on the consumer.
A voluntary tax at that.
What I don’t spend, I save. Savings are capital.
The easiest way for the government to get all the tax it needs with the least complication would be to apply tax when I buy something rather than the outrageously convoluted and cruel way it does it now.
It’s understandable that politicians do not want the public to know how much they are paying. An income tax system is ideally suited for just this purpose.
It not only keeps us from knowing how much we are paying for government, but it also allows the politicians to engage in all their utterly corrupt spending to reward special interest voting groups and campaign contributors.
Oh, they also spend a few bucks to do just enough so they can claim they are doing something beneficial for you and me.
But, they can’t stop spending. They need to feed continuously a voracious (or could I say avaricious) political machine.
That where the U.S. crackdown on global money comes in.
Without going into all the technicalities, intricacies, and complexities of the Foreign Account Tax Compliance Act (FATCA
), inversions, and the attack on other countries as tax havens, it’s enough to say that Congress has dictated that the entire international financial industry now reports to the U.S. Treasury.
Congress seemed under the impression it would be a one-way street. The U.S. gets exclusive rights to tax everybody.
They forgot about the Law of Unintended Consequences.
The European Union picked up on this whole idea of cracking down on multinational people and companies avoiding paying taxes.
Like the U.S., the EU is also run by politicians with greedy constituents.
They launched their assault on multinational companies and others to close what they perceive as tax loopholes. The EU countries want more power to claw back profits being used to benefit other places like the United States.
The result is that the United States is howling in protest.
The Treasury is awfully upset by what it sees as the EU poaching on its tax enforcement turf.
What the Treasury fears is that if these U.S. multinationals and others pay tax to the EU countries, then they could claim a tax credit which reduces the amount of tax that the Treasury would otherwise grab.
With unmitigated chutzpah, the members of the Senate Finance Committee told the EU to back off doing the same thing that the US does since that would amount to a direct threat to U.S. interests.
Hypocrisy to the Senate Finance Committee is like mother’s milk to a baby.
As the global economy heads down the drain, the United States and the EU fight over how much more tax they can squeeze out of the private sector. The cash to pay those increasing tax burdens reduces the capital that business and investors must have to save the economy.
The global expansion of the income tax oppression by the United States and EU countries is a major contributing factor causing the global economy to go into, as Citigroup recently said, a death spiral.
If the U.S. and EU used a consumption tax system, then this could become part of the solution rather than the cause.
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