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Street Politics: It Ain't Your Daddy's GOP Anymore 4
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Street Politics: It Ain't Your Daddy's GOP Anymore 4

Today we get into taxes and spending

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Before we commence with today’s enlightenment, I’d like to take a moment to thank Nick D’Allesandro and Karen Hockenberry for their fine appearances here on the P4B. Not only did they provide a path to health and fitness for us, they left your host looking in the mirror in great distress. But now I have the info to fix that. Karen will be back in a future episode to take a deep dive into specifics of everything we touched on. Awesome guests.

This installment of the book couldn’t be more timely. As McCarthy and Biden go through the theater that was the debt ceiling “compromise”, it’s good to focus on where all that money comes from and who owns the money.

And if you think we have inflation now, think about $4 trillion in new debt coming on the next two years. That’s assuming a briskly growing economy, which we do not and will not have for the foreseeable future.

Here’s the nut of the debt ceiling theater. What will the establishment Regime, GOP or Dem, do with a $4 trillion increase in the debt ceiling? The answer is, of course, they will borrow up to that ceiling quickly and spend it all. There is nothing left under the sun the Government of the United States can responsibly spend money on. It’s all bullshit now, just people passing around bags of your money to each other, your money, pretending to do things of value.

Keep in mind that this book was pretty much in the can in 2014, and revised in ‘15 and ‘16.

So let’s get to it, I might have some comments to close with.

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5  OTHER PEOPLE’S MONEY

"One of the great debates of our time is about how much of your money should be spent by the State and how much you should keep to spend on your family.  Let us never forget this fundamental truth: the State has no source of money other than money which people earn themselves.  If the State wishes to spend more it can do so only by borrowing your savings or by taxing you more.  It is no good thinking that someone else will pay—that "someone else" is you.  There is no such thing as public money; there is only taxpayers' money. "

- Margaret Thatcher

“The problem with socialism is that you eventually run out of other people's money.  

- Margaret Thatcher

Before we get to the nut of it…

The discussion about how the government siphons off your money is not all about taxes, you see.  For example, interests rates have been held artificially low for years now.  This has two, and only two reasons.  One is to make easy money available to Wall Street and big banks.  The other is to provide the government an easy means to service debt and acquire new debt.  As I’ll say elsewhere, your government competes directly against you for every dime of available credit.  Not only that, if your finances looked 1/100th as bad as the government’s, you wouldn’t qualify for a loan.  But the government does.

Further, by keeping interests rates artificially low, the Fed cheats you out of several percentage points of interest.  The interest in your bank account doesn’t even keep pace with inflation.  If the interest rates were market driven and based on demand for cash or credit, you would be making more in interest.  So the government gets to irresponsibly continue to borrow money at your direct expense now and at your future expense when it comes time to pay the piper for all that government debt.  Lucky you!

Let’s Get Down To It!

We conservatives talk a great game when it comes to tax reform.  But we rarely follow through.  It’s the same with profligate spending.  Those we’ve voted in only trim around the edges on these things.  In the meantime our economy has slowly withered.  The success of small and medium sized businesses has occurred not because of what the Beltway whores have done, but despite it.  Imagine where we’d all be right now if those businesses didn’t have to contend with a bureaucracy that spends its time writing regulations that favor a chosen few of the “bigs. ” Almost to the last one, these regulations have the intent of interfering with the companies that compete with the well connected. 

Between a monstrous government and the crony class it supports (that’s called corruption) we dance on the precipice of losing it all.  More and more people are giving up, apathy is at an all-time high, productivity is floundering and growth has been a joke for years.  We are very close, a percentage point of two, to having more takers than makers in our economy.  We are not only losing jobs to other countries, we are losing corporations as well. 

This is the perfect time to change all that.  The Progressives have never been so discredited.  The vast majority of Americans are beginning to awaken to this.  But to do it right, to actually turn the ship around will take an extra athletic effort from a candidate, soon-to-be elected official, with guts and grit.

But that candidate will first, have a lot of work to do changing what citizens think they know about the nature of taxes and government spending.

We’ll get to the spending later.  But for now, the most important point you can hammer home is that government spending, as it exists today, can never give you as much as you can provide for yourself.  If you are working middle class, you will never see a benefit commensurate with what you pay into this malfunctioning system.

If you look to the government for anything, thinking you benefit in the long run, you are a sucker (the exception being anyone who truly cannot do for themselves).  And if a real conservative emerges and takes this country where it needs to go, suckers who try to hold onto the government tit by cheating will be left behind and will deserve every misfortune that will come with that decision.

That said, lets discuss where the governing class gets the money it wastes every year.

And before anyone gets their panties in a wad about the tax cuts and simplification we will discuss, I’ll tip my hand now.  We are going to scatter most of the IRS to the far corners of government and fire the rest.  So now you don’t even need to ask.

The Ugly Truth

Of this entire book, this is the section that will be most lied about, in order to discredit the message.  Although I will write in later chapters that considerations must be carved out for those in true need, commentators will say that the plans I discuss will be designed to hurt the poor and favor the rich.  Even though the numbers I use will be uniform for all income levels, the peanut gallery will still say that the plans will hurt the middle class.  And they will say the same about you if you adopt any of it.  But don’t worry.  Most people will know the “progressive” commentators are full of shit.

Truth #1

Corporations pay no taxes.  They just don’t.  It may look like they do on paper, but they pay no taxes.  Taxes are factored into the cost of doing business.  They know where they want to be in a year; their financial picture, shares, sales, debt, etc.  When they calculate all this, they also calculate future taxes and they note how they came out against past taxes.  That all goes into what they charge the customer.  If a dime of taxes comes out of intended profit or the shareholders’ cut, that is considered bad management.  So when the government says that JC Penny must pay a 30% rate, who do you think pays that? The customers, of course.  You.  You pay JC Penny’s taxes, the wholesaler’s taxes, the manufacturers’ taxes and so on.

And so it is with all for-profit companies.  You, the reader, the voter, pays for it all.  In fact a great deal of the debt you carry went to pay other peoples taxes.  Then you pay your own taxes.  And it’s all perfectly legal.  If you think about it, it cannot possibly work any other way. 

Now, where might there be a few exceptions to this rule?  At times during the year, Walmart or Target might be looking for a way to undercut the competition.  They may calculate the tax liability of a group of products which, if priced correctly, would pull in hundreds of shoppers.  This might be strong enough to calculate below the tax burden with the intention of making up the difference in volume.

But for the most part, if you are buying stuff multiple stores sell routinely, like groceries, they will set their prices to turn a profit and that includes offsetting their tax burden.

Even in a lock-step communist state, whatever a business concern is allowed to eek out as a living will still pay no taxes.  They will decide what they can make from a product.  They will then calculate the tax burden and charge their customers extra to cover that bill as best they can.

Now, the shareholders and the board of directors and employees of the company do pay taxes on their personal income.  But when a member of the board of JC Penny buys a lawn mower from Home Depot, he is also paying Home Depot’s taxes for them.  And since it is likely that he can buy a nice zero-turning radius riding mower, the mower will cost more.  So he will not only pay more retail cost and sales tax, he’ll carry a bigger share of Home Depot’s corporate taxes.  This compared to say, me and my 22-inch walk behind mower.

Perhaps I’ll deal later with the added insult of paying a company’s taxes while they are also getting federal subsidies.  Yeah, you paid for that too.

So how do we avoid spending so much of our money for the direct benefit of companies, large and small? First you get rid of the goodies the government provides at our expense.  All of them! ALL.  OF.  THEM.  That too will be discussed in future chapters.  Then you do what will make the liberals go out of their minds; and make the average “conservative” candidate pass urine.  You slash the corporate tax.

There’s more, of course.  But let’s stay here for a minute.  Many of you just dropped the book on the floor and have to get your breathing and heart rate back to normal before we move on. 

One deep cleansing breath, and…sigh.  Okay! Let’s dive in.

To understand how we will all benefit from this you must think dynamically.  You must shed all the progressive dogma the media has been excreting on you since FDR.  You must see this clearly in your mind as it unfolds.

Candidates, you must get hot with the whiteboard or PowerPoint when discussing this.

Handlers, shut the hell up for a few days! The American people are not stupid.  Most people will get this; enough to get your man elected.  And it WILL work!

Karl Rove, have a sandwich, eat your tie, I don’t know…choke yourself.  But shut up! You know better than anyone that this is a GREAT move and will set the economy on fire.

The First Reason to Say, “Why the hell not?”

Well-connected businesses such as GE, Aetna, and big Wall Street firms not only don’t really pay taxes; they are not charged the same taxes as other companies.  Why would they be? They actually get to write the laws that cover their industry.[1] As a result, they can use this reduced overhead cost to beat out competitors.

So benefit number one of radically reduced corporate tax for everyone is that companies will be competing on an even playing field.  Take whatever the federal corporate tax is at the moment and reduce it to ten percent.  Even that will be an illusion, as I said before. That will be the reduction in the markup companies will charge for their goods and services.  The discount could be substantial, but as you will see, inconsequential in the larger scheme of things.  No matter.  It will work.

The Second Reason

And no, they won’t keep charging you the old prices and hide the money in a mattress.  They will want to compete as they always have.  They will want a loyal customer base.  They will chop their prices as far as the market will bear.

There will be companies who won’t see that much difference in their tax rate anyway.  Established companies, and medium and large companies, are very careful to maintain the expenses and infrastructure in such a way as to maximize write-offs.  So in many cases while the corporate tax rate may be 30%, the effective tax rate is much lower, or non-existent.  With compliance costs and government inefficiency on policing all this money, it will turn out that the government won’t lose nearly as much as you might think in this scenario.  If you are old enough to recall the repeal of the boat tax and luxury tax, it is most likely that within a year or two the tax receipts will be higher than they are with the present tax rate.  We are getting rid of all the write-offs and gimmicks.

Now We Take All The Power From the Progressives!

Kill the income and payroll tax withholding.  BJ Bill’s old lady just threw up in her high fiber cereal.  Karl Rove is pecking out talking points and telling anyone who will listen that this is too controversial.

I didn’t say to do away with taxes.  I just said the automatic withholding should go.  It puts us to sleep.  We don’t pay attention until the end of the year and then we wait anxiously, like pathetic proles, hoping that Daddy Government will give us some money back.  OUR MONEY!

Further, our tax system is a grand waste of money.  The government spends billions making sure you pay your “fair share”.  Then it spends more refunding what turns out not to have been your fair share after all.  Billions more are wasted chasing scofflaws that don’t pay.  And in the private sector, companies spend mountains of billions in compliance to tax laws.  This is all money that comes out of your pocket and helps make the things you buy more expensive.  Yes, your pockets.  I am speaking to you, personally. 

In fact, I’m looking at you right now.  Creepy, huh?

There’s a much more effective way of collecting taxes.  More importantly, this tax will be there for us to consider every time we make an installment. 

Do you remember when I said we should get rid of all the goodies? One of those goodies is a tax refund.  It is a joke to begin with.  It demonstrates that the government shouldn’t collect as much as it does.  It is also the return on an interest free loan to the government.  If all we did on the personal income tax level was to make it payable on an annual basis, your TV and your google machine would be inundated with banks and credit unions touting their tax account plan.  You set aside your monthly tax burden in an interest bearing account and at the end of the year; voila (that’s French for “tah-dah!”) you cut Uncle Stickyfingers a check.  The interest is yours.  The more imaginative institutions will even offer you the service of calculating your total tax liability and help file your return.  Sweet right?

But there is still a question of all the money wasted by the government chasing money to begin with.  Also, a financial expert buddy of mine, Joe R, pointed out the danger of this scenario. Most American WON’T do the responsible thing and open one of these cool accounts. They’ll spend all their cash on goodies and a the end of the year have to scramble to come up with their tax obligation. So we are going to take it one step further.

Kill the Income Tax, and Initiate Point of Sale (POS) Retail Tax.[2]

The effective tax rate, the amount actually owed, for the vast majority of people, is lower than the amount paid to the government each year; often MUCH lower.  This is especially evident, on 15 April, of people who claim zero on their W-4 hoping to get money back each year. (This particular approach to paying taxes is proof that we are brainwashed lemmings.)

Tax deductions are a combination of behavioral engineering and theater, designed to 1) get you to do something like buy a house or 2) convince you that you are “getting something” from the benevolent government.  Both actually cost the American taxpayer money in compliance on the part of citizens and enforcement and bookkeeping on the part of the government.  In other words, they are bullshit. 

I know when I need to buy a house.  I’m not going to make such a massive investment because Daddy Government will give me back a little of my own money each year for having done so.  As far as I am concerned, I can buy my house and the government can BUTT OUT and charge me less in taxes to begin with.

 To avoid all this, once we have slashed the government and put the balanced budget plan into effect, we can initiate federal retail sales or point-of-sale (POS)[3] tax.  The POS tax would be unquestionably fair.  But for now the government is too over bloated to be supported by even a 25% retail tax[4] which would be too high to charge people at the cash register.  This, despite the $5 trillion+ that we spend in retail each year.  It’s scandalous! Criminal!

So radical cuts, some of which will be discussed later, must be made concurrent with the establishment of a POS tax.  This will require a huge wave of conservative legislators and a gutsy president to pull it off.

There are two glaring advantages to the POS tax.  There is the inherent simplicity.  No more returns to file.  No piles of paperwork to send to your accountant.  The other is the fact that you will see the taxes you pay every time you make a purchase.  Knowing the POS just added to the cost of your Big Gulp, you would be much more attuned to government waste and corruption.  A tax on your big sugary drink to help those who can’t help themselves?  Maybe.  But a tax on the same drink to subsidize the giants in the sugar industry? They can kiss your ass! Right?

An additional advantage to paying a POS tax: You will be paying a tax as a result of a voluntary action, not just because you committed the offense of being alive.

We all know that 15% of $1000 is the same burden proportionally, as 15% of $10,000 or $1,000,000.  The vast majority of the media will try their Orwellian best to make you un-know this fact.  They will pretend that making a successful person pay a greater percentage of his income than that paid by someone less successful is actually fair.  That is ludicrous.  It is that kind of twisted thinking that has allowed the federal government to become the monster it is today.  It is the kind of logic that led to the earned income tax credit payable to people who have earned no income and paid no tax.

Voters and candidates alike should be prepared to slap down this stupid kind of argument at every opportunity.  And the press will be stupid enough to provide lots of opportunities.  In making your case, remind the listener their tax compliance will be wildly easier than it is right now and that each year, the government tax receipts will go further and further.  This will be the result of more and more taxpayers working every year and the government pig being butchered down to a manageable, ethical and constitutionally correct size.  And at no time will we have to remove the safety nets that exist for people below the poverty line right now.  There may be people at 400% of the poverty line getting less government goodies than they get right now. But fewer of them will want it each year.  They’ll be making real income from real jobs.

Icing on the Cake

Here’s another benefit of eliminating the corporate tax and creating the POS tax.  Do you remember those board members and CEOs we discussed when talking about JC Penny and Home Depot? Well these guys spend incredible amounts of money on accountants to find ways of reducing their effective tax rate down to…well, zero if possible…but definitely lower than the prevailing bracket.  It is all perfectly legal and I support a person paying the minimum the law allows.  But they, like everyone else, will have to pay the going rate on what they purchase under a POS plan.  And rich people buy really nice stuff! This will be a windfall in tax receipts.   But if conservatives get both houses and the White House in ’16 and hold on to them, the government won’t have long to enjoy their new pile of money. 

The net result is that it won’t be necessary for the government to gouge the rich and the rest of us for 24, 28, 30% of our income.  The neighborhood of 15% - 17%, maybe less, will do nicely. 

Fair warning! The media, the Dems and the members of the establishment Republicans too stupid to understand what is happening this year, will fight this idea tooth and nail.  This type of tax doesn’t allow them to play games with tax money and cheat the American public.  They will tell you that such a program will have terrible consequences.  It will be fun to see how creative they get.  But none of their protestations will be true.  Write your representatives now and tell them to join the POS tax movement.

Now, dear reader, with some appreciation of where Uncle Stinker get his money, let’s turn to how he might spend it more wisely.

Important buttons below the footnotes and commentary.


[1]  Example Aetna and Obama care.  They sat down often with Jonathan Gruber, et al and designed a law making Aetna one of the agents of the government, operating the new government medical insurance industry known as Obamacare.

[2]  In the first release of this book, I favored a flat tax and no automatic withholding.  You would pay your tax at the end of the year.  This was one of those ideas that works great until you add people to the mix.  As my friend Joe, a financial advisor points out, many people would simply spend their money, having nothing left at tax time.  Because so many Americans have been conditioned to be consumers without consequence, we’d quickly become Greece.  Even quicker than we will on the present system.

[3]  This acronym shouldn’t be confused with another common usage as in, “Boy, that Sharpton! What a POS!”

[4]  According to the Census Bureau table 475, Federal Government Receipts by Source, as of 2011 total receipts were $2.174 trillion.  While the retail market has grown since then, it probably hasn’t grown as much as our big federal piggy.  With retail sales in the neighborhood of $5 trillion per year, replacing government receipts would require an enormous cut in spending. There are entire departments we can cut.

  1. A footnote of hindsight: As of 2023, the cost of living or governing has not gone up by 100%. But the government is managing to tax, print, borrow and spend at greater than that rate. When will you wake up and learn you are being play; being robbed?

  2. If you’ve been with me for a while, you’ve heard me talk about Modern Monetary Theory (MMT). Over the last several decades of a government routinely devaluing our net worth with profligate spending, the ruling class has not invoked MMT. Now they do.

    MMT says you can print, borrow and spend all the money you wish and it won’t hurt anything. This is only half true. The whole truth is that it won’t hurt the governing class and their cronies. But it WILL hurt you. But the ruling class and their cronies don’t give a warm, smelly shit about you.

  3. I talked a lot about growth today. When I published this book we were still at the end of the corrupt debacle known as the Obama administration. We had been instructed by Barry O to get used to 1% growth, that it was in his words, “the new normal.”

    Then, Trump came along and had explosive growth by simply getting the executive branch out of the way of the free market. On occasion, he got some pro-growth laws passed through Congress.

    Then the Dems made sure that their overreaction to Covid, erased all the gains and even managed to take the economy BELOW the Barry O economy. As the Covid theater waned, we came roaring back. In 2021 Barry’s puppet took over and the economy immediately went flat again.

    So, as your read this, we are for all intents and purposes back in the Obama economic crapper.

  4. Point number 3 should not be seen as blind cheer leading for Trump. He did know enough to get out of the way, but he also had a “spend wildly” tendency. While the GOP congress was fighting the phony Covid bills and trying to keep the spending orgy down, it was Trump who called for the GOP to go big, to call for even more then the Dems were pushing for. This was as childish and stupid as his social media posts remain today.

The next installment is titled Good Stewards: Swimming With Sharks. It is one of my favorite chapters. So next week I will hit one of the 11 points and immediately follow that with Chapter 6 two weeks from now. Cheers.

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