[Cog]

The left, particularly the ecological left, has a very bizarre thought process. They believe that population reduction in the USA is a grand idea but want to invite everyone who lives in central and south America to settle up here. That is schizophrenic thinking.

[Newfie]

That indeed is twisted thinking. It comes from following the script rather than thinking on your own, which would expose the falling.

Speaking of which:

Weak U.S. retail sales heighten fears over economy
WASHINGTON (Reuters) -

U.S. retail sales fell for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy, keeping the door open for the Federal Reserve to cut interest rates again later this month.

Retail sales are down, so folks are spending less, saving more, and that’s BAD?

No, good drones spend themselves into oblivion to support the “economy”.

Hard to see how this works.

[Ibon]

What makes you feel better, to produce something or to consume something? This is an archetypal and fundamental human characteristic to feel greater wellbeing producing rather than consuming.... production can be carbon neutral as in producing music or art or a bird list or a sculpture or a wooden cabin or a bridge. America was at its happiest up until say the late 60's when our economy was based on goods produced. Even the music was better back then.

Starting in the 70's we started measuring economic activity increasingly based on consumption. Funny thing happened parallel to that.... well being declined, drug abuse sky rocjeted, obesity increased and lonliness.

Is the correlation a coincidence or is there a cause and effect?

[Newfie]

Ibon,

I honestly think your are on to something.

[Ibon]

Ibon,

I honestly think your are on to something.

Consumption replacing production actually partially explains tribalism as well.

The loss of farmers, blue collar workers, skilled craftsmen, the closing of factories, all of these millions of jobs were replaced with retail and service industry. Jobs dedicated to production replaced with jobs dedicated to consumption.

A spin off effect is the loss of community. Small farmers kept small towns alive in agrarian America. And kept alive jobs that serviced farmers; welders, mechanics, craftsmen.... when the farms disappeared folks left and those that stayed went to work for the big box stores that replaced small town mainstreet.

Factories throughout the country formed a nucleus in communities that generated employment with support industries nearby. A blue collar worker made tangible goods like automobiles or televisions and there was a sense of self worth a worker had that he was part of a team producing finished goods. When these factories disappeared the communities perished and so did all the mom and pop small industries that supported these factories. These jobs were replaced with jobs in retail and service industry.

In a society whose economy is based on consumption individual self worth is diminished since the employment for the vast majority is menial and not creative. Even for those in the owner class. Communities fall apart.

We are left with a vast sea of folks doing unfulfilled work no longer being held in their communities. Lonely and isolated this more than anything else leads to addiction and abuse. And also leads to tribalism.

Where do folks then go for their sense of belonging and community? To social media. Unfulfilled and lonely social media fills the void. And the tribe fills the need to belong. This is exactly how an economic system based on consumption that erodes community eventually breeds a population easily susceptible to manipulations by social media and media in general to stoke the tribal fires.

Folks who can still hold on to creative work, producing goods and serving their communities, are fulfilled in their work are not the ones steeped in tribalism. They also tend to not overly consume as well.

Consumption and tribalism are both compensations for unfulfilled lives. And in an economic system based on consumption that means there are a lot of unhappy people consuming crap, Crap information and crap quality disposable throw away goods.

A society whose economy is mainly based on consumption is a society easily manipulated for another reason. Consumption as a compensation leads to an intellect that is no longer active. It becomes passive and instead of creating your own entertainment with your creativity you become a consumer of other entertainers.

All of those folks going to Trump rallies wearing those orange hats are going there to be entertained. They have lost the intellectual ability to be creative and entertain themselves.

Consumption culture is decadent.

[careinke]

Ibon,

I honestly think your are on to something.

Consumption replacing production actually partially explains tribalism as well.

The loss of farmers, blue collar workers, skilled craftsmen, the closing of factories, all of these millions of jobs were replaced with retail and service industry. Jobs dedicated to production replaced with jobs dedicated to consumption.

A spin off effect is the loss of community. Small farmers kept small towns alive in agrarian America. And kept alive jobs that serviced farmers; welders, mechanics, craftsmen.... when the farms disappeared folks left and those that stayed went to work for the big box stores that replaced small town mainstreet.

Factories throughout the country formed a nucleus in communities that generated employment with support industries nearby. A blue collar worker made tangible goods like automobiles or televisions and there was a sense of self worth a worker had that he was part of a team producing finished goods. When these factories disappeared the communities perished and so did all the mom and pop small industries that supported these factories. These jobs were replaced with jobs in retail and service industry.

In a society whose economy is based on consumption individual self worth is diminished since the employment for the vast majority is menial and not creative. Even for those in the owner class. Communities fall apart.

We are left with a vast sea of folks doing unfulfilled work no longer being held in their communities. Lonely and isolated this more than anything else leads to addiction and abuse. And also leads to tribalism.

Where do folks then go for their sense of belonging and community? To social media. Unfulfilled and lonely social media fills the void. And the tribe fills the need to belong. This is exactly how an economic system based on consumption that erodes community eventually breeds a population easily susceptible to manipulations by social media and media in general to stoke the tribal fires.

Folks who can still hold on to creative work, producing goods and serving their communities, are fulfilled in their work are not the ones steeped in tribalism. They also tend to not overly consume as well.

Consumption and tribalism are both compensations for unfulfilled lives. And in an economic system based on consumption that means there are a lot of unhappy people consuming crap, Crap information and crap quality disposable throw away goods.

A society whose economy is mainly based on consumption is a society easily manipulated for another reason. Consumption as a compensation leads to an intellect that is no longer active. It becomes passive and instead of creating your own entertainment with your creativity you become a consumer of other entertainers.

All of those folks going to Trump rallies wearing those orange hats are going there to be entertained. They have lost the intellectual ability to be creative and entertain themselves.

Consumption culture is decadent.

I totally agree. This is the main reason I believe we should tax consumption and NOT income. Eliminating all taxes except for consumption would go a long way towards putting us back on the right track.

[Newfie]

Yup, I’d go along with that. There would need to be a lower limit because it would. Hit the poor hard otherwise.

I still think a production tax has some merits, maybe a combination of the two. But INCOME taxes are not working as intended anymore.

[yellowcanoe]

Yup, I’d go along with that. There would need to be a lower limit because it would. Hit the poor hard otherwise.

In Canada, low income people get a non-taxable GST/HST credit that is paid out every quarter. This should allow for a higher GST/HST tax but unfortunately we've been going in the opposite direction as the previous Conservative government cut 2% off of the Federal portion of the GST/HST tax.

People really seem to hate sales taxes. I would expect people who are working under the table to avoid paying income tax especially hate sales taxes because they are much more difficult to circumvent. That's one reason why I'd like to see a higher GST/HST tax and lower income tax rates.

[Newfie]

But is also an argument for a production vs income tax. Lets say you are a cabbie. You pay income tax. But if they switch to driverless cabs then the income goes away. But the production stays.

Now think about Uber. The individual is paying an income tax, maybe. Shift that to a production tax and the instead of chasing thousands of Uber drivers the IRS just needs to audit Uber. Not sure if that is a great example but you should get my drift.

If a factory lays off 10 employees because it bought a robot then their income tax goes away. Shift to a production tax and it stays. And the IRS only has to chase the manufacturers, not every single one of us.

Think of the effect on the individual person. Who among us likes doing tax forms? How many hours do you spend going over that stuff? How much bigger is it? Lots of incentive to get rid of it.

Also by shifting to a production tax there is then less incentive for a company to use AI over actual workers. That would help with unemployment.

The change over would be a PITA but I think there is significant advantage to it.

On the matter of a Consumption tax basics, the basics of life, such as bread and beer should not be taxed. Even Bill Gates can drink only so much milk. Maybe the first $30,000 on a new car is not taxed, but the remainder is. I don’t know, just ideas on how to make it work.

I don’t think a consumption tax is a panacea because the ultra rich don’t consume as much percentage wise of income as the 99%. They have paper “wealth” but it is static. Generally you can only tax money when it changes hands. Which is also an issue with the production tax.

[evilgenius]

Regarding taxation, the solution to economic inequality may lie in a counter intuitive direction. We might get better traction by eliminating employer side taxation on all employee's income taxes. As it stands right now, the incentive to avoid those taxes has caused a realignment trend which has carved right into the middle class. The line has been blurry for some time between independent contracting and employment. Businesses have been lobbying for that sort of change for so long that people consider the trend as normal, not a threat to the middle class. Business is currently incentivized to only make it worse. It's time to put the power of the law to work on behalf of the middle class in this arrangement, before all benefits are swept away. It may be the only way to slow down adoption of AI enough that we can get a handle on it, so that it can take over humanely. Ditto the role of this tax in the disproportionate rise in healthcare costs. While we are at it, we might as well address taxation of dividend payments, which disincentivize the running of corporations such that shareholders buy shares in them in order to reap that sort of benefit. Taxation of dividends is double taxation. Or aren't shareholders the actual owners of corporations?

[mousepad]

If a factory lays off 10 employees because it bought a robot then their income tax goes away. Shift to a production tax and it stays. And the IRS only has to chase the manufacturers, not every single one of us.

If the factory can produce the same output with 10 less employees, then its INCOME will increase, which will automatically result in more taxes paid.

[Ibon]

There are good suggestions here regarding taxation but we do have to back up a moment and still discuss some more wholistic issues that for me anyway need to be addressed. There is a culture of tax evasion in the US that you find equally across the political spectrum with corporations and the very wealthy. I may have mentioned in past posts I lived for 10 years in Switzerland in the 80's during a time when Swiss banks were sending their managers on US business trips giving presentations in urban areas showing wealthy Americans how to off shore their money. The US tried to tackle this with their leverage as being a center of global finance so the DOJ and the IRS did succeed in obligating foreign banks to report to the DOJ all US citizen bank accounts. I mentioned that I lived in Switzerland for 10 years because I actually was friends with a hedge fund manager who traveled to the US courting clients with a special closed by invitation only hedge fund that was only available for the very wealthy. The stories he told me I wont share but what I can say is that the degree to which the wealthy off shore their riches can not be underestimated.

Panama Papers revealed some of this, it seems like one scandal after another comes out in the press but this only makes the law firm more shrude in how they design their trusts and accounts to hide the wealth of the very rich.

Even Cog here on this site once praised Trump for not doing anything illegal in the way he avoided paying taxes. What this reveals is a still very active anarchy in the collective regarding avoiding taxes. Those poor Trump supporters, most of whom have their taxes taken out every month on their W2's are full of praise about our president who so astutely games the system to not pay his taxes. I point this out not to be partisan but to show how there is this general sabotage mentality present to avoid paying taxes.

A small confession. Years ago I had to voluntarily disclose to the IRS unreported income. I went through the process to clean up my own act and after paying close to a half million US$ I am today squeaky clean with the IRS and every year all my t's are crossed and i are dotted when reporting. I am only sharing this to emphasize to all of you the degree to which I am knowledgable about that of which I speak.

The wealthy and the politicians hold the reins of power in how our tax codes are established and how the loop holes remain robust for the very very wealthy to continue the game of tax subterfuge.

If we don't wake up US citizens to the degree of how egregious this is we can talk for ever about tweaking the system with production tax or consumption tax but it wont mount to a hill of beans.

I sometimes hope that the public is close to erupting in outrage over this issue and I actually think Trump may inadvertantly help in the way he promotes his own intelligence about avoiding taxes. This is an issue sorely in need to a revolutionary outrage among the public. If only Trump supporters know to the degree to which Trump serves himself against their own interest regarding taxes this would be a great start. Instead he seems to be adored instead as Cog for example has shared with us. He is representative and not an outlier in this regard. Instructive actually for all of you to see.

[Newfie]

If a factory lays off 10 employees because it bought a robot then their income tax goes away. Shift to a production tax and it stays. And the IRS only has to chase the manufacturers, not every single one of us.

If the factory can produce the same output with 10 less employees, then its INCOME will increase, which will automatically result in more taxes paid.

OK educate me. How is a factory taxed on income? And what part of that income tax goes to social security and Medicare?

Not sarcastic, much I don’t know here.

[Ibon]

If a factory lays off 10 employees because it bought a robot then their income tax goes away. Shift to a production tax and it stays. And the IRS only has to chase the manufacturers, not every single one of us.

If the factory can produce the same output with 10 less employees, then its INCOME will increase, which will automatically result in more taxes paid.

OK educate me. How is a factory taxed on income? And what part of that income tax goes to social security and Medicare?

Not sarcastic, much I don’t know here.

Here is your answer

https://publicintegrity.org/business/ta ... nt/#part-1



Company U.S. Income Federal Tax Effective Tax Rate
Amazon.com $10,835 –129 –1%
Delta Air Lines $5,073 –187 –4%
Chevron $4,547 –181 –4%
General Motors $4,320 –104 –2%
EOG Resources $4,067 –304 –7%
Occidental Petroleum $3,379 –23 –1%
Honeywell International $2,830 –21 –1%
Deere $2,152 –268 –12%
American Electric Power $1,943 –32 –2%
Principal Financial $1,641 –49 –3%
FirstEnergy $1,495 –16 –1%
Prudential Financial $1,440 –346 –24%
Xcel Energy $1,434 –34 –2%
Devon Energy $1,297 –14 –1%
DTE Energy $1,215 –17 –1%
Halliburton $1,082 –19 –2%
Netflix $856 –22 –3%
Whirlpool $717 –70 –10%
Eli Lilly $598 –54 –9%
IBM $500 –342 –68%
Goodyear Tire & Rubber $440 –15 –3%
Penske Automotive Group $393 –16 –4%
Aramark $315 –48 –15%
AECOM Technology $238 –122 –51%
Tech Data $203 –10 –5%

[mousepad]

If a factory lays off 10 employees because it bought a robot then their income tax goes away. Shift to a production tax and it stays. And the IRS only has to chase the manufacturers, not every single one of us.

If the factory can produce the same output with 10 less employees, then its INCOME will increase, which will automatically result in more taxes paid.

OK educate me. How is a factory taxed on income? And what part of that income tax goes to social security and Medicare?

Not sarcastic, much I don’t know here.

A company is taxed (just like you) on income. But the company is taxed on income AFTER expenses. Where you are taxed on income before expenses (mostly, there are a few exceptions).

Example.

The company sells widgets for $1000.
The company employs 1 person and pays $900 in salary.

The income therefore is $100.
The flat corporate tax rate currently is roughly 20%. So the company pays $20 in income taxes.

The employee (assuming he's a minimum wage employee) get's $900 in salary. This is taxed at a minimum bracket of approx 15%. So he pays $135 in income taxes.

The total tax income therefore for the tax man is $135 (from the employee) + $20 (from the corp) for a total of $155.

Now the company fires the employee and buys a robot instead. It still makes the same widgets for $1000. But the expense is now the operation of the robot which is let's say $100.
So the income of the corp is now $900. The corp now has to pay 20% on $900 which is $180.

So the corporation wins by having more cash at the end of the year. And the tax man wins by having $180 instead of $155. The guy that lost is the employee who doesn't have a job anymore.


So where's the "companies don't pay taxes" idea come from?
The easiest thing to do for a company to avoid income taxes is to invest in its growth. That is what amazon and all those other companies that get the lefty "they don't pay taxes hate".
In the above example the corp had $900 of income using the robot. How can this be reduces? Simple, invest in expansion. New building, new computers, new robots, new markets, new software, new people, and and and. Those are all expenses that are deducted from the income.

So although amazon makes billions in raw revenue, they simple invest a huge amount of it right back into their business, essentially lowering their income to a very small number, hence reducing their tax burden.

So don't blame the companies. They don't do anything illegal. The intention of the tax law is to encourage growth, encourage spending, encourage investment. That's what all those companies are doing.

[mousepad]

Switzerland in the 80's during a time when Swiss banks were

This is long gone. If you have a bank account in switzerland you're an open book to the US.
The US gets all your information from Switzerland AUTOMATICALLY, every year.
Many banks in Switzerland don't even allow you to open an account anymore if you're american.
Out of fear of US scrutiny, additional cost of reporting to the US and severe punishment in case of issues.

All those holes you're talking about have been plugged. It is extremely difficult to do tax evasion in the US.
As funny as it sounds, but it is easier to hide money in Nevada than in Switzerland. For a bank account in Nevada, the IRS needs a warrant to get info. For a bank account in Switzerland they get all the information automatically, no need to ask.

A small confession. Years ago I had to voluntarily disclose to the IRS unreported income. I went through the process to clean up my own act and after paying close to a half million US$

Shame on you. Not for being a rich man. But shame on you for being a rich man while paying your 3rd world worker $15/day. Why don't you pay 1st world salary to workers you use to sell vacations to 1st world clients at 1st world prices?

[Newfie]

Thanks for the answer. I never said anyone was doing anything illegal, just “educate me”, which you did.

But back to the concept of Degrowth.

As you point out companies are incentivized for growth. We all know fre paradigm is that we MUST have growth, infinite growth. We also know that infinite growth is impossible. So here we have a great opportunity to DEincentivize growth.

But also, using your example above, my suggestion is to move the $135 income tax from the person to the production, so the tax would all you mentioned PLUS $135.

But also there is the social security and Medicare deduction which is the combination of the employees share and the employers share. And that needs to added also. And that the employer looses his share that also contributes to his profit.

Another question, does buying back shares count as a tax shelter?

[Newfie]

FWIW no Canadian Bank I can find will give me a credit card. Explicitly against the rules. I’m Canadian citizen but have never worked in Canada and therefore do not have Canadian tax ID, nor do I want one. I suspect this rule has something to do with those international monetary rules Mousepad references above. The bank offered no explanation just a VERY firm “NO”, and a reprimand to the account manager who was trying to help me out.

BTE, if Ibon laid those people USA minimum wage he would start a real problem amongst the local people. It would do no one any good and might get some folks killed. People who do that kind of thing, for all the right reasons, screw it up for ALL parties involved. One simple rule is “never stand out.”

[mousepad]

BTE, if Ibon laid those people USA minimum wage he would start a real problem amongst the local people.

I know. Apple says the same thing when hiring Foxconn workers in China. Or Nike when they pay Indian children to sew cloth. Never stand out they say. We're doing a good thing, they say. Without us, they woulnd't have a job at all, they say.

Could it be that Ibon simply likes to preach water while he drinks wine?

[mousepad]

As you point out companies are incentivized for growth. We all know fre paradigm is that we MUST have growth, infinite growth. We also know that infinite growth is impossible. So here we have a great opportunity to DEincentivize growth.

I'm no friend of growth at all. There a millions of possible options to discourage growth. But the majority of people SCREAM growth from the top of their lungs. First we need to change a world view. Which ain't easy.

Another question, does buying back shares count as a tax shelter?

That I don't know. Maybe Cog can chime in?