I posted this quote on FB:
"The major defense contractors spend at least ten times, and probably closer to twenty times what is actually needed on every project and contract. This is done with the full knowledge and at the command of the federal government. The massive overspending is on man-hours. Major defense contractors such as Lockheed Martin, Boeing, Northrop Grumann, General Dynamics and Raytheon, in addition to supplying and developing technology for the military, are also massive middle-class shadow welfare projects....
"Defense is not the only area in the economy where these massive shadow welfare paradigms exist... almost all of the so-called "compliance" positions in the financial services and banking sectors are completely unnecessary and counter-productive...
"97% of the accounting industry is also a .gov shadow welfare project revolving around nothing but the payment of federal income taxes, which shouldn't even exist in the first place. And finally, we should all understand that most of the health insurance industry is nothing but a .gov shadow welfare matrix."
R.W.: I don't buy that. My wife is a CPA and works for a non profit. Though she does not spend most of her time dealing with the government, nor do most of her friends in the accounting industry. Payroll, budgets, grants and reports to the board are a much bigger part of her day. My best friend at Lockhead Martin works his ass off. He is not paid to sit around. And when there is surplus labor, people are laid off.
Me: Payroll, as in withholding SS, medicare, work comp, sending in quarterly taxes, etc? Government grants? Ok, so I agree that it isn't 100% of accountants and gov't contractors. But the fact is, there is large sections of the economy dedicated to feeding the beast of govt. The author does not assert that there are unoccupied workers sitting around getting paid. So, if the shoe fits, fine, but if it doesn't, also fine.
R.W.: Yes, I think if you say CPA's most of them exist to prepare peoples taxes. But tax season is only 4 months. And though there are tax elements in payroll etc. It does not constitute 97%. Some grants are governmental but most are not. We both agree, that the government needs feeding, the question is how much. And though the numbers may be smaller, the amount of work will pretty much stay the same.
Me: Plus I wonder how much corporate accounting is done because of govt reporting requirements, government-imposed procedures, government-required financial practices, etc. And of course, we know that legislation like obamacare, which is supposedly about health care, will have a huge effect on the way businesses choose to operate, and not only regarding the health benefits they supply. There is a huge backstory of indirect effects that cause business to change their course.
R.W.: Of course. But I WANT businesses to report to government. We just had a vaccine get dispensed to people which killed them. Some government oversight is necessary. And I want them to make sure banks are honest, and insurance salesmen are honest, and real estate people etc. Clearly in many cases there has been too much, and in other places not enough.
Me: I think we probably generally agree, but let me say it this way. A proper role of government is to punish lawbreakers. If someone in a business embezzles, or cooks the books to make the company look more attractive shareholders, those are illegal acts. However, it is not the proper role of government to audit every company to ensure proper accounting standards, etc. It is not the proper role to ensure real estate people are honest by making them all submit to government investigators.
Me: Government has no business assuming people are dishonest and therefore taking over the oversight duties from private entities. I would make a similar argument regarding vehicle license plates, for example. Every car has to display them. Why? Well, besides the financial incentive of a tax revenue source, license plates make it easy to identify you WHEN YOU BREAK THE LAW! In other words, everyone conforms so that the occasional lawbreaker can be identified.
R.W.: But corporations have stockholders, who want to know that proper accounting standards are being followed. Even if a company pays 3% tax, they would still have to submit a proper accounting of their profits. My wife's company is audited by a third party, PRIVATE company, but the results of that audit are then made public. The only way to know a company is breaking the law is by someone checking on them. I feel it is appropriate for that someone to be the government. It should be cursory, and if nothing is found, then they should move on, but Madoff got away with his crime a lot longer and hurt a lot MORE people because the government was negligent. And there is no restitution for those victims. The money is just gone.
Me: The stockholders are the ones who protect their private interests, not government. You noted the safeguard, a private third party, which is precisely what I mean. You see, Madoff had government oversight, which failed. Government did not protect anyone. People who have something to lose are the ones charged with protecting their own interests. They are the ones who stand to lose, so they must perform due diligence.
Yes, the audit is made public, so that people can look at it and make a decision. Third parties, like consumer protection entities, can look at it and charge people for their services. Whatever. In any case, government, which fails more often than not, is the unwanted party in the transaction. Especially, constitutiionally speaking.
Me: Regarding business taxation. A corporate tax return is complicated, long, and indecipherable. Government is the cause of the problem. Government decided to tax businesses. Government created the tax code which prescribes the method of calculating corporate tax obligations. Government involved itself, and of course, created a monster. But we both know that there is no such thing as corporate taxation anyway, since this is a part of the cost of doing business that is passed down to the end consumer. Therefore, there is no compelling reason to involve government in the financials of a business except in the case of criminality.
R.W.: How does one determine criminality? How many people have to lose everything. People go to jail but victims never recoup their losses. the problem is If I watch you and you watch ME, then we can agree to to find anything. An unbiased third party is required. Yes, business pass on their taxes to us. But SOMEONE has to pay taxes and that means oversight is necessary.
Me: The government already is quite active in that arena. Despite its many failures, it is still the entity that is responsible to catch and prosecute criminals. What you are describing, where peopel loses everything and victims never are made whole, that is the PRESENT system. That is what we have with government auditing financials and overseeing business practices. In other words, you have now what you are advocating.
Me: The private individual pays all taxes, whether directly or indirectly, and of course, every person who earns money files a return. Government peers into the finances of every person who files a return. Do you like that idea, that your most private information is in the hands of a government that borrows 40% of everything it spends?
I happen to believe that any sort of taxation that makes government privvy to the private, legal transactions of citizens is wrong.
R.W.: So replace all taxes with one huge sales tax?
Me: As a matter of raw philosophy, only the taxes authorized in the Constitution. As a matter of the best I could hope for, I would support a sales tax in the form of a constitutional amendment that repeals all taxes, fees and tariffs, as well as the repeal of the 16th amendment. A sales tax is a tax on activity, which makes sense to me. It would only be huge if we accept the premise that the change would be revenue neutral. Of course, I don't accept that premise. About 60% of what government does is unconstitutional, and needs to be ended. Pipe dream, I know.
R.W.: you've always been a visionary
R.K.: A sales tax is a regressive tax that has more impact on fixed income and the poor. Not a good idea.
Me: A flat percent to everyone is not regressive. Poor people spend a lot less than rich people. Most sales tax proposals I see exclude food.
R.K.: Wrong, poor people spend proportionally more of their income on necessities. Rich people do spend more and thus pay more gross taxes BUT it has much less impact on them. If I make 30 million vs you making $14,000 you can't tell me you that a 5% sales tax wouldn't hurt you more than my taxes would hurt me. That's what a regressive tax does, it's the Impact. Not the gross amount.
Me: Necessities like food are generally excluded.
R.K.: A flat income tax would be much better. Say 1% of all income above a specified minimum income.
Me: Then the government still gets to pick through your financial details. No way. But consider the position you're taking regarding the flat sales tax. Do you think that either income or the cost of goods would be impacted by the elimination of all other taxes and fees levied by the government?
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