Flat Tax & VAT, Jack (Hudson)

[Chris Coles]

Re: Flat Tax & VAT, Jack (Hudson)

It is as simple as this:

the rich have been taking more their than fair share all the wealth in the country for at least the last 2 decades, maybe 3. They're gonna have to give it back. No revolutions, no worker's paradise, no utopias, no socialism, no communism, no anarchy, etc. They're just gonna have to give that wealth back. The simplest way would be to put taxes and tax policies (particularly on property and capital gains) to back where they were in the pre-Carter days, and maybe close some other loop holes. Not that it would be the perfect way, just the simplest way, and certainly more equitable and better than it is now. Along the way we have to do some re-regulating and start insisting that ethics policies be enforced or maybe make them more stringent too.

In almost every respect, I agree, except for one detail; we do not have either a source of the capital we need to renew the jobs, nor, any functioning mechanism to fund the capital we need to re-create those free enterprise jobs. It was this aspect that drove my thinking when, as an unfunded inventor, (with perfectly viable patents for what has become one of the primary industries), I first wrote evidence of due diligence to the European Patent Office during 1992 and then my first thoughts about what I describe as The Capital Spillway Trust which I sent to Mr. Eddie George, then Governor of The Bank of England during 1994. Over the following sixteen years I then expanded on my thinking ending up with my submission to the UK Green Paper : Financing a private sector recovery, this September. http://www.itulip.com/forums/showthr...ector-recovery

"The primary problem we address is the millions of citizens presently employed using tax income that must be moved into new and equally prosperous, private sector employment.

Add the presently unemployed and under employed and here in the UK alone, we are short of at least 6 million, (In the US probably another 30 million), prosperous, well capitalised; private sector jobs.

A secondary, but equally important aspect - we need these new jobs now; so this solution must be able to deliver results immediately and at every level; right across the nation.

The first question to ask is why has the City of London not driven this debate? Surely, if we are addressing the matter of the private sector; why is government involved at all? The answer is very simple indeed; the general prosperity of the nation has been placed into a financial system simply not designed to address the need to constantly finance the necessary replacement of free enterprise based private sector employment; at every level of the nation.

Salaries, savings, all of the existing prosperity of the wider nation; has been subsumed, by one means or another; into the Finance, Insurance and Real Estate, (FIRE), economy. For this reason, we have no option but to accept that the savings of the people will stay where they are and that it is impossible to change that circumstance within any reasonable timescale. For a start, it would require a massive operation to change the laws underpinning the existing FIRE economy customs and practises. Further, because of the instability caused by recent events; with the “City” and the “Banks” being seen as exploiting to destabilise the wider economy rather than nurturing; it would be equally impossible to encourage the people to change their mindset within the immediate future.

So we cannot use tax, government borrowings or savings to finance a private sector recovery.

We must have a solution that both creates new jobs and does not involve existing funding mechanisms and yes, the instant response would suggest that the necessary funding is simply not available; regardless of the need - I will not accept such negative thinking."

Thus if we cannot use tax or borrowings from the existing FIRE economy and we do not have any savings either .... yet..... we recognise the need to move what are enormous sums of money from the existing FIRE economy back into new job creation; Then we must find a new mechanism to make that transfer.

Using tax is out, for the very simple reason that spending tax to try and create new jobs has NEVER worked over the long term. We need something that will immediately transfer from one side of the balance sheet to the other.

Again, I do not buy into the idea that there is some form of "Elite" at the top that want this situation to continue. For what it is worth, instead, I believe that by far the majority would jump at the chance to be a part of a working solution; but they are as stuck in their "Camp" just as we who wish to revert the damage done. That it is not in anyone's interest to allow this situation to continue.

To overcome these deficiencies, I have proposed we take what are well recognised as "Vapourware" and change its designation; re-print the face description of what are perceived to be damaged goods currently circulating within the Bond markets, CDO's and the like; and re describe them as Vanishing Bonds.

To that end I have challenged the UK government, through the Bank of England, to create £450 billion of Vanishing Bonds and use them within a detailed set of rules to immediately capitalise the creation of 6 million new jobs.

The equivalent in the US would be $2.250 Trillion of new vanishing Bonds to capitalise the creation of 30 million new jobs.

As things stand a large quantity of bonds are almost certainly going to become next to worthless as this existing economy continues to decline. What I have proposed is we use them to transfer their value back into the grass roots economy. The same strategy can similarly be used to do the same in every other national economy that is currently in trouble with declining jobs, tax income and heavy debt.

It is surely in everyones interest to re-establish stability. That the bond holders have just as much interest in stability and prosperity as everyone else.

There is a detailed plan on the table that has been in debate for nearly twenty years and is well respected. It simply requires a new mindset; a little courage to see the potential of new thinking.

So, why not?

[mesyn191]

Re: Flat Tax & VAT, Jack (Hudson)

I would really like to do away with the income tax and go to a national sales tax.

Much like the VAT this is regressive and would be overly burdensome for the non-rich vs. the rich since the rich don't actually spend most of their money and have far more of it to begin with too. Some sort of progressive system is needed where people are taxed according to how much they can pay while still maintaining a reasonable standard of living given their contribution to society. There are lots of ways you can do this and all have their ups and downs while still being better than the way things are now.

The economic output of this country is increasingly not being able to support the government.

It'd be nice to see some of the inefficiences in the military/gov. go away, but ultimately that wouldn't fix things. I think it'd be more correct to say that our FIRE economy can no longer support the very rich/rentier's need for continuing wealth accumulation without cannibalizing the middle class and reducing or cutting altogether the entitlements.

[mesyn191]

Re: Flat Tax & VAT, Jack (Hudson)

we do not have either a source of the capital we need to renew the jobs, nor, any functioning mechanism to fund the capital we need to re-create those free enterprise jobs.

I believe if the government "fixed" the rentier issue and corruption and ended the wars the US would have enough money on hand to fund New Deal 2.0 programs to renew our infrastructure without drastically raising taxes for the poor/middle class or cutting entitlements. Both to make it more efficient and to become less dependent on foreign energy sources while also being cleaner too. I admit that this is pretty much impossible though given the Congress and President we have....which is why I'm very pessimistic about the US and world's future in general. No not a "doomer", but I think we're gonna see a world wide depression and maybe some big wars in the next 10 years or so.

Again, I do not buy into the idea that there is some form of "Elite" at the top that want this situation to continue.

I don't believe that there are any eeeeevil villians twisting their mustachioes in glee at all of this either. I do however think that there are a lot of greedy and sociopathic Gordon Gecko types running the show right now all over the world in each country. No they aren't working together, but all of them do want to seem to try and preserve the status quo at all costs. The status quo is however unsustainable though and by trying to keep the game going on for longer and longer they'll only make things worse. Not that it wouldn't have been bad had the banks been forced to default en masse, but I think we would've recovered quicker and had a cleaner and better banking system in the end.

To overcome these deficiencies, I have proposed we take what are well recognised as "Vapourware" and change its designation; re-print the face description of what are perceived to be damaged goods currently circulating within the Bond markets, CDO's and the like; and re describe them as Vanishing Bonds.

I don't know enough to really comment very well on your idea...but my gut is saying that it leaves all too much of the bad debt in the system to work.

[Chris Coles]

Re: Flat Tax & VAT, Jack (Hudson)

I don't know enough to really comment very well on your idea...but my gut is saying that it leaves all too much of the bad debt in the system to work.

The idea is to take the money out of the existing bond markets for good. That is why I describe them as Vanishing Bonds. That instead of paying the money value back, and effectively keeping the value in place on both sides of the economic balance sheet; instead we keep the value as new equity and working capital entirely invested into new job creation. In the process transferring the value from the existing markets, down into the grass roots of the economy. No hand outs. Not a penny used unless a job is created.

The present problem is we have let the investment banks create trillions of $US and £UK as leveraged bonds. Mervyn King in his recent speech described leverage of 50. That is for every unit in the front door they delivered out of the back door to clients 50 units as loans into the bond market. That is where all the money came from. Yes, I can imagine that no one had any thought as to the consequences; but the chickens have arrived back on the barn roof and cannot any longer be ignored.

If you use any other mechanism to create new jobs, you end up with the cost on both sides of the balance sheet and that will only make matters much worse.

[c1ue]

Re: Flat Tax & VAT, Jack (Hudson)

I've read him closely. He is full of marxist BS, and he can't go two paragraphs without incorporating that drivel into his articles. His point would be better made without the political sidecar. Are you sleepy?

Au contraire - if you have read Dr. Hudson closely, then you've clearly missed the boat entirely on what he is saying.

Dr. Hudson has never advocated the abolishment of private property, nor has he stated any specific policies involving health care, wages, or import taxation. Painting him as a Marxist is stupid if you cannot reconcile this discrepancy - on the other hand Dr. Hudson is an economist in the Marxist tradition.

This is a real distinction which you would be wise to learn.

What Dr. Hudson has repeatedly railed on is:

1) The failure to tax unearned economic rent. Since you have apparently not read Dr. Hudson closely nor apparently any classic economics, this doesn't mean a punitive tax on capital gains per se - but it does mean a punitive tax on capitals gains as pertaining to the increase in land (not building) price, in currency exchange rate arbitrage, for interest on commercial real estate loans, and various other rentier and bankster mainstays.

2) The failure to align the behavior of American federal financial policy with the interests of its people. This is exemplified by tax and dollar policies which favor offshoring and a devalued dollar.

3) The failure of American government at all levels to invest deficit spending into areas which improve the US' ability to grow economically, as opposed to 'moral hazard' banksters. He has given examples where a transnational high speed rail system would easily repay its investment cost over time via increased taxes on the property values increased by such an investment.

Dr. Hudson would also, for example, likely approve EJ/iTulip's thesis on investment towards a better American future/next bubble via encouraging alternative energy development - his quibble would be that the price of this effort should be accompanied by increased taxes on land improved by such policies.

Lastly your rabid focus on Dr. Hudson's last piece again shows ignorance of what is actually written much less the body of Dr. Hudson's work:

1) A flat tax of say 17% permanently enshrines the clearly too low income and capital gains rates for the rich

2) The actual income tax rate is largely irrelevant for the vast majority of Americans. The pennies of savings for the average American which theoretically arise from such a flat tax is more than offset by the hundreds of dollars of taxes lost via the wealthy not paying.

3) Income tax itself is a misdirection. The vast majority of income generated by the wealthy is capital gains - and it is here that the rich will get their pound of flesh.

[BuckarooBanzai]

Re: Flat Tax & VAT, Jack (Hudson)

Au contraire - if you have read Dr. Hudson closely, then you've clearly missed the boat entirely on what he is saying.

Dr. Hudson has never advocated the abolishment of private property, nor has he stated any specific policies involving health care, wages, or import taxation. Painting him as a Marxist is stupid if you cannot reconcile this discrepancy - on the other hand Dr. Hudson is an economist in the Marxist tradition.

This is a real distinction which you would be wise to learn.

What Dr. Hudson has repeatedly railed on is:

1) The failure to tax unearned economic rent. Since you have apparently not read Dr. Hudson closely nor apparently any classic economics, this doesn't mean a punitive tax on capital gains per se - but it does mean a punitive tax on capitals gains as pertaining to the increase in land (not building) price, in currency exchange rate arbitrage, for interest on commercial real estate loans, and various other rentier and bankster mainstays.

2) The failure to align the behavior of American federal financial policy with the interests of its people. This is exemplified by tax and dollar policies which favor offshoring and a devalued dollar.

3) The failure of American government at all levels to invest deficit spending into areas which improve the US' ability to grow economically, as opposed to 'moral hazard' banksters. He has given examples where a transnational high speed rail system would easily repay its investment cost over time via increased taxes on the property values increased by such an investment.

Dr. Hudson would also, for example, likely approve EJ/iTulip's thesis on investment towards a better American future/next bubble via encouraging alternative energy development - his quibble would be that the price of this effort should be accompanied by increased taxes on land improved by such policies.

Lastly your rabid focus on Dr. Hudson's last piece again shows ignorance of what is actually written much less the body of Dr. Hudson's work:

1) A flat tax of say 17% permanently enshrines the clearly too low income and capital gains rates for the rich

2) The actual income tax rate is largely irrelevant for the vast majority of Americans. The pennies of savings for the average American which theoretically arise from such a flat tax is more than offset by the hundreds of dollars of taxes lost via the wealthy not paying.

3) Income tax itself is a misdirection. The vast majority of income generated by the wealthy is capital gains - and it is here that the rich will get their pound of flesh.

Sigh.

An "economist in the Marxist tradition" is still a Marxist. Marx started with premises that are 100% wrong-- and then used twisted logic to make them "right". Any ideas that are remotely derivative of Marx are therefore 100% wrong. Hudson is full of brown stuff.

Addressing your points one by one:

"Unearned economic rent"-- HA!. When the state taxes property, it asserts primary ownership of that property. That is a logically unassailable fact. You either accept the notion of private property (the foundation of free enterprise), and all the consequences of it (which include "unearned" economic rent), or you reject it (which is the foundation of communism). It's clear where Hudson stands-- he stands for communism.

Let's be clear about our definitions. Government does not "invest", government spends. Government does not produce anything; the private sector does that. Sometimes government spending eventually results in things of value, when that spending results in funding of private enterprise to produce things like roads; but always there is corruption, waste, and gross inefficiency when government is involved. Not a matter of opinion since empirical evidence is 100% supportive. "Efficient Government" is a laughable oxymoron.

Flat tax-- since all income taxes lack a moral basis consistent with concepts of Life, Liberty, and Property, there is NO income tax that is moral. The founding fathers prohibited Direct Taxes for a reason. Excise taxes were the only constitutionally-supported taxes because they can be legally and morally avoided, and thus consistent with Life, Liberty, and Property. If you are for an income tax of any kind, you are a socialist-- by definition-- as then the State has first claim to your Labor, i.e., you are indentured to the State.

I really don't understand why Hudson gets so much play here at iTulip. Looking for answers from communists is like looking for diamonds in pig sh*t.

[ThePythonicCow]

Re: Flat Tax & VAT, Jack (Hudson)

Looking for answers from communists is like looking for diamonds in pig sh*t. Looking for answers from communists is like looking for diamonds in pig sh*t.

Given the botch of things that the Anglo-American empire has been making of late (the last century, at least), you could make a good case that "Looking for answers from capitalists is like looking for diamonds in pig sh*t."

"Unearned economic rent"-- HA!. When the state taxes property, it asserts primary ownership of that property. That is a logically unassailable fact. You either accept the notion of private property (the foundation of free enterprise), and all the consequences of it (which include "unearned" economic rent), or you reject it (which is the foundation of communism). It's clear where Hudson stands-- he stands for communism.

By this argument, I should never have been taxed. Any money taken from me in taxes, whether on my income, on my spending (sales), on my property or on my transactions (fees and levies) was the taking of my property.

Ergo -- no taxes. Ergo, I suppose, no government. Ergo, I anticipate, no civil law and order. Ergo, no doubt, anarchy. Ergo, no life, for I am a wimp and some thug would long ago have taken my last can of Spam and left me to die.

If that is the basis for your economic analysis, it serves neither my physical needs nor my intellectual needs very well.

[flintlock]

Re: Flat Tax & VAT, Jack (Hudson)

People always want to focus on how to carve up the last scraps of food on the lifeboat rather than figure out how to get it back to shore. This thread is just more of the same.

[ThePythonicCow]

Re: Flat Tax & VAT, Jack (Hudson)

People always want to focus on how to carve up the last scraps of food on the lifeboat rather than figure out how to get it back to shore.

If the lifeboat is not going to get back to shore, then perhaps that is a sensible focus?

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Hudson is pretty explicit that isn't what he wants, nor does he have any sort of worker's revolution fantasies, which BTW is some pretty interesting framing of what he said. And by that I mean he didn't say anything remotely like that at all. You're reading into it and seeing something that flat out isn't there. Projecting as it were.

Did I project his diatribe on evil white bankers as well? The last time I read something like that it came out of the mouth of someone who would go on to murder millions.

I don't just mean Detroit either, the Rustbelt is looking worse and worse as time goes on. Upstate NY too is pretty grim.

If you knew how hard it is to start and run a business in NY you would see right away why those places have poor prospects, and raising income and capital gains tax won't change that. But be rest assured the federal government will spend every last penny. Most of that money wont end up in places like upstate NY.

Uh its a tax on profits not capital. This means that investors will still make money, quit a bit in fact, just less. BTW the whole "diverting money from the real productive economy" thing is a myth.

It is not a myth. Central bureaucracies are astonishingly bad at allocating capital.

No, the rich/mega corps/banks are the enemy. The government is just their tool. We need a government that will actually enforce the rules and regs, and we don't have that and haven't had that for years. If we did the housing bubble never could've gotten so big at all.

You advocate raising capital gains to strip the rich of their income and then go on to say that the government doesn't enforce rules and regulations. What makes you think raising tax rates will be anything but a feel good measure to reassure the public or have any effect on the rich who make the rules.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Au contraire - if you have read Dr. Hudson closely, then you've clearly missed the boat entirely on what he is saying.

Dr. Hudson has never advocated the abolishment of private property, nor has he stated any specific policies involving health care, wages, or import taxation. Painting him as a Marxist is stupid if you cannot reconcile this discrepancy - on the other hand Dr. Hudson is an economist in the Marxist tradition.

This is a real distinction which you would be wise to learn.

What Dr. Hudson has repeatedly railed on is:

1) The failure to tax unearned economic rent. Since you have apparently not read Dr. Hudson closely nor apparently any classic economics, this doesn't mean a punitive tax on capital gains per se - but it does mean a punitive tax on capitals gains as pertaining to the increase in land (not building) price, in currency exchange rate arbitrage, for interest on commercial real estate loans, and various other rentier and bankster mainstays.

2) The failure to align the behavior of American federal financial policy with the interests of its people. This is exemplified by tax and dollar policies which favor offshoring and a devalued dollar.

3) The failure of American government at all levels to invest deficit spending into areas which improve the US' ability to grow economically, as opposed to 'moral hazard' banksters. He has given examples where a transnational high speed rail system would easily repay its investment cost over time via increased taxes on the property values increased by such an investment.

Dr. Hudson would also, for example, likely approve EJ/iTulip's thesis on investment towards a better American future/next bubble via encouraging alternative energy development - his quibble would be that the price of this effort should be accompanied by increased taxes on land improved by such policies.

Lastly your rabid focus on Dr. Hudson's last piece again shows ignorance of what is actually written much less the body of Dr. Hudson's work:

1) A flat tax of say 17% permanently enshrines the clearly too low income and capital gains rates for the rich

2) The actual income tax rate is largely irrelevant for the vast majority of Americans. The pennies of savings for the average American which theoretically arise from such a flat tax is more than offset by the hundreds of dollars of taxes lost via the wealthy not paying.

3) Income tax itself is a misdirection. The vast majority of income generated by the wealthy is capital gains - and it is here that the rich will get their pound of flesh.

Petty insults aside, every time it looks like he might say something worthwhile I have to deal with his political rubbish. The interviews posted here, for instance, begin promisingly and degenerate into some sort of class warfare spiel.

I read both what he said and how he said it. His own writing is the source my poor opinion.

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

People always want to focus on how to carve up the last scraps of food on the lifeboat rather than figure out how to get it back to shore. This thread is just more of the same.

Well put.

[oddlots]

Re: Flat Tax & VAT, Jack (Hudson)

"Unearned economic rent"-- HA!. When the state taxes property, it asserts primary ownership of that property. That is a logically unassailable fact. You either accept the notion of private property (the foundation of free enterprise), and all the consequences of it (which include "unearned" economic rent), or you reject it (which is the foundation of communism). It's clear where Hudson stands-- he stands for communism.

Surely you realise this makes Adam Smith a communist. And John Stuart Mill. And every single western democracy a communist state.

Errrr... and you had a criticism of Hudson while slinging around this kind of analysis?

[radon]

Re: Flat Tax & VAT, Jack (Hudson)

Given the botch of things that the Anglo-American empire has been making of late (the last century, at least), you could make a good case that "Looking for answers from capitalists is like looking for diamonds in pig sh*t."


By this argument, I should never have been taxed. Any money taken from me in taxes, whether on my income, on my spending (sales), on my property or on my transactions (fees and levies) was the taking of my property.

Ergo -- no taxes. Ergo, I suppose, no government. Ergo, I anticipate, no civil law and order. Ergo, no doubt, anarchy. Ergo, no life, for I am a wimp and some thug would long ago have taken my last can of Spam and left me to die.

If that is the basis for your economic analysis, it serves neither my physical needs nor my intellectual needs very well.

To be fair the government could just issue the currency directly. It worked for Lincoln.

[oddlots]

Re: Flat Tax & VAT, Jack (Hudson)

People always want to focus on how to carve up the last scraps of food on the lifeboat rather than figure out how to get it back to shore. This thread is just more of the same.

With all due respect Flintlock I think you've got it precisely wrong. I find our situation alarming because it seems to promise decline, especially since the supposed efforts at reform seem to only be further strangling the economy. So the argument over taxes is not implicitly about coveting another's success ("the last scraps of food".) It's about recognising that the FIRE sector is not growing the pie it is shrinking it. In fact I think that much of the confusion of our politics is caused by the the assumption that all profitable private enterprise grows the pie. I think Hudson has made a very good case - as have many others - that the FIRE sector is strangling the real economy, suffocating it with debt overhead, exhibit A being the housing bubble.

So this thread to my mind is precisely about getting the lifeboat back to shore.