The Un-Tax: Releasing Productive Capacity

There’s clearly no mistaking the economic devastation that continues to wage war upon the American landscape. Why is it there’s complete silence on the part of government or any of the media talking-heads that are willing to offer-up any of the possible mechanism available to defeat the unstoppable force that seems determined to push this Country over the cliff?  Like many I continue be disturbed that the only measure of observed persistence lies in the Government’s willingness to ignore what is so painfully obvious to everyone else. Moreover, I continue to hope that at least one of the Presidential Candidates will take up the challenge though as it is they seem to be more interested in staging and tinkering with all things mundane and meaningless. 

It’s wake-up time for the American Public who will need to arm and educate themselves with functionally usable concepts for the process of expressing your influence.  So then, this offering is a continuation of a series of articles that we will release for just this purpose; to offer concepts that I believe are integral to the restoration of both your sovereign rights and in this case, a truly productive economy. They are, for obvious considerations of time and space, not intended to be considered as complete and thorough dissertations however they are crafted to cover what I believe to be fundamentals in both structural and philosophical form. So then let us begin with the subject of taxation

“For the Individual, the imposition of taxation is perhaps the single greatest indicator of a government’s abuse of power. Its imposition is universal and yet simultaneously selectively applied; the mechanism places as supreme the cause of government and the unalienable right of one’s productive capacity as subservient. The ruse of patriotic duty fuels disintegration of the social contract binding one to another based solely on the newly created taxonomy of economic class who then must use it bias to craft methods for the purpose of minimizing its (taxation) debilitating effect. And so, for as long as it persists the device suspends the inertial pulse that is the pure and essential fuel of the native economy.”   

The approach to taxing Individual productivity is nothing more than a soft form of tyranny. The U.S. tax code is so completely imbalanced and functionally incoherent so much so that 51% of Americans pay absolutely no income tax of any kind.  This of course then extends the window of discourse to the bizarre and equally specious provocation of “tax the rich” or “the rich need to pay their fair share.” All of which should lead the balanced mind to query: If the so called “rich” are in the remaining 49% are they not already paying more than their fair share? To think that we can finance the infrastructure of a Country the size of the U.S. based, marginally, on the productive capacity of the Individual is to ignore the existence of the mammoth National Debt (Fed & State) which by the mere fact that it exists clearly should be the single greatest indicator that the entirety of the “tax the rich” notion is ridiculous and hopelessly apocryphal.  Case in point: Doubling the Tax rate on the 49% (those who actually pay taxes) would generate revenue of an amount just barely sufficient to cover the annual interest on the ever expanding Federal Debt.  

Without question, the solution is not to be found in expanding Individual tax burden. Instead it is my opinion that resolving the issue lies both in removing the Individual Tax Burden applied to active (productive) income and unearthing revenues shielded from tax; I refer to these as passive (non-productive) income. Additionally, Corporate Income needs to be treated in much the same way though with a few distinct consideration unique to the animus of this type of structure. To be clear, the distinction of type (active and passive) and class (Individual/Household and Business) need to be observed. 

As it is our Government as constructed a system that does the complete opposite; we trend toward raising taxes on Individual active income and lower taxes on Corporate and passive income.  In some instances, such as in the case of Non-Profits, we suspend taxes all together and by doing so allow these entities to accumulate massive amounts of cash which never regenerate back in to the economy or are forced in to productive capacity. Then, to illustrate the more absurd, we allow an accounting system for Gov’t and Non-Profits that actually encourages budgetary waste and fraud – it’s referred to as Fund Accounting!   

In the most simple of terms, the effect of this venomous approach is to witness the disabling of the very wealth creating mechanisms that had been in place to support the truer function of government. We have, in essence, entirely inverted the structure so as to support Corporate-Governance on the backs of the very people Representative Gov’t was intended to serve. It is this very distortion of the process that provides evidence in support of the following excerpt from the above quote: 

“The ruse of patriotic duty fuels disintegration of the social contract binding one to another based solely on the newly created taxonomy of economic class who then must use it bias to craft methods for the purpose of minimizing its (taxation) debilitating effect.” 

Some may be prone to wonder about the issue of “what if we raise corporate tax rates, won’t they simply pass the cost on to the consumer?” This is a common objection to pressing the idea of a fairly distributed tax system and if you must know, Gov’t and the existing and fabulously biased Tax Code already accommodates your justly attuned concerns through various features such as: tax credits, subsidies, reduced tax rates, various offsets for foreign taxes, loss carry-backs/forward, various creative accounting methods relating to transfer-pricing and so on.   

It is fair and reasonable to consider that a tax expense might find its way in to the cost of doing business construct however there are various facilities available for monitoring the risk and no different than those used to calculate what is deemed to be taxable income.  Bye-the-bye, it should be remembered that corporations are inanimate entities and though they should be entitled to a return on investment, should not their return be based on productive capacity/efficiency and not on structured protectionism via gov’t-for-a-price interference?  Seems reasonable enough to me! 

No, the bigger question none seem to be willing to ask is this: If a Corporation is able to escape a fairly assessed tax regiment then why is the Individual Household, the very entity which generates the native demand for the Corporation to exist in the first place, offered as the main course? This of course is a question whose substance is proven by the fundamental premise of efficacy; when you possess sufficient power and influence, you possess the power to produce a desired outcome. Unfortunately it just so happens that the American Household doesn’t possess such influence. 

A quick sidebar which deals with a comment I tendered above; “…unearthing revenues shielded from tax….”  One might be interested to know that there is a completely tax-free segment of the U.S. Economic Profile; one which has Assets Valued at just over 3.5 Trillion dollars with annual Revenues of nearly 1.5 Trillion Dollars. (Source: IRS) The identity of this segment is none other than Public Charities and Private Foundations and these numbers do not include endowments and other so-called non-profits.  Please do not get lost in thinking I question the work and validity of these organizations but instead return to the concept of passive vs. active income and the need to stir economic activity (progenerative economy). These entities entirely avoid tax on income that is largely passive in nature and regardless of what function they serve their structure still relies on a national economic-sourced infrastructure to which they contribute nothing. Corporations with sidelined cash reserves so massive that the FED is forced to flood the markets with more faux money (a.k.a., Quantitative Easing) make no productive investment in the national wealth creating economy and thereby, effectively, contribute nothing as well. 

If this Country is ever going to emerge from the economic black hole that presently consumes this nation it must first look to concepts that will directly influence an economic response. First on the list must be to unleash productive capacity and the only way this will occur is by replacing the entire Tax Code favoring instead mechanisms that stir and support economic activity the fundamentals of which must be built upon a very simple concept:  The native economy which is, at its heart, the Individual Household.  For an economy to be viable it must have a vibrant and wealth-concentrated productive-class (commonly thought of as the middle-class) and for this feature to develop and expand you cannot, must not, tax active income at the Individual level. 

As to the Corporate/Business level the applications are quite similar.  Regardless of ones perspective as to the role of Business in/to the economic cycle one truth remains undeniable: The product or service a business provides must always be understood to exist only as a response to the native economy and not the reverse. Further, the Business Entity must be seen as mechanism that transfers the wealth it creates first back into the wealth creating economic cycle, then to the Individual either as a Consumer, Owner or Investor. It too, by the way, creates both active and/or passive income however its income, due to its inanimate nature, should be treated with surgical precision. For example: There should be separate tax rates for three distinct classes of active revenue: product, services and banking/financial services.  Further, Business tax rates should also be structured based on domestic vs. non-domestic sourced income as well as for passive income.  

Our present system has, for decades, been quite deliberate in its efforts to defeats the native economy and it accomplishes this by confiscating the very fuel (Individual income) that permits the economic cycle to occur. The simple truth is that we as a People should be struck with utter disbelief that no politician has dared come close to disabling this all-consuming menace.  

As is often the case, a solution to an error in action always lies within the consequence of poor judgment. As an example, do you find it a bit odd that we create give-away program that grow infinitely larger than originally projected and then all are seemingly surprised to discover that the program actually cedes native prohibitions and thus creates funding demands far in excess of available resources?  If you don’t plant more than you eat, sooner or later you run out of both food and seeds. In this one statement we see the root cause of a nation in decline.  And yes, it really is that simple! 

The light at the end of the tunnel is either a train or hope beckoning one toward the assurance of more desirable outcome. If however you find that you’re standing on a railroad track and you hear the distinct sound of a locomotive, there’s a good chance it’s a train!  Let me offer a parting bit of good news: We get to choose the tunnel! 

Curtis C. Greco, Founder

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