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Letters by a modern St. Ferdinand III about cults

Gab@StFerdinandIII -

Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands.  Cults everywhere:  Corona, 'The Science' or Scientism, Islam, the State, the cult of Gender Fascism, Marxism, Darwin and Evolution, Globaloneywarming, Changing Climate, Abortion...

Tempus Fugit Memento Mori - Time Flies Remember Death 

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Wednesday, October 18, 2006

Tax cuts are mandatory to roll back the Mommy-State

We need deep tax cuts and massive spending reform. Tax cuts make us all better off.

by StFerdIII

The inimical effects of high taxation are legion. Major cities lose jobs to the hinterland. Government revenues fall over time. Whole countries become uncompetitive due to the overbearing tax structure which impedes innovation and flexible labor and capital markets. Companies relocate to tax friendly jurisdictions taking jobs with them. Workers migrate to lower tax locales that produce employment and wealth. Bono, Buffet, Gates and the Kennedy’s move their taxable assets into charities and offshore accounts to save money, whilst telling the rest of us peasants that high taxes and more African tax funded aid are noble ideals. Crushing taxation levels and appropriation of private wealth impedes innovation, competitiveness, productivity and the relief of those in poverty. But don’t expect the media, left wing politicians or airhead populists to agree. For the Marxists, eco-fascists, and UN-lovers more taxes and more government are the only solutions to create a utopia of egalitarianism and communitarian love. What a bunch of piffle.

In order to further reduce domestic poverty; save the environment, establish a teary-eyed ‘African commitment’; and finance the moronic schemes of welfare that populate populist governance, you need to cut taxes, reform spending and engage in fair and free trade. Government coercion, monopolies, corporate welfare, agricultural/farmer welfare and redistribution schemes all need to be abolished. But instead of looking at facts and at history and understanding what produces wealth and power bleeding heart politicians will instead tax, spend, and ‘manage’ their way into bankruptcy. This is why we all should jump with joy when a big spending conservative like Bush or the conservatives in Canada state that they support tax cuts. They are few amongst the populists who understand basic economics and morality.

Bush has increased US spending by $1 Trillion since 2002. This is the size of the entire Canadian economy. But he did institute $1.3 Trillion of tax reduction. The result has been a US economic boom. Employment is at all time historic highs; disposable income is growing by 1 % and more per annum; net wealth is now over $55 Trillion another all time high; and governments have seen their revenues rise. All ‘classes’ and levels have benefited from the tax cut. As for the rich well they actually pay more tax now then before. In fact the top 10 % of income earners now pay over 50 % of all taxes. So I would logically assume that cutting taxes would benefit those who actually pay most of them. This is too rationale for the socialists to comprehend.

To put it into Marxian terms, tax cuts benefit all ‘classes’. In the US between 2002 and 2004, tax payments by those with adjusted gross incomes (AGI) of more than $200,000 a year, which is roughly 3% of taxpayers, increased by 19.4% -- more than double the 9.3% increase for all other taxpayers. Between 2001 and 2004 (the most recent data), the percentage of federal income taxes paid by those with $200,000 incomes and above has risen to 46.6% from 40.5%. So much for ‘only the rich benefit’ cry over tax cuts. In fact between 2001 and 2004, the percentage of Americans with an income of more than $200,000 rose from 12.0% to 14.2%. The percentage of Americans earning more than $50,000 a year rose from 40.8% to 44.2% -- and that's just in two years.

Why do tax cuts work? They work because they increase the incentives for new investment, not by stimulating demand. They stimulate productivity and risk capital – both of which are at all time highs right now. To paraphrase Say's Law: ‘Supply created its own demand’. Incentives are what matter, not pocket money. In 1997 Clinton cut the capital gains tax rate from 28% to 20%. This meant that the after-tax return from a $100 capital gain increased from $72 to $80—an 11% increase. This 11% increase in incentives led to the late 1990s boom in stock prices, venture capital investment and innovation. For the same capital gain, the 2003 Bush tax cut will increase after-tax returns by 6.6% (from $80 to $85) and for dividends by more than 30% (from $62 to $85).

These changes will reduce the cost of capital, encourage more investment and savings, and cause more companies to pay dividends. The end result will be an increase in economic growth, rising stock prices and a rebound in venture capital investment. For the socialists note this – thanks to tax cuts US government revenues are up 15 % per annum as higher growth rates stimulate more revenues; profits and lower rates alter behavior to claim incomes instead of hiding profits from the tax man. Tax cuts actually result in more government revenue. If governments are smart enough to pay off debt and downsize spending is entirely a different matter.

Witness this. In the US business investment has increased rapidly and non-financial corporate sector productivity has grown an annualized 4.3% over the past three years -- its most rapid growth in 45 years. Over 2.2 million jobs are created in the US each year – versus none in the private market in Western Europe regardless of Euro propaganda. Pre-tax corporate profits have doubled in just five years. A simple capitalized profits model (corporate profits divided by interest rates) suggests that even after recent strength, the broad U.S. equity market is 35% undervalued. In other words the stock market will continue to climb in the near future with geo-politics and perhaps inflation being the only caveats.

Tax cuts work. Government has some duties – the military, security, legal immigration, ensuring the right kind of immigration, infrastructure and some social welfare – not to mention the maintenance of law and order and domestic peace. But the ever increasing role of government in our world means that morally, economically and politically we are worse off. When government moves away from its 3 or 4 prime duties to play mommy, daddy, and the kind doting uncle, redistributing money and chattering about love, equality and ‘values’, society loses wealth, opportunity and intellectual capital. Tax cuts are a necessary anodyne to roll back the mommy-state. Long live tax cuts!

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