Category Archives: 2011

The cost of reality: taxing ourselves out of debt?

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A comment on a previous post suggested that, rather than attack unions or cut spending, we should just raise taxes. My gut response was “raise taxes on what exactly?”

I’m pretty sure that most Americans have no idea who is paying taxes, how much taxes they are paying, and what effect those taxes have on the economy as a whole.

Before I go into more detail, let’s get one thing straight: you do not pay taxes if you get more money back from the government than you paid in. If you paid, say, $1000 in and get $1500 back because of credits and whatnot, you did not pay taxes. If your income is exempt from taxation, you did not pay taxes. If you can claim sales tax credits, you did not pay taxes.

Now, because of the fact that so many Americans get more back in taxes than they pay in, only about 53 percent of taxable Americans actually pay federal income taxes. And, since most states base a payer’s taxable income on what income was taxable, large numbers of people do not pay state taxes either. The issue is a little more muddled at the local level, but it is safe to say that there are tens of millions of Americans paying no or very little taxes.

That brings us to the 53 percent who are paying taxes. One of the battle cries of the progressive movement is to tax the rich, yet most reliable estimates place the amount of revenue gained from those taxes at around $90 billion per year, or about 7 percent of the projected deficit in 2011. Even if all of the tax cuts were eliminated, it would only gain around $500 billion a year, or about 38 percent of 2011′s deficit.

So, what about raising those taxes even higher? I can speak to that issue personally. I already pay about 40 percent of my income in total taxation–sales taxes, excise taxes (as on gas), income taxes, etc. Ending the current tax cuts would represent a 50 percent increase in my federal taxes (because the 10 percent tax rate would cease to exist, meaning the bulk of my income would be taxed at the 15 percent rate). Further, the expiration of current tax breaks would increase my taxable income, thereby exposing more of my income to state and local taxes. In the end, this method alone could increase my tax burden to as much as 50 percent of my income, and for most Americans the effect would be similar.

What would you do if you took a 10 percent pay cut, because that’s what those increased taxes would represent. What would you have to cut? What would you stop doing? What would you stop paying?

Now, imagine what would happen if the government actually raised those rates even higher.

And, keep in mind that 65 cents of every dollar you are paying in taxes already goes into someone else’s pocket, very likely someone else who is not paying taxes, at least at the federal level.

With that picture in mind, explain how raising taxes helps us get out of debt.

DLH

The cost of reality

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I’ve been watching the progress of the collective bargaining revocation bills in Wisconsin and Ohio with great curiosity and not a small amount of amusement. What I see on all sides of this debate is a failure to deal with reality.

Teacher’s unions fail to understand that there is no more money. Wisconsin is in the hole $2.2 billion. Ohio is in the hole $7 billion. Those deficits are only the ones for 2011. Sure, they are just trying to protect their own, but at what cost? What else has to get cut to protect them? Who else has to pay?

On the other hand, you have the conservative law makers and those who elected them. They claim union busting–because that’s what revoking state collective bargaining agreements really is–will save the tax payers millions. That’s true, but so would cutting state programs, especially the costly social welfare programs even conservatives are addicted to.

The problem, as I see it, is that nobody wants to admit the truth: we’re not going to get out of these problems with selective, politically motivated cuts. Instead, we’re going to have to make far-reaching, across the board cuts at all levels of government that will last decades, and those cuts will only serve to allow us to tread water.

Unfortunately, no one is listening. Liberals and progressives want to tax more and spend more. Conservatives want to attack their political opponents’ pet programs without doing anything real to face the problems. Libertarians are too wild-eyed and disorganized to do anything other than make incoherent noises.

In the midst of all of this, our nation is failing. Our currency is devaluing. Our economy is not creating jobs. More than half our citizens effectively do not pay taxes, and the other half are paying so much they can’t make anything happen. Our tax system penalizes success. Our laws make starting and maintaining businesses unnecessarily complex. This year, local, state, and federal governments will spend between $2.5 and $3 trillion more dollars than they collect in taxes. The total US debt burden carried by all levels of governments could exceed $25 trillion–or twice the entire GDP of the US in 2011.

If we really want to fix the problems that got us here, we have to end–no, destroy–the disincentive to perform, succeed, and innovate on the strengths of our own merits. We have to wipe out the notion that we can somehow treat every individual and situation as some kind of an average and deal with reality in all its uniqueness and complexity. For the first time in decades, we have to think, act, and react in accordance with the situation we have, not the one we are convinced we should have. We have to return the bulk of control to the individual and stop expecting governments to take care of us.

And all of these solutions are going to happen whether we want them to or not. We cannot continue what we are doing because what we are doing is failing. The question that remains is whether we participate in the process by which the next thing comes into being or whether we stand and watch as the terms are dictated to us.

I suspect most will do the latter, which is why I’m pretty sure you should be getting ready for some really tough times ahead.

DLH

The looming currency collapse

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UPDATE: For those who find the linked video too painful (that is badly done) to watch, if you browse away from it, then click “Stay on this page” from the resulting pop-up” it will take you to a transcript of the video.

I’m not much for investment research firms for the most part, so I am skeptical when they give advice for free or as part of a thinly veiled promo for a product or service they provide. It is with that skepticism that I viewed Porter Stansberry‘s apocalyptically titled “The End of America” video.

Most people find the subject of the video boring. Many people who actually watch it will see the video as a scare tactic designed to frighten them into using Stansberry’s products or services and will ignore its message.

I believe they will do so to their own detriment.

Whatever Stansberry might be selling, his analysis of the looming crisis with the American dollar and everything it could mean for our way of life is dead on. And, he only focuses on one narrow aspect of looming problems that threaten to create the perfect storm that could bring the American and world economy to its knees.

Again, it is easy to ignore what people like Stansberry or me are saying because it sounds so impossible, yet it is only impossible if one ignores the inevitable lessons history taught past nations and civilizations who thought the same things.

Now is the time, more immediate than ever before, for you to get ready. Get out of debt. Make sure you can provide for your own basic needs without the need for constant infusions of cash. If you live in a city, have a plan for how to get out and where you are going to go. Have supplies and means of self-defense on-hand.

I grant that I could be wrong and that these things may never come to pass. History is quirky that way. Yet, I cannot miss the fact that it can and does happen and that the United States is not exempt from that reality.

The signs are all there. Are you going to pay attention?

DLH

Staying the course, or farming goals for 2010

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As I mentioned previously, I give myself a D+ for the past year’s effort. That means there’s still a long way to go, so the goal for this year is to stay the course with what I am already doing.

Staying the course means resisting the temptation to add more when what I am already doing is not quite working yet. I have a lot of ideas I would like to try, but before I do, I want the stuff I’ve already started to work.

To that end, I will be focusing on the following efforts this year:

My hope is that, by the end of this year, I can improve my grade to at least a C+ and have something to show for it too. Keep reading on this site for updates.

DLH

Will you be ready in 2011?

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I believe being ready is more than having a stockpile of supplies just in case something happens that deprives me of the modern comforts I have come to expect. Readiness is a state of being; a world view focused on the art of living and a lifestyle adaptable to whatever circumstances might present themselves at the moment.

I want to inspire other people to pursue being ready the way I want to be ready myself, hence this weblog. Yet, over the last year, I have discovered just how much of a task readiness is and how hard it is to convince other people it is worth doing at all.

That last statement is not despair of trying. To the contrary, it is an acknowledgement of the difficulty of the task at hand and an acceptance that it is not going to happen quickly or easily.

I plan to be more ready when 2011 ends than I am now that it has started, and I hope you will join me in the quest.

DLH

Complex and evolving: Education 2011

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My views on education are complex and evolving. On one hand, I love learning and want to learn all I can. On the other hand, I am coming to the realization that I hate the process of formal education.

My hatred of the process of formal education comes from the fact that it presumes too much about the commonality of the people involved in the process and denies too much about their differences. Formal education is, by definition, a process catering to the lowest common denominator. As a result, it stifles the most advanced so that everyone can advance.

In realizing that I hate the process of formal education, I have come to a point of view far more in keeping with the idea most famously expressed in the movie Good Will Hunting: “See the sad thing about a guy like you, is in about 50 years you’re gonna start doin’ some thinkin’ on your own and you’re gonna come up with the fact that there are two certainties in life. One, don’t do that. And two, you dropped a hundred and fifty grand on a fuckin’ education you coulda’ got for a dollar fifty in late charges at the Public Library.”

As I see it, the fact of the matter is not that formal education educates someone but that it vets someone by comparing what they have learned, really on their own, to what someone else says they should know in order to be able to claim they know it. I find that whole idea repugnant because it denies that I can learn on my own, vet myself, and demonstrate my knowledge without someone else’s approval.

Now, I know there are all kinds of people who have benefited from the formal education process and are all the better for it, but I now realize the reason I am not one of those people is because I find the process too constraining.

Of course, now the problem becomes what to do. How do I educate myself, establish myself, and promote myself if I intend to reject the process 99 percent of the modern world believes is the only way to do those things? I think I will do so by accomplishing those tasks on my own terms and by succeeding at what I intend to do. In order to do so, I must do them myself, and the only barrier, then, between me and success is myself.

So what does that mean for 2011? I think this will be a year for exploring the idea of self-education to its fullest extent, and I plan to share that journey with anyone who cares as much as I can.

DLH

2011: A year to write

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Frankly, my writing goals for 2011 are not much different from my writing goals for 2010 with perhaps the exception that I’ve taken on another project besides the Eagle Stone in an effort to get something going.

Really, all I want for 2011 is to establish a regular routine of writing that produces some volume of work by the end of the year. If we pretend that I can write 2,000 words a day between now and 31 December, then we can also pretend that I should have 730,000 words to show for it at the end of the year.

While I hope that I write, I also hope that, if you have something you want to write about, you write too. If you need someone to encourage you in that task, please let me know. I am always willing to help encourage other writers as much as I appreciate the encouragement myself.

DLH