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The Art of the Tax!

Donald Trump claims he will “fight for” a better tax system as President.  We usually doubt politicians “fight for” promises, but Mr. Trump seems like a guy who will deal with the problem. Where taxes take money from people who expand the economy while government is to “keep the peace, guard the realm and build the roads.”  What is the optimum tax rate?

In the 1980’s “The Way the World Works” by the late Jude Wanniski was popular.  He was an Editor at the Wall Street Journal.  In the book he told the story of having lunch at the White House with Ronald Reagan, Dick Cheney, Donald Rumsfeld and Dr. Arthur Laffer who graphed a concept on a napkin in a flash of genius!  Jude saved the napkin to put the image in “The Way the World Works,” dubbing it “The Laffer Curve” creating one of the great myths pleasing the Washington, DC elected ruling class to this day.

Figure:  Laffer Curve

1-laffer-curve

The figure simulates a female breast, thus riveting the attention of male economists.  The dashed line through the maxima suggests the economy is optimum when tax rates are 50%    Dr. Laffer is likely a disciple of John Maynard Keynes, who was for high taxes, and leaning to socialism as it is popular in academia where most of their money comes from government. 

In Laffer’s time the successes of Kennedy, Reagan and Gingrich with lower taxes drove Laffer to compromise facts. The curve was not correct.  I went to a public library for the Statistical Abstracts of the United States.

In a three day grind I quantified the concept by extracting GDP and tax data of America from 1776 to 1987, drew a scattergram with 211 data points to strike a “means” curve through said data points and create “The Genesis Curve” wanting to  commemorate the first time the concept appeared in history: Genesis 47:24 in the Bible, “…ye shall give the fifth part unto Pharaoh, and four parts shall be your own…”

Europe in the Dark Ages was a laboratory for government and economics. They found duchies taxing 20% thrived while those taking less could not keep the peace, the roads or the realm.  Those taxing over 20% slid into corruption so they defined “The King’s Fifth” as the optimum level.

Meanwhile back at the data, drawing a scattergram and plotting a curve through the points as well as developing an equation I found that the optimum peak for taxation was 18.3%!  Very close to the “one in five” of antiquity, the Bible and “The King’s Fifth” of Medieval Europe.

Figure:  Genesis Curve

1-genesis-curve

Where this is a great truth long known and several times discovered, why does it not prevail in this time?  And, what do we see from the better informed minds of our time:

Washington Post Dylan Matthews wrote “Where Does The Laffer Curve Bend” noting Art Laffer became famous on the idea there is an optimum tax rate for an economy to thrive.  He queried academicians and members of the elected ruling class on the concept.  Including: Dr. Emmanuel Saez, the E. Morris Cox Professor of Economics at UC Berkeley, who wrote:

”The tax rate t maximizing revenue is: t = 1/(1+a*e) where “a” is the Pareto parameter of the income distribution (= 1.5 in the U.S. and easy to measure), and “e” the elasticity of reported income with respect to 1 – t which captures supply side effects. The most reasonable estimates for “e” vary from 0.12 to 0.40 so e = .25 seems like a reasonable estimate.  Then t = 1/(1+1.5*0.25) = 73%  which means a top federal income tax rate of 69% (when taking into account the extra tax rates created by Medicare payroll taxes, state income tax rates, and sales taxes) much higher than the current 35% or 39.6% currently discussed.”

It should be clear this is a smokescreen as Dr. Saez makes no attempt here to illuminate anything but his reputation.  The sooner the American people get the idea that people who write like this are not sincere, but laying down smokescreens the better.  What this reduces to is “We write your ticket.”

If the concept of an optimum tax rate comes out of the mists of antiquity to appear in the collection of manuscripts that became the Holy Bible and then rediscovered in Europe during the time we call “The Dark Ages,” then it should be expressible in language that anyone who able to tie his shoe laces can understand!  It is just that simple.

Our economic history reveals when we tax at the rate of 18.3% our economy expands 10% to 30%!  That event coincided with the invention of the cotton gin which increased our output of exportable fiber dramatically.  It was also one of the causes of the Civil War as the economics and culture of southern states would change when little black children did not have to stay home all day and pull cotton linters from seeds.  Machines did it better, faster and cheaper.  We have a similar event horizon with our coming robots, but this time it will be for adults in a decade or two.  With a clear understanding of these facts we will thrive.  Without we are at the mercy of the elected ruling class.

While our tax rates are 40%, when all are summed, including those hidden in goods, they are nothing like European rates.  Denmark is highest at 83%, but none are under 59.6%.  Value Added Tax, VAT, is the hidden tax in every good.

Chart: European Tax Rates

 1-european-taxes

Socialism defenders say, “Yes, but we get a lot for it,” However, it’s like going to the DMV for the necessities of life, much less what we like to have and how we get it.  We have always have more in real wealth, goods and better lifestyles than Europe because of our free and open markets, but the Democrats want to make us more like Europe.  Why should this be?

The elected ruling class wants power over the people more than anything.  They feel diminished when they see billionaires in the private sector.  These people are anti-freedom.  They dream of arriving at an airport to a thousand people on their knees screaming, “We are not worthy!  We are not worthy!”

If we’re smart we’ll see that no elected person ever gets more than one term.  “If they are in, put them out,” must be the cry.  In three elections, six years we the people can be in charge.  The insanity of the elected ruling class is the rising arc on this graph:

Graph:  Political Power Curve

1-power-curve

While this curve is conceptual rather than mathematical we believe it is as valid as anything for which an equation exists.  In physical science equations are often written after-the-fact.  This curve is fact.

In socialism government has 100% of everything from power through money and more.  At the optimum of the Genesis curve concept they have 18.3% and that is the problem.  It is up to us to change these people every term as power corrupts and absolute power, as in socialism, corrupts completely.

Europe is closer to the writings of antiquity and the great truth expressed in Genesis 47:26, “…and Pharaoh shall have one in five.”  And they were the  birthplace of “The King’s Fifth.” Both defined an optimum tax relationship between the ruling and the ruled as 20%.

If we know the optimum tax rate, and surely those in Congress do, why don’t we put a flat tax of 18.3% on all working or in business?  We have to deal with state and local taxes, perhaps limiting them to a total of 9% and let the federal people take 9.3% of the GDP which today would be $1.58 trillion when they are spending $3.5 trillion?

Our social programs are now $2.27 trillion.  If they were privatized, which would net more in benefits and generate trillions in capital leaving the federal government an obligation of only $1.23 trillion and a surplus of $350 billion which they could apply to the national debt meaning it would be paid off in 54 years.  Bond terms are 30 years so we have to float new issues and ladder the system, which has been done.

To be sure there are questions and the greatest of them is that we cannot predict the cataclysms of the future.  We can prevent some by outlawing them.  We can outlaw war by announcing we will carpet bomb any nation that invades another or promotes international terrorism like Iran today.  We will not give a warning; we do it and Iran would be a good start.  While we would kill millions of civilians today we must accept they bear responsibility as they were unwilling to fight for their freedom as we were in 1776.  This is what makes a nation and keeps it alive; ideas like the Genesis Curve.

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The opinions expressed in this commentary are solely those of the author and are not not necessarily either shared or endorsed by iPatriot.com.

Adrian Vance

Trained as a science teacher, with eight years classroom experience, he has been writing professionally since the age of 15. He was the youngest person to be published in Journal of the Illinois Academy of Science at 17 as a result of a paper he wrote suggesting a revision in the science teaching curriculum. Publication was accidental as his teacher headed the selection committee and his paper was sent to the printer in error. Nonetheless, it received positive response. It proposed teaching General Science, then Physics followed by Chemistry with Biology in the senior year given the then new molecular focus in Biology. During his college years he worked on the school newspaper, primarily as a photographer and did an occasional feature, some of which caused him to be called to the Dean's office. "You don't like the way we do things here?" was the usual opening remark followed by the expected suggestion. After his third year, exhausted and without direction, he left for one year, but returned, when Sputnik and Admiral Rickover's books documented a crisis in American education. He felt called to teach and completed a B.S. in Physical Science at Illinois State University with a major in chemistry, minor in biology, near minors physics and education. He did graduate work in both Illinois and California completing a California Life Diploma teaching credential in 1962. While teaching he saw many needs and opportunities in educational publishing so he wrote and produced educational materials, primarily filmstrips and sound recordings. He also wrote for photographic magazines as film work put him in touch with many photographic and production problems. He has 325 screen credits in educational, industrial film and filmstrip as a writer-producer. In 1976 he won the Learning Magazine “Best of the Year” award for his “You in the Universe” filmstrip series and the New York Film and Television Festival Silver Medal for “An Introduction to Cells” filmstrip series. For a partial database of Adrian’s publications please click on http://www.worldcat.org/search and you will see them listed by series title and publisher. Each series title included four to 30 filmstrips and all are not fully listed in this database. The grand total is over 800. Over that 30 years Mr. Vance also wrote other material: two books, published in New York: “UFO’s: The Eye and the Camera” for Barlenmir House and “Audiovisual Production” for Amphoto Books. He wrote and illustrated over 100 features and columns for photography magazines. He was a Founding Contributing Editor for Peterson's PhotoGraphic Magazine and the West Coast Editor of Popular Photography from 1974 to 1978, writing a monthly column for the magazine. As a result of underwater photography work he contributed to SKIN DIVER magazine in the 70's. His "Timing Waves to Enter The Sea" article, first appearing in SKIN DIVER, is now a chapter in a classified U.S. Navy Seals training manual. "UFO's, The Eye and the Camera" documents his "Two channel information theory for the analysis of events simultaneously seen and photographed." It is the first comparative analysis of vision and photography written with the idea of combining information from both sources into a single analysis that can be used scientifically and forensically. Mr. Vance is also credited with solving the mystery of how complete maps of Earth were drawn in antiquity and he rediscovered Captain Cook's secret method of locating Pacific islands so well their positions have only recently been improved. He is cited with discovering the method in the seventh edition of "The Maps of the Ancient Sea Kings," by Dr. Charles Hapgood and he later contributed to a definitive article on cartography in antiquity for The Smithsonian Magazine as they confirmed his method. On February 19, 1976 Mr. Vance got a “Certificate of Appreciation” award from the Los Angeles Police Department “in grateful recognition of his generosity in make available to officers of this Department the talents and training of his German Shepherd, Boris. The ready willingness of Mr. Adrian Vance to become involved and to make available his valuable dog in a potentially hazardous situation deserves the gratitude and approbation of the entire Los Angeles Police Department.” This incident was critical to the LAPD administration’s realization that trained dogs could be of value in police work and they are now employed by the LAPD. When the computer replaced film the school market audio-visual field he switched horses at full gallop and produced 460 computer educational disk systems for the Apple II computer over 15 years. During that time he became a professional broadcaster in the 90's to promote the State Water bond issue in Santa Barbara, California as he felt it was critical for the town. He was publicly credited for having been one of the top ten reasons the measure passed thanks to his book “Drought in Paradise” and radio work. The collapse of his software business when Apple Computer discontinued the "II" machine line in 1995 crystallized the failure of his second marriage. With no clear direction in the school market supplemental materials field he sought a career in broadcasting in Las Vegas, Nevada doing shows on both KDWN and KXNT. This was unsatisfying due to the "star" economics of commercial radio where a few performers make millions and everyone else starves. Mr. Vance has also been a day trader, strategist, system developer and author on the equities markets and trading. He now trades stock, land and develops residential property. His website and trading information service, "The Stock Surfer" was a leading Internet service for seven years. He has been developing “The Young Americans” series of Young Adult novels promoting conservative values as well as his personal memoir, “A Long Way From Normal.” You can buy Adrian Vance’ books or downloads at Amazon.com December 21, 2010 he was awarded US. Patent 7,855,061 for his “Fuel Farm” that makes a gasoline equivalent 100 Octane fuel, butanol, from CO2, water and sunlight with algae and bacteria. You can see the full disclosure websites regarding his inventions at: http://CO2Au.blogspot.com and http://fuelfarm.i8.com -30-

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