I don't like the government.
There are many things that I do not like about it. Perhaps some of you share some of my dislikes, perhaps some of you have other things that not as per your liking. If so, go and write about it yourself; this is my blog.
What is there about it specifically that I don't like? I promise I'll get to it. Eventually.
Consider, if you will, the various people that you see when you go around town in a typical day. There are shop keepers selling everything from liquid soap to bulldozers, from BMW's to frozen chicken sandwiches, from plastic toys (guaranteed to break the moment your child unwraps them) to cats of questionable pedigree. The shops come in all sizes and shapes; along with a plethora of advertising to get you to buy from them.
The retail outlet buys from middlemen or, sometimes, from manufacturers. The producers have these great big factories with a legion toiling away to produce the goods (why does that raise an image of dwarves under mountains?) all the way down to tiny, dark rooms with single people assembling, weaving or employing whatever manner to put together the stuff that you buy.
Then there are people who grow grains and pineapples. There are those who dive for oysters - although no one actually does that any more; they grow oysters in industrial quantities in huge ponds. There are those who extract oils from the ground and those who work the mines (no, not dwarves).
There are those like myself who sit in front of computers and write software that you use to balance your cheque books and to crush candies (as if we don't waste enough of our lives).
There are teachers and firemen, ditch diggers and bankers, pilots and people who wash the tires on the airplanes (whatever that profession is called). I even saw an airport security guy whose job in life is to sniff shoes. It's a living, I suppose.
People, lots of people, doing lots of work. There are those who employ others while they sit back. Although, if you think about it, they worked long and hard to make the money which now allows them to sit back (not counting those who stole it or married into it).
As I said, a whole lot of people. They have two things in common. Yes, they have other things in common, but for the purpose of this post, in case you were wondering, there are two.
Firstly, they work to make money. Secondly, the government takes away a portion. Ostensibly, this is to run the machinery of government itself which, as you see, is completely circular logic. Let's assume that the government employees do not use your tax money to buy villas on some island in the Caribbean or flat screen HD TV's to put into those villas. Yeah, let's just assume that.
The original taxation was the tithe to put food on the king's table and for the gentry to buy silk. Some of the tax went to pay the army to raid other nations for the silk that they had and to defend themselves from raiders coming after their silk. There we go into circular logic again.
The town volunteer firemen would go to the aid of only those who had paid the fire tax till someone decided to make the fire tax universal. This was actually so that the firemen would not waste a trip to a defaulter's house.
Custom duty started with port officials in England taking money from merchants importing wine from France. That annoyed the merchants who asked why they should start giving money instead of taking it to get people drunk. The reply they got was: This is your customary duty to the king. And thus, history was made.
Today, we have the Tax man. He doesn't earn for himself. He produces nothing. He provides no service. All he does is to take a part of the money that you worked for. All so that the tax collected pays for his salary. No, that money doesn't build roads; there's a separate tax for that.
Part of the money pays for services that the government does provide: police, army, and I'm trying to think of more.
So, let's have another assumption here that the tax that the government takes is (partially) used to provide services.
How much does the government need? A budget is prepared each year with expected tax to be collected and amount to be spent. Adding a bunch of obvious assumptions, let's accept the budget. Let's just say that X amount is needed to meet the expenses. Add another amount for emergencies, another for reserves and another for "miscellaneous" and we arrive at an amount of Y.
Now, the point of this post is that X and Y are amounts. You can call them figures or whatever, it all means the same; it is a number (with lots of zeroes).
On the other hand, when you import crude from the Middle East, or when you sell a pencil, or when you get your pay check, the government does not deduct an amount, instead, it deducts a percentage. How did the amount get converted into a percentage? That's easy enough to answer: They carried out a lot of calculations after putting in a horrendous amount of assumptions (I'm so tired of that word) to come up with the percentage that should be taxed when a bottle of perfume (no, not wine) is imported from France.
At the end of each quarter and financial year, the same bunch of people sit down to figure out which assumptions were missed or just plain wrong, and what we have is called a "shortfall". This shortfall is added to the calculations for the next year's budget and the whole circus starts again.
Here is what I propose: Make those tax men work. No, not the army nor the street cleaners nor the lamp lighters; they already work. I mean the tax men. They have the responsibility to collect taxes, so make them responsible for generating the amount. Plus, make it the amount and not the percentage.
The key difference here is that if an amount of 100 is earmarked as that to be collected from those who import rubber toy dogs from China, make the tax men responsible that enough toy dogs are imported to allow collection of that amount of 100. With the percentage collection, he doesn't really care if the import goes up or down.
The tax man who is given the target to collect the amount of 100 from people receiving their salary should also be given the target to ensure that enough people are employed to gather that amount from. How? It's my job and my responsibility to deliver a piece of code on time. If the tax man doesn't know how to do his job, well, can anyone spell "incompetent"? Here's a suggestion, lower corporate taxes for companies employing more people so that more salary tax is collected. Here's another: Start advertising on the benefits of having a companion for children that doesn't need to be fed to increase the import of toy dogs. In other words: Go do your job!
And so on, all the way down the line from import and manufacture to retailers and lawyers.
Here's the second part of my suggestion, which is an obvious part of the above: Give the tax man a reward for achieving his amount target; that's how the private sector works where factory workers get a bonus when the factory does well.
Now for my bombshell: We are settled that it is the amount and not the percentage that is of importance here. As of today the government needs that figure that we called X, Make that the baseline and from next year on (even after adding inflation) go after X plus a margin. What is this margin and what do we do with it? That's the whole beauty of my proposal. We throw away the margin in the subsequent year's tax by lowering the percentage of tax. Let's say the for every 3% extra margin of tax collected, the tax percentage for that item is dropped by 1%. The result than becomes obvious also: Lower taxes means cheaper goods, cheaper toy dogs. The tax man should like this idea also. When the percentage goes down with the amount going up, the Audi that he buys would cost less; the price would be the same but the tax and hence the total amount would be less.
The tax man then gets a single target: For the area that he collects tax from, the area that he is responsible for collecting the 100 amount from, bring the tax percentage down to 1%. The first department that does it, everyone employee gets an X Box.
And this, ladies and gentlemen, is why I will never be an economist; I have scary ideas. I have ideas that rock just too many boats. A 1% tax? What an idiot.
There are many things that I do not like about it. Perhaps some of you share some of my dislikes, perhaps some of you have other things that not as per your liking. If so, go and write about it yourself; this is my blog.
What is there about it specifically that I don't like? I promise I'll get to it. Eventually.
Consider, if you will, the various people that you see when you go around town in a typical day. There are shop keepers selling everything from liquid soap to bulldozers, from BMW's to frozen chicken sandwiches, from plastic toys (guaranteed to break the moment your child unwraps them) to cats of questionable pedigree. The shops come in all sizes and shapes; along with a plethora of advertising to get you to buy from them.
The retail outlet buys from middlemen or, sometimes, from manufacturers. The producers have these great big factories with a legion toiling away to produce the goods (why does that raise an image of dwarves under mountains?) all the way down to tiny, dark rooms with single people assembling, weaving or employing whatever manner to put together the stuff that you buy.
Then there are people who grow grains and pineapples. There are those who dive for oysters - although no one actually does that any more; they grow oysters in industrial quantities in huge ponds. There are those who extract oils from the ground and those who work the mines (no, not dwarves).
There are those like myself who sit in front of computers and write software that you use to balance your cheque books and to crush candies (as if we don't waste enough of our lives).
There are teachers and firemen, ditch diggers and bankers, pilots and people who wash the tires on the airplanes (whatever that profession is called). I even saw an airport security guy whose job in life is to sniff shoes. It's a living, I suppose.
People, lots of people, doing lots of work. There are those who employ others while they sit back. Although, if you think about it, they worked long and hard to make the money which now allows them to sit back (not counting those who stole it or married into it).
As I said, a whole lot of people. They have two things in common. Yes, they have other things in common, but for the purpose of this post, in case you were wondering, there are two.
Firstly, they work to make money. Secondly, the government takes away a portion. Ostensibly, this is to run the machinery of government itself which, as you see, is completely circular logic. Let's assume that the government employees do not use your tax money to buy villas on some island in the Caribbean or flat screen HD TV's to put into those villas. Yeah, let's just assume that.
The original taxation was the tithe to put food on the king's table and for the gentry to buy silk. Some of the tax went to pay the army to raid other nations for the silk that they had and to defend themselves from raiders coming after their silk. There we go into circular logic again.
The town volunteer firemen would go to the aid of only those who had paid the fire tax till someone decided to make the fire tax universal. This was actually so that the firemen would not waste a trip to a defaulter's house.
Custom duty started with port officials in England taking money from merchants importing wine from France. That annoyed the merchants who asked why they should start giving money instead of taking it to get people drunk. The reply they got was: This is your customary duty to the king. And thus, history was made.
Today, we have the Tax man. He doesn't earn for himself. He produces nothing. He provides no service. All he does is to take a part of the money that you worked for. All so that the tax collected pays for his salary. No, that money doesn't build roads; there's a separate tax for that.
Part of the money pays for services that the government does provide: police, army, and I'm trying to think of more.
So, let's have another assumption here that the tax that the government takes is (partially) used to provide services.
How much does the government need? A budget is prepared each year with expected tax to be collected and amount to be spent. Adding a bunch of obvious assumptions, let's accept the budget. Let's just say that X amount is needed to meet the expenses. Add another amount for emergencies, another for reserves and another for "miscellaneous" and we arrive at an amount of Y.
Now, the point of this post is that X and Y are amounts. You can call them figures or whatever, it all means the same; it is a number (with lots of zeroes).
On the other hand, when you import crude from the Middle East, or when you sell a pencil, or when you get your pay check, the government does not deduct an amount, instead, it deducts a percentage. How did the amount get converted into a percentage? That's easy enough to answer: They carried out a lot of calculations after putting in a horrendous amount of assumptions (I'm so tired of that word) to come up with the percentage that should be taxed when a bottle of perfume (no, not wine) is imported from France.
At the end of each quarter and financial year, the same bunch of people sit down to figure out which assumptions were missed or just plain wrong, and what we have is called a "shortfall". This shortfall is added to the calculations for the next year's budget and the whole circus starts again.
Here is what I propose: Make those tax men work. No, not the army nor the street cleaners nor the lamp lighters; they already work. I mean the tax men. They have the responsibility to collect taxes, so make them responsible for generating the amount. Plus, make it the amount and not the percentage.
The key difference here is that if an amount of 100 is earmarked as that to be collected from those who import rubber toy dogs from China, make the tax men responsible that enough toy dogs are imported to allow collection of that amount of 100. With the percentage collection, he doesn't really care if the import goes up or down.
The tax man who is given the target to collect the amount of 100 from people receiving their salary should also be given the target to ensure that enough people are employed to gather that amount from. How? It's my job and my responsibility to deliver a piece of code on time. If the tax man doesn't know how to do his job, well, can anyone spell "incompetent"? Here's a suggestion, lower corporate taxes for companies employing more people so that more salary tax is collected. Here's another: Start advertising on the benefits of having a companion for children that doesn't need to be fed to increase the import of toy dogs. In other words: Go do your job!
And so on, all the way down the line from import and manufacture to retailers and lawyers.
Here's the second part of my suggestion, which is an obvious part of the above: Give the tax man a reward for achieving his amount target; that's how the private sector works where factory workers get a bonus when the factory does well.
Now for my bombshell: We are settled that it is the amount and not the percentage that is of importance here. As of today the government needs that figure that we called X, Make that the baseline and from next year on (even after adding inflation) go after X plus a margin. What is this margin and what do we do with it? That's the whole beauty of my proposal. We throw away the margin in the subsequent year's tax by lowering the percentage of tax. Let's say the for every 3% extra margin of tax collected, the tax percentage for that item is dropped by 1%. The result than becomes obvious also: Lower taxes means cheaper goods, cheaper toy dogs. The tax man should like this idea also. When the percentage goes down with the amount going up, the Audi that he buys would cost less; the price would be the same but the tax and hence the total amount would be less.
The tax man then gets a single target: For the area that he collects tax from, the area that he is responsible for collecting the 100 amount from, bring the tax percentage down to 1%. The first department that does it, everyone employee gets an X Box.
And this, ladies and gentlemen, is why I will never be an economist; I have scary ideas. I have ideas that rock just too many boats. A 1% tax? What an idiot.
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