Taxation, the States, and Trade

The State of Connecticut, and other states, are having increasing difficulty meeting the conflicting demands  of a declining tax base and increasing need for its services.  Next year the state must cut over $1 Billion of valuable and even critical services in order to balance its budget.

A recent article in Forbes ascribes the cause of the deteriorating tax base to the imposition of a personal income tax 25 years ago. (25 Years, $13 Billion Lost: Connecticut Income Tax Continues To Fail) *

But let’s look at something else which could be a cause:  According to “State Smart,” ** the state of Connecticut, in 2014, paid out  $53 Billion dollars to the United States government in taxes.  However, that year, it only received am estimated $45 billion in benefits from the federal government. Every year the people of the Connecticut give out to other states $8 billion.  The state and local share of that $8 Billion, (about 13%) works out to about $1 Billion in lost taxes.   And that is just one year.

It is up to the state’s Congressional delegation to address this problem, if they can.  In the meantime, the state is running the race with one foot in a bucket.  While bad, this can be mitigated.  The problem for the state, since it is easier for rich people, and more generally for businesses and corporations, to move than the working and the poor, is that the state is only allowed a regressive tax system. Since Connecticut is stuck in the shadow of pricey New York City, it must also pay more for what it buys.  These are not insurmountable problems.  They mean, however, that the state must attract enough wealth generating business activities that the tax load is not so burdensome upon the poor and the working class that it cannot be mitigated by proper state expenditures. And this means the state must have tax policies, and spending policies, and regulatory policies, which are attractive to those kinds of business activities which bring in money.

For instance, Corporations collect wealth from their many operations, and the place they accumulate the most of this wealth is at their headquarters. Other business activities which accumulate wealth are corporate offices in general, laboratories and factories.  All of these activities bring money into their communities, and into the state. 

These are activities the state wishes to attract and encourage.  While it cannot directly subsidize them, (Well, nominally, it could,)  it can capitalize the infrastructure these businesses rely upon.  Investing in roads and railroads, human capital, but perhaps even more importantly efficient institutions and the resolving of conflicts, including those inevitable conflicts businesses have with the state itself.   This will reduce the many costs of doing business in this or any state, and enhance the profit margins. 

For comparison, stores, in particular chain stores such as Walmart, Home Depot, CVS, McDonalds, (and Amazon) and so forth, take money out of communities, and out of the state.  Walmart itself takes several billions of dollars out of the state of Connecticut each year, and sends those dollars off to Arkansas. Much of the money which goes to the larger cable and telecommunications also leaves the state. This loss of money the state can, with proper taxes, and by taking the part of the communities and local store owners in their struggle with these large retail chains, diminish. 

There are other activities, which themselves do not generate wealth, but merely rearrange the ownership of wealth.  These may also be taxed.  Some of these businesses, like real estate, cannot leave.  The others, since they do not actually generate wealth, may be allowed to leave without penalty to the state’s economy.  These would include many personal services of all kinds.  Most of these personal services are elective, and raising their costs would not affect the well being of most people directly.  Most especially, these taxes would not have a critical affect on the well being of the poor.  For those services which were not elective, such as child care, the needs of the poor could be supported.  Indeed, for something like child care, the state would in general have and interest in subsidizing it for all possible clients, as this would form a more attractive workforce environment and this would be something to attract businesses.

The state is in the business of allocating resources.  Taxes take those resources from one use and expenditures put them to another.  In many cases, this fulfills social needs that the market cannot fill.  Quite simply, the market simply cannot supply any particular thing or service to everybody.  The laws of supply and demand guarantee that there will always be those who cannot afford fuel, who cannot afford shelter, who cannot afford adequate food, without intervention into the marketplace.  Private intervention, that is, charity, cannot suffice. For the charitable will find themselves at a competitive disadvantage to the mean and selfish.

As the production of resources within the state declines, the state must reach out to the production of other states, by attracting the functions of businesses which accumulate the production from other states.  And the state government must adopt policies which attract those functions.  It is only once this income is spent by the corporations and businesses that the state attracts, that the state can begin to collect taxes on it. And increasingly, the state becomes unable to directly tax its own production.  As due to increasing offshoring, domestic production declines, (And without tariffs, taxes cannot be collected on production in foreign countries,) competition for the remaining factories, other remaining production facilities and the headquarters of domestic enterprises, the offices and laboratories, will intensify. Only the intervention of the US government can stop this spiral to the bottom.  But in the absence of such intervention, a state government which understands this reality, and which is able to adapt to it will, for a time, prosper.

So only the actions of a government can assure that the needs of all of society are met. A government which fails in this, will eventually fail altogether, one piece at a time, as first the bottom, and then each higher level of society falls below its ability to sustain itself.  Only by capturing an adequate share of the incomes of the very wealthy can the government succeed at this. But first it must attract these incomes to itself. 

Since all taxation is against production, the government must capture all productive streams, in order to extract necessary income. Any streams it does not capture will be more competitive than those which must bear the additional cost of taxation.  When an economy runs a trade deficit, it must also tax foreign production, since otherwise domestic production will be uncompetitive with foreign production, and domestic production will be replaced, and government revenues decline.

Non-productive activities must also be taxed. Otherwise, economic activity will preferentially go to non-productive activities, since these will have the greater nominal profits.  In particular, the non-productive activities of the wealthy must be taxed, to prevent decapitalization of the economy.

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* http://www.forbes.com/sites/rexsinquefield/2016/05/23/25-years-13-billion-lost-connecticut-income-tax-continues-to-fail/#589c29771b80  (and others)

**https://www.nationalpriorities.org/smart/connecticut/

The Democratic Party is really not very Democratic

The Democratic Party is really not very Democratic

Hey!  All you Democrats out there! The Democratic Party is really not very Democratic. Consider first the “Superdelegates.”  Not only does the Democratic electorate have no say in who they are but it has no say even about how many “Superdelegates” are designated by the Democratic National Committee,. Not only is the voting process at the Democratic National Convention weighted by the so called "Superdelegates," but the Democratic National Committee is itself weighted by the inclusion of elected government officials and party functionaries.  The executive committee of the party is even more so. You have to check the bylaws for the prescribed composition.

Anyway, Article Two, Section 4 of the Charter describes the procedures by which ‘ordinary’ delegates are chosen, and subsection (e) seems to exclude the creation of a significant block of delegates who were selected without the “participation in good faith of all voters…”  BUT:  Article Two, Section 5 throws democratic processes out the window.  While the number of elected delegates is limited by the charter, the number of delegates which can be ‘designated’ by the Committee is not.  Basically, Section 5 allows the appointment of any number of delegates by the Democratic National Committee, and if there are a mere 700 or so of them, it is because the National Committee has exercised some restraint.  That is by my reading.  For your convenience, I provide Section 5, so you may interpret, and decide, for your self.

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THE CHARTER OF THE DEMOCRATIC PARTY OF THE UNITED STATES

ARTICLE TWO, SECTION 5: The delegate vote allocable to each state shall be determined as provided in the Bylaws, consistent with the formula:

a. giving equal weight to population, which may be measured by electoral vote, and to the Democratic vote in elections for office of the President; and

b. giving such additional delegate votes as may be specifically designated by the Democratic National Committee in the Call to the Convention, subject to such conditions as may be set forth by the Democratic National Committee in said Call, for the purpose of providing incentives for scheduling the event constituting the first determining stage in the presidential nominating process in each state later in the year of the Convention than such event would otherwise be scheduled in the absence of such incentive; and

c. which shall also provide additional delegate positions to members of the Democratic National Committee; and

d. which may also provide additional delegate positions to Democratic elected public officials specifically designated by the Democratic National Committee in the Call to the Convention, subject to the provisions of Section 4.

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Subsection a: is the sop to democratic process. The rest of the Article is the work around. The Charter and Bylaws of the Democratic Party and The Rules of the Republican Party, can be Googled, and any participant in our political processes should.

In a way, it is not in the interests for those members who are elected or appointed government officials for the Democratic party to actually be successful.  The greater the success of the Democratic party, the greater the competition for positions on the National and Executive committees.  

For comparison, I have also checked out  The Rules of the Republican Party.  The Republican document seems to be more procedural, and the Democratic Charter more purpose driven.   The irony is that, (At least as far as I can tell.  The comparison is not easy.  Both documents seem to me to be unnecessarily obscure.) under their Rules Republicans are more democratically represented by their party officers than the Democrats under The Charter are by theirs.  The Democratic Party structure is rigged in a way which caters to the establishment and is contrary to democratic principles.  The Republican Party structure under its rules, anyway, is not.

The Democratic Charter seems to go back to 1972.  (This is from the revision of 2012.) So there has been plenty of time for the appropriate people to notice this and bring it to the attention of the party membership.  

A note of small humorousness:  The Republicans have no mention of God in their preamble, nor of the Constitution.  The Democrats mention both.

One other important question:  Why is the government at all involved in the primaries?  No one is elected to any government office, so why is it the government that is concerned with fairness or procedure.  It is the concern of each of the various parties, to assure fairness, in their election.   (Or not.  The officers of the party may believe that an unfair nominating process will not compromise, and may enhance, the electability of their party's candidates in the general election.)  The members of the various parties elect candidates they hope are both electable, and perhaps equally important, represent the interests and desires of a majority of that party's members.

 

As things stand, one party must overcome the opposition of the other party to follow the procedures it considers favorable to itself, and the other party must follow the procedures laid down by the opposition party, whether or not those are the procedures desired by its electorate.  

These interests of the party electorate are not necessarily the same as the interests of the government, in particular the interests of the establishment politicians of the various states.  Where they diverge, the government may be expected to interfere and impose conditions which harm the interests of the electorate.  Where the government imposes procedures, the government must be expected to impose procedures which distort the primary process to favor its interests, rather than the party's.  Granted, the party’s interests are not necessarily coherent.  The party elite’s interests are not necessarily the interests of the party voters or the rank and file, as they may expected to align more with the government’s interests.  Indeed, since one or another party is the government  only if the government is disinterestedly and competently serving what the voters desire.  Simply, it is the job of each party to run their own elections.  It is not the government's job.

In fact, it is in the interests of each party to establish those rules and procedures which that party considers the best able to attain the goal of nominating the candidates who best most likely to win in the general election, while taking those positions the majority of the voters of that party desire.  Failure to do so would disadvantage not only the particular party in the general election, but compromise the ability of the government to  properly respond to the needs and desires of their electorate.   It would thus  compromise their ability to govern.  Democracy is the best system while it is the most responsive to the electorate.  When it fails to do this, when it corrupts the process or violates the principles of impartial access to information by the electorate, it is no longer.  

Now, as it is, the government does subsidize the primaries by providing and servicing the polling places and vote counting and so forth.  But as we have seen in places like Arizona, the government need not always provide these services fairly and in the desired quantity.   So the government could provide the necessary services while allowing the various parties to form and follow their own policies and procedures.   Provisions could be made to accommodate the minor parties.  

Disarming Terrorists

Recently, a nearby community college proposed arming its guards.  Let’s suppose it wasn’t just to protect against ISIS, but against the locally grown dangerous and the locally grown insane.  One could claim that there is cause, since a few years ago a young individual brought an assault rifle into a neighboring elementary school and killed 20 small children and  6 adults. 

While arming the guards may perhaps make the students at the particular college safer, while they are at the college, it does not address the broader problem:  How to keep society safe, given the wide availability of weapons capable, from use by someone so motivated, of killing a fair number of people very quickly. But if we make that particular college safe, what of other colleges?  If we make the colleges safe, what of other schools?  If we make the schools safe what of the plazas, and the stores, and the factories and the hospitals, and the homes?  What of the water supplies and power grids?

It is clear that what ever we protect, what ever we do not protect will become the target.  And so we must protect it all.  The material cost would be stupendous, not just in capitalization, but in maintenance.  We cannot pay sufficient guards, so citizens must go armed.  And then how to tell, who among the myriad of armed citizens, is not a terrorist, armed and on his way to destruction.  Further, even if armed, how can the citizens be protected against suicide bombers.  Explosive fireworks, albeit of limited gunpowder content, are available in 26 states.  Will potential terrorists find these limitations to be insurmountable? 

The fact is, we cannot prevent any terrorist, of either foreign or domestic origin, once sufficiently determined, from inflicting damage on our society or our infrastructure. 

What can be done is minimizing the strength and power of the motivations behind the terrorist and his acts.

Two things must be done.  The first is to stop inflicting violence.  The second is to excite admiration, rather than to incite envy.

Politics in More than One Dimension

The terms ‘right’ and ‘left,’ as political terms in use today appear to me to be applied in an ad hoc and makeshift manner.  Certainly, there seems to me to be no clear theory underpinning their application to politics.  So let’s develop one.

We will start with two positions: 1)  Society should act to benefit the individual.  We will suppose that to be the premise of the right.  The nest step is the notion that society is best served when it serves the individual.  The extreme logical conclusion is that society can be sacrificed for the individual.

                                                      2)  The individual should act to benefit society.  We will suppose that to be the premise of the left. The next step is that the individual is best served when he serves society. The extreme logical conclusion is that the individual can be sacrificed for society.

This is just where we are starting.  We will come back to this. 

This will not give us our usual alignment of interests.  For instance, from this basis, universal health care is something which should be desired by someone on the right. On the other hand, the justification for national defense is found on the left.  So, apparently we have another axis, independent of the left or the right, which is the size of government.  The argument against universal healthcare, then, is against a larger government, and in favor of a smaller one. But it cannot be one of efficiency.  There are dozens of examples where universal healthcare is more efficient at delivery of services to citizens than what happens in its absence.  Neither can it be a liberty argument, and it cannot be a danger argument.  

We also observe that while totalitarianism is indeed on the left, anarchy, reputed to be a phenomenon of the left, is under these premises, in fact a possibility of the right.  Note we have said nothing about inequality.  We have not mentioned any relationships between individuals, but only between an individual and the rest of his society.

Now our two premises are incomplete, and in fact pejorative of the left.  We have placed the benefits to the individual on the right, and the costs to the individual on the left.

Lets go back to what we see. Or rather what we are told is what we see:   We see Right and Left.  We see Republicans and Democrats.  We see the rights of the individual versus the demands of the state. But I do not think that is the real situation.

Consider instead that all politics comes down to who gets the benefits, and who bears the costs.   And remember, all benefits have to be paid for.  The extreme positions on each of these then is either the individual as a particular, or society as a whole.

But this gives us the following table:  I have also included some rubrics one might consider these positions, and their arguments, to go under.

  Society pays: Society Benefits                     Society pays:  Individual benefits

           (Communism)                                                      (  Capitalism )

Individual pays: Society benefits                 Individual pays: Individual benefits  

           (          ?           )                                                   (Libertarianism)

          

So these statements are like the corners of a physical table.  They are the extremes, and all of politics, all the actions of and in society, goes on on the surface of this table, inside these corners. 

                     

Now, no society really exists, or has ever existed, at the corners, or even at the edges, of the table.  Robinson  Crusoe, for instance, being both the individual and his complete society, is squarely in the middle.   They are ideals that (misguided) individuals strive for.  They are misguided because these corners properly apply to different aspects of every society.  These values are themselves a higher dimensional structure than we have come to understand, and -  and the table,  it’s actually a tetrahedron.  I am preserving the line of my thinking because, even described, it is far more difficult to jump directly to the tetrahedron.

But to return to consideration as a table, the left-right axis is from the lower left corner to the upper right hand corner.  The lower left corner, we can substitute for the question mark "altruism."  Or, taxes.  Similarly the upper right, which we have shown is congruent with universal health care, we have put capitalism. As we have stated above, there is another, independent, dimension, which is size of government.  On the right we can have all government, (which de facto I suppose would be fascism,) and on the left no government, which we have named "altruism," extending the definition of the word to include the corresponding political structure, however it may be constructed.