Friday, December 15, 2017

How to destroy America

Use a catchy name such as Make America Great Again.  Then lower corporate tax rates.

Why destroy America
First, like climate change or exploiting whale oil, it is more a matter of whether there is a dollar to be made by ignoring the destructive consequences of that activity,  than seeking the destruction itself.  The republican party is owned by those wanting profit despite the consequences of destroying America.

The media wants to destroy America for its sensationalist entertainment value, but also because they are controlled by Republican destroyers.

What a destroyed America will look like
First a banking crisis with currency devaluation and economic decline.  Then the only technological progress being tools to protect the oligarchs from the poor masses, and ethnic/racial cleansing programs to address the concerns manufactured for the slightly less poor.  Greater totalitarinaism from government until it defaults on debt.

Corporate income tax cut to 20% will destroy America
A lower corporate income tax necessarily destroys jobs and business spending, because spending results in a tax reduction equal to the tax rate.  Lower rate means lower deduction.

Business spending is done in the anticipation of making more money.  The preferred source of that money is always current profits rather than dipping into business savings, and so if there is an idea that has hope of being profitable, it is invested in regardless of tax rate.  Also, regardless of tax rate, the after tax return is the same, but with a higher tax rate, there is lower risk:  The higher tax rebate is certain;  the future profits not.  This applies even in the rare cases that the investment comes from a dip into corporate savings.

The effect of cutting business tax rates is to provide incentives to cut costs in everything that doesn't obviously enhance profits:  Executive assistants, quality assurance, customer service, newer computers/phones, conferences in Hawaii... any cost cut that is theorizable to increase profits.  The cost of all business spending under a 20% corporate tax rate ($0.80/dollar) is 23% less competitive (more after tax) than under a 35% rate ($0.65/dollar).   Lower business tax rates shift the balance towards greed and away from ethics in all decisions.  Bribes, illegal immigrant cash paid exploitation, and other off-the-books payments are 23% more competitive.

Another provision of the tax bill also inexplicably increases risk of investment for no good reason:  A cap on business loan interest deductibility.  Normally, a restaurant owner that wants to expand to a new location could feel comfortable that the incomes from the new and old business would cover the loan interest.  Even if he hopes that it will greatly exceed the loan interest, as long as he's fairly certain that it will cover it, it makes sense to go with it.  With new rules, if the new restaurant doesn't meet high expectations, the business may owe taxes that exceeds its net income.  

When every business is directly incentivized to spend less, it is necessarily destructive of jobs and the economy.  Any people telling you different are either retarded imbeciles who should keep quiet, or actively lying and intentionally destroying America's economy in order to channel a larger share of the pie to their masters.  Even more simply, stock market salesmen use tax cuts as a good sounding story to get you to buy more stocks, even when the job creating story is a lie, and even the intrinsic effect on stock prices themselves is, in most cases, a lie.

Republican masters and desperation

The Koch brothers and other energy dead enders (climate destroying and murderous (polluting, explosions, geopolitics) energy that is already more expensive than renewables without even including the environmental restoration costs) are the key group intent on destroying America.  They and other billionaires are the ones pushing for this tax plan, really as a single issue for them, and are the corrupting influence that allows the republican party to remain influential.  They are also threatening to withdraw support for what will be difficult mid term elections if they don't get the tax plan they want.

The corporate tax cut, and estate tax elimination, electric vehicle credit, continued subsidization of carried interest and 401k plans for wall street, are the key aims of America's destroyers.  They want this tax plan, not because they wish to dip into their or their corporate savings to create jobs, but so they can die with more in savings.

Many key republican Oligarch minions have ties to Russian Oligarchs and/or mobsters.  Its my opinion, that though most of those relationships are to facilitate money laundering, the support that the Russians provide these minions and republicans is to facilitate their intended destruction of America.  At any rate, Americans should be more concerned about Americans trying to destroy America than whether Russian agents left a paper trail in assisting them, which since they could use their own money, is unlikely.

The foreign competitiveness argument
By leaving much of the transfer payment structure, there's no effect on tax competitiveness.  There continues to be opportunity to shift profit to low tax countries independent of where the revenue comes from, but a lower US tax rate encourages putting production expenses elsewhere.  There may be a bit more profit assigned to US jurisdiction as a result of this, there will be political grandstanding of HQ's announcing a move to the US, but the real spending of production may move to Europe if that makes sense (wage costs and talent usually much more relevant than tax considerations in where to produce).

Lying fuckface Tim Cook, CEO of Apple, has made 2 disgustingly absurd statements in support of the parasitic oligarch destruction of America.

First, he's committed $1B to an investment fund as a purely political grandstanding measure he falsely claims is in anticipation of the corporate tax cuts.  Lying fuckface controls $270B in cash, and tax cuts have no bearing whatsoever on this political grandstanding.  He can make any investment he wants by borrowing against cash (/assets earning the same return as the loan) held overseas.  If those investments fail, he will reap a larger tax offset if the rates are lower.  Though this perfectly offsets the risk for paying taxes if the investment wins (and so the investment decision is completely unaffected by tax rate), if the investment pays off, its more cash for the hoarde regardless of tax rate.

Second, he's said "Why repatriate cash and pay 35% tax when we can pay 0%?"  So then why pay 14%?  Placing surtaxes on foreign subsidiary profits should shift more spending overseas to reduce overseas profits.  With blue state surtaxes, R&D should be shifted overseas where it will reduce profit at higher tax credit, and where specific research credits are available.  Arguably has a fiduciary duty to shareholders to do so.

An aside on the hamster wheel economy
The US QE money printing program was used, if  as we are told, to save civilization from collapse.  Though fundamentally similar to Zimbabwe monetary policy, the quid pro quo arrangement between the central bank and the banking system did successfully keep banks solvent, interest rates low, and asset prices high:  Banks and rich bond investors were offered the sure trade/free money. of buying government bonds ahead of the Fed.  That free cashflow and profits flowed down to other asset categories such as stocks and housing.  This further helped banks trading portfolios and loan collateral value.

Its entirely fair to resent the extreme inequality in wealth increases that the "recovery" permitted, but the lack of job and income growth would have been much worse without the resulting bank solvency, and relatively broad trickle down of asset portfolios that sustained some modest spending levels throughout the economy.

While this tax plan is also an attempted stimulus for the rich, it will lead to another banking and asset crash, and in fact harms every economic sector that isn't a monopoly.  The next banking/asset crash may be the last due to the high US debt/obligation burden.  Another round of significant QE and US currency devaluation may avoid public debt restructuring/defaults, but its more likely to take shape as QE for banks and cannibalism rather than QE for people and UBI.

Tying collapse to the corporate tax cuts
The US banking system is ultra competitive, but also very simple.  Loan rates are driven by Net Interest margin (NIM) targets (difference between saving or Fed rates and loan rates). At a 35% tax rate, a 2% pretax NIM results in a 1.3% after tax contribution.  At a 20% tax rate, there's an illusion that the after tax contribution can rise to 1.6%, but if a top tier bank was happy targetting $10B profit for the year under the old tax rates, then it is happy to lower mortgage rates from 2% old pretax NIM to a 1.62% pretax NIM to make that same 1.3% after tax NIM under the new tax rate proposal.  One bank cannot offer a 4.38% mortgage while its competitors offer them at 4% and keep business, so if any one bank targets the same profit shitload it was going to make under the old plan, all of its competitors must follow.

While lending is a bank's main business, its overall profits are significantly affected by trading and loan losses.  Lower pretax NIMs significantly increase the risk that loan losses overwhelm expected loan profits.  Higher tax rates reduce the risks of losses banks are particularly prone to from erasing its "trickle" loan income.  The flawed tax treatment for business loans is going to reduce demand for commercial lending, and so pressure lending rates to be even more competitive.

On the personal tax side, several provisions reduce housing affordability, and so necessarily decrease housing prices: caps on property tax and mortgage deductions, and expected interest rate rises.  Housing values everywhere in the world are a function of mortgage availability/affordability.  The US banking system is too fragile to stop the hamster wheel economy of perpetually increasing asset (mainly homes) values.

The 19th and 20th century economy are by far the dominant employers in the US.  For the most part are also highly competitive:  Auto, Aerospace/airlines, mining/materials, retail, packaged food, transportation/logistics sectors.  These sectors will also face the same gross margin compression pressures as banks while in an environment of high consumer debt levels, and disemployment related to a 23% cost competitiveness penalty for US expenses.  For multinationals, a 23% relative competitiveness improvement to any foreign production costs will mean less domestic production competitiveness and associated jobs, or more likely, a near 23% reduction in US dollar strength, spurring a race to the bottom in global currency valuations.

20th century economy companies are not doing as well as monopolists and the tech sector.  Lower gross margins, and lower value of accumulated tax credits in the old economy will risk bankruptcies and reduce the value of bailing them out of or persisting through the risk of bankruptcy and sustaining their labour force.  For those profitable tech companies, any foreign profit surtax encourages bringing foreign profits to 0 potentially by moving all R&D overseas.  The important jobs that determine long term international competitiveness should leave quickly if the intent of the ruling party to destroy America is understood.  Whatever California based protest and opposition funding there is will be irrelevant so long as gerrymandered voter suppression is processed by unaccountable voting machines installed by the more corrupt party or their foreign agent hires.

The false simplicism that a corporate tax cut will boost non-monopolist stock prices is a narrative the financial market salesmenship industry portrays in order to pump stocks.  Even in the case of monopolists, a $100/mo cable TV package or $1000/mo HIV medication doesn't do well in Somalia when few people can afford them.  In fact, the only rational value of a corporate tax cut push is the glorious opportunity generated by a false stock pump, where oligarch management has insider information for the appropriate timing of the collapsing dump, and in the ensuing "drowning of the collapsing government in the bathtub", in the desperate reach for social funding, gratitude from the politicans that stimulated the collapse, will hand out new privatized monopolies of government services to the oligarchs that sponsored their power to do so.  Collapse is in fact the only profitable rational intent of a corporate tax rate cut within the WTO-discretionary-profit-allocation.  A world where the S&P 500 pumps to 3500 before collapsing to 1000 is gloriously preferable for those positioned with insider information to guess the top than a hamster wheel world that tediously inches forward sustainably.  Oligarchs aside, small-proportion asset owners have a greedy impulse that prefers a collapsing unsustainable pump (followed by dump) relative to boring sustainability, as there is an overconfident tendency to anticipate the proper sell/dump timing.  Banking and stock panics always follow business tax cuts because of the widespread greed-blinding stupidity on this issue.

Risk of global race to the bottom and collapse
While Americans are disproportionately stupid, the huge investment in packaging lies to sell to Americans can be repackaged cheaply to sell to other jurisdictions.  Nations who've already invested in attracting meager HQ and international tax arbitrage jobs through low tax rates might be tempted to lower them more.  In fact, for multinational oligarchs with monopolist power, lobbying global politicians to sweeten their tax arbitrage opportunities in response to US move will come naturally.

To avoid this race to the bottom, just one nation needs to adopt natural/cashflow taxation as described below.

Natural/cashflow taxation permits a race to the top

Natural taxation is:

  • A flat business tax rate that applies to all cash inflows within the jurisdiction, and same flat tax deduction for all cash outflows including investments and dividends within the jurisdiction.
  • All payments/receipts have a counterparty in the same jurisdiction, so each transaction is at worst tax neutral.  No tax implications exist for transactions outside the jurisdiction.
  • The same flat tax rate + small surtax (0%-3%) applies to personal income.  A 10% surtax applies to personal investment profits.
  • No payroll taxes.
  • Basic income is funded from tax revenue surplus, thereby making the flat personal tax rate progressive on an effective tax basis.
The big difference for multinationals between natural taxation and WTO-discretionary-profit rules is that there is no discretion in taxes due.  Sell somewhere, and pay at that jurisdiction's rate.  Make somewhere, and receive a cash refund at that jurisidiction's rate.  Its no longer possible to sell cars in a high tax jurisdiction at low profit (due to made up expenses paid elsewhere) while selling the same cars in low tax jurisdictions for high profit (again with expense assignment discretion).  Panama/Paradise papers tax avoidance schemes are impossible.

The big difference for societies is that imports pay the full tax rate on their full revenues to their society, thereby participating in funding its programs or UBI.  Export oriented business models that spend more than they make locally are supported at near net 0 tax cost.  The 3% personal income surtax in fact ensures that the tax revenue generated by their activity in the local society is 3% of their spending.  But spending is always the entirety of jobs and supporting of more local spending.

UBI is also fundamentally a job creating program.  There's money to collect from UBI recipients by providing goods and services in exchange for it.  Everyone who wants a job has a much easier time obtaining one (if those who don't want jobs refuse to work), and the boost to innovation in addition to earning cash back on early year losses (tax credits) comes from the freedom to pursue ideas without starving, or having the fortune of a rich family patron.

Not only is this a fair and honest tax system made to dial in any desired growth/job creation/pro-wage (higher tax rate) vs wealthy paradise (lower tax rates that allow for lower consumer prices), but because the US is breaking WTO rules first, it can be launched to expand its viability for other nations.  Any competitive disagreement among trading partners is best addressed by matching the tax strucuture and setting  the tax rate to your own society's preference.  This mechanism could even be applied between US states to account for each's desire for fostering innovation and welfare

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