Tax Foundation: America one of the Most Stifling Countries, Hurts Economy

This is why we can’t have nice things:

-because the government takes them. The U.S.A. has practically the worst tax system in the industrialized world. According to the Wall Street Journal, the Tax Foundation has ranked the U.S.A. 32 out of 34 countries in terms of “competitiveness and neutrality” in tax laws. In fact of the two countries worse than the United States in their taxing policies, one of them, France, has an actual Socialist as President.

A competitive tax code is one that limits the taxation of businesses and investment. Since capital is mobile and businesses can choose where to invest, tax rates that are too high “drive investment elsewhere, leading to slower economic growth,” as the Tax Foundation puts it.

By neutrality the foundation means “a tax code that seeks to raise the most revenue with the fewest economic distortions. This means that it doesn’t favor consumption over saving, as happens with capital gains and dividends taxes, estate taxes, and high progressive income taxes. This also means no targeted tax breaks for businesses for specific business activities.” Crony capitalism that rewards the likes of green energy with lower tax bills while imposing higher bills on other firms is political arbitrage that misallocates capital and reduces economic growth.

But What about Sweden, Finland, and Norway with their Safety Nets and Universal Healthcare?

All those countries liberals talk about as being way better than the U.S. in terms of what “the government provides” for the citizens; yea they have better tax systems. You see, in those countries their tax systems do not seek to “punish the rich”, so they can collect more tax revenue, without discouraging business. This in no way negates other arguments about why it is bad to have centralized and socialized government programs, but it does however show that America is essentially immature in their taxing policies.

America has an almost 40% corporate tax rate, and a progressive income tax. This means people who earn more money pay not only a higher amount of money, but a higher percentage of their income to the government. It should be obvious why this limits growth, and gives incentive to move money to better tax regions outside of the United states. The poster children of socialized nations however—Sweden, Norway, Finland–do no “punish the rich”. They are far less likely to tax an estate when a person has died, or capital gains: money made from investment.

Keeping estate taxes at bay means people save more money, knowing they will be able to pass it on, leading to more capital for banks to give out housing loans for instance. And taxing investment income less means people are more likely to invest, since the reward is greater. That type of tax code therefore rewards saving, fiscal responsibility, and economic investment, while deterring frivolous spending through consumption taxes, like a higher sales tax. The rich still pay more if they spend more, but not just for simply earning the money.

nicethings

Newsflash: The U.S. is Corrupt

I know, we like to think of the U.S. as pretty good when it comes to governing. But the United States government uses its tax code to punish their “enemies” and reward their “friends”. This is crony capitalism: different companies and individuals play by different rules depending on who they know. Capital generally flows to the most successful prospective investment, but the government can change that by making one investment more risky, due to a higher tax burden. In turn, capital flows to companies who will not be as successful in general because they were chosen based on the tax breaks the government gives them, versus the quality of the product or service.

So here’s the recipe for a successful crony capitalist economy, where the government gets to pick the winners and the losers. 1) Set the corporate tax rate the highest in the world:

The accounting firm KPMG maintains a corporate tax table that includes more than 130 countries and only one has a higher overall corporate tax rate than the U.S. The United Arab Emirates’ 55% rate is an exception, however, because it usually applies only to foreign oil companies.

Check. 2) Now retain the ability to arbitrarily lower said tax rate on an individual basis, so that companies you favor have an economic advantage over companies who play by the rules you set. And there you have an economic dictatorship, or “Fascist” State. (Working definition of Fascism: Complete economic control by the government of a country; the system of government characterized by total control over the means of production, versus ownership of the means of production, as in Socialism).

But we could also take it one step forward and implement oppression over the proletariat using our high corporate taxes. You see, there is a misconception that somehow taxing businesses at a higher rate will be better for workers. This is absurd; if companies pay higher taxes this leaves less money for paying employees. While some of the difference is made up through higher prices for the consumer, workers’ pay also takes a hit.

Abundant economic research, by Kevin Hassett and Aparna Mathur among others, has shown that higher corporate taxes lead to lower wages.

Lower wages mean people must work longer hours, giving them less free time, and therefore a lower quality of life. But the cycle does not end there. Less free time means more dependence on government institutions to tell us which products are safe through the FDA, USDA, EPA, CFPB, etcetera, thus giving even more control to the government to pick the economic winners and losers. Diminished free time also means fewer people have the time to pay attention to politics, and must rely again on government controlled media to tell them who to vote for.

These are not the only factors, but some key economic methods used by government to control a population. Therefore based on the evidence, it would seem countries like Sweden, Norway, and Finland care less about controlling their population than the U.S., despite having arguably more socialist tendencies.

Wait, High Tax Rates Make Businesses Flee? Duh.

Here’s some statist logic: we continually raise taxes on businesses which burdens both the consumer and the business. The company cannot expand as quickly, nor hire as many employees due to the tax rate. When that company decides to move out of our tax jurisdiction in order to better provide for their customers, employees, and investors, we accuse them of being selfish, corrupt, and unpatriotic. Even though the money taken through taxes by force is often wasted, given to friends of the elite, used to benefit cronies, or spent on jobs and handouts to boost reelection chances of politicians, it is the companies who earned the money, and created the wealth who are the “greedy” ones.

I am talking of course about Burger King’s plan to move its base to Canada in order to take advantage of the 26% tax rate, instead of the 40% rate it pays in America. Hey, maybe they can afford to pay more than minimum wage with all the money they save? But that still wouldn’t make the state lovers happy. Unless businesses and people submit 100% to the government overlords, the state will demonize them.

Obama has called companies that engage in inversions “corporate deserters.” And Treasury Secretary Jack Lew has criticized the companies for failing to practice “economic patriotism.”

“I don’t care if it’s legal. It’s wrong,” Obama told a crowd last month.

But stealing 40% of the company’s wealth each year is not wrong? Why do we allow the government to posture as benevolent public servants, when it is so obviously not true. They are selfish thieves and public slave-masters. The government adds nothing of value to the economy, except by restricting private businesses from supplying particular consumer demands, at which point the government provides a worse product/ service for a higher cost.

The easiest examples of this are the post office, versus private shipping, or the failure of government backed green energy companies to produce alternative energy. The argument can also be made that government roads are more expensive and more shoddy than private roads, though the examples are few due to the government force exerted to complete the projects. And I would certainly argue that the police pose more of a danger to the public since they do not have to compete to deliver a better product for a lower price, as would be required in the private market.

But back to taxes: the Burger King Tim Hortons merger in Canada is one of these examples that leaves me exasperated saying “I feel like I’m taking crazy pills!” Warren Buffet is a main financial backer of BK’s move to a slightly less oppressive tax jurisdiction. Warren Buffet, you may recall, is the billionaire who inspired Obama to call for a minimum 30% tax rate on everyone earning $1 million per year or more… Because making a million dollars each year, and making a billion per year is like, the same thing, right?

But I don’t get it. What happened to the selfless Warren Buffet? Hasn’t he earned enough already? Why would he abandon funding the glorious U.S. government and all the philanthropic work it does? It seems Mr. Buffet understands quite well the detriments an excessive tax rate can have on business. Why would he advocate taxing millionaires more, when he himself will not pay higher taxes? Does he not think millionaire would likewise relocate to friendlier tax regions in the event that the government tried to rob them at a higher percentage than it robs most people?

You want businesses to stay in the USA? Repeal the 16th Amendment authorizing the income tax, abolish the IRS, and get rid of all corporate taxes. Defund the federal government, all the “good” they do is a myth. Let the states compete, and we will see what policies create economic opportunities, and which ones stifle growth by killing the individual freedom to keep the wealth you have created, and retain what is rightfully yours.

Organized Crime Benefits From Regulations

I think we can all agree on the fact that prohibition of alcohol was a huge help to organized crime (and the Kennedys) in the 1920s. So why is it so hard for people to understand how much the drug war helps drug cartels and other crime syndicates? Essentially the government says no one is allowed to sell these things, unless you care so little about laws that you will do it anyway. And voila, we have a robust organized crime network ready to step in with a supply where the market demands a product. What exactly do people think would be different if guns were outlawed?

But not only does making something completely illegal help organized crime, over-regulating or over-taxing something can equally assist an underground economy.

The political addiction to higher cigarette taxes is creating a boon for organized crime. Last month, the Tax Foundation, in testimony before the US Senate, noted that over 56% of the cigarettes sold in New York State were smuggled in from other states. New York has the highest tax on cigarettes in the country.

Many smokers are avoiding these higher taxes, though. They are simply buying their smokes, usually unwittingly, from criminal syndicates.

As documented back in 2009, New Jersey has had the unfortunate experience of seeing total revenue from cigarette taxes drop after pushing through a cigarette tax increase.

I never thought government should be in the business of trying to shape behavior, when it does not encroach on others rights and well being. Add to that the situation where they make behavior worse with unforeseen consequences. They want fewer people to smoke fewer cigarettes, so they make them more expensive, and this creates an underground demand for the cigarettes, which leads to underground jobs where no taxes will be paid in addition to the loss in tax revenue from the cigarette sales. I’m not too concerned about falling tax revenue, the less money the less power. But there are lessons from this.

Higher taxes do not always mean higher tax revenues. Sometimes (maybe always), trying to solve one problem with force, gets you a bigger problem (i.e. mafia). The answer is for the government to stop robbing us and allow prices for everything be decided by market demand, and market supply.

Sugar Tax Considered While Sugar Subsidies Persist

The classic government-creates-problem-government-propses-solution-that-causes-more-problems paradigm is hard at work. How will we ever solve obesity in the USA?! Let’s ban what can be sold at bake sales, and force kids to take food at school that they will throw away.

Almost $85 billion has been handed out in corn subsidies just in the past 20 years. And what is the highly concentrated sugar syrup packed into drinks and snacks partially blamed for the obesity epidemic? Corn syrup. And why is corn syrup so “cheap” to use? Because we already paid for it up front by force with tax dollars, dropping the shelf price, making corn syrup infused products cheaper by comparison to healthier options.

Yet somehow we never talk about the fact that simply removing corn subsidies would be a great first step towards combatting this weight issue, and would save taxpayers dollars at the same time. There is no negative; unless of course you are one of the cronies who receives the corn subsidy. Bon Jovi is reportedly one of the “struggling farmers” receiving a corn subsidy from the federal government.

And now, congress is talking about raising taxes on sugar in order to raise the price of sugary products to serve as a disincentive to buy them. But guess what, the price of sugary products would rise on there own if the government would stop subsidizing sugar producers as well!

Rep. Rosa DeLauro (D-Conn.) introduced this week the Sugar-Sweetened Beverages Tax (SWEET Act), which aims to institute a tax of one cent per teaspoon – 4.2 grams – of sugar, high fructose corn syrup or caloric sweetener.

the text of the bill itself notes that the goal is to reduce public consumption through a price increase.

There is a net transfer of at least $1 billion annually from taxpayers to sugar producers, lowering the shelf price of sugary products. If the government would just get out of the economy, we would pay fewer taxes, and have an incentive to buy healthier foods, because they would be more reasonably priced than the unhealthy, government subsidized foods. This is what government solutions look like.

“Statists” “Parasites” and Other Accurate Insults

The following is taken from Larken Rose, on the subject of people considering accurate terms used to describe them as insults. I have posted in the past on the importance of defining words in order to have an informative discussion, and this is of the same vein.

The best kind of “insults” are those which are simply literally accurate descriptions. Most of the time, when it comes to bashing state-worshipers, being blunt and precise is plenty nasty all by itself. For example:

1) “Statist” has become an insult, when all it means is someone who advocates a state. The exact type and flavor of the state is irrelevant. Constitutionalists are statists just as much as fascists are. If you’re not an anarchist, you’re a statist, just based on what the words mean. Yet many who openly condone “government” consider the term “statist” an insult, and insist it doesn’t apply to them (when it obviously does).

2) When I call politicians “parasites,” I’m being literal. A parasite (a tic, a tapeworm, a flea, a leech, etc.) is something that lives by latching onto to something else (a host) and robbing it of its life blood, its resources and energy. Is that not a perfect description of the state: an organism which gets all of its wealth and power by stealing it from the actually productive people?

3) There’s a term for someone who is a hired gun, who inflicts violence on others in exchange for a paycheck. He’s call a “mercenary.” So when I call cops and soldiers “state mercenaries,” I’m being perfectly accurate. The fact that they don’t like the literal description of what they do isn’t my problem.

Statists also don’t like “taxation” being referred to as theft and extortion; but it is. And they don’t like recipients of “government” “benefits” to be identified as recipients of stolen loot; but they are. And they don’t like “political action” being described as the advocacy of violence against one’s neighbors; but it is. And so on, ad infinitum.

Here’s a thought: if LITERALLY and ACCURATELY describing what you advocate and condone sounds like an INSULT, maybe it’s because you’re advocating and condoning irrational, immoral crap. The proper solution is not to bitch at the people pointing that out. The proper solution is to STOP advocating and condoning irrational, immoral crap.

Kill the Golden Goose: Higher Tax Rates Can Mean Less Tax Revenue

One reporter feels that income distribution in America is less than ideal. That is true, far too much of our income is upwardly distributed to the government and their cronies who build non-functioning websites, unsuccessful energy companies, and cars no one wants. But this reporter thinks the problem is the people who produce, not the leeches attached to their jugulars. He suggests that the top tax rate be raised to 80% because, to hell with the economy, we’ve got to punish the rich! After all, the top tax rate was 90% after WWII, you know, just after most of the world’s manufacturing capability was destroyed, but not America’s.

So now, in the most competitive global economy ever, with abysmal job creation, somehow taxing 80% of what the most productive Americans earn will have no negative effect on jobs and the economy. Somehow, raising the minimum wage to $15 will not slow job creation, will not keep people from hiring, and will not leave more unemployed without the chance to gain skills. Magically, the rich will continue working for merely 20% of what they produce, jobs won’t go overseas, and companies won’t raise their prices. And if you believe all this I have a bridge to sell you.

This reporter, and many others, like to pretend that the top marginal income tax rate only applies to the super rich. This is not true. Earning more than $400,000 a year puts a person in the top income tax bracket. What surgeon is going to keep doing brain surgery, with all the costs and risks, only to make $80,000 in the second half of the year, for the same effort put in for $400,000 in the first half of the year? They won’t, they’ll go on a well deserved vacation to Hawaii, because the work and risk is not worth the reward. This means longer waits, fewer and less skilled surgeons.

Or what about the CEO who makes $10 million a year running a grocery store chain. He might decide to retire early since he only takes home $2.3 million despite earning $10 million. Since everyone who has the skills to properly manage a large successful business also has the means and investment and savings to forgo future employment when the reward is not great enough, this means less qualified people running the grocery store chain. Say goodbye to fresh vegetables, well stocked shelves and affordable products. CEO’s don’t get paid a lot for nothing, they get paid for their skills in making the company money–money that is taxed.

So great, the government makes almost $8 million off this CEO the first year they tax the top bracket at 80%, and $70 million in corporate and capital gains taxes on his company. Then the next year they only make $4 million on the salary, because the new CEO is not as skilled as the last, so he doesn’t get paid as much. As a result, the company does not do as well, earning 75% of the profits from the previous year therefore only contributing $53 million in taxes from corporate and capital gains. The $8 million gained from the CEO being taxed at 80% the first year is quickly lost in a less profitable business, which contributes fewer dollars in taxes from the lower profits of the company.

What could have been a continuous $70 million per year in tax revenue could turn into $78 million the first year, then quickly shrink the next year to $57 million. This is a case of killing the goose that lays the golden egg. If the government would just leave alone the people who do the most work, and produce the most, they could have their cake and eat it too. But its never enough for the government, they always want more, more money, more power, more control. But they don’t seem to realize that when you bite the hand that feeds, you stop getting fed.

IRS Perfect Tool for Government Control

Note: I will be on vacation for the next week or so. You might notice some old posts sprinkled in with some new ones. Thanks for reading!

In a recent column Walt Williams essentially said that collectively Americans deserve the IRS we have, because without such a powerful body we would be unable to take 50% of what individuals in this country earn, and allow it to be spent by government. The 16th Amendment which was passed in 1913 while Woodrow Wilson was President, allowed taxes to be collected on income, which was, until that point, unConstitutional.

Our Founding Fathers feared the emergence of an agency such as the IRS and its potential for abuse. That’s why they gave us Article 1, Section 9 of the Constitution, which reads: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” A capitation is a tax placed directly on an individual. That’s what an income tax is. The founders feared the abuse and the government power inherent in a direct tax. In Section 8 of Article 1, they added, “But all Duties, Imposts and Excises shall be uniform throughout the United States.” These protections the founders gave us were undone by the Progressive era’s 16th Amendment, which reads, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Today federal spending as a percentage of Gross Domestic Product is 25% while from the time our country was founded, all the way until the 1920′s no more than 5% of the GDP was spent by government, except during times of war. Williams argues that this is precisely why the U.S. became the most powerful nation on earth, which would explain why as more and more of the production of the country is taken in taxes and spent by the government, the U.S. is fading as a world producer and power.

As incentives to produce are diminished with higher taxes (plus the crony capitalist use of business-government relations as a way to make money without producing products that are in demand) it should be no surprise that the economy is slowing. The U.S. has historically been better off when it allowed people to keep more of what they earned; production which would fuel further production by allowing the people who earned the money to decide where it is spent. Since these people have already proved their worth in their ability to produce, you can bet that the way they spend their own money will be more productive than the way the government spends their money.

Today federal spending is 25 percent of our GDP. State and local government spending is about 15 percent of the GDP. That means government spends more than 40 cents of each dollar we earn. If we add government’s regulatory burden, which is simply a disguised form of taxation, the government take is more than 50 percent of what we produce.

And apart from money that the government inefficiently spends on things that we would spend it on anyway (schools, police, fire departments), it spends much of that money on unproductive activity such as politicians and bureaucrats salaries, failed loans, subsidies, bailouts, and grants. While it may seem that some of these activities are productive, they are taking the place of what the money would be spent on in the private sector, and changing the method which decides where the capital goes.

The government chooses to provide loans to solar companies that go out of business, or bailouts to car companies that are not providing people with demanded products. That money kept in the private sector would be spent based on the needs of the person who earned it, meaning a person must produce something before they can demand that something else be produced. This process ensures capital is spent in the most efficient way possible, to provide products most desired and needed by the consumer.

Walt Williams concludes by saying that the government needs a powerful, scary, and intrusive agency like the IRS if we wish to take half of the productive capacity of the country, and let the government spend it. However if we would like to see America advance economically, then we need to allow as much money as possible to remain with the people who earned it, and be used by the people who earned it. Repealing the 16th Amendment authorizing the income tax, and simplifying the tax code would be an excellent place to start.

Will America Learn From Australia’s Carbon Tax?

Australia has given the United States a chance to see the negatives of passing carbon tax legislation. According to the Daily Caller, it is not going so well. Unemployment shot up, energy costs have risen 15% in one year, and almost 20% of the average Australian electric bill is taxes.

According to Robson, Australia’s one-year old carbon tax increased taxes on 2.2 million people in the country and has not actually decreased the country’s carbon emissions — which won’t fall below current levels until 2043…

News Limited Network reported in March that the carbon tax was contributing to a record 10,632 businesses that faced insolvency in 2012 — up from 10,481 for 2011.

The Herald Sun reports that Victoria provincial hospitals forked over an extra $6.1 million for energy costs in only six months due to the carbon tax — payments to which ranged from 8 percent of hospitals’ total energy costs to 22 percent.

Will politicians see these negative effects on the economy, on the poor, and the ineffectiveness in reducing carbon emission? We can hope, but I wouldn’t hold my breath. I hope it is becoming more and more obvious to more and more people that congress does not generally care about the actual effects of the legislation, only about the actual effects to their campaign or career. They will pass horrible legislation if the masses call for it, or if they have something financially or politically to gain. Politicians are interested in themselves, and bear no personal consequences for many of the terrible pieces of legislation they vote for. It is up to the people in this country to make sure the politicians feel the negative effects that they force on us with bad legislation.

As Benjamin Franklin said to a woman in response when she asked what type of government America will be, “A republic, ma’am, if you can keep it”.

Do Tax Deductions Force Other Taxpayers to Foot the Bill?

Government propaganda really does come at us from every angle. My attention was drawn to an ESPN article which is mostly about college and NFL football tactics, but has a section titled “Athletic Donations Should Not Be Tax Deductible”. The author likens donating a tax deductible sum of money to stealing from the taxpayers. His logic goes like this: if Phil Knight gives $68 million to build a Football Center, this will allow him to pay $25 million fewer in taxes, because the gift is deductible. According to the author, Gregg Easterbrook, “To cover Knight’s deduction, average people must be taxed more or the national debt must increase.”

This is what Easterbrook calls the taxpayers footing the bill. But he missed a third option besides average people being taxed more, or the national debt increasing: cutting government expenditures. Is it just taken as a given that we can never reduce the amount of money that the government spends in tax dollars? Easterbrook uses this situation to argue that gifts in athletics should not be tax deductible, apparently believing that the taxes collected from these rich folks will do more good being spent by the government instead of being donated to an athletic cause. Easterbrook laments the fact that these donations go towards sports facilities instead of towards educational endeavors.

And maybe he is right about societies’ unwillingness to spend as much on education as entertainment. But what bothers me about this article is that Easterbrook acts like keeping more of your own money is the same as taking money from the taxpayers. It is not Knight’s job to earn money for the sole purpose of funding the treasury, and deciding to make a move with his money that will keep more if it out of the hands of the government is not “allowing taxpayers to be hit” for the extra money saved. The government decides how much money will be taxed, and how much will be spent, so to put the responsibility for paying enough taxes on the earner is essentially a form of slavery. Easterbrook also incorrectly assumes that whatever the government does with that $25 million will be more beneficial to society than going towards the sports complex.

Knight needs to pay those taxes in order to fund the government, otherwise government must make others pay more, or go into debt. Nope, sorry, the government could be responsible, and not spend more than it takes in. It could craft tax policy that rewards earning, so that people don’t have to think of ways to keep their hard earned money. The government could cut waste, and not run up a $17 trillion debt with year after year of deficit spending. But they do not, and that is the fault of the bad politicians who are irresponsible with money, and the voters who keep reelecting people who systematically rob earners. It is not the fault of people who end up paying fewer in taxes because they made a charitable donation.

The amount of money the government spends each year is not automatically the government’s, it is taken from individuals in taxes depending on how much they earn, and what they do with their money.We need to step back and get away from this statist thinking where the government inherently deserves the fruit of our labor. We need to stop pretending that what the government does with our money is better than what we do with our own money. And we certainly need to reject fuzzy language that allows a journalist to equate paying fewer taxes with robbing the taxpayers.

Walt Williams: IRS Powerful By Design

In a recent column Walt Williams essentially said that collectively Americans deserve the IRS we have, because without such a powerful body we would be unable to take 50% of what individuals in this country earn, and allow it to be spent by government. The 16th Amendment which was passed in 1913 while Woodrow Wilson was President, allowed taxes to be collected on income, which was, until that point, unConstitutional.

Our Founding Fathers feared the emergence of an agency such as the IRS and its potential for abuse. That’s why they gave us Article 1, Section 9 of the Constitution, which reads: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” A capitation is a tax placed directly on an individual. That’s what an income tax is. The founders feared the abuse and the government power inherent in a direct tax. In Section 8 of Article 1, they added, “But all Duties, Imposts and Excises shall be uniform throughout the United States.” These protections the founders gave us were undone by the Progressive era’s 16th Amendment, which reads, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Today federal spending as a percentage of Gross Domestic Product is 25% while from the time our country was founded, all the way until the 1920’s no more than 5% of the GDP was spent by government, except during times of war. Williams argues that this is precisely why the U.S. became the most powerful nation on earth, which would explain why as more and more of the production of the country is taken in taxes and spent by the government, the U.S. is fading as a world producer and power. As incentives to produce are diminished with higher taxes (as well as introducing business-government relations as a way to make money without producing products in demand) it should be no surprise that the economy is slowing. The U.S. has historically been better off when it allowed people to keep more of what they earned; production which would fuel further production by allowing the people who earned the money to decide where it be spent. Since these people have already proved their worth in their ability to produce, you can bet that the way they spend their own money will be more productive than the way the government spends their money.

Today federal spending is 25 percent of our GDP. State and local government spending is about 15 percent of the GDP. That means government spends more than 40 cents of each dollar we earn. If we add government’s regulatory burden, which is simply a disguised form of taxation, the government take is more than 50 percent of what we produce.

And apart from money that the government spends (inefficiently) on things that we would spend it on anyway (schools, police, fire departments), it spends much of that money on unproductive activity such as politicians and bureaucrats salaries and other expenses, failed loans, subsidies, bailouts, and grants. While it may seem that some of these activities are productive, they are taking the place of what the money would be spent on in the private sector, but changing the method which decides where the capital goes. The government chooses to provide loans to solar companies that go out of business, or bailouts to car companies that are not providing people with in demand products. That money kept in the private sector would be spent based on the needs of the person who earned it, meaning a person must produce something before they can demand that something else be produced. This process ensures capital is spent in the most efficient way possible, to provide products most desired and needed by the consumer.

Walt Williams concludes by saying that the government needs a powerful, scary, and intrusive agency like the IRS if we wish to take half of the productive capacity of the country, and let the government spend it. However if we would like to see America advance economically, then we need to allow as much money as possible to remain with the people who earned it, and be used by the people who earned it. Repealing the 16th Amendment authorizing the income tax, and simplifying the tax code would be an excellent place to start.