Wednesday, January 25, 2012

Sarkozy and Merkel, France and Germany, Have to Get it Right First in Europe


The political scene in Europe.

After posting about European leadership issues yesterday at LawPundit, I read today in the German FOCUS magazine (Szenen einer Polit-Ehe, Focus Magazin) that French head Sarkozy had said to German Chancellor Angela Merkel that the two of them were the head and feet of Europe.

Merkel, who is sometimes understimated in the quickness of her wit, had retorted in a perfectly friendly way that Sarkozy alone was the head and feet of Europe while she, Angie, was the bank.

Gee, that's what I wrote a day previously without knowing this telling exchange.

French savoir-faire and German money are the key to the fortunes of the European Union generally.

Obviously, all the other nations of Europe are also important, but Germany and France have to get it right first.

Government Financing Could be Fair and Simple: Here is An Example


If you and I and one other person started a company, and I owned 50%, what share of company expenditures should I pay?
33%?
You would surely say 50%,
reflecting my half of company ownership and wealth.

What share should you and the other person pay?
You would surely say 25%, reflecting your share of the company,
i.e. one-half of the other 50% of ownership.

Now, I think the same is true for government financing.
Everyone should put back into the country what they have taken out.

We could get rid of all income taxes and replace them with a single wealth tax ---  equally applied – to everyone, once a year.

I have calculated that a wealth tax of about 4% on everyone would pay off the national debt in the USA in a day – i.e. the day of its assessment.

The problem with the way we assess taxes today is that it makes them look like a penalty on earning and/or entrepreneurship,
which are activities we actually want to applaud and encourage.

I am very supportive of all entrepreneurs.
Indeed, certain kinds of activities require economies of scale,
so that the existence of large corporations is essential
to enable the making of products in the modern world
– automobile manufacture would be one example, energy another.

How do we get – everyone -- to pay their fair share of government costs?

Obviously, everybody should pay taxes of some kind, regardless of wealth or income, unless they have no wealth and no income.
That is because we all profit from the things that taxes pay for.

Imagine corporations having to hire people who are not educated – a lot of that education is done with public monies, etc. So corporations should pay taxes. It is a symbiotic thing.
Similarly, we all use public roads and highways – so we should also be prepared to pay for them.

Obviously, governments (federal, state, local) have to finance their general activities, pay rent, use utilities, hire employees, etc.
Attempts to have governments finance themselves by entrepreneurship have not done well anywhere, so taxation has remained the only sensible means of government financing, outside of printing money.

What we need to achieve is better agreement among citizens as to what activities governments should have to do and how the taxes for those activities are to be fairly allocated.

To go back to our company example....
If I now own 50% of our joint company of which you own 25% and a third person owns 25%,
and I then receive 50% of the profits, as corresponding to my equity,
while you own 25% of the company and receive 25% of the profits,
how should we be taxed?

I think you would not be pleased if we were both assessed the same monetary amount of income taxes, even though I earned twice as much as you did.
But exactly that is what many pundits recommend. They say, why should I, who earned twice as much, have to pay twice as much as you.
But of course, you, who earned fewer profits, would be paying proportionately more than I am into the tax pool. That is what many are advocating.

Obviously, in a fair system, taxation should be proportional to earning and wealth. Those who profit most from the system should have to pay the most.
There is nothing wrong with that and it is not discriminatory against those who have income and/or wealth.

We could put it this way as a matter of principle (I use 10% here just as an example):

ANNUALLY,
for every $100 earned, $10 would have to paid to the government by everyone, period, no deductions, no loopholes, no exceptions from taxation (e.g. religions), EVERYBODY PAYS
and,
for every $100 of wealth gained or owned, $10 would have to be paid to the country that enabled that wealth to be acquired and which pays for the legal system and structure that protects that wealth.
No exceptions.
That would be eminently fair and governments would be adequately financed.

My approach, you see, has nothing to do with politics. It is simple arithmetic.
How we get this simple arithmetic outside of the yelling and screaming political sphere is another matter, and I know of no solution for that.

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