Eurekanomics – the No Tax Economics
By Jim Osburn
Smashwords Edition
Copyright 2010 Jim Osburn
ISBN 978-1-4524-9720-4.
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To all those
who have tried
to make a better world.
Contents
Introduction: Welcome to Eurekanomics
Chapter 1: The basics of Eurekanomics
This is not your grandfather’s economics
Wealth distribution patterns
Objectives of Eurekanomics
Chapter 2: How Eurekanomics works
The standard wealth distribution
The economic efficiency modifier
Small world example
Playing the system
The separate corporate curve
Chapter 3: Eurekanomics and the public interest
What is money?
The power of wealth
Wealth and income
Dealing with poverty
The Federal Reserve System
Inflation, recession and depression
Debt and interest
Chapter 4: National taxes
Income tax
FICA (Social Security and Medicare)
Capital Gains
Estate/Inheritance (Death taxes)
Import/Export taxes (Customs)
Excise taxes
Chapter 5: State and local taxes
Complexities
Revenue sharing
Piggyback taxes
Sales tax
Property tax
Chapter 6: Effects of Eurekanomics
Transaction fees
Incentive
Accounting records
Capital Formation
Employee benefits
Income sources
State and local governments
Chapter 7: Summary
Implementation
Resistance to Eurekanomics
Who files net worth reports
What assets are reported
Formula for computing each position
The bottom line
Eurekanomics – The No Tax Economics
Introduction: Welcome to Eurekanomics
This book will explain how we can eliminate all taxes.
Eliminating taxes is not the objective of the system we will describe here. It is only a byproduct of the many changes we need to make in our economy for a lot of other reasons.
You already know what is wrong with our economy. It doesn’t deal well with recession, depression, unemployment, automation, poverty, excessive wealth, poor distribution of income, capital formation, political power, credit, the money supply, investment initiative, tax equity, productivity and a host of other problems.
As a public administration consultant in developing countries for more than a decade, I became aware of how the various tax systems failed to serve the interests of the people. As a Systems Analyst, I did a lot of private brain-storming about how a more reasonable system might work. I gradually put the pieces together. The key component came to me one night while lost in thought on a bus in Panama – a way we could reasonably eliminate taxes – while resolving a lot of other problems with our economy.
I call the resulting system “Eurekanomics”, after the ancient Greek wizard Archimedes. He was ordered by the king to determine whether the royal crown contained the proper amount of gold. Legend has it that he was sitting in a bath tub when he figured out that a floating object displaced its weight in water, and he could use this principle to check the volume and gold content of the crown. He was so happy that he reportedly went running naked through the streets of Athens shouting “Eureka! Eureka!”, meaning “I have found it!”.
I have found a no-tax economy. I call it “Eurekanomics”.
Chapter 1: The basics of Eurekanomics
This is not your grandfather’s economics
Consideration of Eurekanomics will require some new ways of thinking. Here are some of the concepts you will have to deal with:
a. An economic system is not an unchangeable artifact of history. It can be, and must be, designed, monitored and adjusted to serve the public interests. Our economy is, and will continue to be, an uncivilized burden to civilization until we are able and willing to make major changes to it.
b. The Federal Reserve System is not an agency of government. It is a privately owned banking cartel that controls our economy by operating unsupervised outside the rules of private finance. No reform is possible without drastically changing or abolishing the Federal Reserve System.
c. The wealthy now control our economy, our politics, our media, and virtually every other aspect of our lives. Any reform based on income will not alter the basic power of wealth.
d. We do not need to, nor should we, make paupers of the wealthy – but unless we are willing to find some reasonable limits, then any tinkering with the economy will be a wasted effort.
d. We have been trained to think of money as finite, just as it is with our household budgets. But money is infinite at the national level. The Federal Reserve creates money with magnetized spots on computer media. There is, therefore, never a shortage of money.
e. Taxes are not used to get the money for what we need, but rather to take back some of the excess money we have already spent in order to avoid inflation.
f. The power of the wealthy is now used to insure that the tax burden falls disproportionately on the income of those with little or no wealth.
g. The mantra of our present economy is that we have plenty for wars and bailouts, but not enough for legitimate social needs. The truth is that we can afford whatever we really need. The underlying debate is not about what we can afford, but who will pay for it.
h. The most convenient tool for the wealthy to expand their wealth is credit. Thus we find ourselves, individually and nationally, drowning in and enslaved by excessive credit.
i. Anything that does not protect the interests of the wealthy is mindlessly stigmatized and dismissed as “class warfare” and “communistic”. We debate with labels, not with reason or ideas.
j. There is reason to believe that the wealthy might support a system, such as Eurekanomics, that defines and protects limited wealth, and opposes confiscation.
k. We are like Dorothy’s companions on the way to Oz. We must have the heart to sincerely want to provide an economic opportunity for everyone. We must have a brain to devise a system that will work in the real world. And we must have the courage, for the first time in human history, to make the changes we need.
Wealth distribution patterns
There are three basic patterns for the distribution of wealth illustrated on the cover page: the communist pattern (red), the Eurekanomics pattern (green), and the present wealth distribution (blue). The horizontal axis represents the percent of the population, from 0 to 100. The vertical axis is the cumulative percent of the total national wealth (TNW) for each percent of the population, from 0 to 100%. The examples below will help to clarify what is shown on the graph.
The red straight diagonal line represents the communist unrealistic ideal. Point #1 on the graph indicates that half the population (50%) is authorized to own half (50%) of the total national wealth (TNW). In other words, every individual owns an equal share. This has never happened, and probably will never happen. It is shown here only for contrast with the other two patterns of wealth distribution. We will have nothing more to say about this pattern.
The green smooth curve represents the wealth distribution standard (SD) proposed by Eurekanomics. The horizontal axis is percent of the population, and the vertical axis is the cumulative percent of the total national wealth (TNW) authorized for each percent of the population. Point #2, for example, indicates that the poorest 40% of the population would be authorized 8.35% of the total national wealth (TNW). Point #3 indicates that the poorest 80% of the population would be authorized 40%. The remaining 20% (richest) would be authorized 60% of the wealth – that’s 100% minus the 40% that goes to the poorest 80%.
The percent of the total national wealth (TNW) for each individual can be computed using the formula and the simple Basic program contained in Chapter 7. In every case, it is equal to the cumulative percent for that individual minus the cumulative percent for the next poorest adjacent individual. Assuming a population of 100, for example, the person in position 65 (see point #4) would be eligible for 24.007% (cumulative 65) minus 23.163% (cumulative 64), or .844% of the total national wealth (TNW). (24.007 – 23.163 = .844)
The graph refers only to the overall pattern of wealth distribution. Nobody knows what his/her individual position will be until the actual net worth data has been received from everyone and sorted in poorest to wealthiest sequence.
The blue abrupt angle line represents the present distribution of wealth. It is obvious that the wealth is very poorly distributed. Point #5 indicates that the poorest half of the population owns only about 2% of the total national wealth (TNW), while the richest half owns 98%. Here is some other interesting information about the current wealth distribution.
a. The poorest 33% of the population has a zero, or negative, net worth.
b. The richest 1% of the population owns about 35% of the wealth.
c. The richest 5% of the population owns 62% of the wealth. If only investment wealth is considered, that percentage rises to 72%.
d. For at least two decades, the rich have been getting richer and the poor have been getting poorer. The middle class, if there ever was such a thing, is rapidly disappearing and we are becoming a third world economy – with only the very rich and the very poor.
We will not detail here the injustices and inequities of the present system – Google lists plenty of resources for that. We will point out that it is precisely those abuses of the power of wealth that are causing the economic problems we face today – unemployment, poverty, political corruption, erosion of democracy and the voting process, and many others.
There is discontent abroad in the land. It remains to be seen whether we have the courage to do something about it.
Objectives of Eurekanomics
Eurekanomics is, to use a term that has been demonized and stigmatized by the wealthy, a redistribution of wealth. It is not, however, a simple taking from the rich, which Eurekanomics does not support. As you will see, Eurekanomics defines wealth, then limits it, then protects it from mindless redistribution.
Eurekanomics deals with wealth, not with the wealthy. The objective is to design, implement and maintain a standard distribution (SD), and to periodically adjust the actual distribution (AD) so that it conforms to that standard.
The need for some wealth and the inevitability of some poverty is recognized. It is essential, however, that each individual must be free to change his/her position in the actual distribution of wealth based on his/her economic efficiency.
The focus is on wealth and not income. There is no imposition of taxes and no limitation on legal incomes or expenses.
Chapter 2: How Eurekanomics works
The standard wealth distribution
a. Each individual is required to submit an individual report (IR) of net worth at the end of each year. This will list his/her major assets and liabilities, and will determine the individual net worth by subtracting liabilities from assets. The actual market value is used, regardless of cost or book value.
b. The individual reports are sorted, poorest to richest, on the value of the net worth. This determines each person’s position on the actual distribution (AD) curve.
c. The total of all the individual reports is the total national wealth (TNW).
d. The amount required for government is deducted from the total national wealth (TNW). This will be described in detail later. The remainder is distributed as described below.
e. The percent of the total national wealth (TNW) authorized for the person in each position is computed from the standard distribution (SD), as shown above in the description of the green curve. The amount that whoever in that position has in the actual distribution (AD) is then adjusted by taking from or paying to him/her the difference between the authorized and the actual.
f. The individual result is that his/her wealth exactly conforms to the percent authorized for that position by the standard distribution (SD). The overall result is an actual distribution (AD) that exactly matches the standard distribution (SD).
Getting and keeping this standard distribution pattern is the specific goal and purpose of the Eurekanomics system.
The economic efficiency modifier
One modification is required to correct the effect of chance adjustments at the end of the year. Before the individual net worth reports are sorted, the plus or minus adjustments made in the prior year are reversed. This will cause the individuals to move up (or down) to on the richest to poorest scale, making each eligible for more (or less) than the net worth alone would indicate. This offsets the effect of the prior year adjustment, and makes the person’s position generally correspond to his/her economic efficiency.
Small world example
To further illustrate the mechanics of how Eurekanomics works, we will assume a group of five people who will represent the entire population. These folks decide that at the end of every year they are going to redistribute their total net worth. The poorest will get 10%, next 15%, 20% and 25%, and the richest will get 30% - which totals 100%. We will not know until the end of the year who will be the poorest, richest, or in between.
If the poorest has less than 10%, he/she will receive enough to make it 10%. If he/she has more than 10%, that person must pay out enough to leave him/her with 10%.
If the richest has more than 30%, they will take enough to leave him/her with 30%. If he/she has less than 30%, they give him/her enough to make it exactly 30%.
The same is done for other members of the group. It is a zero sum procedure - the amounts taken will always equal the amounts paid. The result is a distribution of the total wealth that is exactly like they decided they wanted it to be.
That is the basic procedure. There are two modifications. One has to do with a shared expense (cost of a meeting place?) comparable to costs of government. This amount is deducted from the total wealth before the redistribution is made, and the remainder is what gets redistributed.
The other modification has to do with the element of chance. Whether one pays or is paid depends on where he/she happens to fall on the poorest to richest rankings. We can correct this chance element by reversing the adjustment made in the previous year. The amount that was paid is deducted from (or the amount collected is added to) each person’s net worth before the poorest to richest ranking is made. The effect of this is to cause the person to move down (or up) on the richest-to-poorest ranking, making him/her eligible for less (or more) than he/she would otherwise get, thus offsetting the luck of the previous year’s adjustment.
Playing the system
It should be obvious that the amount of each person’s wealth distribution adjustment is not dependent on how much wealth he/she has – or doesn’t have. It depends on where one falls on the curve, which in turn depends on where others fall. The adjustment may take from anyone (rich or poor) or give to anyone (rich or poor) to make the result equal the standard distribution (SD). That makes it virtually impossible to predict what to do to get a favorable wealth distribution adjustment. In any event, whatever one gets will be reversed in the following year to reduce the effect of chance.
There will be the misconception that reporting a major asset will make it subject to some kind of tax. That is simply not true. To combat this, however, there should be severe penalties for anyone who attempts to beat the system by understating or overstating wealth.
The separate corporate curve
The distribution of wealth among major corporations is even worse than with individuals – so much so that world security is threatened by the power of the large internationals. For that reason, a separate standard wealth distribution curve is proposed for them. There will be greater complexities in defining who and what should be covered – but the same procedures would apply. The result should be limitations on the power of the giants, and a wider range of corporate sizes.
Chapter 3: Eurekanomics and the public interest
What is money?
In the beginning, people traded goods and services for other people’s goods and services – like perhaps the man who made spears traded for bear skins. That got complicated and limited, so they started trading for common products that everybody wanted, like gold and silver. Those metals were durable, transportable, easy to hide, and could be subdivided into small units. That was the birth of money.
It was natural for commoners to ask the noblemen and their guards to look after their money. The noblemen would issue receipts for the metal money they were safeguarding, and the commoner learned that he could buy things with those receipts. That was the birth of paper money.
The noblemen then learned that they could write receipts for money they didn’t even have. So long as the people didn’t ask too many questions, those receipts worked just as well as valid ones. That was the birth of what we now call “fiat” money.
Until a few decades ago, United States money was printed “silver certificate”, and you could actually cash it in at the Treasury Department for an appropriate amount of silver bullion. Now our money is printed “Federal Reserve Note”, and the only thing you can trade it for is another Federal Reserve Note.
A new form of money has appeared with the age of computers. Money is now magnetized spots on computer media. The keepers of the media that manage your computerized bank accounts and such are presumably kept under control by rigid accounting rules and audit procedures. The media regularly reports cases of fraud where only computerized “money” is involved. The Federal Reserve, that openly creates money for the national government, has never been audited.
Try to imagine a Monopoly game that uses no paper money, but relies on a banker to keep all the data in his head. That is the kind of game we are playing.
The power of wealth
Despite the economic hardships and revolutionary spirit abroad in the land, genuine reform within the system is extremely challenging.
a. Wealth controls the Congress. Legislation and financial breaks for big business are quietly and routinely passed, while measures in the public interest are mostly token, deceptive, and generally ineffective.
b. Politics is rigged. Third party politics has been made virtually impossible by ballot access restrictions. The voting process has been corrupted by proprietary electronic systems that were supposed to have corrected voting problems.
c. The media is biased and ineffective, dealing mostly with entertainment and rarely ever with investigative reporting.
d. Regulatory agencies have been captured by the industries they are supposed to be regulating. Consumer interests are subordinate to corporate profit.
e. Civil rights are under attack, making protests ineffective and protesters subject to arrest.
f. Bill Gates is reportedly worth $53 billion. Warren Buffet is next with $43 billion. Third are the Koch brothers, at $35 billion. To anybody but the radical right, that is obscene wealth in a land that denies health care to children whose parents can’t afford insurance.
It is the contention of Eurekanomics that a more equitable distribution of wealth will increase the power of middle class citizens, which will make more reforms possible.
Wealth and income
Working people pay tax on their income. There is no choice. It is withheld from their pay. A wealthy person with a million or so net worth will derive all his or her income from tax free municipal bonds and pay no tax at all. Taxing income instead of wealth is a bit like squeezing the individual bee to get the honey instead of taking it directly from the hive.
Income taxes depend of the circulation of money. In general, everyone who handles a dollar as it flows from one person to another pays a tax, and wealth is ignored. For everyone to participate in the system requires constant increases in income circulation, or what economists call “economic growth”. The idea of an infinite growth economic bubble prompted John Langerak of Chester ME to ask “Isn’t growth for the sake of growth the philosophy of cancer?”
Dealing with poverty
Presently, about one third of our population has zero or negative net worth, and an estimated 61% of our population lives from payday to payday. That will change as Eurekanomics puts more of the nation’s wealth in the hands of more people, and perhaps with other social programs like guaranteed employment.