Thursday, April 7, 2011

GE is Right!

You may have seen that GE, despite having a massively profitable year, will pay zero federal income taxes for 2010.  That’s right, less than you!  And this is the second year in a row.  I have no love for GE and its hearty embrace of crony capitalism, but they are doing the right thing by not paying any taxes. How can I say this? Because I believe no business entity should pay taxes, and that includes behemoth GE.

Let me ask you a question: How many people do you think would die of cancer each year if all cancer cells could be somehow trained to start growing on the tip of your nose? Every morning the first thing you would do is look in the mirror and see if you had any cancer. If you saw something, you would immediately have it removed. That would be the end of cancer, right?

The price of runaway government today is like cancer in that it hides undetected until the symptoms begin. By then, it’s often too late. If every citizen woke up every morning and could see the true cost of runaway government on the tips of their noses, they would never allow it to metastasize, and that would be its ultimate demise.

Business taxes are a good example of this disease. The fact is, businesses don’t actually pay taxes. Citizens do. Businesses merely collect taxes and pass the cost along to the next entity in the supply chain until an ultimate “end-user” buys the product and pays the cumulative tax. Economically literate politicians, (an oxymoron) know this full well, but will never end stealth taxes unless forced to because they are a perfect way to ensure that the cancer they caused stays undetected.

Right now in Washington there is an epic battle going on over budgets for this year and next and it makes for great drama on the nightly news.  But this tragic play will repeat ad infinitum as long as we allow the true cost of runaway government to stay undetected. Have you seen Paul Ryan and the few other responsible leaders working their tails off trying to treat this cancer? They remind me of lonely sentries on the deck of the Titanic yelling, “ICEBERG! ICEBERG!” to the sleeping passengers and crew. The masses are not listening and the ship is sinking. It’s a noble crusade Rep. Ryan is on, but there may be a more effective way.

Wouldn’t it be better if we just stopped hiding the cost of government and put it all in the open for everyone to see? Wouldn’t it be easier if the interests of voters and taxpayers were automatically aligned with the interests of the responsible members of government? Wouldn’t that be better than trying to convince an indifferent public to somehow care? Why not just pass a law to end stealth taxes once and for all? Why not put an end to business entity taxes, payroll matching taxes, mandates that force businesses to do the collecting, and any chance of a VAT ever getting passed?

All it would take is an itsy bitsy constitutional amendment with one sentence:  “All domestic revenues shall be collected directly from individuals.”

The effect of this would of course be higher tax rates on individuals, but the price of goods and services would go down by an equal amount. The net effect overall would be zero. This amendment would cost you nothing.

Would this cure the cancer? Let’s just say you’d be staring the true cost of the runaway government in the face everyday. Would you tolerate it metastasizing? Wouldn’t this amendment be worth working for, and at least campaiging on?  Pass this on to the candidate of your choice if you think so. 

Oh, and one other thing; small companies like maybe even yours, would have the exact same advantage that giant GE has today when filing taxes!


  1. You say prices would go down with individual taxes instead of corporate taxes? And how do you imagine one can guarantee that ALL companies BIG and small will lower prices!! Is the government going to MANDATE that they lower prices!! yeh, right!!
    Not so sure I agree with this philosophy!
    No guarantees!

  2. @Anon, Thanks for the thoughtful comment and I understand your skepticism. Prices will NOT go down instantly or in an orderly fashion, but they will normalize at a level to offset the increase on individuals. How can I know this? Because this is how markets work. Do you own a cell phone? Did the government mandate your provider lower the cost on your latest smart phone? No. They did it voluntarily because their costs went down. If you've ever run a business, you'd know that is how competition works. And it works that way whether it is Apple responding to lower production costs or your corner store responding to a lower tax burden.

  3. I can easily see the government phasing in a VAT style tax while promising to remove the income and corporate taxes. Unfortunately they will then spend the extra income (and then more) and it would become necessary to retain all three tax structures.

  4. If your comment "prices would go down" were true, then when crude oil prices dropped below $140 per barrel, then we would have seen this at the pump, which we didn't at least not in an equal way, any business that can get consumers to pay the higher fee will continue to charge that fee, the only way we can get these costs down is to stop purchasing entirely for many, many years, only then will prices begin to drop. But we can't stop purchasing, we have to keep gas in the gas tank in order to get to and from work, & if we can't work we can't buy so we're in a circle that will never end.

    Without jobs, there's no income, without income there's no spending power, we're soon to see our country become a third world highly developed country with a marked change we'll have a larger gap between the haves and the have nots.

  5. @FamaSemperVivat, You are correct in one sense. Gasoline prices and crude oil prices are not always directly corelated. That is because they are not the same thing. The price of gasoline is affected by many things that are not reflected in the price of the unrefined product, like refining and trucking, and if those things swing enough in the opposite direction, the linkage can be broken for a time. Overall though, they usually find their normal relationship as can be seen in this graph of the historical relationship.