How to fix the problem of off shoring

The problem of off shoring jobs isn't fixed by limiting free trade, the problem is fixed by changing our tax STRUCTURE that is causing an UNSTABLE economic condition. By our emphasis on the income tax to fund government, we have put the burden on US residents to pay for ALL the costs created by government activity. Those costs become folded into our cost of living and become part of the cost of anything made here. Meanwhile some businesses have figured out they can avoid all those costs and keep their prices low by going outside of our borders.

In 1913, after much struggle and debate, congress got the income tax incorporated with the passage of the 16th amendment. Prior to that, almost all federal revenue was from tariffs. We also had a bad experience with commodity taxes before the revolution [remember the Boston Tea party and “no taxation without representation”], and the tariff was causing trade wars. But the final straw was that the tariff-based system just wasn't bringing in enough money for those politician’s plans.

And the initial income tax rate was very mild, just 1% starting at 5X the median income. So even after the income tax was incorporated, the majority of the revenue still came from tariffs on imports. Interestingly in 1913 the Federal Budget was only about $1 Billion! Today it's about 2,500 times bigger.

Today 90 years later those horrible tariffs are gone, the nanny state is huge and expanding rapidly and virtually 100% of the cost of all this is born by the US taxpayer. By a cruel twist of fate, none of these costs are born on products and services that are sold here as long as those things are NOT made by any US citizens or residents. This is outrageous! The income taxes, corporate taxes, regulations and lawsuits drive the cost of living and producing products and services HERE through the roof and make it nearly impossible for us to produce anything HERE that we can sell HERE.

This is where the problem solving should be done. Shift some of the taxes from income to commodities.

If there is a tax on commodity sold in this market, and it is the SAME tax rate regardless of where it came from, then nobody can complain. This is fair because it costs something to keep this market here. There are no open sewers on the side of the streets, or thugs with machine guns in pickup trucks roaming the streets, or government officials demanding payoff. This is a peaceful, well ordered and the most profitable market to sell in. Remember, they are coming HERE to sell. It is entirely within our rights to expect ALL merchants selling HERE to pick up some of the costs of having access to this market.

Some will argue that sending jobs overseas has been going on for a long time and the net effect is good, that those are all low tech low pay jobs and that this change opens up opportunity here for the better jobs. Well it looked like that was happening for a while because the technology here could make productivity and quality advantages that could more than offset the cost advantage of going overseas, but nothing stays static. Flush with money from the increased business over the last many years, overseas operations have made quantum leaps in productivity, quality and service. Add the effect of broadband internet connections that put a supplier in China only one mouse click away and you have a situation where a foreign company can match any domestic source for quality, service, selection, delivery, etc. and overwhelm them with low pricing.

An analogy may make it easier to see. Suppose you have a big department store in a town that was very popular. This store offered a place for the local clothing and goods suppliers to sell their products, and in return asked for a 30% cut for the store. Now this system worked fine for many years, then one day some suppliers came in from out of town and, because of a quirk in the contracts, didn’t have to pay the store their 30% cut. At first these out-of-towners only made a few lower quality, inexpensive products and nobody was very concerned about them. After a while though, these out-of-towners started to improve. They slowly got into the higher priced and higher quality products and because they didn’t have to give the store a cut, they could beat everyone on price. The local suppliers worked feverishly to compete by cutting costs, then wages, then staffs, then products, but they couldn’t overcome the advantage the out-of-towners had on pricing. Then the store told the remaining local suppliers that they had to increase their cut to the store to 40% to keep it open. Soon the local suppliers were so financially weak that the out-of-towners could get any business they went after and the local suppliers started to disappear. In the end, the out-of-town suppliers had nearly all the business, and the store went bankrupt.

Leaving the effects of regulations and lawsuits aside for now, If we want to have a stable society again, what we need to do is reduce personal and corporate income taxes and add the equivalent in commodity taxes. The net tax burden on US citizens and residents would not change, so it will be a tax shift and not a tax cut. But for the first time people who bring imports to the market will contribute to the cost of having that market there. The products and services made in this country will be more competitive, economic stability will return and costs will go down, and EVERYONE will be PAYING THEIR FARE SHARE!

The cost of labor is still less in India than in the United States.

Yes it is. And that is because the income tax burden on our economy has driven prices and wages up. In 1913 the federal budget was about $1 Billion/yr and the average wage of the American worker was $520/yr. They set the income tax starting point at $3000/yr for singles and $4000/yr for married couples. As the income tax took root in our society, the average wage is currently around $36,000 and the Federal budget is 2.4 to 2.5 Trillion with a "T". Are you noticing a pattern here?

Government spending went up 2500 times and our wages went up about 70 times. You just don't realize how pervasive the effect of high income taxes are to all our costs and not just on taxes directly. Hell, imagine how much cost there is in business just in tracking income for tax purposes

To break it down, the instability is caused by having two groups selling in the same market but taxing the income of only the first group. The overhead on the first group will be higher and so the breakeven price for their product will be higher. The second group can enter a product with a price below the first groups breakeven point and just sit back and watch him slowly die. Market losses in the first group cause unemployment which increase the burden on the first group only. The second group is not effected by the burden and makes a healthy profit. This is like a negative feedback loop. The second group will quickly find they can adjust their price slightly and drive companys in the first group into the ground while they can make a comfortable profit.

It is that instability that I am talking about. Now if we take the government cost burden off the first group and then put it on the products directly that both groups make. Then the second group's cost advantage will drop.

This tax change won't be an instant fix which is what some want. That would be a tariff that would put all the costs only on the second group, and that would simply ignite a huge trade war. What this would do would be to take some of the burden off us by lowering our income taxes. It would also be adding that burden to the imported products. And finally the net effect on the price of products sold here should be zero.

Thanks for your response. Yes, I figure his book will be an interesting read too. Perhaps it will fill in some of the blanks in my understanding of SS.

Back in 1982 I sent a letter of resignation to SS, telling them I did not want any future SS benefits, period. They sent me a one line response . . . "There is no provision in the law allowing you to resign from Social Security."

Go figure !!!

They're right. There is no provision in the law to withdraw from social security. It really means that there is prevision in the law to withdraw from social security. Why? Because one is not needed.

According to testimony before a Senate investigation and hearings on the social security system in the '60s, social security is a set of statutory rights.

To claim these rights, you have to sign up for them by your own hand. That means that you can unclaim those rights by your own hand. There can be no law requiring you to claim a right, and likewise can be no law that keeps you from denying any right you have claimed. You just can't deny performing the responsibilities that logically flow from the claiming of a right.

So the letter just acknowledges you don't need a statute to allow you to do what is your right. This is the conclusion I come to.

Do you also challenge the state's action to issue you a driver's license and regulate your driving? If you do, you are toast on that one. I think I've figured out the "privilege" thing, and the state is right.

Since there is no such thing as free trade (otherwise there would be no fight for it) prove that the free trade theory works.

???

Let me ask you a question. I've listed the definitions of two words below. Please tell me which form you believe in:

A theoretical economic system characterized by the collective ownership of property and by the organization of labor for the common advantage of all members. Communism A system of government in which the state plans and controls the economy and a single, often authoritarian party holds power, claiming to make progress toward a higher social order in which all goods are equally shared by the people. The Marxist-Leninist version of Communist doctrine that advocates the overthrow of capitalism by the revolution of the proletariat.

An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

Here is free trade at work: I want to hire an adult male to repair my roof. The adult male agrees to do the work and the adult male and I agree that he will perform the repairs for XX dollars. The adult male performs the repairs on the roof and he receives the pay that was agreed upon. The benefit is that I receive the roof repairs that I desire and the adult male who performed the work receives the money that he wanted for the work.

I will tell you something else my friend, if you do not advocate free trade, you are advocating socialism or communism. You are advocating using the power of government to dictate the distribution of wealth.

Please cite an example of how this benefits all. (first of all, in the end it doesn't matter what "benefits all", unless you are a proponent of communism)

Here's another interesting page by Jon that goes into a little more detail. Sounds better and better the more I read !!!

http://www.futuregate.com/tax_buster/

There's nothing you can do about the driver's license as long as the state holds "Title" to your automobile. You only hold a "Certificate Of Title"... which is NOT the same thing as "Title" !!!

There is no state citizenship any more. That was changed by the South losing the war between the states.

Licensing drivers doesn't have anything to do with vehicle titles issued by the states. It has to do with the states' power to regulate practices that impact the health, welfare and safety of those living in the state. That power is generally called the police power, and its concept and practice in ancient and uncontested.

Driving a mass of metal weighing a ton or more, at high speeds, in close proximity to other people inside or outside of another vehicle is a proper exercise of the police power.

The problem is that there is a right to travel in this country, and mode of travel attaches to that. Since the character of these regulations must be essentially criminal, when the police power regulates a right, it must do so using due process, including indictment for each offense.

Since there are millions of cars moving in every state at any one time, the instances of violations and controversies arising out of the vehicular activity number in the thousands every day, perhaps tens of thousands on some days.

To follow due process on each would quickly overload the courts of record. That would grind the administering of justice to a halt for all controversies, some much more important to the people in the state, besides those related to vehicular traffic. That condition is itself a proper subject for the police powers of the state.

So, the fiction is that driving a motor vehicle, noncomercially, is a "privilege" which issues can be dealt with in courts not of record and by information not indictment, and administratively by just "pleading guilty" by mail and sending in a fine.

Every official involved "knows" that this is a right, but to publicly acknowledge that would require due process to be used, thereby creating a much worse condition, the destruction of the justice system, so everyone plays the game.

It will be a little simpler for me if you state that know you know the difference between a a VAT and an RST and then tell us which one you are talking about.

Well I'm talking about something that isn't either one, although it bears similarities to both in certain circumstances. A VAT has many steps along the way that adds a small amount of tax at each step. This would have one step when you presented the product to this market, note I didn't sat customer. If taxed there that would be thw sales tax. Most states already have a sales tax around 5%. If you added a 20-25% federal sales tax that would cause a revolt. I suggest folding this tax into the price of the product just like income tax burdens behave now. When the merchant invoices for the product or service the tax is included there. When he gets paid so does Uncle Sam. This would also allow for different rates for different products; higher for luxury or high value added or dangerous products and lower for unfinished or bulk items like ore or grain, or oil! There would be plenty for accountants and bean counters to work on and congress to fiddle with. Just as long as the tax is there it would have its negative feedback stabalizing effect on the economy.

And that would be bad because?

Simple human nature. If you bought something for $20 and it rang up $27 you would object! Now if that same thing was priced $25.95 and it rang up $27 you would not make a peep. I forget where they tested it but whenever the tax is "rubbed in your face" like this it produces large scale fraud. Hell, I remember in NY years back they pushed their sales tax from 6% to 8% I believe, and there were weekly stories of people doing all sorts of things to get out of the tax. If you want constant turmoil and chaos and the police state reactions it would engender then go for it. I frankly don't like doing things the hard way.

Have to agree. No one can make a decent business guess or take risk without stable tax laws. Changing the law every two or three years is NUTZ! The IRS and accountants can't keep up, so how is the little guy to make out his own return, no less figure out how the politicians are trying to take his money to pay for those that evade, avoid and welfare out the system.

The only thing I am betting on are penny stocks. If they aren't belly up now, they are possible investments. Because of the current 15% LT cap gain tax, the MMs, traders,and other basic crooks are going to run those stocks before the end of the year, particularly if BUSH looses and/or the Degenerats take over Congress. EZ answer - they do not want to pay a much higher rate with te next tax change. Remember, there is no such thing as CAPITAL under the Socialists (er Dems) everything is a gift of the state.

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