Want To Fix Income/Wealth Inequality? Here's How

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

There is nothing fancy about these three solutions.

I have covered rising income/wealth inequality for many years in dozens of entries. Since Thomas Piketty's new book has catapulted the topic into the media spotlight, it's a good time to list solutions that go deeper than Piketty's proposed global wealth tax–a proposal he characterizes as utopian.

Every solution is utopian, because the Financial Aristocracy and their central bank cronies have democracy by the throat. There is no legislative way to change the Status Quo when political power is for sale to the highest bidder, and central banks are issuing nearly-free money to the financial oligarchy that owns the political machinery.

But listing solutions is still important, because it reveals just how far from democracy, rule of law and free-market capitalism we have fallen. I have been describing various aspects of widening inequality in recent entries:

America's Nine Classes: The New Class Hierarchy
A Critique of Piketty's Solution to Widening Wealth Inequality
Are You an Elitist? Class Warfare and the New Nobility

I propose three straightforward solutions that will systemically rectify wealth and income inequality.

1. Rather than add taxes to fund more social welfare–in effect, placing a Band-Aid over the tumor–let's start by removing the source of rising inequality: the Federal Reserve. I laid out in detail how the Fed's policies have enriched the top .1% at the expense of everyone else in Want to Reduce Income/Wealth Inequality? Abolish the Engine of Inequality, the Federal Reserve (January 28, 2014)

This boils down to the Cantillion Effect: new money is injected into the economy at specific points, creating winners and losers. Those with access to the new money (in the Federal Reserve's policies, those with financial power) gain immensely and everyone far from the free-money spigot loses purchasing power.

There's no mystery here: if trillions of dollars are available at near-zero interest rates to those at the top of the pyramid, they will benefit accordingly.

This chart shows how access to the Fed's free-money spigot causes the very top layer of owners of capital to outpace their less-wealthy peers: while the top 10% has outpaced the bottom 90% and the top 1% has outpaced the top 10%, the real action is at the very pinnacle of wealth holders: the top .1% has outpaced the 1%, and the top .01% has outpaced the .1%.

Were the Fed abolished, the top holders of financial wealth would no longer have access to unlimited sums of free money, and the asset bubbles that are the essential engines of wealth inequality would all collapse, along with the vast majority of the top holders' phantom wealth.

The collapse of asset valuations would impact middle-class holders of IRAs, 401Ks and pension funds invested in asset bubbles, but the real losers would be those at the top who own most of the phantom financial wealth.

2. Eliminate the 6.2% Social Security payroll tax paid by employees and employers, and print the money to pay Social Security benefits in the Treasury. I described this solution in How About Ending Social Security and Paying Retirees with Cash? (November 15, 2013).

The basic idea is this: rather than borrow money into existence via the Federal Reserve, abolish the Fed and print the new money directly. There is no interest to be paid on this new money, and so the financial parasites have nothing to gain from its creation.

This would wipe out the most regressive tax on the working poor, and benefit all employers. Each currently pay 6.2% of wages, so eliminating Social Security taxes would give every worker an immediate 6.2% raise and every employer a 6.2% reduction in labor overhead. (The 1.45% Medicare tax each pays would remain in place.)

The newly issued $800 billion a year would flow directly into tens of millions of individuals' accounts, where the the majority of it will be spent in the real economy.

As for those who claim creating $800 billion a year would spark runaway inflation: the Fed has printed over $3 trillion in the past five years, and inflation is mostly a result of asset bubbles and cartel pricing (sickcare, college tuition, F-35 aircraft, etc.), not new money.

Abolishing the Fed would trigger a deflationary collapse of asset bubbles. Printing $800 billion and distributing it to tens of millions of households would only counter some of this deflationary wave. The $800 billion annual distribution is simply too small to create inflation in a $16 trillion economy that is undergoing a cleansing of trillions of dollars in phantom wealth at the top of the wealth pyramid.

3. Tax unearned income at much higher rates than earned income. The vast majority of the New Nobility's income is unearned income from rents, interest, dividends and capital gains. Taxing unearned income is in effect a wealth tax because only those who own income-producing assets have unearned income.

It would be easy to set up a simple tiered tax structure that reduces income taxes for households with less than $250,000 annual earned income and offsets that reduction by raising the tax on unearned income above some level that enables small entrepreneurs and middle-class households to accumulate capital–for example, unearned income such as interest, dividends and capital gains would be taxed at the same rate as earned income up to $100,000 and then rises to much higher rates above that level.

There is nothing fancy about these three solutions. They shift the incentives away from speculation to earned income/productive work, they lower regressive taxes on the middle class and working poor and they do not restrain legitimate enterprise and wealth accumulation. They eliminate complex systems (the Federal Reserve and the tax code) and put money in the hands of tens of millions of households rather then the top .1%.

Yes, they are utopian, but only because we keep electing the same bought-and-paid-for Demopublican lapdogs of the super-wealthy and vested interests.

Want to give an enduringly practical graduation gift? Then give my new book Get a Job, Build a Real Career and Defy a Bewildering Economy, a mere $9.95 for the Kindle ebook edition and $17.76 for the print edition.

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Marina’s Story

Once I told Marina “It’s Your Turn” in the first session, she was like a horse to the barn and her stumbling blocks of fear became stepping stones of courage as she galloped to the finish line ~ which was herself ~ unchained from unworthiness, freed from the stifling harness of fear and ready to speak her truth.

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The Refi Boom Is Dead; Applications Drop To Lowest Since Lehman

The Fed’s QE efforts were – if one is to believe the words spewed from their ever-lying mouths – designed to aid the man on the street, to lower interest rates, and enable another refinancing-led housing boom/bubble which would maintain the status quo and confirm the ‘happily-ever-after’ dream of every taxpaying (and non-taxpaying American). Today’s data from the Mortgage Banker’s Association confirms – QE’s work is done and the refi boom is over. A 7% plunge on the week has pushed the refinancing activity index to its lowest levels since September 2008 – just before Lehman.



Chart: Bloomberg

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Veterans Suffering from PTSD Denied Access to Marijuana in Colorado

A bill was rejected by the Colorado House State, Veterans, and Military Affairs committee Monday that would have added post-traumatic stress disorder (PTSD) to the list of ‘debilitating medical conditions’ that qualify for a medical marijuana recommendation.

Vía Veterans Today http://ift.tt/1rQkjge

We are on the road to Bitcoin Heaven: Roger Ver



In the US, a supposedly free country, one is not allowed to play poker or gamble on the Internet with one’s own money using credit cards or Paypal. Bitcoin is able to circumvent these regulations by allowing users to spend their money on what they choose to……. Read More >>>

Vía Max Keiser http://ift.tt/1rGWyFn

You Pay For Tax Haven Bliss

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You don’t benefit from it, but you pay for it as a result of the government losing out. Yes, the government complacently sits back and does nothing while tax havens enable people to put their money hidden away in some secret off-shore excuse for a bank while at the very same time the taxpayer ends up paying for what the state is losing out on. Why is it that it’s the little guy stuck in the middle that gets pushed around, shoved into a corner for him to have his nose pummeled by the taxes levied on him, instead of the ones that are putting the money away in those off-shore financial generators? It’s not as if it’s just a couple of dollars per person. No, the sum that every American citizen ends up paying because of that works out to roughly $1,259 extra on their tax bill. Yes, the state is hardly going to allow the shortfall to go amiss and it’s the average American that end sup picking up the tab.

According to research carried out by US Public Interest Research Group in Boston, there are some $150 billion in federal revenue and $34 billion in state revenue that goes down the plug-hole into some off-shore banker’s vaults. It’s all stashed away by wealthy corporations and high-net-worth individuals that want to (and therefore have the financial ability to) avoid paying their taxes in the USA. Estimates show that corporations account for about $110 billion of the total that is lost and private individuals make up what’s left.

93% of the profit made for corporations between 2008 and 2013 was through off-shore companies, meaning that they were paying no tax in the USA. Great, so now we understand just why (well, one of the reasons apart from the Federal Reserve blunder on Quantitative Easing and the far-from-wise handling of the economy by Ben Bernanke and his pals) the economy hasn’t actually budged an inch in the right direction.

The loony loophole that we are all paying for is that any corporation can avoid paying federal income tax on offshore profits. Easy, and you can’t even call it a loophole. It’s a clear-cut measure to allow those corporations to benefit from the non-payment of taxation in the USA. Not only do those corporations manage to avoid paying taxes in the USA on a federal level, but they don’t have to pay tax in the states where they are operating. Nice! Why not let us all set up our own corporation, or even better all Americans should join forces, create the People’s Corporation, headquarter ourselves in the Cayman Islands and then refuse to pay both federal and state taxes since we will be based offshore, operating within the USA and exploiting the so-called loophole.

290 of the top Fortune 500 companies in 2013 held $1.6 trillion of their profits in accounts located in tax havens. That was an increase from $1.1 trillion in profits in 2009. Nice little earner this business, isn’t it?

If you live in California, New York and New Jersey, then you’re suffering the most since it’s in those states that there are the most tax dodgers.

But, it’s fighting a losing battle sometimes where all of this is concerned. Do we really believe that the people that earn the most, those that have their own savings in offshore accounts are really going to put an end to his? Taxes were never made to be fair. They were intended to share the money (that was the idea) and provide for those that needed it so that we had a better world. The real reason taxation might have been invented is to filter the money of the people through the hands of those that meet in the corridors of power. Ah! Well, as the humorist Will Rogers once said “it’s a good thing we do not get as much government as we pay for”. Always look on the bright side of life…

The average American ends up paying that shortfall in government revenue simply because without that money the state cuts spending, increases taxes and establishes an order of priority of who gets what and how much is dished out.

Remember as someone once said, you don’t pay taxes, they take taxes!

Originally posted: You Pay For Tax Haven Bliss

Day Trading Data Sheets Futures and Forex

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