66. Recall Seems To Tax, But Fails.

Recall seems to Tax, But Fails
Bob Komives
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To an individual taxpayer, monetary recall seems to work. She can trade every dollar in her hands for a small percentage of the wealth traded in the marketplace. If the federal government recalls dollars from her --taking money out of her hands-- she can now trade for less of that wealth. Each dollar she gives to the national government seems to reduce the wealth that she has to make purchases or investments for herself.

To the government official that receives her dollar the tax seems to work. He sees the recalled dollar as revenue. He sees the dollar that comes in as an opportunity for government to buy from the marketplace. The perceptions of both taxpayer and government official are understandable, but erroneous.

First, a superficial problem: taxation has costs. To debate, to legislate, and to receive, as well as to calculate, to send, and to avoid taxes we use resources. The recalled dollar buys less of what the government wants than it does of what the individual wants because part of the dollar erodes away during recall. In what amounts to circular bucket pouring, a little drips out with each pour.

Second, the fundamental problem: within a small margin of error, taxpayers know how much they will have to pay in taxes. They discount every dollar they receive, anticipating the return of part of each dollar to the government.

Into marketplace
goes the taxpayer
and with taxpayer
begins to bargain.
"After taxes I have nothing," he says.
"After taxes I will have nothing" she says.
After exaggeration and inflation,
taxpayer and taxpayer make a deal.

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Monetary recall is almost never a secret. It may be the biggest topic of conversation after weather and sports. People are smart enough to discount the face value of the money they receive to allow for the amount that they will have to return through the recall. Thus, it takes more discounted money to buy a refrigerator than it would take undiscounted money. Spread through the savings, lending, and investment system, the net effect of discounting is to force the economy to mint more money --to force inflation.

When a seller of chickens believes he should get the equivalent of one 75-cent cement block for each chicken, he will intuitively try to charge $1.00 if he knows 25 cents will eventually go for taxes. In turn, the cement block has a price of 75 cents because the cement block maker must charge that to get the fifty-six cents she wants from the sale of the block. The rest she sets aside in her mind for taxes.

This price-raising system is not perfect. Chicken sellers and block makers cannot raise prices without fear of loss of sales to competitors. However, the entire marketplace operates with discounted money. The value of a dollar is the value we give it. If together we discount its value in anticipation of monetary recall, together we push inflation. Buyers and sellers exchange goods and services for money in the marketplace with full knowledge that they have to pay taxes. All of the money collected by the Internal Revenue Service has already been discounted in value (prices have inflated). The value of each dollar reflects the net value that people believe they can receive from it. It incorporates a discount that reflects the average tax burden experienced by the population. If that average burden is about 25% a suit that would cost about $75 without recall taxes could cost about $100 with them.

When the price of oil went up rapidly in the early 1970's, other prices in the world's marketplaces tended to follow because petroleum users successfully raised their prices. Monetary recall has the same effect.

Income "taxes" raise the cost of my labor.
I raise the price of my labor because
I discount the value of my income
in anticipation of the taxes
I know I must pay.
When I discount the value of dollars I receive,
I, in effect, demand that more dollars be printed.
I have become inflationary pressure.

.....We thought we had severely taxed ourselves
.....when, automatically,
.....we sent back some of our national currency.
Yet, we only taxed sincerity.
.....We thought we had paid
.....for what our government spent.
Yet, we only paid for what we did not earn.
For this is the rule:
.....Our automatic tax,
.....our national income tax,
.....puts more money into circulation,
.....and then tries as best it can to take it back.
If you doubt this rule,
please search for its exception.
Search for:
.....the person,
.....the employer,
.....the employee,
.....the customer,
.....the idiot
.....who bargains and shops
.....ignoring that he knows
.....some of what comes
..........in to him
..........goes right back
.....out to his government.

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:: Bob Komives, Fort Collins © 2006 :: Plum Local IV
:: 66. Recall Seems To Tax, But Fails ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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