FALLACY OF 101 ECONOMICS -- An Exchange

FOR MY READERS:

Don is a fellow Clintonian (Iowa) with whom I grew up. Like me, he first went into science and engineering as a career, than regrouped, and went into psychology with NASA, while remained in both careers in the private sector with high tech companies.

Dr. Don has created a network of more than 300 fellow Clintonians stretched across the globe to keep them in contact with each other and with the source of their good fortune, growing up in Clinton, Iowa, a crescent city on the nose of the Mississippi River as it rolls by Iowa.

A fellow Clintonian, reading something that I had published, offered a professor's take on how the tax system works. This is my reply from the perspective of being a thirty-nine year resident of the State of Florida.

MY COMMENTS ON "101 ECONOMICS"

Don,

This is clever. I enjoyed it. But it is still a chicken and an egg thing, don't you think?

The rich or the upper level economic class of American society illustrate the chicken, and the egg those in the lower number denominations.

We wouldn't have the upper without the lower, but we could have the lower without the upper in a different societal configuration as we see across the world. But this is the United States, and we are ethnocentric to the extreme. We would rather analyze our problems to death as some kind of a game rather than solve them. Solving them would mean making sacrifices, changing tax codes, and actually changing the nature of our priorities (i.e., our behavior), which we find impossible to consider much less do.

We want gain without pain. We do a good job of this by perpetuating the myths that the wealthy have programmed into us to believe as irrefutable: that without them we would not survive as a nation. They have killed our mom & pop grocery stores, our mom & pop ice cream parlors, our mom & pop farms, our mom & pop hardware stores, and on and on, while sending jobs that were the life blood of a community elsewhere, and that makes their myths irrefutable? I don't think so.

We have been sold a bill of goods that big is better and corpocracy is best, and we have fallen in line to support this myth and therefore giving it credence. One of the major reasons we fail on the international scene is that we promulgate this myth to a world that has a decidedly different orientation and perception of existence.

I


I happen to know people who pay $26,000 a year property tax; the guy next door pays $13,000, and they both have essentially the same valued house and property. The first one built from scratch, and the second kept a sliver of the foundation and a wall, and therefore, was classified as "upgrading his domicile."

Both of course are heavy hitters, but know all kinds of tax shelters that blow the professor's economic illustration out of the water. But that is another subject.

II

So, back to the chicken and egg thing. The chicken pays more in actual dollars as the illustration demonstrates but without the egg -- without those millions and millions who pay little taxes -- the country or county (in my case) sinks into the red.

We in Florida just had a vote for property tax relief. It passed. BB and I voted against it because we could see where it would have to cut police, education, and other city and county services.

In our area, alone, this will be by some $50 - 100 million. The shortfall, of course, that nobody wants to think about, will probably in the end cost more than the tax relief just passed. It is an economic oxymoron that politicians favor.

This will no doubt result in raising the sales tax which is already 7 percent in this county and 7.5 in the next. It will likely introduce a state income tax, which we have never had. It will no doubt bump up the sales tax a half point or more, while still failing to tax services, which is our main industry.

Currently, we don't pay sales tax for food, prescription drugs, health services and solar energy investments, or services. Because the property tax reduction passed, chances are we will see cracks in this tax barrier wall as well. But rest assured, politicians will attempt to hide this as much as possible in sleight of hand tricks.

III

For us old codgers, we can't imagine paying a sales tax for Internet purchases here in Florida, but that is coming, too. The Florida Tax Watch has said that property taxes could be reduced by $2 billion annually if Florida collected sales taxes owed on Internet purchases. Don't hold your breath on this.

IV


If I were to come from another planet, I would think economic madness was a precondition to human existence. We don't want to give up sin, so let's tax it!

Here in Florida, the government is looking to ways of expanding the lottery, increasing casino gambling, leasing now free bridges, raiding trust funds, imposing surcharges on strip club, and generally, finding new ways to have sin pay its way by encouraging sin to spread like a prairie fire.

For example, those little minds in Tallahassee that are running the state lottery have come up with a scheme where people who are willing to pay $2 or $3 for a lottery ticket instead of the current $1 can have the same chance at the lottery jackpot, but get this, win two or three times the published jackpot sum in the newspapers.

So, if the jackpot is $5 million, and they hold a $2 or $3 ticket, they can win either $10 million or $15 million. GREED IS GOOD and lottery officials believe people will rush to buy $2 -- $3 tickets. Sin, you are so predictable.

The Seminole Indians Revenge is like a book out of Revelations. These crafty warriors have convinced the Florida governor that the Seminole Nation has a scheme that can relieve Florida of much of its economic woes, and make the governor a hero, by establishing Las Vegas type gambling here in Florida. It is expected to add billions to state coffers.

Since the house is the only winner in the gambling scheme, little concern seems to register about the fall guys and gals in this enterprise.

If Florida makes billions, than the house will be making hundreds of billions, an industry that creates jobs from sin to promote sin and to ultimately establish Dante's Hell for losers.

That said the Florida governor, who is widely popular for reasons beyond my understanding, with a chameleon like instinct for survival, bypassed the state legislature and signed a contract with Andrew Jackson's former nemesis.

"He who waits finally wins," must be an Indian proverb.

The Spanish may have attempted to annihilate Florida Indians some 500 years ago with small pox infected blankets, but the Indian Nation today has discovered a less intrusive way of neutralizing its eternal nemesis with casino sin.

V


Back to reality, our property tax increased for BB and I by 110 percent last year. We represent 50 percent of the Florida households so assessed. Others were assessed 75%, 60%, and down in reverse order to the professor's equation.

Then we had this reality headline yesterday for Tampa: Generous City Benefits Continue Amid Cutbacks.

With the property tax referendum (i.e., Amendment 1) passing, the City of Tampa will have to cut $12 million in its budget. It paid Tampa City employees $16.5 million last year in compensation for unused sick leave and vacation and that is expected to be the same this year.

Earlier in the year, the Tampa mayor announced the elimination of several hundred jobs, and get this, NOT A SINGLE MANAGER IN THE BUNCH. All of the redundant employees were in low level city service sector jobs.

No one ever said politicians had to have backbones, did they?

Of course not! The public sector is no more courageous than the private sector where, as you know, I was right in the thick of it as a Human Resource Director in Planning & Development.

The cushy jobs are always protected in the public and private sector, but the jobs of the real workers doing real things in real time are always expandable. And why? Because real workers have given the cushy job brigade their power. It is another one of corpocracy's perpetuated myths: workers will not work without a supervisor.

In my experience, we could get rid of NINETY PERCENT OF THE DEPARTMENT HEADS and there wouldn't be a glitch in the activity.

On the other hand, eliminate workers who cut lawns, fill potholes, resurface streets, service fire hydrants, repair buildings, put out fires, recover stray animals, clean our reservoirs, protect our persons and property, then the cry of the city is, "Tampa, we have a problem!"

A professor -- and we've both been there -- lives and works and thinks in a surreal world of ideas and algorithms, while the real world works quite differently than a nice exercise in logic. I truly wish it worked in actuality the way the professor illustrates, but capitalism like other social economic systems is sick and showing signs of age and symptoms of senility.

We are a dying society not because we don't protect the rich enough to keep them investing and growing our economy.

We are a dying society because nobody is in charge, and everything goes along on "101 logic" as if that will spell our problems.

No, we would rather argue how many angels are on the head of a pin than prick our pomposity and hubris, and get on with it.

Be always well,
Jim


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SUBJECT: ECONOMICS 101, OR HOW THE TAX SYSTEM WORKS

Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it
would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every
day and seemed quite happy with the arrangement.

One day, the owner threw them a curve. 'Since you are all such good
customers, he said, 'I'm going to reduce
the cost of your daily beer by $20. Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the
first four men were unaffected. They would still drink for free. What
happens to the other six men - the paying customers? How could they divide
the $20 windfall so that everyone would get his 'fair share?' They
realized that $20 divided by six is $3.33. But if they subtracted that
from everybody's share,
then the fifth man and the sixth man would each end up being paid to
drink his beer. So, the bar owner suggested that it would be fair to
reduce each man's bill by roughly the same amount, and he proceeded to
work out the amounts each should pay..
And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four
continued to drink for free. But once outside the restaurant, the men
began to compare their savings.

'I only got a dollar out of the $20,'declared the sixth man. He pointed
to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar,
too. It's unfair that he got ten times more than I!'

'That's true!!' shouted the seventh man. 'Why should he get $10 back
when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get
anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat
down and had beers without him. But when it came time to pay the bill,
they discovered something important.

They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our
tax system works. The people who pay the highest taxes get the most
benefit from a tax reduction. Tax them too much, attack them for being wealthy, and
they just may not show up anymore. In fact, they might start drinking
overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.

_______________
Dr. James R. Fisher, Jr., an organization/industrial psychologist, former chemist and field chemical engineer, has worked for Nalco Chemical Company, Honeywell, Inc., and Honeywell Europe, Ltd. He has worked across the United States, and in South America, Europe and South Africa, and has traveled extensively in the Middle East and North Africa. He is the author of nine books in the o/i genre with his most recent A LOOK BACK TO SEE AHEAD. He encourages exchanges such as this.