RW:
Our thoughts on the subject of income tax and a tax on goods are similar. You want to see a reduction in income tax, I want to see it disappear completely and both of us want a shift to putting the tax on goods on services. The system you detail seems to me to be too complex. It may be a fair way of applying tax but its complexity will open it up to avoidance just as the complexity of income tax makes that avoidable if you know how.
Changing "Money", what it means is necessary; but as Ben Franklin once said, Death and Taxes are two things you can be sure of.
But of course in Ben Franklin’s day ..... I don’t believe the US had income tax. That only came into being with the creation of the First National Bank a forerunner to the FED.
Taxes are more easily changed, i think, because changing money would require an even greater revolution of confidence and thought.
I don’t agree with that statement. Both income tax and money are changeable and really in a very simple way.
As Positive Money suggests, the creation of money has to revert to being a responsibility of the Central Bank instead of being created by private commercial bank. This is the way bank notes are created and have been so for generations, why not electronic money as well. The method of money creation whether by banks or the Central Bank, is identical This change has nothing but advantages for both bank borrowers and ultimately Government borrowing.
A commercial bank creates new money every time it makes a loan. It does this simply as a data entry on a keyboard ...... effectively it creates a number on a ledger. Because the loan had no origin other than a few key strokes, the bank has no liability to repay. When it recovers the loan it simply writes this number to zero ...... it destroys the ‘
money’.
At the bank nothing will change as far as the customer is concerned. He will still go to the bank to borrow money, but now the bank will have to borrow it from the Central Bank. The government controls both the interest rate and the mark up by the banks.
This of course will radically change the accounting system of the banks! They no longer have loans as 'assets'; they now have a liability to repay the Central Bank. Bank deposits become assets of the customer not a bank liability and the bank just charges you for looking after it by charging for services. The banks are now intermediaries, not the source of money. They will still make a profit but the inherent risks within the current system, disappears. No more risk of bank runs. NPL’s would be resolved by transferring the customers debt to the Government and they make the decisions as to how to deal with each NPL on a case-by-case basis.
If the function of the creation of money is done by the Central Bank, in exactly the same way, it also creates new money. One huge difference ....... it is not created as a loan, it is created as a perpetual currency. It is in continuous circulation ‘
ad infinitum’. No need for income tax as there is no loan or interest to pay. The tax on goods is collected by the treasury and they then re-spend the same money back into the economy. The taxes are now imposed on spending rather than income and can be graduated according to their ‘
luxury vs necessity’ rating, rather than an ‘
environmental’ based tax.
This requires a Sovereign currency which only has value within the State. Like the Cyprus pound used to be. To convert it to a trading currency, the conversion has to be through the Central Bank where they have the foreign currency reserves.
If someone hoards large quantities of the sovereign currency and decides he wants to take it abroad, the Central Bank imposes a transfer tax on behalf of government. A small amount for a holiday or business trip ..... no problem .... tax free. But if you want to move many thousands to invest elsewhere, you pay a tax on the basis of ‘the-more-you-have-the-more-you-pay’. So it is, in a way, similar to income tax but only payable when you want to convert it and take it abroad. If you want to bring a foreign currency into the country you declare it, the Central Bank converts it to Sovereign currency at a predetermined rate ...... no tax. If you just pile up the money in the bank it is of no use as it is not spent into the economy .......... so you may just as well spend it and benefit.
Whether money is 'Free' or not, Taxes should identify what 'it' costs, with the motive of getting 'it' done.
Rather than what it costs being the basis of a goods and services tax, maybe its level of luxury should determine the goods/services tax rate. Quite easy to implement if you have just a digital currency because every transaction has to be electronic and software would prevent tax avoidance ...... no more ‘
cash-under-the-table’ deals because there would be no cash.
With rose coloured spectacles on
........... with the UK out of the EU and with the casino banks separated completely from the commercial banks, this could be implemented in exactly the same way as Cyprus went from the CY£ to the € over a weekend. With modern computer system a single ‘
enter’ could achieve the transfer in seconds.
There is only one problem
....... The Bankers would never allow it to happen as it would demolish their power base. All the trillions they hold as Government debt would become a sovereign currency overnight and their unlimited wealth would evaporate. Many have tried to wrench the power from the Bankers and most have paid with their lives ..... several US Presidents among them.
But it’s nice to dream but I'm keeping a low profile just in case!
