Trump's Shift In Tax Policy
There is something interesting going on within the Trump Administration. It is not something that gets attention from the media, probably because they do not realize it is taking place.
Actually, this is something that isn't political, although in this era, everything is made political. That said, what we are looking at is the possible restructuring of the economic landscape as it pertains to individual taxes.
Obviously, anyone who gets on any social media has heard about the tariff wars Trump is waging. This might seem like something that is without thought but, underneath, there is a great deal of validity to it.
The key to understanding this is to see what is possibly taking place in unison.
In this article we will look at how Trump is seeking to shift the tax policy of the United States.
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Trump's Shift In Tax Policy
For a more than a century, the United States operated on an income based tax policy. Each year, hundreds of millions of people file their tax returns. Politicians took this to be a talking point, often citing that "people have to pay their fair share".
Opponents of this call it theft. Certainly, there is something to the fact that politicians can engage in uncontrollable spending and then, simply alter the amount of taxes people pay (i.e. the percentage of a paycheck the government will take) simply through Congressional vote.
All of this, of course, is policed by the Internal Revenue Service.
Here we see the basis of two shifts taking place with regards to taxation.
From Internal To External
The idea of an External Revenue Service was floated. Hell, there might have been an Executive Order creating this.
Whether there is an actual agency or not is immaterial. The basis here is the shift from internal focus to external.
Tariffs tax externally. It is placed on the imports of goods from other countries. While the knee-jerk reaction is to simply call it inflationary, that it will send prices up, it is more nuanced than that. Often, the totality of the price cannot be passed on. Instead, it is spread across the entire supply chain. This reduces profits which, ultimately affects the company in the country of origin.
In other words, this is less money that entity is able to extract from the United States.
That does not mean there is no increase incurred by the end user. It is very common for their to be price increases. Not all of it is eaten by the different corporations involved. Naturally, this is framed as a bad thing.
But it is?
The Shift From Income To Consumption
if operating in a vacuum, this impact would lean heavily in the direction of being negative. However, there might be something else in play.
Earlier this week, the idea of, once the budget is balanced, of eliminating taxes on people making $150K or less was floated. Here is where the other side of the equation enters.
By eliminating (actually reducing the tax rate to zero) the income tax on these people, the burden is is placed onto consumption. Income, for this group, is untouched.
Above I mentioned that people have no say in the income tax. In fact, for wage earners, it is removed from one's pay by the employer. The person never gets to touch the money.
Reverting back to the tariffs, the "tax" here is voluntary. Nobody is forced to buy a particular product. Sure, this situation is amiss when there are no alternative (substitution) products. Under normal circumstances, where choices exist, people select what they purchase.
Americans might have a tough time with this. There is a significant portion of the population with an entitlement complex. They feel they deserve that luxury European automobile and it should be as inexpensive as possible. Making them pay more or, heaven forbid, price it out of their budget is simply unacceptable.
Since individual entitlement is outside the scope of tax policy, we will have to leave it aside. Nevertheless, the shift from income to consumption does present an interesting dynamic.
For many, the idea of working overtime or moving up in one's profession is offset by the fact that additional financial gains simply aren't worth it. When the income tax is figured in, the additional compensation in return for added responsibility doesn't make sense.
Why should someone who wants to work more hours or step up to a higher level be dissuaded because the government takes a larger bite out of the paycheck?
It shouldn't.
Will It Work?
The question is whether this will work or not.
At this point, we have no idea how this will unfold. Balancing the budget is something that hasn't been done in almost 30 years. That alone will be an astronomical feat.
On top of that, can tariffs raise significant revenue for the government. When people have options, they often take this. The retort to this is that, by buying from companies that are operating within the US, growth will occur, providing tax revenue from other areas. This might be the case but is no guarantee. Also, dependence upon corporations for tax funding is dangerous since we know many pay very low rates (to none at all).
We will see if this can be accomplished. The move from income-to-consumption based taxation might be underway. How long until CNBC starts to talk about this?
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Trump tariffs on Canada, Mexico, and China might be a decision to boost companies paying more taxes operating in the USA.
Trump screwed us with his last tax cut that limited property taxes and other deductions to only 10k I would think he would screw us over again...
The consumption tax is one step removed to the carbon tax which is based on consumption. It seems the WEF agenda is still in play.
After 1776 until the US civil war, there was no tax. The republic fractured due to the release of the slaves who under the 13th amendment, given freedom, but who were still in an insuperable bar as to citizenship. This is where the 14th amendment came in to create what we now know as "US citizen".
The 14th amendment was not legally ratified according to the 90th congress (congressional record of 1967):
https://www.dropbox.com/scl/fi/fil976el28r6y9zz11wyd/Congressional-Record-1967-Talking-About-How-14th-Was-Never-Ratified.pdf?rlkey=oppg721db6olzv28f9su2tzay&e=1&st=zp49vpzw&dl=0
The result was that we now have "state citizen" with constitutional rights and "federal citizen" (aka US citizen), with civil rights (privileges and immunities). By 1871, the organic act killed the republic by turning everything into "equity" in law. In it, every single dejure state, county, township, etc was given a similar name as a corporation. California republic became "State of California", the city of LA became "City of Los Angeles". Then their locations were moved 4 USC 71, 4 USC 72 to the District of Colombia.
The corporation known as "United States" (defined in 28 USC 3002 15(A)) can be seen to have been relocated in UCC 9-307(h) to the District of Colombia.
So most of you were never even in the United States and got tricked into contracting with a corporate entity which is completely foreign to the united states for America. Those tax dollars don't go where you think, but to the IMF (International Monetary Fund) bank which placed all US citizens as sureties on the debt in the emergency banking act of 1933. It is fraud (part of owning nothing and being happy I guess). They violated two precepts of contract law (lack of transparency and lack of consideration) and violated your rights as free men and women "of the union" in the words of the honorable justice Miller (Slaughter house cases).
Problem is you have to rebut the presumption (federal rule of evidence 301) that you are a US citizen. It's not "innocent until proven guilty" in a maritime court. It's the opposite "guilty until proven innocent" because rule 301 says they're allow to throw presumption bombs against you and you have to refute it in their court system.
This is certainly an interesting take. For an import-heavy economy, it's really not far-fetched to speculate on this being the strategy in play.
That said, when you say that the cost of tarrifs are spread across the entire supply chain, it suggests that the cost is evenly distributed, which I honestly doubt is the case.
It's very unlikely that anyone other than end-users bare the most costs either directly or indirectly, so the real concern here would be how long consumers will have to endure the pain of these policies before the system comes close to being favorable.
https://www.reddit.com/r/Economics/comments/1jcdlzt/trumps_shift_in_tax_policy_possible_restructuring/
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I think the increase in the tariffs would have an effect later on
I think Trump's tariffs are bad and may trigger a recession in the US. It is something he is doing deliberately to make things difficult globally but he should adopt different approach.
More likely, if one is triggered (or added to) it will be in other parts of the world. China is already suffering and it could get worse.
The tariffs can have significant effect on the global market
That is true. There is a danger that global recession can take hold. That is how the answer to higher prices is resolved, people stop purchasing.
I believe the tariff plan was really necessary to put some systems and structures in place. The result might not manifest now but it will