Taxation and Innovation

What is Innovation?
Innovation is the successful implementation of a new idea. Development of a new idea always has a seed belief, yet unproven, that must overcome current thinking. It starts with an inventor forming a biased opinion based on limited experience. This is refined by research (to a limited extent) but most effort is placed in development (to actually do anything) to prove the idea and to persuade others to come to the proposed change in thinking.

Objection, prudence and precaution always oppose any new idea. Some are well founded to ensure that "do no harm" caution is observed; others simply resist any change, a sort of "don't rock the boat" attitude which greatly increases the cost to develop any new idea.

There are only three ways to increase confidence in a new idea:
 * 1) provide qualitative analysis that suggests that respected sources believe it has real merit.
 * 2) provide quantitative analysis to say it is a more likely solution than other alternatives.
 * 3) prove it using causality.


 * Qualitative analysis is merely a judgment by a credentialed source. It must deal with the fact that the status quo will resist change, so it is very unlikely that any new idea will see the light of day from credentialed sources. The use of credentialed sources is also unscientific in that it is only opinion, not fact, and is only properly applied when an idea introduced as "new" really isn't, which a disciplined examination is able to recognize it as something already tried.  A new idea (if it truly is a new idea) has no history, thus an experienced source adds nothing to the analysis, save an honest conclusion that "we don't know."  Qualitative analysis often involves an intellectual lazy practice of placing blind trust in others to render opinion for what we do not yet understand.

Rarely, if ever, does a new idea come from credentialed sources. More often, credentialed sources often resist new ideas as "Not Invented Here" (where they are supposed to be). A new idea also has a rough time of getting the status quo to buy into risk, thus it is unlikely to get approval. As Senator Alan Simpson said, "There are some people that the only thing they like better than how things are, is how they were." Typifying the fate of new ideas is Doctor Lister's famous quote, "Gentlemen, the disease is on your hands" shows at least one example of running this gauntlet.


 * Quantitative analysis (statistical sampling) does greatly improve one's confidence in adopting a new idea, but it again rarely can be used because those data required as evidence most often depend on having the product or idea in force to collect any proof that is required. A recent example is Lee Iaccoca's experience when he tried to introduce the minivan at Ford.  The opposition was based on quantified market studies.  Iaccoca dismissed the studies as absurd because there was no minivan for the market to form any opinion.  He later introduced it at Chrysler and proved his point. Moreover, any future event that is not causal always has a certainty of less than unity, i. e., there is always some probability that any assumption suggested by quantitative analysis is entirely wrong.  It also suffers from confirmation bias, because those data used are often "cherry picked" to prove the idea.


 * Causal analysis is the only mechanism that concretely dispels doubt and invites adoption. This is the struggle of the every inventor, to actual produce a working model of what is claimed. It is the "if and only if" of mathematical proof.  But even with a working model, others will have to be made aware of the problem, persuaded as to why it is better than alternatives, and finally motivated to adopt it as a solution.

Thus, there is a trichotomy that all decisions about new ideas must obey:


 * One can decide for,
 * one can decide against, or
 * one can not decide.

The risk-averse will not decide. The larger the organization, the more it has to risk and the more likely it is not to decide. The more an organization has to risk, the more reticent it will be to deciding anything, because much more proof and persuasion must be done before anything is attempted. You can see this behavior throughout history: Texas Instruments turning down the microcomputer, Western Union dismissing the telephone, etc.

The role of government
The suggestion by many is to have the government perform an unbiased role of protectorate, particularly in the case of an unbiased review of of new ideas. The fact is that this introduces a "do nothing" bias to development, because the emphasis is to make no errors.

Monopolies and Innovation
When one looks at the electronics industry, we see the opposite. Here, any inventor can try a product, find out a way to produce it, and market it. However, capital obstacles do exist when it requires government approval (e. g., FCC and other approvals). There always are good reasons for the establishment of these approvals, but they often become the molasses that drags down new ideas. Within medicine, for instance, there are fundamental "do no harm" issues that are well founded because of the risk of doing the wrong thing. This appears in telecommunications to ensure that energy impressed by a device into the network does not damage other equipment, or the earlier maxim of "last in, last compatible" that it must work with everything that preexists. The possibility of risk of fire, electric shock, and other "code" requirements are also well-grounded (pun intended). But, invariably, these requirements are rarely purged and the "check list" would make even Job weary and reluctant to try anything. Only when the monopoly opposition is dismantled can a new idea find fertile ground.

Monopoly "bid specifications" that keep doing the same thing at more cost never scrutinize what should be done, only who will do it. The public is not asked to look at the cost and the people making the decision are insulated from failure by always doing what they last did. I can tell you with experience that it is much easier to manipulate the outcome of a bid by writing the specification.

Nevertheless, certain industry standards exist that are truly unpublished and unregulated which permit innovation at the interface. The result is that electronics continues to have real productivity gains whereby the unit cost to do a useful thing dramatically decreases. With few exceptions, this real productivity is mostly conspicuously absent whenever a monopoly (government, academia, industry or utility) controls the end product. We see the same myopic stagnation in electronics in government procurement for defense, NASA, or avionics. These industries often claim they are on the cutting edge of the wing, but in fact they are far behind the free market. Their only success is forced formation of capital and schedule and they only succeed when they perceive competition (other governments).

The same is true in the health industry. The idea of patent is to encourage public disclosure by giving the inventor an incentive to bring to market a product which has exclusivity to recoup the cost. But government and self-imposed medical certification provides huge barriers to innovation, which invariably lowers real productivity. Large risk of damage requires large monopolies. As the distribution possibilities enlarge, the risk and cost of doing it wrong penalty greatly increases. The decision invariably becomes to do nothing (stop development) and innovation stagnates.

This is not to say that monopolies don't accomplish anything significant; they do. But the odds are five to one they will not and the cost of what they do accomplish will necessarily be five times higher and five times later than left to freedom. It is also true that when these monopolies are wrong, they are not quickly disciplined by the free market before they have done great harm (thalidomide, for example). So the wrong decision is likewise magnified by a factor of five.

This is the reason behind the quip that socialist "five year plans" were "five steps forward and four steps backward." They were not totally wrong. Some things they decide are good and should be done, but that is not tantamount to giving them permission to decide everything. But the same errors are made in a free market and repeatedly in nature; but less is risked per roll of the dice and much more is gained when it succeeds. It is therefore beneficial to see that everyone gets to play the game, not just a few central planners or a silver-spoon elite.

Quantification of Values
There is a means to quantify the worth of a decision and this is expressed in money. In essence, one dollar is one vote. One dollar has a universal meaning of worth as a medium of exchange. Attorneys are trained to quantify damages in money, though many don't agree with the AMA-tagged "jackpot justice" huge awards for damages. To those that are convinced by watching the behavior of others (like the market going up or down), it is what a few other people who control money think it is. The more closely controlled the wealth (resources) of a country is, the more likely it is to be risk adverse and the more likely is to make catastrophically wrong decisions. This boom/bust cycle is a consequence of central control, not a cure.
 * The total economy (if not artificially manipulated by monopolies) can be expressed as the product of individual decisions to buy and sell times the assessment of value of its participants.
 * The number of decisions made is the number of transactions (what is bought and sold) and the aggregate amount of money exchanged is the value of all of the decisions.
 * Thus, an economy is what its citizens think it is.

The Socialist Monopoly versus the Capitalist Monopoly
Monopolies should be avoided. The analysis by Karl Marx that capitalism was wrong, but not totally wrong. Karl Marx would be right if he substituted the word "monopoly" for "Capitalism"; the economic system is not the true determinant, if it is whether or not such a system permits monopoly. Unless it is strictly limited, it always does. Basically the socialist (or communistic) principle was to use centralized decisions to direct the mandatory labor of the masses and then to distribute their production according to the need of the masses. The value of these resources and the value of the need is dynamic; centralized control substitutes its own judgment of value for that of the individual. This works well when those values are obvious, basic and somewhat homeostatic. It fails dramatically when these basic needs are met and then change to wants. The latter overwhelms those in central economic control. It does not matter if this corrupt central control is a government, a religion, or a capitalistic business. Invariably, their decision process becomes sluggish and reactive which shows up in long lines or glut in overproduction. Necessities become dire and luxuries become cheap. When the decision process is highly centralized, communication is strained and overwhelmed. The theoretical concept of centralized planning seems to be unassailable. Take the following example:
 * It is inefficient to have two dump trucks loaded with fill dirt from passing each other on a highway going in opposite directions. It seems as silly as one person directed to dig a hole while another is busy filling it up.  Centralized planning emphasizes this firm grasp of the obvious as a basic tenet, pleading that this inefficiency can only be avoided by centralizing the decision.
 * But this simplistic construct in the example never gets the information that one of the trucks is due for maintenance, or that the urgent need for fill dirt was unknown at the time the decision was made, or that the driver had to be somewhere else as well. Attempts to add these type of modifiers to the information needed for central decision making creates a behemoth of bureaucracy whose demands for information are insatiable. Requesting a dump truck begins to look like a 1040 form.  The free market, which theoretically at first appears to be inefficient, makes these value decisions as low in the economic organization as possible and is thus more efficient.  This is the pragmatic value of the competitive free market.

It is affirmed by nature everywhere we look. Highly social animals (bees, ants, termites) rarely have a "new world order" but seem to have an intrinsic switch that divides the colony when it has grown too large to be of benefit. Though this can be somewhat explained that the colony must divide to achieve greater resource efficiency by autonomously duplicating command and control, it is always resisted by the existing status quo.

Communism did a much better job in doing a lot of things that were blamed on a corrupt, elite public in capitalistic societies. Scientific education flourished, albeit somewhat warped by political ideologue. Menial justice (apolitical) and law enforcement was reasonably free of corruption. Medical care was universal. Employment was universal.

Capitalism differs from communism mainly in its control of production. Indeed, in the waning days of the soviet empire, a young graduate had supposedly seven choices of where they would work, with at least three close to home. Capitalism made no such guarantees, nor did it place any restrictions. Whereas communistic production is centrally planned by government, capitalism is ideally planned by competing entities and leaves the individual in the market as a decentralized decision of need. Many criticize capitalism as destructive Darwinism (the survival of the fittest) saying that eventually will end up in a very few artificially controlling most resources. In addressing this problem, communism merely swapped a centralized capitalistic monopoly for a centralized political monopoly.

''Creation of monopolies and the subsequent suppression of economic freedom (individual assessment of value) is the problem, not the noble purpose of aspiring to meet universal human need. ''

It follows that the free market must be protected (as Roosevelt asserted) from monopolies.

One must realize that our government itself is a monopoly and is subject to the same sin of greed as private enterprise and, if it becomes too powerful, the cure is worse than the disease. Failure to recognize this frustrates both opposing schools of thought. They react to protect their baby, attacking one another's intent, i. e., poisoning the well of the opposition and then resorting to manufactured disasters and war to gain or hold onto power.

Learning from History
The solution is to make some empirical observations about what has happened over thousands of years. In doing so, it is important to strip away biased descriptors and evaluate what was tried. The concept that genetic bloodlines are the best guess to obtain beneficial paternalistic leaders gave way to the concept of democracy for a while. The concept of justice by belief (theocracies) was too discarded. The freedom of organized criticism of government was embraced by the Rights of Man and the United States Constitution. Industrialism flourished and large, quasi-government monopolies came into being. These, too, were partially dismantled. Then fascism, which was based not on owning things but controlling them, was substituted as yet another monopoly. The concept of tolerance to opposition was refined to include opposing representation in Parliament. Equal protection of the law was declared. Abject slavery was abolished. Common defense of all citizens was declared. Democracy was again reasserted and the idea of one person (if of major age, a citizen, not a felon, not insane, and from a particularly defined government territory) was dusted off and mandated for all governments. Capitalism (really, private ownership over communal ownership) seemed to gain footing. But many governments realized that social security, health care and education seemed to be a universal right of all.

Invariably, in all of these vain attempts, every governing monopoly increased its influence and power until it failed. Karl Marx would be right if he substituted the word "monopoly" for "Capitalism"; the economic system is not decisive if it results in a monopoly. Unless it is strictly limited, it always does.

The Forgotten Freedom
What was untouched was the power to tax. No government now exists, however elected, that depends merely on voluntary contributions. The socialist government owned everything and paid citizens. It failed to supply what the citizens wanted. The United States state, federal and local governments now consume over 40 percent of every dollar that is spent by its citizens, up from less than two percent in the year 1900. Thus freedom has been constantly eroded in the United States and embezzled by its governments. It is dying the death of a thousand cuts. Thus, innovation is turning the economy to foreign, developing countries. The government can no longer think and spends its time justifying its mediocre performance by looking for opportunities to prove itself wise.

Inversions and Paradox
As confidence in centralized science (evidence without belief) wanes, humanity turns to religion (belief without evidence). Chants replace logic, self-discipline to live a long, healthy life doing nothing for nothing, falls hollow. Government cannot lead because it is a navigator, not a commander. It will always be a navigator.

Government and accounting can be likened to driving a car using only the rear view mirrors: you can only go where you have already been and even then with great peril. Innovators look out the windshield and command the course.

Thus, paradoxically, we need to take collective action to get government out of the way.

This is the purpose of the constitutional limit on the amount and method of taxation.
 * It is to allow the public to democratically determine what it will support with charity, because this is not best done by a republic whereby a few decide what to do with the resources of the many.
 * It is to recognize the homeostatic needs of all citizens and to provide as a basis for the entire economy an absolute ratio for what will be spent to support its good health, education and welfare. These homeostatic securities are essential for intellectual freedom; intellectual freedom relies on imposing a limit on these securities.
 * It is to hold, perpetually, the size of government and monopolies in check. Not merely because this was the true objective and belief of our founding fathers, but because logic dictates that freedom will be lost if it is not.
 * And, most importantly, it is to guarantee freedom to each and every citizen.

We cannot guarantee freedom to each and every citizen if we continue to allow that a republican representative government may take (with its power to tax) everything we have, subject to the only proviso that it does it to everyone. Nor can we ignore the damning evidence that periodic replacement of political leaders will is an adequate remedy, because experience has shown that it does not work. This leaves the greed of government, as an organization, completely unchecked, and it grows like a insidious cancer, slowly and imperceptibly until it consumes the vitality of its host. To paraphrase Thomas Paine, it makes no difference that we are given a choice of Prince A or Prince B; though they may disagree on some things, both agree to plunder.

Striking the balance is what our forefathers realized was the task to be done by government.

Limitation of Taxation
Thus, for the first time, we need to rationally limit the size of government: not just federal government, or local government, or state government, but all government. It needs to be put on an overall budget, not merely one that says that it must take from citizens whatever it chooses to spend. Such has always been a common characteristic of tyranny and it matters not whether or not tyrants are periodically elected. Though we must pick and choose some ideas over another, we can't do them all. Indeed, if management is defined as the allocation of critical resources to accomplish an assigned task, if the resources are not limited, there is no management.

What we get instead is soft limits. If you exceed your budget, raise the price. If the people don't like it, hide the tax or identify an imaginary foe to blame. The latter shows the folly of a balanced budget amendment: it does not absolutely constrain spending but leaves an out to raise taxation, thus lowering freedom. It is the fox's offered solution to problems in the hen house.

Instead we need to put a hard arithmetic limit on the amount of resources government gets, just like we now do for who wins an election. Ideally, it should be matched to the management task and be self adjusting. This, simply, should be a percentage of our free economy.

But what should this ratio be?

The best ratio for this seems to be an approximation of the inverse of the Booz Allen [Hamilton] curve, which found that 80 percent of all Research and Development funding, resulted in accomplishing less than ten percent of new innovations; conversely, it found that the remaining decentralized, free market produced 90 percent of the results. Anecdotal examples abound: the telephone was not invented by the powerful telegraph industry, nor were most medical breakthroughs, and the latest example is the spreadsheet. The latter is the most used analytical software that exists. Yet it was not developed by Harvard, by M. I. T., by IBM, by Wall Street, by Microsoft, or by the Financial and Accounting Services Board, by any economist, or by any of the departments of mathematics or computer science. It was developed by a college drop out. This is not to say that centralized research can't be made better or doesn't produce anything of value. It just provides overwhelming evidence that centralized thought is always bounded by those who control it. As General George Patton observed, "There was never a good decision made in a swivel chair."

Tax Reform
Freedom is not what we do, it is what we allow others to do

In looking at this, a ratio as the first objective of government budget would peg all government to consume no more than one fifth of the economy (Gross National Product). Studies have shown (we cite some of these elsewhere) empirically that a ratio of around 21 to 23 percent in fact have produced the most real growth of the standard of living in the United States. Currently, as mentioned before, taxation is exactly twice as large as it should be (40 to 45 percent of the economy). This, in turn, stifles the economy and quashes competitive innovation. That, in turn, reduces tax revenue. Though many would argue that 20 percent is still too much, it is a safe start and can always be lowered. If, due to some unforeseen circumstance, it needs to be larger, means are provided to make it so with suitable public safeguards.

Control the Taxing Authority
To control government by limiting taxation necessitates eliminating multiple, uncontrolled sources of taxation. Currently, the federal, state and local governments may all levy taxes without regard to those imposed by each other. As Robert Townsend observed in his book Up the Organization, when you have two people in control, you have no one in control. Thus to control taxes, the taxing authority needs to reside in only one entity. The 1USATax accomplishes this by giving the power to set tax rates only to the federal government.

That by itself, however, would be a disaster.

It is also what practically exists now, in that state and local governments are treated like the bishops, sheriffs and mayors of the Middle Ages: they are permitted to glean for their own pockets trivial amounts provided that the King (the federal government) gets the lion's share. The chief taxation by the federal government is income and excise taxes (fuel, power, etc.) and the chief revenue of state and local governments is local sales taxes, with a minor amount coming from state income and property taxes. There is a reason for this, in that sales taxes come off the top of the deck, whereby income and property taxes (due to various and numerous exclusions) come from the bottom of the deck. A rule of thumb from Dartmouth city planners is that a one percent sales tax will collect the same amount of money as a five percent payroll income tax. It is this principle that dictates that a five percent transaction tax can replace all taxes and result in a twenty-five percent budget for all government.

Move the Power Down
But the evil in centralized taxation is that it is currently married to centralized decisions of distribution and therefore leaves all power in the federal government. This was not the intent of the framers of the original Constitution, who knew a little something about it. Some power should be in the federal government, but most should reside in the state and local governments. Thus the 1USATax (which is a name I came up with to describe the new method), in exchange for the loss of the power to tax by the local and state governments, fixes the ratio of distribution of the revenues. It gives the federal government only the power to set the class and amount of the tax, and only one fifth of any revenues collected. The state and local governments each receive the same share of revenues that the federal government receives. Thus, the local county commission (or city board of alderman) gets the same percent of the tax revenues as the federal government.

It left two-fifths of the tax revenue to allocate to individual entitlements (preventing the grasshopper and ant mentality of youth) and a ballast to correct temporal inequity through charity. This is explained elsewhere on the site and is not material to the discussion on maximum tax rate and promotion of innovation.

Take the Who Out of Taxation
That, too, would still invite the federal government to form taxes that would penalize one territory or market over another which history suggests has been the reason for political strife. So, the 1USATax prevents any tax from being imposed based on where a citizen resides or who the citizen happens to be (instead requiring equal protection of the law for all areas and all citizens). In essence, it restricts all taxes to only what type of product, service, or property is sold and specifically prohibits tax categories that discriminate by market (who) or territory (where). This means that any tax declared is the same for all citizens buying or selling the same type of thing, regardless of where they reside.

Tax Creep
History has shown that there is a phenomena called "tax creep." Many may refer this to a person who levies taxes, but here it is used to talk about the slow escalation of tax rates, such as the growth in the tax from 1% in 1900 to over 34% by the year 2000 in the United States. Growth in aggregation in the United States has been accomplished by:
 * 1) Growth in the number of taxes,
 * 2) Escalation in the rate of taxes,
 * 3) Change in the base (definition) of what is taxed, and
 * 4) Growth in the number of exemptions to special interests.

So, the first of these is to stop the growth of the number of taxes and this the 1USATax does, by limiting government to a single tax that is exacted only when products/services are sold. Only one tax can be applied to any one sale and no other tax can be applied as long as the product is owned.

The rate of tax followed Adam Smith's dictate in his The Wealth of Nations and is limited to ten percent of the value and all selling the same product/service had the same tax rate. This made sure of two things: The average tax rate and the default was set at five percent, which thus achieved the idealized ratio of 20 to 25% of GDP. A progressive super majority was required to approve any tax rate, which could vary only by product/service, and it would automatically decrement if not re-approved annually until it was again five percent.
 * 1) No product could be singled out to be taxed an excessive amount, i. e., Peter could not be robbed, and
 * 2) No one was exempt, i. e., Paul could not be paid.

The base of tax was chosen to be the value of the sale, i. e., the gross amount. Whatever value changed hands was the base of the tax amount. No amount of the value can be exempted, no surcharges may be added.

The final element was to recognize that a single tax rate on the gross amount needed to be tempered with reality. The tax rate could vary, nationally, by type of product, subject to broad consensus and vigilant process, where it made sense. Thus, Congress could set a tax rate very low (for necessaries such as food, etc.) and "sins" relatively high (such as tobacco and alcohol). Thus, legitimate special interests, to the extent that the public agreed, could petition for more favorable treatment. A particular product/service could be made set to zero tax, provided that a super majority of Congress annually agreed.

Thomas Paine observed that war was another reason for taxes and quipped that taxes were another reason for war.

Complexity Breeds Corruption

 * It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood. James Madison.

Every embezzlement depends upon lack of vigilance and this is enhanced by complexity. Enron was not wanting for accountants, lawyers, managers, and consultants, nor was any other scam. Economist John Smith recognized that a tax must be simple, reasonable and fair to ensure its collection. Complicated rules do not administer justice or fairness, but are mainly introduced to give unfair advantage by their sponsors. Since it is empirically known that a gross receipts transaction tax is five times more productive than an income tax, requires no history nor periodic "filing" of records, it is far simpler to use a transaction tax than an income tax.

But here a lot of specious arguments fester. The progressive income tax supposedly taxes the wealthy more and helps to redistribute income. This is patently false, both in theory and in practice. First income represents change of wealth, not wealth itself, so it is not true even in theory. In practice, "income" has a variety of definitions. It represents the net gain in wealth for rich people and corporations, but merely the gross revenue received for those without any assets. In fact, there are over one hundred thousand pages to the Internal Revenue Service code which modify what the word "income" means. A hamburger for a truck driver, for example, is not deductible as an expense, but a five martini lunch for a lawyer or businessman often is. The dress worn by a school teacher is a personal (non-deductible expense) but the suit worn by a movie star or news anchor is. Yet, a definition of income is essential to any income tax scheme. Gross revenues must be tracked, allowable expenses deducted, and the resultant gross margin obtained for a specific period of time. It also necessitates the introduction of complicated calculations of depreciation. It also requires that records be kept over the period of time (usually one year) because that is the only way to determine what change has occurred. In short, it is a nightmare of accounting.

The result is, over the period since its introduction when taxes comprised roughly 2-4 percent of the economy in 1913 when the 16th amendment was passed, is that most wealthy corporations pay about two to six percent of gross revenues in tax and the typical salaried worker pays about 50 to 60 percent of their gross revenues in tax. The progressive income tax accelerates the rate of taxation to get wealthy. It makes sure who is wealthy, stays wealthy; and it makes sure who is not wealthy has a very hard time getting there. It is the preferred taxation system of the rich and the ignorant. It is also highly secretive and not subject to public scrutiny.

It is also thoroughly corrupt. Businesses buy tax advantage through influence of political contributions and these get embedded in the tax code through the Ways and Means Committee. Once there, they stay forever. No business can afford not to participate, because they will be taxed out of business if they are forced to pay the default rate. Thus, this influence is brokered by Congressmen and their entourage not to maximize the well being of all citizens, but to maximize short term votes. To begin with, this began as punitive taxes for one region or business to gain advantage over another (like on the South raw materials preceding the Civil War or on foreign imports since), but it has now evolved into a general agreement to tax consumers more and businesses, particularly large businesses, less. The sales tax, for example, is only levied on the final consumer; likewise, tobacco, fuel and like taxes are "passed on" through a combination of creative accounting methods. Although a housewife and mother must pay seven percent tax on a gallon of milk in Georgia, a corporate raider pays no tax on any transaction in the stock market. The mother must pay the tax with the transaction because she is not trusted to have either the wherewithal or the incentive to pay it at the end of the year; Enron, however, is trusted.

Academia and education also feeds at the trough. College presidents are selected for their ability to "obtain funding" and they wheel and deal to get more donations from tax exempt funds. This introduces a definite bias in the other things that they do, conscious or not. Those in academia tend to prefer policies that result in larger tax exempt pools to obtain funds. Thus, these sources prefer high taxes and complex exemptions. Donations from corporations and the wealthy are exempt from taxation. Hospital bonds and big municipal facilities pay "tax exempt" revenues to wealthy investors who get to declare no income for a twenty percent (about two percent) lower rate of return. Even the media joins in the game. Though the housewife pays on the spot sales tax for a gallon of milk, advertising, lawyer fees, spot adds and the like pay no sales tax and any amount of extravaganza qualifies as a deduction as legitimate business expense. To these special exemptions, all who receive them prefer to remain quiet, lest they be taken away. This lack of willingness to protest is exploited by politicians.

The worse part is that the trend shows it will only become more corrupt. Proposals are rife with agreements to make business exempt from taxation (John Linder's "Fair Tax" exempts businesses from paying any tax, for example). Jack Kemp's "Enterprise Zones" exempt businesses from property taxes, an idea that is going in the right direction as to give enterprise a chance to get established before being ruined by taxes, but an artificial means to achieve it.

Credits, Surcharges, and Externalities
The political currency for chiefly Republican politicians is "tax credits" and this is even being sold as a solution to the so-called Social Security and health care crises. Without an oppressive tax system in force, there would be no economic incentive to follow any of the rules proposed for 401K's, IRA's, college funds, or health savings plans. Indeed, all of these "tax credits" further the insanity of oppressive taxation and give a ruthless government the ability to selectively enforce the law. Physicists and mathematicians do not believe that exceptions make the rule, only politicians. Over one hundred thousand pages of tax code is the product of this insanity. It is not a babe in dirty bath water, it is a maggot-infested troll in a cesspool. Most now agree that it is beyond correction and the entire system needs to be thrown out.

Where the Republican politicians look to put in tax credits, the Democrats favorite is tax surcharges, otherwise known as "externalities" that selectively raise taxes on certain products and the general tax rate on what they call "the rich" and pass out tax exemptions to collective groups. The revenue recipients love the windfall (for which they have done nothing to receive). They then use these revenues to increase a plethora of ill thought out, but well intentioned, social programs.

The net result is that the total tax rates are raised, the burden selectively shifted to the disenfranchised, and the total government bite grows larger. Once done, the damage is nearly impossible to reverse because it cannot be incrementally undone equitably. Those who find themselves favored, rightfully do not want to pay the excessive tax rates. This is the same rationale behind the so-called "mortgage deduction" which exists, not because it is right or well thought out, but because the general tax rate is wrong and ill thought out.

Ticks Do Not Voluntarily Jump Off A Dog
Ticks do not voluntarily jump off a dog. Nor can they be coddled or persuaded to leave on their own accord. They will resist because they must do so or they will perish. Likewise, a "tax expert" that spent his entire life studying the morass of the federal income tax would know nothing of value when it is thrown out, save the whims of history. He cannot, therefore, be trusted to be an unbiased, credentialed judge in his own cause. Asking the status quo establishment to evaluate a change to the status quo should follow the wisdom of an old trial lawyer: never ask a question of a hostile witness to which you do not already know the answer.

I don't intend with this argument to poison the well, but to caution the reader to never take an unexplained opinion from a potentially biased, credentialed source on faith alone. I merely put forth the argument that only a revolution can rid us of this Gordian knot. Use Thomas Paine's advise, use common sense.

Summary
Freedom from oppressive taxation and central control is essential to culture innovation. It should be tempered to provide those common elements of government that effectively and efficiently allow it to exist such as common defense, protection of individual rights and private property. The CLAMPIT Amendment using the 1USATax addresses these problems systematically and scientifically. It provides a surety of economic freedom.