A Concept Forgotten

The fourth in a series of posts to answer questions I’m tired of explaining over and over again. For the others see Flattened Taxpayers, I Won’t Pay for Your Star Trek V Collectors’ Plate and Some Answers on the "Rebel Flag" and Reality

Here’s something that a stunningly large number of Americans apparently never learned or perhaps forgot. I see it demonstrated every time somebody asks, “Why don’t those people need to prove they’re American before…” or “Why do we keep giving things to ‘illegals’”

Read the following, hopefully familiar, sentences:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Notice that doesn’t say that “citizens” are given rights, it says all men.

Notice that doesn’t say that the government grants rights, it says those rights are endowed upon all men as a characteristic of their existing.

Those are not cases of poetic license.

Those are not cases of carelessness.

Throughout history governments had existed above the people run by the powerful who granted privileges on those who pleased them.

With the founding of the United States of America a new philosophy of government was tried for the first time. A government that was below the people, that was a tool of the people and not a cudgel held by the powerful or chosen few above the rest of humanity.

That concept of government meant that rights that were not gifts of the powerful as thanks for obedience and for peasants quietly knowing their place but as inherent parts of being human. A government whose power was not to grant or remove privileges but to protect these universal rights wherever it had authority for whoever was in land under their authority.

This is the biggest philosophical change that the founders of America instituted and one that surprisingly few ever understand. I guess it doesn’t get much discussion because the powerful still want to wield the power of kings and nobles over those they feel are their lessers.

The old ways die slowly but America has been teaching this new way to the world for almost a quarter of a millennium now. Perhaps it’s time we learned what we, as a nation, stand for and stand proudly for it.

Some Answers on the “Rebel Flag” and Reality

The third in a series of posts to answer questions I’m tired of explaining over and over again. See Flattened Taxpayers for the first and I Won’t Pay for Your Star Trek V Collector’s Plate for the second.

Having lived in the deep south for well over a decade back in the late 1960s and 1970s when racism was slightly less hidden, I had to deal with racists who flew the Confederate Battle Flag or who wanted their state flag to contain some confederate emblem as a part of that flag’s design.

When something comes up over and over again and I’ve gotten tired of typing the same answers over and over again through the years, I put together some quick answers to the most common questions so that when it comes up yet again I can just point them back here.

No, flying a confederate battle flag isn’t about your love of  "Southern Heritage".

Southern regional history (at least European Southern regional history) goes back over 400 years. The “Confederacy” was 4 of those years. If you pick less than 1% of your history that’s defined by treason and murder justified by wanting to expand racism-based slavery (as the secession declarations clearly stated) then you’ve clearly picked the only 1% of Southern "heritage" that you actually care about and made what you treasure as “heritage” abundantly obvious.

No, the Southern Treason was NOT about "states’ rights".

The major states rights issue at the time was whether non-slave states could pass laws that overrode the Federal Fugitive Slave Act which required all states to arrest escaped slaves and return them to their "owners". Guess which side of the coming conflict said federal law supersedes the “rights” of states? Hint: It wasn’t the ones wanting state law to free slaves.

No, the Southern Treason was NOT about unfair tariffs impressed on the South by Northern Congressmen.

There are two tariffs that are occasionally brought up in this canard by people who think that once you move to a subject as exciting as trade tax policy their opponent will fall asleep without finishing the discussion. One of these tariffs was written by some of the slave states’ own Congressmen. The other was passed after the war had already started. Neither one was even mentioned in the various secession documents.

No, it wasn’t about anything that President Lincoln did.

Abraham Lincoln hadn’t even been inaugurated when the first six southern states declared themselves above the laws of the United States and started murdering US soldiers. The President at the time that the talk of treason turned to war against their own nation was James Buchanan. I’ve yet to hear anyone say that the war was a response to Buchanan, though.

No, it wasn’t a reaction to there being no mechanism for states to secede in the US Constitution.

There is a perfectly good mechanism for anything anyone wants in the US Constitution. It’s called Article V. It deals with the process for creating amendments. Want to do something the Constitution doesn’t describe? Fine. Amend the Constitution to give yourself that power.  It’s not “impossible”, it’s been done quite a few times now.

The usual response to this is “well, a Constitutional Amendment wouldn’t have passed”. Too bad. Laws apply to you when you lose and the other guy wins just as much as they do when you win and the other guy loses. Just because you don’t think you’ll win a vote doesn’t give you the right to start murdering people. That this isn’t blatantly obvious is a bit frightening.

No, there wasn’t a war between the Union and the Confederacy or a war between the Yankees and the Rebels or a war between the United States of America and the "Confederate States of America".

There was a war between the United States of America and a bunch of criminals who had decided that violating US law by stealing US property and killing American soldiers and sailors was a better course of action than trusting in democracy or rule of law. That’s about as noble a cause to be honoring as memorializing Timothy McVeigh or Charles Manson.

Deal with it.

I Won’t Pay for Your Star Trek V Collector’s Plate

The second in a series of posts to answer questions I’m tired of explaining over and over again. See Flattened Taxpayers for the first.

Let’s start by clearing up a misimpression that people seem to have.

Buying and selling stocks is not investment income

Buying stock is not “investing in a company”, it is gambling on reselling some collectable you bought based on your assumption that the stock or Limited Edition Star Trek V Collector’s Plate is going to fetch more in the collectors market than it did when you bought it.

Actually investing in a company would require that the money you paid went to the company. Aside from when you buy into a public offering of new stock, your money did not go to the company, it went to another collector. It does nothing to help the company fund their start-up costs to produce a new product for the actual marketplace. And even in the case of a public offering you don’t help the company when you cash out that investment. You bought, say, 0.1% of that company and that was the only time you helped them bring something new to the market. If you purely sold that 0.1% of the company for 1/1000th of the actual value of the company at the time you sold it, then your income would be “investment” and your profits would be actual investment income tied to the increase in the actual value of the company you risked money on.

No purchase and sale of stock is investment. By the time the company is ready to float an Initial Public Offering they’re cashing out on the investment by selling off the company’s assets. Any purchase and sale of stock after the IPO is just gambling income and does not contribute to the free marketplace that Capitalism revolves around.

Neither is most venture capital

That said, now lets talk about actual investment income. If you are an “angel investor” or “venture capitalist” (which is really another name for unregulated banking with no guarantee on either your return nor their costs) then your income from that risk is the increase in valuation of the company’s actual assets over the time you were a partial owner. Any income you get beyond that isn’t investment and in no case does your selling your share benefit the company’s ability to bring products to market – they get no benefit from your profit so stop thinking that you’re risking your money to help get a startup going when you cash out.

Adam Smith, Capitalism and “Investment Income”

One of Adam Smith’s premises in The Wealth of Nations – the book that defined Capitalism back in 1776 – is that the greatest harm to a Capitalist market based economy was the creation of instruments that brought in income without producing valuable items that could be traded in the marketplace.  He called these instruments “rents”.

These practices produced income sources for an essentially parasitic class that could use their wealth to create ongoing revenue for themselves with no risk and no contribution to society nor the marketplace. It’s important to remember that despite what the GOP or some Randian tells you, Adam Smith was an Enlightenment radical who created Capitalism to flatten society to a level competitive playing field. He was doing so at a time and place where most wealth was held by the landed houses of England who did nothing but being born into the right family to achieve wealth far beyond even the worst robber barons the US ever produced – families with trillion dollar plus family assets in current dollars.

Smith’s central premise was that society did best when ideas and products competed equally and the wealth created through the market was by production and sale of competitively better goods at a better value as determined by consumers.

What we call “investment income” does none of this. It is a Smith “rent” scheme. It is wealth distributed not by the competitive value of new inventions and improved products but by passing valueless paper around from one wealthy family to another. This is neither Capitalism nor good for a Capitalist economy. Smith himself said that as this is something that damages the efficiency and fairness of the market it is the job of the government to regulate it into harmlessness and to re-level the playing field so actual competition can continue.

As an aside and a reward for reading this far, the next time some “get the government out of the free market” idiot blathers on, you can now safely assume he doesn’t know what Capitalism actually is.

Now, let’s look at some “investor” assertions I’ve actually gotten in my discussions…

I earned the money I spend on stock from a job.

That’s really irrelevant. If I say “I used the money I made by selling food to starving orphans at minimal costs to buy equipment to torture kittens” do we really care how you got the money to torture kittens? No. No matter how you got the money it’s the issue of whether we as a society should subsidize what you choose to do with it.

I take risks

Should taxpayers subsidize your losses in your hobby of buying and selling collectables? We currently do. Investment loss is deductible and when we do that we’re precisely taking tax dollars from other people to cut your risks. I’d argue that we should not do this at all but that isn’t the question at hand.

I should be able to cash in on my gains

And I think so, too. In the case of long-term investment I suggest taxing your “cashing in” collectable sales profits at the same rate as income you gained by actually producing something of value to the market. That’s probably too generous but I’m trying to be reasonable during the transition period of moving toward actual Capitalism.

I also suggest that we tax short term gains at a 50% rate. Yes, it really should be higher as its meant to discourage if not eliminate a dangerous hobby. There are several damaging aspects of short-term investment that need to be addressed but lets focus on the worst of those. Short term profit taking discourages businesses from actually producing goods and services for the market and ends up replacing the productive free market with optimization for short-term shareholder return.

As a compromise, how about we say “if you want to claim short-term stock gain as regular income you are prohibited from voting your shares directly or via proxy, are prohibited from participating in any shareholder litigation and are barred from any interaction with the company you partly own during your period of ownership for a period of two years prior to your intended or actual sale. Any of these activities triggers marking the “investment” as stock manipulation and requires your shares to be sold at the price you paid for them or the current market value, whichever is lower and any income you received above that amount to be added to your tax bill.

The increase in stock price funds innovation

Some people will say that the increase in stock price in the speculation market continues to fund the company since that company gains as the shares they own increase in value. That anyone thinks that way shows that we have let the tail wag the dog. The purpose of the company in actual Capitalism is to produce a product for sale in the competitive marketplace. When their income is now tied to the immediate stock price rather than the value of their products in that marketplace they no longer are participating in the market and are now just speculators themselves and no longer focused on producing goods and services to stimulate the market based economy.

Summing up…

Summarizing, I fully support actual investment as measured by the purchase of a share of a company and the gain in wealth of the value of that share of the company itself. That is investment income. It is unsubsidized risk being rewarded by the marketplace. Speculating on buying and reselling collectables that do not directly fund the value of the company is both harmful to the company and to the economy and should be discouraged by any Capitalist government as part of their role to keep Adam Smith’s playing field level.

So move if you want to

We keep hearing from people on the authoritarian side of the political spectrum about how horribly high their taxes are and that they’re just fed up and want to move somewhere where they don’t have to pay for their society. So, if you plan on actually doing what Rush Limbaugh only promises, here are the countries with LOWER taxes than the US (in decreasing order of tax rate):

• Philippines
• Singapore
• Dominican Republic
• Sudan
• Sri Lanka
• Costa Rica
• Niger
• Pakistan
• Cambodia
• Guatemala
• India
• North Korea (People’s Republic of Korea)
• Azerbaijan
• Bangladesh
• Nigeria
• Vanuatu
• Afghanistan
• Burma

That’s it. Really. Of the roughly 200 nations in the world, those 18 are the total list with lower taxes than the US.

And, really, of those 18, moving to any of the top six would only drop your taxes by less than 10%. To make it worth your moving costs, you might want to only consider those who would cut your taxes by at least a quarter.

That leaves you with:

• Bangladesh
• Nigeria
• Vanuatu
• Afghanistan
• Burma

Yes, even living in the "paradise" of Korea under the Kim family would only save you 24% off your tax bill.

Personally, I think paying a little more to live in the US is a bargain, but if you disagree then send me a post card from Nigeria. But don’t send email, I’ve already got enough email from Nigeria in my spam folder.

—

All data from that obviously radical leftist source, the United States Central Intelligence Agency.

Annoyances: Extraordinary Proof

This is the first in what will be a series of short note about things that annoy me.

One often hears that phrase when dealing with people claiming to be skeptics that “Extraordinary Claims require Extraordinary Proof”. The phrase has its origin from Marcello Truzzi and was later popularized by Carl Sagan.

The general interpretation is that if you are claiming something wildly different from what is accepted you must meet a burden of proof that is proportionately as rigorous as the claim is unconventional.

This, on a quick listen, seems to make sense but it is completely wrong. The level of proof for any claim is the same. If I say “a ‘bigfoot’ ran through my back yard yesterday’” or I say “a dog ran through my back yard yesterday” the level of proof is the same. The difference is not the proof required but the difficulty of gathering and producing evidence. The more common claim will, by its nature, have more evidence already present. I can, for example, offer as evidence the presence of dogs that are known to live in my neighborhood where I’d have a much more difficult time providing a list of ‘bigfoot’ known to live nearby.

For decades the coelacanth was ‘known’ to be extinct and the claim of seeing a specimen was considered about the same as seeing a dinosaur. When one was caught in 1938 the proof needed to back up the claim was the fishermen producing the dead fish. The level of proof was the same as if they’d caught an otherwise common variety of mackerel that hadn’t previously been found in that region. The claim was extraordinary, the burden of proof was not.

Where the Truzzi canard presents a problem is that it merely provides a bias against new information and a bias toward what is already “known”. This is neither “science” nor “skeptical” but is merely adding inertia toward commonly held “common sense” and against change and innovation. It’s a fancy way of admitting that the “skeptic” prefers to only be told things they already agree with and that is precisely the opposite of being a skeptic.

Extraordinary claims require the same proof as anything else. It’s just that it’s generally extraordinarily hard to get that proof.