Hedgehog Party

The Fog of (Political) War

This article by Charles Babington tries to analyze Obama's tax proposal for Social Security.  As described in earlier posts, tax proposals these days means taxing your supporters to benefit a lot of my supporters.  This rule applies to both parties.  Obama is using the old politician's sleight of hand to prevent analysis of his proposals.  A fog of vagueness has settled over what he really intends.  So lots of voters can believe that they are helped and someone else is taxed.

Raising taxes without connecting them to a large majority of the electorate simply extends class warfare over tax and spend.  The inevitable result is more of the same...unfair taxes...and inefficient and corrupt governance of spending.

Jumping the Shark

There was in episode on the old TV Series "Happy Days" starring Ron Howard and Henry Winkler.  Winkler played "The Fonz."  The Fonz was always the coolest and always on top of things.  One day, while surfing, the Fonz jumped over an attacking shark.  TV shows can be far out, but their viewers require a level of credibility to maintain interest. That incident began the loss of credibility for the Fonz.  After that, people described the beginning of the end as "Jumping the Shark."

I keep thinking our tax, spend, and deficit builders in the Congress and voting public are going to author a "Jumping the Shark" moment for the US.  Maybe an unfunded prescription benefit funded by a bankrupt medical payments system didn't do it.  Maybe an unfunded Iraq war didn't do it.  However, by joining forces with an inept Federal Reserve and banking oversight, the "National Bailout of Everybody in Real Estate and Mortgage Banking Bill" has zipped through a vote buying congress.  This bill, I think, represents the final frontier...the outer space of public finance...our Jumping the Shark moment.

We the people need tax reform that works and helps keep the rat in all of us out of the cheese. 

"Doing the Impossible"

Any fundamental tax reform will require the support of 70% of the voters.  Any tax reform that requires a consititutional amendment will require the support of 60% of our congresspersons.  Most issues of our time feature highly polarized debate and very close votes.  How then are we to legislate the Hedge Tax?

The Internet raises the promise that it is possible.  Some politicians have realized the power of this technology.  Mostly, it has been the Democrats (Howard Dean, Jim Webb, and Barack Obama to name a few).  The theme of "power to the people" has played well, and the grassroots have given a powerful push to those that have adopted the new reality.

From a people perspective, though, little has changed.  Powerful politicians and special interests are vacuuming up money and votes.  To what end?  If anything, the future portends a more exaggerated version of what now exists...pandering to powerful interests, further fragmentation of tax and spend, and further polarization of the electorate.

The central idea of the Hedge Tax is to directly reconnect the voter to tax and spend.  We propose to do this by constitutionally driven equity and tying spending directly to the taxes of 85% of the electorate.  Achieving this through the power of the Internet will require another iteration in the use of the Internet.   We need the Internet to create the group, and raise suppport and money.  Once achieved, how do we use this power?

History shows us that politicians pursue money, power, and their own interest.  Clearly, if we are to succeed, we need to convince (or force) politicians to support the Hedge Tax.  History also shows us that the next fresh breeze will blow away most political promises.  But, there is a way.

Generally, politicians want one thing more than any other...election and re-election.  This is a time when elections are close and voter apathy is high.  The route to victory for the Hedge Tax is to create a left/right voting block that supports the single issue of tax reform.  A 10% block could put most politicians out of office (either in the primary or the general election).  A 10% block could make a new political career.

The Hedgehog requires little for this largesse.  Just the execution of a binding contract requiring the introduction and support of the Hedge Tax in every session of congress.  Taking down one or two major congresspersons from both parties should start the revolution.

High Tax Rates

People do react to high tax rates.  This Wall Street Opinon Journal article examines the effect of Obama tax proposals.  In some countries, people exercise their Alec Baldwin option and vote with their feet.  They leave.

As the article states, it won't work for Americans, because US citizens are taxed on their worldwide income.  However, it should reduce the number of talented and educated foreigners trying to get into the US.

Tax proposals that are targeted at various activities and special groups are a source of mischief.  First, they are political chips that are used for various forms of vote buying and punishment.  Second, they are gasoline on the fires of class warfare and political discord.  Third, they provide the openings for outright corruption of the tax code. 

Worst of all, they do not collect a higher rate of revenue, because the economy is weakened, and people arrange their affairs so as to not generate taxable income.

Obama Tax and McCain Tax

The tax code has become a political plaything.   The machinations or our two presumptive candidates are discussed in this Human Events article.  All of these articles miss the point.  Why should the tax code be in play in every election and every meeting of Congress?  Why should important elements of our economy be at the constant mercy of the political hot wind de jour?

Why not adopt the tax policy of "The Rats are in the Cheese."  After that, there is only one discussion...how much to raise the tax rate to cover the latest idea of our representatives.  I believe it would result in a fundamental shift in the way we conduct politics.   Gone would be the slice and dice of the electorate that we have now.  That is real change to believe in.

Tiger Woods Taxed

This post by the TaxProf analyzes the effect of Obama's proposed tax changes on Tiger Woods.  Those that want to "tax the rich" will get a lot of satisfaction from this.  But I doubt that Tiger thinks that it is fair.  Under this new regime, the high ordinary income earners are brutally punished.  Obama had better hope that Tiger (among others) don't just leave the country.

The electorate is so polarized over tax and spend that our country faces "Yo-yo taxation" every time a new party gets in office.

In the meantime, the truly wealthy are largely unaffected by these changes because they can manipulate their affairs to avoid or minimize taxable transactions.

All of this is ultimately a drag on the most productive areas of the economy.  The end game is lower economic activity and lower tax collections.   The tax regime proposed in "The Rats are in the Cheese" aims at equity and control of tax and spend by the voters.