The Real Cost of Taxation: An Effectivist Observation

First, we need to define some terms used in this discussion.

1. Working Class- Those people who do the actual labor in society, who pay taxes and purchase good and services rather than own the means of production.

2. Ownership Class- Those people who own the means of production or provide services to the working class and the poor. Factory owners, restaurant owners, landlords, etc (there is some overlap with the Working class at the low end of the scale).

3. The Poor- Those people who do no productive work in society and rely solely on handouts from government or private organizations.

4. The Working Poor- Those people who do the actual physical labor in society, who pay taxes, and purchase goods and services, but who also receive direct benefits from the government in one form or another that match or exceed their tax burden.

5. The Political Class- Those people who work for and are paid by government and lobbying organizations.

6. Corporate Ownership Class- Those people who control entire segments of the economy or have so few competitors that they can dictate fully the price of goods and services from that segment of the economy.

7. Corporatism (Crony Capitalism)- The marriage of business and government in which the ownership class and the political class work together to freeze out competition and promote the interests of large conglomerates over small business interests.

8. Corporate Unionization- A compact of business owners who come together to fix prices and set market values based on their interests rather than actual market principles.

Next, we need to establish who pays taxes and who doesn’t

Taxes do nothing but harm the working class and the working poor. Unless you are willing to take everything the rich have and distribute it to the poor (which won’t work for reasons we can explore later) raising taxes does nothing but hurt the middle class and working poor. All taxes….I’ll say that again “All Taxes” are paid by the Working (middle) class and working poor, The higher you tax the Ownership class the more they increase the price of goods and services they provide to the classes below them. It is a game the government can’t win unless it is willing to acknowledge that all tax revenue eventually comes from those who work not those who own the means of production even if the government owns the means of production. Anything the government does the ownership class has a way of avoiding and passing the costs to others. This is a basic tenant of capitalism. If the cost of business increases, business increases the cost of goods and services to match. In our current society, this is exacerbated by Corporatism.

Corporatism allows large companies to lobby or even purchase outright government rules and regulations that harm or even destroy smaller businesses and increase the economic and political power of the Corporate Ownership Class. In a vibrant economy, small and large business would compete on a level playing field to provide goods and services to people in general. In that system, taxation would harm the working and working poor classless because a multitude of businesses would be competing to provide goods and services at a lower cost. This means that they may eat the cost of taxation in order to curry more business. In a Corporatist society, the corporate ownership class fully dictates costs and may realize a profit at the expense of the consumer thus allowing them to raise prices to avoid the cost of taxation. What is the solution? How can we help the working class and the working poor without destroying the market-driven society?

The solution is simple…strict avoidance of monopoly coupled with low taxation. Any monopoly is bad for the consumer. Monopoly leads to price gouging, wage stagnation, and tax affected economic downturns. High taxation leads to Corporate Unionization in which businesses come together to price fix. The breaking up of monopoly and lowering of the tax burden on all sectors of the economy leads to several positive outcomes for the working class and working poor. When competition is spread out it is less entrenched politically and economically. There is room for mobility out of the working class and into the small business ownership arena.

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