How the tax system works today; Tomorrow, try my way

Below you will find a very fundamental explanation of how the tax system works. However, I will submit to you that it is not working. Not if you wish for equal protection and fairness under the laws of a free society. But I’ll save that for the end. Here we go:

This is a VERY simple way to understand the tax laws. Read on — it does make you think!!Let’s put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men — the poorest — would pay nothing; the fifth would pay $1, the sixth would pay $3, the seventh $7, the eighth $12, the ninth $18, and the tenth man — the richest — would pay $59.

That’s what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement — until one day, the owner threw them a curve (in tax language a tax cut).

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.” So now dinner for the ten only cost $80.00.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six — the paying customers? How could they divvy up the $20 windfall so that everyone would get his “fair share?”

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, Then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59. Each of the six was better off than before. And the first four continued to eat for free.

But once outside the restaurant, the men began to compare their savings. “I only got a dollar out of the $20,” declared the sixth man who pointed to the tenth. “But he got $7!”

“Yeah, that’s right,” exclaimed the fifth man, “I only saved a dollar, too . . . It’s unfair that he got seven times more than me!”.

“That’s true!” shouted the seventh man, “why should he get $7 back when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison, “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up. The next night he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!

And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!

END

Do you understand now? Do you see any logic in this? If not, may I suggest to you a FAIR tax? It consists of complete removal of the IRS forever (savings in that alone!) to be replaced with a federal sales tax that applies to everyone. This way the people who spends more pay more in taxes. This would be fine, since they are now given the choice on what to buy according to price.

Do not cringe, please! I know that the price and availability are so important to those of us who sit at a desk and crunch numbers, but trust me on this. This is a good theory. Here is why. There would be no taxation on anything not to be considered a final product. A final product would be designated as “A product available for retail.”

This way we are not taxed for the flour, sugar, eggs, transportation, etc. which go into the bread we buy. If flour is not taxed, that cost is not passed on to the consumer. Also, the bakery pays less for his product, so our cost is less. This only one of millions of examples.

This is being explained by someone who only took two courses in Economics, but it is also common sense. For each product we buy, every single solitary ingredient is taxed on its way to every place it stops on its way to market. Is that fair? NO! It should be a final product tax, and everyone should pay the same amount.

If you don’t want to be on the bottom rung of society, stop sitting there! Get an education, then get a better job. Better yet! Create your own job. This is America. Land of the *taxed to death* free!

By the way, are you aware that the Boston Tea Party was caused by an outcry over a 2% tax?

Hat tip: The Chicken Coop linked to Syringe.Net.Nz.

China, Russia urge Iran to play ball

Source: CNN.

MOSCOW, Russia (AP) — The presidents of Russia and China have called on Iran to fulfill the U.N. Security Council’s resolutions over its disputed nuclear program.

Vladimir Putin and Hu Jintao also said Monday in a joint statement that their countries — permanent, veto-wielding Security Council members — were ready to “search for a comprehensive, long-term and mutually acceptable solution to the Iranian nuclear problem.”

“Russia and China are calling on Iran to take the necessary constructive steps to fulfill the U.N. Security Council resolutions and (International Atomic Energy Agency) board decisions and believe that Iran … has the right to pursue peaceful use of nuclear energy while observing its obligations under the Nuclear Nonproliferation Treaty,” the statement said.

They emphasized again that the increasingly tense dispute should be resolved “exclusively through peaceful means.”

Russia and China joined other members of the Security Council on Saturday in voting to impose new sanctions on Iran. The sanctions included the banning of Iranian arms exports and the freezing of assets of 28 people and organizations involved in Iran’s nuclear and missile programs.

Iran rejected the sanctions and later announced a partial suspension of cooperation with the International Atomic Energy Agency.

“We intend to extend our partnerships in all areas,” Putin said after the statement was signed. “The development of trade and economic relations remains the priority.”

“The strengthening of the strategic cooperation between Russia and China … is very important from the point of view of a multi-polar world and the democratization of the international relations,” Hu said.

The visit by Hu to Moscow comes amid efforts by both countries to bolster what they say is a “strategic partnership” forged since the 1991 Soviet collapse. Before Hu’s arrival, Russian and Chinese officials said that North Korea’s nuclear efforts — as well as Iran’s — would be on the agenda.

Like Russia, China has been reluctant to join the United States and other Western nations in an aggressive push for punitive sanctions against Iran, which says its nuclear programs are of a peaceful nature.

Washington and some of its allies fear the Iranian efforts are a cover for producing atomic weapons.

The new sanctions could be lifted if Tehran helped assuage global concerns, Deputy Foreign Minister Sergei Kislyak said earlier, according to ITAR-Tass.

Earlier on Monday, the Russian state-run company building Iran’s first atomic power plant said that Tehran had made its first payment toward the delayed construction of the Bushehr plant since a dispute over financing halted the project.

Moscow and Tehran have been at loggerheads over financing of the plant, and Russia earlier this month said that nuclear fuel would not be supplied this month, as had been planned. The delays prompted Russia to indefinitely postpone the reactor’s launch, set for September.

Iran, meanwhile, angrily denied falling behind in payments and accused Russia of caving in to U.S. pressure to take a tougher line on Tehran for defying international demands to halt parts of its nuclear program.

Russian officials denied media speculation that it was putting political pressure on Iran under cover of the financial dispute.

“The fact that our Iranian partners have overcome their difficulties is positive, however, it far from compensates for the requirements of the (project) that have arisen during the period of nonpayment,” Atomstroiexport spokesman Sergei Novikov said in a statement.

The company also said the new payment was just half of the monthly amount needed for a normal construction schedule to be resumed.

U.S. to bar banks from business with Macau’s BDA

Source: CNN. Also an earlier CNN report.

WASHINGTON (Reuters) — The U.S. Treasury Department will bar U.S. banks from doing business with a Macau bank holding frozen North Korean assets believed connected to illegal activities, a U.S. official said on Tuesday.

The move would clear the way for Macau authorities to decide whether to release some of the frozen accounts — an estimated $8 million to $12 million — Pyongyang has demanded as a condition of negotiations on its nuclear program, other U.S. officials said.

Releasing the funds could take weeks and Washington’s prohibition on U.S. banks will continue to complicate the North’s access to the international financial system. This is expected to irritate Pyongyang and could shake efforts to denuclearize the Korean peninsula, officials and experts said.

For the past 18 months the Treasury Department has been investigating the Banco Delta Asia bank, known as BDA, over charges the institution for years accepted proceeds from North Korea’s counterfeiting, drug-smuggling and money-laundering operations.

As a result, Macau authorities who oversee the bank froze $24 million in North Korean accounts, causing Pyongyang to boycott six-country talks on its nuclear program for more than a year.

The figure is a fraction of the $500 million to $1 billion Pyongyang earns annually from criminal activity, according to the Library of Congress’ Congressional Research Service.

Some $15 million to $25 million is from high-quality counterfeiting U.S. currency, according to a report by the office of Republican Rep. Ed Royce of California.

Under a limited nuclear agreement reached with North Korea on February 13, the United States promised to resolve the BDA issue and the decision will be announced this week.

Announcement soon

“We plan to finalize the rule on BDA this week, most likely Wednesday or Thursday,” a U.S. official told Reuters on condition on anonymity. “Finalizing the rule means that U.S. banks can no longer open or maintain correspondent accounts for or on behalf of BDA.”

The decision to release any funds rests with the China-administered enclave of Macau. U.S. officials have said they expect between one-third and one-half of the $24 million to be released, reflecting accounts determined not to be connected to illicit activity.

The United States is expected to transmit results of its investigation, highlighting high-risk North Korea-related clients, to Macau authorities, who could take several weeks or longer to decide what funds to release.

China is concerned about the cloud of suspicion the U.S. decision will leave over BDA. Some U.S. officials say North Korea likely will reject the way Washington has chosen to interpret its promise to resolve the case.

The officials acknowledge Macau has taken steps to clean up its jurisdiction by tightening banking requirements and promoting transparency but say BDA’s shortcomings were systemic largely involving U.S. concerns about the bank’s ownership.

“Our concerns about the bank’s ownership have not been resolved,” another U.S. official said.

In 2005, the Treasury Department designated BDA as a “primary money-laundering concern [because it was a] willing pawn for the North Korean government to engage in corrupt financial activities.”

Some U.S. officials and experts have long wanted to resolve the dispute so Pyongyang would come back to six-party negotiations and the focus could be on persuading the North to abandon its nuclear program, rather than counterfeiting.

A shutdown of North Korea’s Yongbyon nuclear plant by mid-April is the centerpiece of the February 13 accord reached in six-party talks grouping North and South Korea, Japan, Russia, the United States and host China.

Ex-leader of Liberia charged with stealing $1.3 million

Source: CNN.

MONROVIA, Liberia (AP) — The former president has been charged with stealing more than $1 million from Liberia’s coffers while in office, government officials said Wednesday.

Gyude Bryant, who led the interim government from October 2003 until current President Ellen Johnson Sirleaf took office in January 2006, had previously been accused of embezzlement in a report issued by the Economic Community of West African States.

Police had questioned Bryant in recent months as part of a wide anticorruption campaign, and government officials said they finally had enough information to issue charges.

“Mr. Bryant has been formally charged with theft of property,” Information Minister Laurence Bropleh said, adding the figure of $1.3 million “could go higher.”

Bryant took office as the country emerged from civil war and totalitarian rule by Charles Taylor, who fled into exile in Nigeria in August 2003 and is awaiting trial for war crimes in a U.N.-backed court for atrocities committed by his forces in neighboring Sierra Leone.

Liberia is still recovering from more than a decade of war and unrest, with limited electricity even in the capital, poor roads and wrecked industries. Sirleaf has spent much of her first year in office leading a crackdown on government corruption that Liberians have applauded.

Bryant declined to comment on the charges. One of his lawyers said they were awaiting the government’s proof.

“If you make a charge, make sure you can support the charge,” Samuel Clark said. “It is just not fair to make allegations when you have no proofs of those allegations.”

Bryant had said earlier that he believed he would be protected by immunity given to sitting heads of state.

Bropleh said the former president would be held accountable.

“Unfortunately, when the action is criminal and you are former transitional head of state, you don’t have that immunity. You have to account for your actions especially when it has to do with theft of government’s resources,” Bropleh said.

Bropleh said a court date has yet to be set for Bryant’s case.

North Korea probe turns to banks

Source: CNN.

HONG KONG, China (AP) — A U.S. Treasury Department delegation worked Monday to resolve sanctions against a Macau bank accused of helping North Korea launder money — a key condition in the North’s agreement to give up its nuclear weapons program.

The meeting with Macau officials came about two weeks after North Korea agreed in six-nation talks to take initial steps to abandon its nuclear weapons program in return for aid. Washington agreed on the meeting’s sidelines to settle the financial sanctions by mid-March.

On Monday, Dale Kreisher, spokesman at the U.S. Consulate General in Hong Kong, declined to say whether Washington was ready to lift the sanctions on Banco Delta Asia, accused of helping North Korea’s money laundering and counterfeiting.

But Kreisher, whose office is responsible for Macau, told The Associated Press, “Discussions (with North Korea) along with the U.S. investigation have brought Treasury to the point where they think they can begin taking steps to resolve the BDA matter.”

Washington slapped restrictions on Banco Delta Asia in 2005 and put it on a money-laundering blacklist. This prompted Macau to freeze about US$24 million at the bank. Consequently, banks worldwide shunned North Korean business for fears of losing access to American markets.

Many believe the sanctions dealt a severe blow to cash-strapped North Korea, which denied the allegations and boycotted the six-nation nuclear talks over the issue for a year.

Banco Delta Asia has said that money might have been laundered at the bank, but added there is no evidence the institution was aware of it. The bank said it is small, family-owned, and didn’t have the technology to check big batches of U.S. currency for fake bills.

The bank also said it used a dated computer system and that it didn’t pay enough attention to maintaining its own books. It has also said the bank didn’t have adequate written anti-money-laundering policies for its staff.

Macau was a Portuguese enclave before it returned to Chinese rule in 1999. The territory — the only place in China where casinos are legal — recently displaced the Las Vegas Strip as the world’s most lucrative gaming center.

News on Government Waste coming from Minnesota

Here is one e-mail I cannot let slip by without sharing with you. Please take note:

In case you missed it, you can watch CAGW President Tom Schatz’s appearance on CNBC’s “Squawk Box” this morning online. In the weekly “Pork Watch” segment, Tom and CNBC host Joe Kernen discussed the record $2.3 billion loan the Federal Railroad Administration is considering granting to the Dakota, Minnesota, and Eastern Railroad (DM&E) at the behest of Senator John Thune (R-S.D.), a former lobbyist for DM&E.

As Tom wrote to you last week, this corporate welfare handout is a poor credit risk for taxpayers. DM&E’s current yearly revenue is less than the estimated annual service payment on the loan, and the railroad ranks last in safety among the nation’s 43 largest railroad companies!

If you haven’t already, please take a moment right now to tell your U.S. Representative and Senators to oppose this special-interest giveaway that is so risky it’s being compared to the $1.5 billion Chrysler bailout in 1980!

Tom Schatz can be seen every Wednesday on “Squawk Box” at approximately 7:50 a.m. EST. (Please note all media appearances are subject to change.)

***

Citizens Against Government Waste is the nation’s largest taxpayer watchdog group with over one million members and supporters nationwide. It is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

For more information about CAGW, visit our website at www.cagw.org. Make a tax-deductible contribution today to support CAGW’s waste-fighting efforts that have helped save taxpayers $898 billion!

Help spread the word about CAGW and the waste in Washington. Forward this message to a friend.

This is another one of those reasons why we must elect principled people. I am so tired of hearing about choosing the person that will most likely get elected. Why not try for the person most qualified for the job? What happened to that principle? No more RINO’s. Not from me.