High Taxes Breed Tax Cheating… and Trade Deficits

Warning! The Truth is sometimes disturbing!

Let us consider the Foreign Trade Deficit. Officially the statistics show that the US economy has been falling behind in International Trade for decades. I can assure you that companies make a profit on almost every single trade made, otherwise they would close the doors. Furthermore, it is not logical that the any Country would be able to maintain a trade imbalance for so many decades. Any thinking person would conclude that there must be more to the trade deficit then appears on the surface.

Here is a question to ponder. Do you seriously think that the owners of any company are going to submit to the ridiculously high taxes that the US Government demands? Does anyone expect business owners who take the risk of investing capital into a business to just hand one third of their profits over to someone else who took no such risk? It is really counter intuitive. Companies have an incentive to under-report profits, hence the illusion of a trade deficit. It is my observation… that the high taxes in this country have turned ordinary businessmen and women into criminals. This has been a very common trend throughout all of history. The higher taxes and tribute are, the more effort people will put into beating the tax system rather then being productive.

The fact is that at once you get above the point were you are working for a salary, taxes are voluntary. Business-owners objectively consider how much they have to pay in taxes and how much it costs to beat he system. As long as it costs less to beat the tax system, ordinary people will take that option. The way it works is simple. Hypothetically, if I buy a product from China (or any other country) that costs $1, I will have my buying-agent in China record the cost as $8 on the invoice and I will send $8 in payment to the agent in China. I then sell it for $10 in the US and show a profit of $2 to the IRS. Meanwhile my agent in China wires $6 to my bank account in Panama or some other country and keeps $1 for himself for his assistance. The fact is that there is more US dollars outside the US then inside the US. Taxes are way to high when ordinary businesspeople will go to such great lengths to avoid them.

The underlying misconception has been that American Companies prefer to import rather then buy domestically. This is false. Purchases made domestically fall under US jurisdiction and records can be easily obtained by seopena. This is not the case with international transaction going through foreign banks who have every incentive to protect their account holders and none to help US government agencies… and are not legally obliged to do so.

The average businessman today is more concerned about his potential tax liability then he is about his competition. That is contrary to free market ideology where government is not suppose to interfere. Taxes are way to high when peoples actions are influenced by the tax consequences to the extent of Trillion Dollar Trade Deficits.

Take a look at the Form 1040 from 1913: http://www.irs.gov/p…rs-utl/1913.pdf

The first tax tier was….1% (20k to 50K)
The second……………..2% (50k to 75K)
The third………………..3% (75k to 100k)
The fourth………………4% (100k to 250K)
The fifth………………….5% (250k to 500k)
The sixth and final ……6% (500k plus)

The average income in 1913 was only 15k. The median was about 3k. The vast majority of people were exempt. Do you know how rich you were in 1913 to be making 500k a year? These are tax rates at which the the govt would have the people’s support and cooperation. This is how they got the 16th Amendment passed, legalizing the Federal Income Tax. The American people would have never had allowed an Income Tax Amendment to the Constitution if they knew how far the congress would have gone with it. The people have responded in kind by working around it. If the government would reduce taxes to 1913 rates, they would find that people would be more willing to pay a fair share.