If a parasite's entire income is leeched from the productive, then isn't their entire income a tax on those creating value? In this sense, the share of the parasite's income which is carved off by the Central State as tax revenues is a secondary tax: the parasite's entire income is a tax on the economy.

This distinction between legitimate wealth derived from value creation (think Steve Jobs/computer industry) and parasitic wealth skimmed from the productive (think Mitt Romney/investment banker) is the heart of Correspondent James B.'s insightful inquiry into the question: can the parasitic Elite be said to pay taxes at all, given that their income is itself a tax on legitimate wealth creation?

I'd like to add something to your recent essay Income Tax Solution: Apply Social Security Taxes to the Super-Wealthy. (June 1, 2012)

I'm a former banking executive and I've had the opportunity to figure things out from the inside. (Emphasis added: CHS)

In the article it mentions the disparity between what the rich pay in terms of percentage of earnings for income tax compared to the middle class.

However, a substantial portion of the rich earn their income by co-opting the income of the middle class via money-printing / income suppression. They can do this by being in the loop for the "money printing" machine as the Fed manages the economy to benefit the connected Elite.

I think it's underappreciated that the banking system and the financial system has been perpetually bailed out on a moment-by-moment basis by printing money to cover duration mismatch while the Fed has replaced transaction balances with credit - thus enforcing a spread for the benefit of the connected financial Elite, corporate CEOs, etc. This has been going on for decades with periodic accelerations of the bailout process due to mismatched duration excess (i.e. the Austrian Economics Business Cycle).

The middle class (the workers) put value into the currency by producing, while the money-printers take that value out (by dilution, and by lobbying with the value they've stolen). It is an organized, structured system of theft, and that includes VISA, etc. which are cash substitutes because cash has been replaced with credit transactions. No amount of taxes are ever "paid" by those rich, as all their income is stolen.

For example, quite a number of top banker CEOs have not paid any taxes in the economic sense, they are not productive (they are destructive), and that is true even if their 1040 says they pay "60%". Someone else (a producer) paid their taxes ... Money really is a "veil" in this case. It diverts from the truth.

Unfortunately, the legitimate rich are really hurt by this process, as they impart tremendous value and have that value taxed away. They are, in a sense, the justification for hitting the lower and middle classes, and they suffer particularly for it.

In my view, we should make all cuts and adjustments from the top down, starting with those institutions that destroy value (pretty easy, just let the market work and let the organizations fail), as that is where the problem lies, and there can be no recovery as the poor simply do not impart enough impact in this parasitic process to make the difference. In fact, many poor simply want a job, and jobs are hard to find as the impediments to working rise higher and higher with the necessity of rationing the spoils in a crony capitalist system.

A recent Levy research article noted the total support by the Fed for the banking system was 29 trillion dollars. While that is not direct cash infusion (with FNMA / FHLMC / FHA, and other back door programs) - there is simply no group in the U.S. with as much influence and welfare.

In other words, the connected insider Elite pay nothing at all in taxes - and in fact they don't do any "work" in the sense of something beneficial for society as no voluntary payment for their services exists.

Thank you, James. That last line is profound: investment bankers like Mitt Romney don't solicit voluntary payments for buying companies and reshuffling the assets to skim their parasitic siphoning of the wealth created by others.

If we understand the difference between parasitic wealth and real value/wealth creation, we can properly align the tax structure to reality: the tax on authentic wealth creation should be low, to encourage wealth creation and the employment (broad-based wealth creation) generated by legitimate value creation.

We must also understand that the Central State now protects and enables parasitic skimming as the primary function of the nation's financial system. Thus the entire financial system is parasitic on the wealth of the nation.

Financial parasitic incomes should be taxed at 99%. If Mitt Romney reshuffles assets created by others and skims $100 million, 99% of that parasitic wealth should be returned to the nation via taxes. The parasite still gets to keep $1 million, more than enough to live well but not enough to buy the presidency, the Congress and the regulatory machinery of the Central State.

All those who claim the Mitt Romney/investment bankers are "creating wealth" are either terribly confused about value creation and capitalism, or they are lackeys/ apologists of the parasitic Elite.

If we cannot grasp the difference between parasitic wealth and legitimate value/wealth creation, then we are well and truly lost.

Read the Introduction (2,600 words) and Chapter One (7,600 words) for free.

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.

We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.

The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution, and it combines cultural, technological, financial and political elements in a dynamic flux.

History is not fixed; it is in our hands. We cannot await a remote future transition to transform our lives. Revolution begins with our internal understanding and reaches fruition in our coherently directed daily actions in the lived-in world.

If this recession strikes you as different from previous downturns, you might be interested in my book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.


Readers forum: DailyJava.net.



Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition: Of Two Minds blog-Kindle

---

"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.

---

NOTE: gifts/contributions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Janice S. ($20), for your exceptionally generous contribution to this site--I am greatly honored by your support and readership.

---

Or send him coins, stamps or quatloos via mail--please request P.O. Box address.

Subscribers ($5/mo) and contributors of $50 or more this year will receive a weekly email of exclusive (though not necessarily coherent) musings and amusings.

At readers' request, there is also a $10/month option.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

Your readership is greatly appreciated with or without a donation.

---

For more on this subject and a wide array of other topics, please visit my weblog.

                                                           

All content, HTML coding, format design, design elements and images copyright © 2012 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.

I would be honored if you linked this essay to your site, or printed a copy for your own use.

Terms of Service:
All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.