The Undisclosed Reason to Abolish the Income Tax


Two reasons are obvious.

First, if we get rid of the tax, then we have more money for ouorselves. We earn it, we keep it.

Second, we don't have to pay accountants and tax attorneys, keeping still further money for ourselves.

Don't feel sorry for the newly unemployed accountants and attorneys. Their work existed only because of government fiat, not because they provided any directly useful work. If they all went on welfare, then the productivity of society would be exactly the same as if they continued doing work that is not truly needed. But they probably won't sit around collecting welfare. They are likely to find other, truly helpful, work, thereby increasing prosperity of society in general. They might even find jobs that offer better pay than their old ones did.

Third--and hardest to discover--is the problem of inerlocking ownership. Without the income tax, ther is no need for IRA's, pension plans, and other financial contrivances that exist to help us avoid taxes. True, even without income taxes people may decide to invest in mutual funds or other third-party financial instruents. But the fraction of a large corporation that is owned by a third-party instrument instead of directly by the stockholders will be reduced substantially when people can get control of their own investments. Sure, people can get self-directed IRA's. But what about pension plans, including ones run by unions?

The problem occurs when a large corporation has a significant percentage of its ownership in the form of investors who own a significant amount in specified other corporations, too. To such a mega-investor, the loss of value in one company is not very important if there is a similar inrease in value of another company. But if you own stock in only one corporation, then you will be mad as hell if its board of directors surrenders value to another corporation just beause someone owns more of the stock than you do and wants another company to increase in vallue.

To keep up with the big boys, you have to invest in the same ratio that the big boys use and in the same corporations. But suppose you think one of their favorite companies is a bad investment. Then the mega-investors can contrive to increase its value as soon as you don't own any of it. Conversely, if a corporation gets popular because it has honest business practices and a good sales and management record, then it can be induced to make a crooked deal with a disfavored corporation and you lose value.

If most of a corporations's stock is held by its ultimate beneficiares, directly, then such skulduggery is less likely to happen.

Immediate consequences inlcude health care inefficiency. Don't bother to guess what happens if major industry stock is held together with drug-company stock or medical-insurance stock. Just look at reality. We can't take seriously the crocodile tears from the directors of traditional heavy industry as they cry about health care expense; their owners are also owners of drug companies and medical insurance, right? Same for unions and their pension funds: reform of health care and drug prices is a worthy cause, but union members will resist if their retirement assets are endangered.

Weakening the influence of interlocking ownership of our major corporations will improve our freedom and, by unshakling corporate directors from the need to kowtow to others of other corporations, will improve their overall profitabilit, too. Only the control-freaks lose.