3D Model to Raise Taxes
The best way to stimulate the US economy and reduce the US government deficit is to raise taxes.
Before I go any further, I want to say that I truly believe that government spending needs to be thoughtfully reduced. The government "wastes" a lot of money through lack of effective oversight and that waste should be eliminated to the greatest degree possible. But that would not stimulate the economy and would only slightly reduce the deficit.
The "economy" (US, EU, etc) is the mechanism by which goods and services are distributed. When it's working well, a very large percentage, nearly all, of the people are able to obtain goods and services in a timely manner without undue sacrifice. When the economy is working poorly, as it is now, a smaller percentage is able to obtain these benefits. What's an acceptably large percentage? What's an unacceptably small percentage? I think you and I will agree that if the percentage doesn't include us, you and me, it's too small.
Goods and services are distributed by a sophisticated and complex bartering system that uses currency (dollars) as its exchange mechanism. When I obtain goods and services from you, I exchange them for currency, which you then use to obtain goods and services, and visa versa. The currency is simply a promise to exchange goods and services. The currency has no value on its own. Without my promise to exchange something in return for currency, the currency has no value to you. A dollar without people is entirely worthless, it only has value when you and I agree that it can be exchanged for something else. Without us, you and me, the dollar is not even worth the ink and paper it's printed on, because most of our currency, most of the dollars, don't even exist - most are simply numbers in a ledger or computer - most were never printed and never will be.
Not only do we have to agree to exchange currency, we have to actually exchange it, keep it moving. If currency piles up in one or more spots, it stops working. If I collect currency from you and never exchange it, if I horde it, I've broken my promise to exchange it and it becomes worthless. When I have all the dollars and you have none, you have no reason to exchange services or goods for dollars. You would be better served by picking a new exchange mechanism, like navel lint, where you and I both start out with pretty much the same amount.
Currency has its greatest exchange value when it's moving freely. It has zero value when it stops moving. When it's moving sluggishly, like now, its exchange value is somewhere in between. Stimulating the economy means causing money to move at a rate that yields an acceptable value. What is that value? Once again, you and I will agree that it's too low if we have to sacrifice to obtain the goods and services that we need to thrive.
Right now, currency is not being exchanged at an acceptable rate, it is pooling up with the wealthiest companies and the wealthiest people. For instance, Google was recently published to have over 42 billion dollars in cash and equivalents. What will it take to get this currency moving? What about incentives? Google is already working as hard as it can to become as big as it can. Will giving Google monetary incentives, giving Google more money, cause Google to create more Jobs? Currency loses value as it pools and Google already has a really big pool. It would take a huge monetary incentive to get Google to even notice it and then they wouldn't be able to try any harder than they already are.
One way to keep currency moving and stop dollars from pooling is to take it, in the form of taxes, from those who have large amounts of it. By some estimates, for every dollar the government spends on goods and services from US companies, the GDP increases by $.70 to $1.50. Right now, the government is spending lots of money on interest because of the deficit. By raising taxes, less money could be spent on interest and more could be spent on goods and services. That spending would stimulate the economy, but so would the companies and people from whom the taxes are collected.
Corporations are not autonomous entities working on cool logic to maximize revenue. Corporations are managed by people who seek to obtain a higher standard of living. A man with a full belly has little incentive to gather food, but a man who has had a full belly and whose belly is now empty has a lot of incentive to find food. The idea that taking money from someone who is accustomed to having it is going to cause that person to want it less, to become less productive, is naïve and demeaning. The people that make our country great are not going to lie down because they have to pay more taxes, they are going to rise to the occasion and make more money to maintain their standard of living. And by doing so will create new jobs and stimulate the economy.
Stimulating the economy means causing currency to move faster and to pool less. An effective way to accomplish this is to raise taxes on currency that isn't moving. Taxing income and/or sales is counter productive - earning and spending moves currency and should be encouraged, not taxed. Collecting huge cash pools and properties should be taxed, not eliminated, just taxed. A well thought out cash, cash equivalents and property tax could benefit all, including those paying the taxes.
