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Hugo Papenfus


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Tax Systems: Currently we have a mixture of paying tax as you earn and spend.... shouldn't we rather move to pay tax as you spend only?

We have different tax systems over the world, but they mostly tax people on what they earn??? Shouldn't we move to tax systems that tax people only on what they spend? In other words get rid of all other taxes and raise spending taxes like VAT sufficiently. This will have some positive and negative effects. Let's discuss them and see how it weighs up to current tax systems.


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    Aug 19 2011: Let's look at another comment from Ryan:

    "......Spending money is what makes the economy better, this would also discourage spending which ends up hurting everyone's earnings and thus would lower the amount of Gross income everyone receives in the end.. thus you end up with a similar or smaller amount of net income even without earnings taxes and then you are also taxed when you spend that smaller amount of money......."

    Spending money is also the very downfall of the economy as we can see from the HUGE problems facing USA at the moment? And even more so for spending money that you don't actually have......DEBT......

    If you take the taxes that people are paying now, and you add the debt factor to it, you will see that it adds up to more then the % from a VAT only system......The illusion that debt creates at the moment is what you are saying is good for the economy?

    A VAT only system will educate the masses in a forceful way to lean towards saving......This is what we need in the world today......a Saving mentality.....Not just in finances, but in everything, and especially resources......The industrial movement created the illusion around spending and DEBT, and the spending mentality......we all know that we can NOT go on like this.......nothing keeps forever, and we are spending resources faster than we can create it. The natural resources will also deplete in time, and what then? what will we have to spend then????
    • Aug 20 2011: Ok, let's talk about that debt. Lets say we never borrowed any money.

      That borrowed money built factories, roads, schools, products, patents, part of that debt led to research that built out the internet. We would not have any of those things, you wouldn't have a cell phone, because the telecoms wouldn't have had the cash or business model to envision running high speed internet lines across the entire world or monetizing frequency for cell use without the government loaning the money to them or giving them tax breaks to push that innovation. That kid that invented a pivotal part of your flat screen, or satelite, or even that MRI machine that might save your life one day would not have been able to go to school if the government had not provided the security for his bank to loan him that money by loaning it to them with a 100% guarantee.

      We wouldn't have most of the things that were developed in the last 20 years without the government either A. Raising taxes or B. borrowing money that was sitting around being "saved" by someone else.

      A savings account that doesn't invest in someone (like a government or business) is a savings account that actually loses value with inflation.. who wants to save their money in an account that becomes worth LESS as time goes on?

      So, our "debt" is someone else's "profit" and our advancements in technology and achievements are our "prizes", living in a better world that is being made better every day in many different ways
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        Aug 20 2011: everyone who is sane understands when it is feasible for a household to borrow. only when it comes to states, reasoning like yours can be uttered without outrage following it.

        when an ordinary man borrows money, he might do it to start a business, which will generate higher yield than the interest rate. what about the government? can we say that the US invested the money and now reaps profits above the interest rate? or can we say that the US is so better off now that the increased GDP causes increased tax revenues, so paying back the debt is not an issue? where is that profit? where is that GDP increase?

        young couples also borrow money when in need. they sacrifice future joys in order to get a fridge right now, to be able to start a living. it is a conscious decision. one has to be careful though, not to overcommit. but this is the case with the US? the US is ready to give up future consumption in order to get necessary items today? does not seem so.

        what is the most dangerous thing to do when it comes to debt? in my book: borrowing for consumption to bridge the gap between desires and reality. and then borrowing money to pay back the debt that is due. this is the downward spiral everyone knows. just ask anyone in harlem or in kenya, whether it is a good idea to borrow money to get a nice dress, and then borrow more when you need to pay back. we all know that this can only lead to disaster. but when the state does that, everyone is giving us smart talks about how reasonable that is.

        ps: i'm talking about the US here, as you are american. but please feel free to substitute any other country. they all do the same. the state is dumber than any ordinary person.
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          Aug 20 2011: Our debt is not money we want to spend (that's our budget) it's money we have already spent and must be paid back.

          What we do and do not spend money on today (the budget) is based on our ability to decide correctly if we will have the financial resources to pay it back later.

          There are two fundamental activities that together are the most effective way to bring our debt back down to reasonable levels. It is the same strategy that any financial consultant worth their salt would tell you. It is what we do as individuals and as families. The two activities are:

          1. Reduce spending wherever possible and humanely appropriate
          2. Increase income (revenues) iwhereverpossible and humanely appropriate.
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        Aug 21 2011: From your comments I can see that Krisztian and Jim see the point I was trying to make on debt.

        Jim said....
        "....1. Reduce spending wherever possible and humanely appropriate
        2. Increase income (revenues) iwhereverpossible and humanely appropriate......"

        Will this not happen in a VAT only system?
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        Aug 21 2011: I do not agree with you RYAN, as for if they did not borrow to do those things, it might just have been postponed until they had the money to do it....
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        Aug 21 2011: Also, if you buy the fridge now, and pay three times for it over the next three years, isn't it better then to get people into planning mode? If you are going to get married then you know that you will be needing a fridge, so save for it. If you don't buy on debt, you will have three times more in a lifetime than what you can have with debt.....

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