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Sunday, November 16, 2008

What's the True Cost of the State?

The State directly leeches 50% of the economy via taxes and inflation. When you take into account hidden taxes and regulations, the full cost of the State is 95%-99% or more. For now, I'll assume the "50% cost" figure is the actual total cost. Approximately 50% of all the productivity of people living in the USA is directly squandered.

I came to a really depressing conclusion. The State isn't merely leeching a flat 50%. The State is leeching 50% *COMPOUNDED ANNUALLY*!

Suppose that, instead of 50% of the economy being wasted by the State, that 50% were invested in productive businesses. Next year, the economy would be twice as big! Not all of this 50% would be reinvested in capital, but a large chunk of it would be reinvested.

When you take into account 50% each year, plus the effect of compounding, then the true evil of the State is far worse than any estimate that looks at a single year. If you use the 95%-99%+ figure, then the effect is even worse!

Agorism is a way to break the cycle. The State won't leech 50% of the productivity of agorists. Instead of squandering that wealth, it will be reinvested productively. There should be rapid exponential progress, once a free market economy gets started.

3 comments:

Mike Gogulski said...

Heady thoughts, FSK, but do check your operators. I suspect there's at least one place in your thoughts where a * ought really be replaced with a +, or a ^ with a *.

Either way, we're being fucked quite soundly.

Anonymous said...

I agree with FSK, we are taxed 95% of our income or so (although FSK said 50% compounded).

If you were to calculate everything, not just income tax, you'd see this is true.

This is because amounts that were already taxed, are taxed again and again, for example consider buying a car on after tax income. You pay tax again! Now, service it, and you pay taxes again. Sell it, and you are taxed! Take this money and buy a stock, you are taxed again, even though these are the money that you have been taxed on long ago!

The explanation is that we really live in socialism, where property and income is illegal, but we are conditioned to think that we live in freedom.

What speaks louder to you, the promise or the actions? What good is there from "technically" owning your own property and income, if you DO NOT own it in reality?

It is a matrix, and we are fools.

Thomas Blair said...

You might like the following:

http://gregmankiw.blogspot.com/2008/10/blog-post.html

In it, he shows the effects of just four taxes (income/payroll, corporate, capital gains, and estate) impose an effective 93% marginal tax on earned income. And that's with static tax rates over 35 years with a very generous estimate of pre-tax corporate rate of return on investment. Of course, the number increases asymptotically, but imagine what kinds of models of wealth destruction you could derive just factoring in inflation! I'd estimate that with variable (always up!) tax rates and even a very modest estimate of inflation (say...10%), the marginal tax rate on the value of a dollar invested today in 35 years could be 97-99%+.

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