Airfoil Tax Comparisons

Went to give a presentation today. Turned out to be informal and more of a Q & A . Though I would make a blog of it.

First I would like to thank you for your time and consideration.

I have had trouble connecting with people on the subject of my book, part of it has been the dryness and the passive voice in which I presented it. So today I am trying a new approach.

Most of the ideas in my book are built not on numbers and statistics but based on concepts  I believe these concepts are similar to those of fluid mechanics, and aerodynamics. The CUT Tax which in an acronym for the Currency Use Tax.  was envisioned in my mind on concepts of competition and exploiting the basic theories of fluid mechanics.  

The competition part is simple to explain. People will pay whichever they see as less. That is simple human nature. So, if you can exploit a deduction in the tax code, you will seek it out. If a CPA promises to save you thousands of dollars, you will enlist their services. You will pay which ever you see as less. If the cost of avoiding the tax exceeds the tax you will just pay the tax and move on. Simple competition. I think this is something people forget when they want to tax the rich. They usually don't get rich by overpaying. And the rich generally understand that money does act as a fluid, and treat it as such.

Now, the fluid dynamic portion is a little harder. So I will try.

Imagine if the United state was a ship. This ship would look more like the Schooners, Cog, or maybe a ship of the Line. With the sails furled. And the sails would represent our tax code.

We have three sails on our ship. The Corporate, personal, and nonprofit. Now the Nonprofit does not really have a sail. It is just there to enforce the government definitions of nonprofit. It is there to control the nonprofits. If you are religious, don’t act political, if your political don’t act religious. Fail these tests and we will tax you as a corporation. And the corporate tax was not designed to handle nonprofits, and is very punitive to the nonprofit.

When we instituted the Income Tax code we where a growing economic power. All the trade winds and economic currents favored us. So we used these massive sails to collect the money, and push the ship of America along. Soon politicians realized that they could acquire power by cutting holes in the sail to allow certain monies to flow through, and manipulate behavior . This started the growth to a 75,000 page tax code.

Now the tax code is so full of holes that they realize it is inefficient and unworkable. Their solution is to put up brand new sails, This will enable them to again start cutting holes to allow money through. I say it is time to modernize the Tax Code.

In the Mid 90’s Neil Boortz and John Lender wrote a book call the Fair Tax. And this changed my thinking on taxes.  Sure most states have had sales taxes, But this lead me to think of the tax structure not as a sail, but as an air foil.

Now an airfoil is more versatile and efficient than a sail. The fixed nature of the sail does not lend itself to the wider range of motion provided by an airfoil. Captains of old  managed manipulated the sail expertly to tack against the wind. By doing this they were attempting to manipulating the sail to mimic an airfoil. But the sail was primarily designed to perform its best with the wind behind it. It was designed as a drag sail. And The Fair Tax had the possibility to perform like an airfoil.  

First I have to show you the similarities, between an airfoil and taxes.

Now there are four components that determine the efficiency of an airfoil. You have thrust the forward direction, which I will call the economy, You have lift generated by the airfoil that I will call revenue, Counter to the revenue pulling down you have gravity, this I will call reluctance. For the person's natural inclination to avoid taxes. Today, our fear of federal prison and financial ruin help the government overcome our reluctance to taxes . I feel this is unnecessary.  And counter to the economy or thrust if you will is drag.  This I will call embedded taxes.  Now the fair tax claims that by removing the taxes and compliance cost from business, you will remove the embedded nature of taxes. And I agree with this to a point. Business don’t really pay taxes,  Taxes are just another expense to cover in the process, so the tax is passed on in the final price of the item.

But removing the tax on business and creating a higher end user tax on the consumer and calling it an end user tax is also a fallacy. By calling it that you have stated that the tax ends there. It is no longer part of the economy. Walla it vanished. Unrecoverable. I will tell you a secret. There has not been an end user tax since the abolition of slavery. Only a slave is forced to accept what is given, and cannot ask for a wage that exceeds all of his or her living expenses. And taxes are included in the cost of living. People wish seek compensation above their basic living expenses. So all taxes will become embedded  into the cost of goods. You cannot really remove taxes from the economic model.  All they removed was compliance cost and company matches. Now that is substantial, but not enough.  This is my biggest problem with the Fair Tax.

The fair tax split the airfoil and air stream in half. Then said the top of the airfoil is unimportant and discarded it. They in effect used it as a sail to capture the wind from the consumer. This is a very inefficient use of the airfoil.

By doing this they had to increased the angle of attack required to achieve lift. It is about a 23% rate. This is a steep angle of attack and requires a stronger amount of thrust from the economy to maintain the lift.

The top half of the airfoil is the most important part of the airfoil from an efficiency standpoint. The bottom half is just a flat line for the higher air pressure to push against. The camber of the wing allows a an area of low pressure. This low pressure draws the air from the lower portion up. So instead of hitting the bottom of the wing from hitting at a steep angle the air can strike at a lower angle, thus not having to expend energy by changing directions.. That is seeking the low pressure system created by the camber of the top portion. This maximizes the amount of lift generated. The higher the angle of attack the more drag you generate. Air striking the bottom of the plane becomes dead air, and this air disrupts the flow of air behind it. Part of the energy from the incoming airflow has to be diverted to push the deader air out of the way. The way this would be exhibited in the Fair tax is sticker shock. You may be more reluctant to the higher rate. To minimize this differential You try have more air strike the bottom but at shallower angles. That way dead air does not build up under the wing. And in the economic model, that dead air becomes embedded taxes.

That brings me to the mechanics of The CUT Tax. The Currency Use tax is designed to act like an airfoil. It does not want to obstruct the flow of money, over or under the wing.

It’s only extract a smaller percentage from all financial activity that passes around it, on all individuals, or organizations. It is design with very limited exclusions, the biggest would be the exclusion of principle, Governmental accounts, and social security deposits.

It will have no enforcement mechanisms.

The rate would be flat for every individual or organization.

There would be no maximum or minimum requirement.

Nonprofits would not be excluded from the tax. (I believe that  the tax will be lower than the cost to comply with tax free status. So they will not be disadvantaged.

Their would be no personal audits.

Cash and direct barter will be excluded from this tax. However, Cash deposited into account will  still be treated as a taxable event.

The Cash exclusion is for conscientious objectors.

And if you think living on cash only is easy, have you tried it lately. Most people have gone to the convenience of debit cards, and online banking. It is hard to get paid in cash anymore.

Since it would be handled at the financial level, by computer protocol any discrepancies would either be intentional or accidental. Intentional would be  criminal fraud, and can be handled by the various law enforcement branches. Accidental would be human error, or software issue. These issues could be handled by  technical monitoring services and in house audit by the financial institution.. No need of a large tax collecting bureaucracy.

The Cut Tax works this way. You would Deposit your money in a financial institution. At that point a computer protocol would determine if the transaction originated from someone other than the owner of the account. If the origin was not an account linked to the owner, the protocol would then determine if it was from a small group of exempt sources. After running through the protocol, If it determined the deposit was taxable, It would deposit the funds and debit the tax from the account. This tax would then be deposited into a holding account at the bank. At the designated time, the bank would transfer the taxes collected from the previous month to an account specified by the treasury. The government would receive this deposit only knowing the source bank, It would not have any individual transaction details. The government would not know how much was in your account, or how much tax any unique individual paid.

Well not by the CUT Tax plan anyway. I am pretty sure, that they have all access to this information already. We just pretend they don’t.

One final item. I take the pyramiding critique seriously, even if I believe all taxes become embedded. So I ran a few simple  spreadsheets, and was pleasantly surprised by the results.

Although these where only baseline test. I developed them to maximize the pyramiding effect.

The first page are ranges built on what I though the maximum initial tax would be on the left, with what I believe the true initial tax would be on right. From top to bottom the first show that if a product was sold at each step in the process. This guaranteed maximum tax exposure. The price doubles at each step in the first set. The second shows 50% increase in price, third is on the second page with a 25% and forth 13%.

Then on the last page, I simulated a little more realistic look at a simple item from manufacture to final sale. This I included various additional expenses with the worst modifiers possible, a factor of one, and a 10 percent gross profit margin plus the base tax.  Even the 5.5% fell under the 23% fair tax rate at 19.67%, and the 3.8% finished out at 14.21% embedded tax. I may not be an economist, However, I believe that this deserves some serious consideration by economist. So yes I would prefer my tax system over any other proposed. Including a 23% end user tax

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With the cut tax system we may be able to get beyond the class warfare rhetoric and onto the real problems of inefficiencies in the system.

We Are Made Of Empty Space

Recently, I have watched a documentary made by Nova, called The Fabric Of The Cosmos. The first episode dealt with concept of space. Or what makes up space.

We think of space as the empty distance between objects. Like if we were standing in the same room, the distance between us would be made up of what appears to be empty space. Now we know that the space only appears empty. We know that there small particles that exist between us. They could be molecules of air, dust, and other small particulates, that we can not see with our eyes.

Now you look at your hand, and it seems solid. Like an unbroken mass of blood, tissue, and bones. However, it is not solid if you look at your hand from the perspective of an atom. From this perspective your hand would have a closer appearance to a forest. That being you would see individual molecules as distinct objects, with empty space between the molecules.

Even at the subatomic level there is this appearance of empty space between the electron, protons, and neutrons. And you can go smaller, from the perspective of the neutrino, the space between electron and proton would appear to be as vast as the distance between the walls of the Grand Canyon would appear to us.

We are made of so much empty space that if you compressed all of the empty space from your body, all the mass would take up the area smaller than that of an electron.  

This has lead me to think along the theory of the Big Bang. Now I do not dispute that the Milky Way Galaxy could have been created in a Big Bang event. Even the entire universe could have been created that way. However, it is hard to imagine it happening all at one time. That is that all of the mass of the universe was contained at one time to a small super dense point in space.

If it all of this is an offshoot of one specific event, then there has to be a center of the universe. And we are either expanding away from this center, or moving back towards this center. The current consensus is that we are still expanding from the center. This is held up by the fact that the redshift of the wavelength, more items in the universe appear to be moving further away from us.

We have a presupposed bias. Everything in our known existence has a beginning, middle and end. Have we just projected this onto the universe? The human mind cannot grasp the true concept of infinity. We cannot see that it is possible that the universe was not started at one point and will end at a future date. And that it could just exist in a infinite loop. Where galaxies are born, expand and die to be reborn again. Maybe, what we are seeing are not an infinite number  galaxies, but the echoes of this and a handful of other galaxies going through this cycle. Maybe we are just seeing our past being replayed million of times, throughout space and time.

We even say that there are constants that dictate physics. What if the speed of light is not the constant we observe. What if it changes based on a medium unknown to us. What if the speed of light pass instantly beyond the influences of a galactic medium? In other words, what if the light generated in a neighboring galaxy accelerates as it leaves the influence of that galaxy and decelerates as it enters the influence of another, with an instantaneous jump between. This is a bit of over simplification. However, remove the instantaneous leap and just leave in the acceleration and deceleration, and our math is completely off. This could mean the universe is bigger and older than we thought, or the opposite. This could also lead to a bias of the redshift when viewing distant objects.

What if time is more like space? The empty spaces that fill in our areas of conscience. The area that we measure between objects to give them dimension. What if time is an artificial construct of the mind to order events that are really happening simultaneously? What if the universe really has no time? Well if this is true we would not find it. Because, it would not conform to what we expect to find. So our own biases form our own truths, even if they turn out not to be true.

What if everything we know is derive from one fractal? After all the pattern on the subatomic mimic the pattern on the galactic level. An atom looks like a small solar system, the solar system looks like a smaller version of the universe. Yes there are variations, but these stem from the parameters of the local physical conditions. Look at a snowflake. It contains this infinite pattern that is finite because of the physical conditions that will not support the ever expanding fractal. Remove all physical properties, and the snowflake would continue to expand along the fractal pattern, that it started from.

I am not trying to engage in sophistry. I am just trying to point out that there is still a lot we don’t know, From the perspective of a neutrino we are only a projection in space. We have very little mass to obstruct the neutrino.  Could our own interpretation of the galaxy be just a projection of what we observe locally, and not paint a true picture of the universe.

Flight 370

I guess I will put in my two cents on the missing airplane. Although, it is possible that the plane crashed in the ocean, it is just as likely that the plane could have been hijacked. I am starting to believe the latter, if only because of the information that it flew for 4 hours after turning off the transponder.

What strikes me the most is this perception we have that an airliner can not  disappear. We tend to view the rest of the world by our own perceptions. In America, if a missing 777 disappeared, we would probably locate it in hours. The simple fact is we are all connected with multiple lines of communication. If it landed at a small municipal airfield in Nebraska. Most of the people would know about it in hours, as one neighbor called another, texted a picture, or talked at the local coffee shop(tavern).

However, you are looking at an area with a relatively high population density, but there are several areas with minimal outside communication. There are islands without the basic infrastructure we take for granted here. Like a phone line, or electrical grid. Everyone may know by the end of the day that a large airplane had landed. However, with limited connection to the wider world, that knowledge could be kept in the isolated area. Most of the citizen may not be aware that an airliner went missing. Therefore, you would not have to corrupt many individuals to keep your secret. Only the few people in power. They will be the only ones with electricity, and outside communication.

Now, you are saying, if their lifestyle is so primitive. How can you even land a large aircraft there? That is the amazing thing I discovered by studying Google Earth. There are a large number of unregistered airports. Not just grass strips, But, with long concrete runways. It is hard to say how many of them could actually support the weight of the aircraft or are wide enough. However, since most of the data in Google Earth for this region is 10 years old on average, many could have been updated since then.

I cringe when I hear someone say. “Why can’t they find the plane on Google Earth?”

That is because many of them do not realize that the data on Google Earth, is archival information, not real time. As far as I know there is not full 24 hour coverage of the whole earth at this level. If there was you would only have to go back on tape to retrace the flight from it’s origin. 

You are lucky that image you are viewing on Google Earth is only a year old. And most of the area is uninteresting to Intelligence Agencies. You have hotspots that they try to stay on top of, But for the most part, there just isn't enough resources or people to monitor every square foot of the earth. And now if your population does not have electricity, that means you are almost immune from spying by the NSA, and most other intelligence gathering agencies. You are only going to commit your limited human assets to known highly volatile areas. If an island is politically stable, it will be ignored. Even if you have the most barbaric dictator running the island.

So yes, it is possible that someone has hijacked the plane. The scary part is, that if it was hijacked, it will be used for a more sinister plot than just flying into a building. You do not go into all of the planning and expense of acquiring a large and difficult asset, unless you have grander plans for it. Like it’s capacity to carry a large payload. With proper planning, and retooling of the electronics suite, you may be able to enter any airspace you wish.  And from that area of the world, and with the range of the 777, you can reach almost any country you wish. Los Angeles, Jerusalem, London, New Delhi, and Moscow are within possible flight range, Restage the aircraft after the world gives up looking for it, and, New York City, and Washington DC are within range.  911 was different in that they had to use the assets as soon as they acquired it. There was no safe area in that hemisphere to hide the planes. Everyone was connected, and have been since about 1950s on.

Reality

I get annoyed at all of the wealth re distributors trying to tax the rich. Trying to tax the rich is the reason the tax code is so confusing to the average person. You ever think this may be by design. After all most politician could be considered rich. Are they really going to punitively tax themselves?

The new call is to simplify the system. They want to remove a lot of deductions, stabilize the progressive rates, and lower corporate taxes. If we are going to keep the government manipulation tool known as the Federal Income Tax Code, then by all means try to reform it. However, at the end of the day we will still have a tiered tax structure that is biased towards moving income into non-taxable vehicles, or overseas. This is a nonproductive idea in my mind. You do not want to push money away from the revenue stream, you want to draw it towards the revenue stream. At the end of the day, the only people who will pay the actual tax is the person who is ignorant, forced, or if the cost of avoiding the tax is greater than the cost of compliance.

We have been taught that the government is noncompetitive. This is a fallacy. Everything has a competitive nature to it. By ignoring the fact that government is a competitive monopoly, we fall into the false illusion that if you tax the rich, they will pay it. The truth is that the rich will pay which ever cost them the least. If an accountant saves you $100,000. in taxes, you will gladly pay him $50,000 for his services. Likewise, if I can put $10,000,000 into a charitable trust, and pay myself a salary of $200,000 a year as the trustee, I would do it. This will allow me to invest, give, purchase property,  and hire who I wish as a nonprofit entity. As long as I follow the guidelines set up by the tax laws, all the future growth of my wealth within this structure would, then be free from taxes, except, on my income paid by the trust. And the trust can buy me that shiny new truck if I wish.

If we get into the game of tax reform, we are just playing a game of three card monty, and the Queen is already palmed. All they are doing is generating the bets(campaign contributions) from the marks. The last presidential election generated billions in campaign funds. How much tax revenue did this generate? Directly, probably none, indirectly, yes, most of that money went to buy services, somewhere further down the line someone may have paid a tax on money received. However, was this revenue generated offset by the deductibility of the charitable giving. Was the influence that this money generated worth the deduction. It undoubtedly was to the politicians, but not to the middle class.

The income tax system was set up to benefit politician, with tax free campaign funds, and tax deductible contributions, it heavily favors the professional politician. However, many of the elite have caught on to this nifty trick, The Koch Brother, and Moveon.org(George Soros) are the two most polarized examples of this. Correct me if I am wrong, but these are the rich you are saying you are going to tax. Get real people. They will pay what they believe they owe, nothing more.

That is why I believe in the Currency Use Tax(CUT). I know I have not conveyed this properly in the first version of the book, That version was written to just present the mechanics, not the concepts of competition, and the overall vision I had writing this book. I see the CUT Tax as a dynamic system that creates a competitive tax market. Many have pointed out that this tax can easily be bypassed, and I agree, that is the dynamic I wish to create. That is, that the tax will be paid because it is safer, convenient, and viewed as just by the payer. In other words it is a competitive tax. I will get more into to this in a future blog on banking. Mainly, I wanted to get into a discussion about Bruno. Not Bruno Mars, But Italian Dominican friar, Giordano Bruno.

Aside from being a Dominican friar, Bruno was a philosopher, mathematician, scientist, astrologer, and poet. His claim to fame is that he had a vision that lead him to believe that the Earth Centric vision of the universe was wrong. He believed that the stars were really individual suns and each had planets around them like ours, with intelligent life. This was pretty radical thinking during his time. It was one of the many beliefs he held, these beliefs inevitably lead the church to condemn him as a heretic, and burn him at the stake. However, ten years after his death, Galileo, created the first telescope, and that lead to the discovery that the Earth did revolve around the sun. Of course, this created problems for Galileo among the inquisitors. I marvel at this because, Bruno, was more right than the collective thinking of the day. And I see parallels in today's world. Even today, many see him not as a scientist, But a person with a religious vision, and happened to have a lucky guess. Some think that his quest for the divine lead him to a hypothesis that turned out to be right. Not that this could be the only logical conclusion that his mind could see, after a lifetime of studying the facts, and discounting no theory without contemplation.

Today, they may not burn you at the stake. However, that is only because they believe they could not get away with it. That does not preclude the collective powers of today from trying to shape knowledge. In effect they have been doing it for years. This is an ongoing quest to bend the will of the people through the selective application of knowledge. The biggest example I see is in the global warming movement. Not that I disagree, and that people can have an impact on climate. It is just that I don’t agree with their dire outcomes, the sources they point to, or their climate models. They seem to be more politically oriented, than based on any hard scientific model. Case in point would be the balance of CO2 as a greenhouse gas, while they largely ignore H2O, which has far larger effects than CO2. H2O drives all of our weather patterns, Why is it ignored?  To ignore water is to ignore the big picture, and water distribution has greatly varied in the past years. So yes, I believe the Global Warming crowd has an ulterior motive, other than saving the earth. Thus, I am resistant to their message. Science has been manipulated beyond the realm of finding the truth, into the realm of securing a religious/political belief. Or maybe they are just selling a product through fear.  

The main point I am trying to make is. Start thinking for yourself, and only trust the experts when you know their facts are right. As the slogan for AE sports says. “Challenge everything.” Everyone has an agenda, including me.