Slashdot Mirror

So even thought things might look bad now in the 3rd world that is the USA, with countless homeless people,

The People's Republic of San Francisco gives ~$400/mo cash to their homeless, and their city government is perplexed as to why they have so many of them when they're spending so much money.

even more people living the poverty line, California and 5 other states recently bankrupt (failing to meet budget requirements) with a huge national deficit,

California reelected a crooked socialist governor. Really, really dumb move. Davis is almost certain to be recalled even though the state deserves to be stuck with him for his full term.

a shaky international reputation and lack of human rights.

Actually, I think we now have a pretty solid reputation as a nation you do NOT want to fsck with. This counts as an improvement over the years immediately prior to 2001. As for human rights, the fact that you can post such drivel with impunity speaks volumes.

Not to mention things are getting worse day by day. Perhaps The sates could use Estonia as a model to help pull them self out of their current slump.
No one in the USSR saw it coming either, a lot of them were laughing at how bad the USA had it, and how lucky they were to be living in the greatest nation on earth.
Guess things are just the same as always, the USA is 15 years or so behind Russia.

Some people will believe anything. It helped that the Soviet dictatorship rather severely limited access to foreign travel, had total legal control over the media, and "disappeared" people who disobeyed. 'Twas kinda hard to get an opposing viewport. OTOH, you could read Pravda over here. I remember seeing it at my local library (People's Republic of Ann Arbor, the main midwest base for the now Former Soviet Useful Idiots) when I was little.

As for why the Estonian and Russian economies are zipping along today, one major reason is that they've both passed flat income taxes. In Russia it's a 13% flat tax, not sure about Estonia. That wipes out most of the compliance overhead, it dramatically raises participation (not worth the risk to duck a 13% tax that's easy to audit), and it stops the economic distortion that occurs when people do otherwise stupid things to minimize their tax hit (like take out the biggest mortgage they possibly can to max out the interest deduction, thus fueling all those McMansionvilles). We really, really need to pass a Flat Tax here, it'd wipe out half the K Street lobbyists and accompanying corruption since there'd be no more tax loopholes to lobby for, but the socialists (er, Democrats) will scream bloody murder that The Rich(tm) wouldn't be paying their "fair share" (defined as "as much as we can get away with looting to buy the votes of the sheeple"), so there y'go. Word is that China is considering copying the Russian flat tax.

In ForbesAmerica, everyone's taxes are just $1! Nuhuheehehee! Ponies!

And how come Dick Armey gets to abuse .gov like this? I mean, a line graph comparing numbers of lobbyists to numbers of words in the tax code? Jesus. I always kinda thought that .gov was for official government stuff or something, but I guess not. I checked nic.gov and there's really nothing stopping random congressmen from registering steveshomepageLOL111.gov and blogging. For that matter, there's nothing stopping them from making .gov porn sites.

Heh. Some intern has got to get somebody to sign for goatse.gov. The hilarity...

(ii) the amount paid for services ( other than for the services of employees, including fringe benefits paid by reason of such services) in connection with a business activity

is that we shouldn't need to buy a complex software package to figure out how much money the government is going to take out of our hides every year. Pass the Flat Tax and put Intuit and a helluva lot of accountants, lawyers, and lobbyists out of work.

Though that still leaves Microsoft's product activation. Oh, right, I'm running Linux. Never mind.

Exactly right. Enron did its damage using dizzying complexity, using the incomprehensable federal tax code (how many of you fellow Americans blindly punch your numbers into TurboTax and hope for the best?) to their advantage. Give the tax code a radical lawyerectomy and you'll wipe out a huge chunk of corporate and political corruption (corporations "contribute" to politicians to write advantageous lines into the current code). Corporations can't buy favors that Congress isn't selling.

Ending the double-tax on dividends will have a positive (though lesser) effect too: dividend payouts force discipline (can't fake cold hard cash). Plus it'll make it easier to raise capital with equity instead of debt, which will be a big help to manufacturers, which will be a big help to my home state of Michigan. One very smart thing: the double-tax is only dropped on income that was taxed to begin with. Play Enron games and tax shelter your income and ending the double-tax does you no good at all.

Fix the above two and IP laws become a much more exposed target for change. Technically the order they're tackled in doesn't matter, but I think changing IP laws will be the hardest (hardly anyone deals with IP laws directly but everyone deals with the tax code), so from a practical perspective we should deal with the tax code induced corruption first.

Flattax.gov has the info. Yes, we definitely need to switch to this. It replaces the mortgage deduction with much higher personal and dependend deductions too, ending the tax discrimination against renters. That mortgage deduction artificially drives up real estate costs too (gotta maximize that deduction! Except you're paying the bank $3 to save $1 on your taxes... but real estate only appreciates in value, right? Right?). I wouldn't want to own a McMansion if this ever passes though :-).

I'm convinced that most startups don't need venture captial. What they do need is a core crew of engineers and (later on) a skeleton crew of support staff (ie, people who will find paying customers) who are willing and able to take equity instead of cash until paying customers are found. When and if those paying customers are found, profits not reinvested in the company are paid out as dividends to the shareholders. Add angel investment into the mix as appropriate. Don't even consider going public (not worth the overhead and distraction, especially now that the IPO bubble has gone kaboom), but if the stockholders (mostly engineers, if you've managed to do this right) want to sell out to a Big Company that offers the appropriate pile of lucre, that works too. (A local crew did this, selling out to Cisco for $millions. Neat trick.)

Benefits:
1) Paying out cash to employees is inefficient, since the marginal tax rate in America is roughly 50% (28% Federal income + 12.4% SocSec + 2.9% Mediscare + the state income tax that pays for the roads/schools/fire/police that people actually use). This is known as "soaking the rich", aka slavery, aka how the Democratic Party has adapted from the pre-Civil-War era to the Information Age. Equity doesn't get taxed until it's sold, and the long term capital gains tax is 20%. Which is why the 1993 Federal income tax hike didn't kill the economy, people just switched to financing with stock instead of cash, which had the unfortunate side effect of making it easy to fund things like pets.com.

2) Very little corporate overhead, very simple. Minimizes contacts with lawyers, accountants, and other such creatures that add friction to the economy.

Problems:
1) The U.S. Federal Tax Code is rigged to royally screw companies that pay out dividends. Corporate profits are taxed once as income, and the stockholders are taxed again on what's left of that income when they receive their dividends at the stockholders Federal income tax rate. So $1,000 in gross profits becomes $650 in net profits becomes ~$450. Possible workaround: profit-sharing checks for the employees, but that doesn't help angel investors if you have them. Killing the double taxation of dividends would make more sense but it would never get through the Senate.

2) Surviving on little to no income while the company gets off the ground. Even without dependents, just paying for housing is a bitch, and geeks tend to congregate in territories with the looniest real estate valuations. (In the Midwest, that means my home city of Ann Arbor, Michigan, home of the University of Michigan, with housing valuations second only to Chicago.) The reason valuations are so high is that the Federal Mortgage Interest Deduction encourages real estate inflation, and the average voter is too stupid to realize that giving up their precious deductions (aka social engineering) and switching to the Flat Income Tax plan would leave them at least as well off. Local zoning regs that make high-density development impossible do the rest (thus why we have yuppie lofts in renovated decrepit downtown buildings renting for $big bucks rather than highrises).

3) Stock is much riskier than cash for workers. Nice upside when it works, though.

4) This doesn't work for companies with heavy capital expenses. Fortunately, many/most geek companies don't fall into this category.

Fair warning: IANA(lawyer | accountant), just a geek who follows finance and politics enough to be dangerous.