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Taxes Or HellOver the years governments and government-sponsored organizations (i.e. politicians' puppets) have determined that not paying the "fair share" of taxes is evil (as if there would be any reasonable way to determine what that number is). In order to prove this they "sponsor" so-called "researchers" to measure what they call the "shadow economy". One such attempt can be found in the Policy Research Working Paper 5356 from the IMF titled "Shadow Economies All over the World" which was published in 2010 (if you have a strong stomach, we attached a copy for your revolting dis-pleasure). This paper presents a "methodology" to estimate the un-estimatable, which is the size of the "shadow economy". Incidentally, if you happen to take a peek at this document, you will notice that on its side is marked "Public Disclosure Authorized". What this means is that in the best Orwellian fashion, the IMF is a highly secretive organization. This is not conspiracy theory; this is reality in black-and-white in their own documents. Incidentally… and now back to our main topic.

WE OBJECT!

To begin with, we object and are utterly disgusted with the use of the term "Shadow Economy". What we have is a free market that was coopted by organized crime (i.e. governments) into paying for "protection" against people with guns and badges. Taxes are a racket, a scam, a shake-down, robbery, assault and insult. Taxes are shadowy, not the economy. If anything what the authors estimate in this paper is the Freedom Index. The lower the indicator the lower the freedom.

THE METHOD

If you are interested in the methodology that the authors used, please feel free to read the paper, although it is quite difficult to understand even for somebody with a reasonable degree in economics. This is so not only because of the complex model they used but also because of the deeply flawed measurements involved in the calculation, such as the GDP (see for example GDP Keynessians Vodoo Economics). Basically, garbage in, garbage out. But in any case, let's play. Let's assume that since the paper was "blessed" by the IMF it is "kosher".

THE RESULTS

The paper is peppered with tables and results but all those tables indicate about the same tendency: the Freedom Index is dropping everywhere in the world. As such, it is pointless to analyze country by country and as such we won't. We will simply use the world average (which was already calculated in the paper). If we plot those numbers between 2000 and 2007 (we skipped 1990 since there is no intermediate data) we can see the result below:

Freedom Index

As you can see, over the plotted period freedom in the market has been dropping consistently. BTW, market freedom is measured on a scale between 0 and 100 as a percentage of GDP. In 2000 we were 33% free but by 2007 we were down to only 31.3%. If you feel that you have no freedom and whatever you have left is quickly disappearing, you now know why in the figures provided by the IMF itself. Essentially what this plot is showing is that governments have become very efficient at persecuting and prosecuting freedom fighters (or what they call "tax evaders"). But don't you worry, it's all "for the greater good".

Fair enough, considering that since we all know that governments are trustworthy and filled with dedicated politicians who exercise extreme discretion and caution in spending, we rest comfortably in the knowledge that our tax money is being used judiciously. Yes sir!

Or…we could just measure it, right? Well, if we replot the Freedom Index and the World Debt per population we should see that as our tax payments increase world debt should decrease, right? If politicians and governments are getting more of our money, they should have less need to borrow, right? Well…see for yourself:

Freedom Index and World Debt

Hummm…. what's wrong with this picture? The more we pay in taxes the more politicians borrow and the more we end up owing!! What the heck!? But it gets worse. Between 2000 and 2007 tax efficiency increased roughly by 6.5% while debt increased by 40% !!?? And these numbers are already corrected by population growth! And tax efficiency does not include increases in taxation during those years!!!

What this means is simple; the more you pay in taxes the more they borrow and spend and therefore the more you "owe" and the higher the taxes and tax efficiencies will be! It is a vicious circle.

There is yet another way of looking at this phenomenon. A decrease in market freedom implies an increase in government control which implies an increase in government power which implies an increase in impunity which implies and increase in borrowing and spending!

Basically, you are the mark of politicians' long con. Now remember, the numbers we present here are their numbers, not ours. They can't sneak away by claiming methodological error or bad faith. Let's repeat this again: these are their numbers!

Do you begin to see the big picture here? If you feel that you are persecuted and prosecuted is because you are! Remember, you are not being paranoid if there are people out to get you.

The reality is that debt levels have absolutely nothing to do with peoples' needs but with the need politicians have to keep spending to stay in power. It is obvious that debt levels are unsustainable when tax efficiency is rising ever so slowly because people are tapped-out and simply refuse to pay the extortion.

CONCLUSION

In the end, the paper delights us with one final conclusion to which we added our comments:

"Considering these conclusions, it is obvious that one of the big challenges for every government is to undertake efficient incentive-orientated policy measures in order to make work less attractive in the shadow economy and, thus, to make work in the official economy more attractive.

And how exactly do they propose to do so? We don't know since the authors didn't expand the topic. It is obvious that the oppressed economy exists because of taxation. Remove taxation and the oppressed economy disappears altogether. This is a classic example of only-stick-no-carrot politicians use. Basically, since nobody wants to pay taxes, politicians use taxes to police and punish those who do not want to pay (which is pretty much everybody). As it is obvious that paying taxes is not exactly pleasurable, politicians make it so that not paying taxes becomes unbearable. Furthermore, for this to be effective, they have to intimidate everybody. This means that they are using fear purposely and with total cold-blooded and calculated efficiency on you! All the time. Even if you pay taxes! Speaking of traumatic and post-traumatic stress disorder!!! And you thought that the government was here to help you and to make your life easier. Silly you.

Successful implementation of such policies may lead to a stabilization, or even reduction, of the size of the shadow economy. Of course, even after 20 years of intensive research about the shadow economy, its size, causes, and consequences are still heatedly debated in the literature indicating that further research is necessary to improve our understanding about the shadow economy.

Of course, even after 20 years of intensive research about the oppressed economy, its causes continue to be crystal clear but this is highly inconvenient for people who depend on governments to so-call "make a living". Hence, the need for more research. Humm…. How much more self-serving can a statement be? Everybody including our fish Jackass (yes, that's the real name of our pet fish) knows that taxation and regulation create oppressed economies. This is a simple matter of cause or effect. The purpose of taxes and regulations is to oppress markets, to intimidate them, to make them behave in an anomalous and non-natural manner. The second there are extra-market impositions (stuff from outside markets) on the market; the market will adapt to try to correct those artificial impositions. One such correction is the so-called "shadow economy". Thus taxes and regulations are the very causes that produce oppressed economies. It is absolutely in-credibilis (from the latin, non-credible) that mainstream economists can't see it. We can and we are amateurs by any measure. It is obvious that there is a great deal of vested interests and biased opinions going on in academia and some people will go to great lengths not to bite the hand that feeds them... even if this hand oppresses us all. Furthermore, it is quite interesting to see how each economic topic is treated independently as if an economy could be taken apart like a Lego set and continue to work. Debt is relative and irrelevant. Stimulus is necessary. Taxes are good for business and many others. The tiny problem is that when you put all the pieces back together what you get instead of a cuddly set is Godzilla…and it is in a pissy mood.

In conclusion, the more you pay in taxes the more you owe. It is a vicious circle that politicians are quite keen to maintain.

And then we have the "other" point of view. The point of view from people who actually enjoy paying taxes. Those who can't wait to see how much money they have given to the government. Those who relish in every cent that the government takes. Those who not only recognize but support -with their money- the need for taxation to achieve "the greater good". Those who are glad that the government takes a "fair share" of their income. Now please, with a show of hands, let us know who you are. Camon… don't be shy… camon… there must be at least one in the audience… no one? Oh…well…we guess not… must be the sample size… or sun spots… yeah… that's it… sun spots.

Note: please see the Glossary if you are unfamiliar with certain words.

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