April 23, 2013
Phnom Penh, Cambodia
Surprise, surprise… the completely insolvent US government has yet another idea to raise revenue in the Land of the Free: a new tax!
The Marketplace Fairness Act was introduced some time ago, and we’ve discussed it before. But it’s now being rushed through Congress as quickly as possible.
It’s aim? To collect sales tax for online transactions. And in addition to being financially debilitating, the bill is also a bureaucratic nightmare.
Just imagine– if passed, online retailers will have to collect a different tax for every customer based on his/her location, keep track of it all, pay the correct amount to dozens of state governments, AND file periodic reports to each of them.
It borders on the absurd. Naturally, though, the Obama administration “strongly supports” the bill because it will “level the playing field” for mom and pop shops on Main Street.
Total nonsense. This is just another money grab masquerading as good intentions for the benefit of the people.
What they haven’t managed to figure out in all this time is that raising or creating taxes doesn’t actually increase tax revenue.
In the post-war history of the United States, taxes and tax rates have been all over the board.
And yet, as a percentage of GDP, the US government consistently takes in about 17.7% of GDP in tax revenue, i.e. their ‘slice of the pie’ remains the same.
But while raising or creating taxes doesn’t actually increase total tax revenue, they can affect GDP– ‘the size of the pie.’
When taxes are high, people have a disincentive to spend, invest, or start businesses.
In this case, the bill sticks it to consumers and Internet retailers. Businesses will go under, and individuals will reduce their consumption due to higher prices.
Net result: a decline in economic activity. For the government, this means taking the same 17.7% slice of a smaller pie. It’s genius!
You’d think the government was intentionally trying to push productive people out of the US.
Think about it– the banks are insolvent, the stock market is rigged, nearly every aspect of people’s existence is criminalized and overseen… from what we can put in our bodies to whether we can collect rainwater.
And anyone wanting to start a business has a myriad of taxes and regulations to navigate, such as Obamacare or this new Internet sales tax. Why bother?
There are places in the world, like right here in Cambodia, that are teeming with opportunity, minimal regulation, and almost no competition.
This will be the other major effect of this legislation (and all the other tactics that the government is embarking upon in the Land of the Free)– people will simply leave, either physically or virtually.
From this bill, any rational Internet entrepreneur will merely restructure the company overseas where the law cannot be applied.
This is the ‘multiple flags’ approach that we have been discussing for years in this letter, and detailing exclusively in our premium service Sovereign Confidential.
With a few carefully managed steps– incorporating the business in one location, processing payments from another, warehousing in another, managing from another, it’s possible (and completely legal) for online companies to escape this burden.
And I suspect a great many will do so. At least, while the window to take action is still open.
