Killing the Goose That Lays The Golden Eggs

17 Dec

Written in a moment of irritation.

Let me start with a modern-day parable.

In the middle of a city – we will call it Idealism – there sits a large castle, surrounded by ivory walls. Inside that castle live the kings of the city, hidden behind walls so high they never have to see a merchant, peasants, soldier or slave in the city below. Those kings spend half their time trying ideas to reinvigorate Idealism, which has lost some of its lustre since the kings took control, and the rest of it inspecting their coffers and distributing largess to the masses. But there’s just one problem. The coffers are running out.

Surprised? Largess is expensive, you know.

So the kings sit down and have a think. Eventually, because they’re not really that bright, it occurs to them to raise taxes. Excellent, they think; we will get more money to fill our coffers, which will allow us to distribute more largess and everyone will love us! And so they raise taxes.

And it works, for a while. Until they do the accounting at the end of the year and discover that their revenues are falling off, sharply. Their ability to distribute largess is also falling, because they have less money. So, after a slightly shorter think, they issue new orders; once again, taxes are to be raised.

Next year, they have even less money.

And now the kings are panicking. They’ve agreed to keep distributing largess … and now they can’t, because they don’t have the money. But the people who were receiving that largess are looking riotous. All of a sudden, the kings look vulnerable … and so they make a desperate grab for the remaining wealth … and discover it’s gone.

And then the gates of the castle are stormed, by those who took the largess, and the kings are hung from the roof … and then everyone starves, because the kings have shut down or driven away anyone interested in producing food.

This isn’t exactly a happy ending, is it?

OK, if you haven’t already guessed it, the kings are the European Union’s unelected bureaucrats and the kingdom is the European Union. And I’m talking about the VAT increase on ebooks and other electronic products, which will be coming in January. It is about as short-sighted and stupid as killing the goose that laid the golden eggs.

Why?

Amazon’s solution to this is to basically decide to increase prices, matching them to VAT, starting in January. They don’t have much choice, unless they want to take a harder hit than they already will. But let us see what choices this leaves us kindle authors:

One – accept the price hike, lose sales, get less profit (and Amazon gets less profit too) and pay fewer taxes.

Two – lower our prices, get less profit (and Amazon gets less profit too) and pay fewer taxes.

Is anyone else seeing a problem here?

Less profits – fewer taxes. Fewer taxes – less government revenue. Less government revenue – fewer services (largess).

Amazon will probably survive this. But what about the smaller companies? Everyone selling something online will take a major hit from this piece of government-issue stupidity. And how many productive businesses will go under because of it?

There are times when I feel Atlas Shrugged should be compulsory reading. If you increase taxes and regulations, you drive businesses out of business, which causes unemployment levels to rise, which places a greater demand on social services … when the revenue stream needed to keep them running is starting to fade. And, in the end, you cut your own throats.

This, frankly, is what you get when you allow people with zero experience outside politics to actually run countries.

<Goes off to bang head on wall>

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17 Responses to “Killing the Goose That Lays The Golden Eggs”

  1. Jack Hudler December 17, 2014 at 9:31 pm #

    Stupefied amazement!

  2. Dennis The Menace December 17, 2014 at 9:31 pm #

    “The problem with Socialism is that it always runs out of other people’s money”

    I believe the Iron Lady said that (bless her departed soul!).

    I suppose I should be glad that I won’t be paying VAT at Amazon.com. They can’t levy it against foreigners overseas w/o violating WTO regulations, I believe.

    That is until Obama waves his unconstitutional executive order pen and imposes a VAT on Americans, that is.

  3. Tim December 17, 2014 at 9:52 pm #

    You’re missing one part of the picture: as revenues “run out”, the “kings” will turn to the big international financiers in order to borrow money to continue the “largesse”, which is the whole point of the exercise. No matter what happens, the institutions who provide the funding for business, government and individuals will still be increasing their wealth.

    Ah, the beauty of the debt-driven world economic system…

    • Jack Hudler December 17, 2014 at 9:59 pm #

      Hmm good point, wonder if interest rates will climb.

    • Dennis The Menace December 17, 2014 at 10:09 pm #

      True that. I remember reading about how both the Federal Reserve and the 16th Amendment (making it possible for Congress to impose a workable, progressive income tax) was created in the same year.

      Basically: The Fed was created to put America into as much debt as possible and the income tax was authorized to pay the interest (but not the principle..oh no! Not that!) of aforementioned debt created.

      • Jack Hudler December 17, 2014 at 10:15 pm #

        Yep more interest, more cost of doing business; round and round we go.

    • chrishanger December 19, 2014 at 6:57 pm #

      Yep, but that’s running out too. Chris Date: Wed, 17 Dec 2014 21:52:53 +0000 To: christopher_g_nuttall@hotmail.com

      • Jack Hudler December 22, 2014 at 4:02 am #

        When the economy becomes stress; I remember Keynesian economics and ask myself the question; Where is all the money going? It’s certainly not in my mattress. 🙂

  4. David December 17, 2014 at 10:39 pm #

    To quote Mr Heinlein…’When a place gets crowded enough to require ID’s, social collapse is not far away. It is time to go elsewhere. The best thing about space travel is that it made it possible to go elsewhere’ ….I can only hope that my young children see that opportunity arise in their lifetime…as I quite agree that Atlas shrugged should indeed to required reading, though prehaps a read of ‘ Greenies ‘ by AL Steiner from his perfect World Series would provide an interesting variation…but bread and circuses is sadly alive and well in our world, administered by the inept, manipulated by the power hungry, voted for by the deceived or selfish, unnoticed by the sheeple ….but then again I could be wrong..I’d just like the opportunity to let others try it…again…prehaps it will work…this time….however if history is proved correct…again…I’d just rather not be around to experience the results. Ah well one can but dream…and enjoy the escapism of a good book, well written, with thought provoking insight.

  5. Scott Campbell December 17, 2014 at 11:07 pm #

    That problem is occurring on both sides of the Atlantic. I think it is part of a plan to destroy capitalism and western civilization.

  6. misterjonez December 18, 2014 at 2:02 am #

    This is actually a fundamental part of why I moved out of the USA. The velocity with which these ‘changes we can all believe in’ are taking place is well-and-truly frightening.

    I do think that capitalism, strangely enough, is currently best-practiced by the Chinese. They merely use the communist government to leverage lower wages from their workforce, and then they go out and dominate the global markets.

    It is quite literally what John. Rockefeller was accused of doing, but never really did…at least, not to the scale the Chinese have engineered.

    The line I like to give people when they give me the incredulously arched eyebrow after I tell them I left the USA because it’s completely uncompetitive with the rest of the world, is, “When the world’s largest communist country is also the world’s best practitioner of capitalism, it’s time to head for the hills.”

    • Jack Hudler December 18, 2014 at 2:26 am #

      Pray tell where did you move? I might just do that!

      • misterjonez December 18, 2014 at 6:59 am #

        I live in the Philippines and absolutely love it 🙂 Everything is in English (it’s the second language here, and all legal documents/road signs are in English) and the people are hyper-attuned to Western Culture due to this country’s longstanding relationship with the USA, Australia, and even Norway has seen its expatriation rates going to the Philippines increase markedly in recent years.

        If you want to live in a city (not for me) then most experts agree that the cost of living is just a little under half (we use the 40% mark when talking with other expats, who generally agree) but the real beauty of a place like this is that you can go live out in the sticks for very, very, very little money (I lived on a beach house for two years and spent, all told, less than $1,000 USD per month – and I gained weight, for what it’s worth).

        Of course, unless you’re on a pension or government retirement program, figuring out how to earn money can be tricky. But, being an indie author, it fits me like a glove!

  7. Useless Old Fool December 21, 2014 at 7:26 pm #

    I am a self professed “Useless Old Fool”; a cackling old fart well into my dotage.
    But your rant had me laughing silly on the floor at the malarkey.

    Let me quote one of my favorite lines from the “Ghostbusters” movie.
    “”Dr Ray Stantz: You never studied.””

    First In my may long years; I have never lived in or seen in practice a True Meritocracy.
    The Fact is that there is simply no free market force that provides Justice, and their is no morality to money.

    The Preamble of the USA constitution; a statements of intentions and guiding principles were explicit “”establish Justice”” and “”promote the general Welfare””; because both the weak “Articles of Confederation” and the iron grip of the British Empire; had Failed on both counts.

    Basic Econ 101 is that people are emotional and irrational; sadly marketing and propaganda give a many fold return on investment. But Alan Greenspan in his conceit and Idolatry of Ayn Rand; had to relearn that lesson to our Global cost in this Great Recession. Greenspan failed in his responsibility when he romanticized investors instead of providing oversight and accountability.

    Remember “The Theory of Moral Sentiments” by Adam Smith, if your memory needs help read some of the posts from writer David Brin who was keynote speaker at FreedomFest.
    http://www.econlib.org/library/Smith/smMS1.html#I.III.28
    http://davidbrin.blogspot.com/2010/06/can-libertarian-conservatism-find-its.html

    All accumulations of money and power must have accountability.
    http://davidbrin.blogspot.com/2014/08/the-true-origins-of-american-revolution.html
    http://davidbrin.blogspot.com/2013/11/liberals-you-must-reclaim-adam-smith.html
    http://davidbrin.blogspot.com/2012/01/is-libertarianism-fundamentally-about.html
    http://davidbrin.blogspot.com/2011/08/solution-isnt-left-or-right-its.html

    Even as privileged White Male in the USA; the Cheating at the top has cost me and my family; see the decades long stagnation of wages.
    http://www.cheatingculture.com/daily-cheats/
    http://www.epi.org/blog/good-eric-schmidt-evil-eric-schmidt/
    http://www.stateofworkingamerica.org/fact-sheets/wealth
    http://www.epi.org/publication/the-top-10-charts-of-2014/

    So yes, I Stand with my Nation’s founding principles; which were designed against the Bullies and the Cheaters of that time. Cheaters who get to top and use any means to stay there; they need to be held accountable in this generation to protect our Posterity. There is a preponderance of clear evidence that shows the modern cheaters have rigged the game against minorities and the poor. This was done in an attempt to Train Helplessness and Avoid Competition.

    We have to acknowledge that injustice is still a Fact of modern living history, whose karma is felt in the daily lives of minorities and the poor today. Yes admitting to the referees that there was a foul on the field will cost us on the score board. But can you have any pride in an hollow accomplishment when others play at an onerous difficulty level; just so you could get ahead.

    http://www.washingtonpost.com/news/post-nation/wp/2014/12/17/judge-throws-out-teens-murder-conviction-70-years-after-his-execution/

    http://www.epi.org/blog/led-troubles-ferguson/
    http://www.epi.org/publication/making-ferguson/

    Other writers who have spoken out.
    http://whatever.scalzi.com/2012/05/17/lowest-difficulty-setting-follow-up/
    http://www.jimchines.com/tag/racism/

  8. David P. Graf December 22, 2014 at 4:10 am #

    Considering how much of the world’s wealth is held by the top one percenters, Atlas Shrugged is a fantasy best left behind when one enters the world of reality. Increasing regulations and taxes do not in themselves cause an economic slowdown. It depends upon the nature of the regulations and the tax rates. I lived during the days when the economy was doing great and most people doing well and the tax rates were up in the stratosphere compared to today. I also continue to think that laws against child labor were and still are an example of “good” regulations.

    • Paul (Drak Bibliophile) Howard December 22, 2014 at 4:36 am #

      When talking about tax rates and the “1%ers”, there are several factors involved.

      First, taking all of the 1%ers money is a “one-time” thing and the government “giveaways” would eat up that amount very fast. Of course, considering that the 1%ers are a major factor in a growing economy, taking all of their money means that they aren’t around to help grow the economy.

      Second, even raising the tax rates won’t solve the problem. The so-called loop-holes would likely remain because they often serve a useful purpose and because the people in the legislatures use the loop-holes to protect their money. Therefore the increased tax rates will hit the middleclass who either can’t afford the tax lawyers to use the loop-holes or they don’t make enough to even use the loop-holes. Of course, then you have middleclass people either leaving the country or because of the taxes they are unable to remain middleclass and drop into the lower classes who don’t even pay taxes.

      As the class of people who pay taxes decreases, the “need” for more government “giveaways” increase so the government not waiting to decrease the giveaways increases tax rates even more.

      Finally, when people talk about reducing regulations, they aren’t talking about eliminating regulations as some regulations have good reasons behind them.

      The problem is that too many regulations have no good reasons behind them. Often regulations increase because the regulators want to expand their numbers (and power).

Trackbacks/Pingbacks

  1. Happy New Year! | The Chrishanger - December 31, 2014

    […] businesses are likely to go under. This will naturally REDUCE the EU’s tax base, which is really freaking stupid.) Kindle Unlimited, in many ways, has had a similar effect on my income. Instead of a 70% share of […]

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