Economics and Government

[Grok]

In a little bit of non-mathemetical thinking during a shower, my mind drifted back to government, budges, taxes, and monetary systems.

It seems to me that not so many decades past our average tax rate was pretty low, relative to today.  By taxes I mean any revenue that a government generates, and also mean the collective tax rate an individual suffers if you add up all the payouts from his 'income' (not debating this word right now even though it's largely misused by 99.999% of everyone).

For most people, that tax rate is at least 35% and up to 65%.  So this is the individual churn rate.  Churning is a term used to describe how a unit of money (dollar) changes hands and gets taxed back into the goveernment hands.  So let's say $1 churns by 5 hands of exchange and becomes a nickel ($0.05, or 1 * .35 * .35 * .35 * .35 * .35), making it effectively zero.

It seems to me the effective worth of a given economy then, is determined by some relationship between the churn rate and the total number of source (unchurnced) dollars.  If 100% of the money ends up in government hands after the churning, you can measure the total amount of worth in the economy by examining that governments tax revenue.  Right?

So if Charlotte, NC, has a $1 Trillion yearly tax revenue and Atlanta, GA has a $5 Trillion yearly tax revenue, it seems pretty obvious there's 5x as much money in Atlanta than Charlotte.

But that's not what bothers me.  On the surface that seemed right, then I got to thinking about the churning issue.  It feels to me as a non-economist that churning faster creates fake money.  The higher tax rate you have exposes the total worth as being less than it is.  So what I think is going on is as America's production has been shipped overseas, our imports outweigh our exports, we have astronomical debt and we are working merely to pay off the interest on our countries debt's ... well I think we're already bankrupt or near to it.  Could that be why we need 35%-65% tax rates, to churn money and hide the fact that there is none?

[Adron]

Imports increasing is probably one reason you need a higher tax rate. If the money paid for basic stuff now leaves the country quickly, it won't be churned in your economy as much and so it has to be churned quicker. Previously those simple things probably were churned through many stages of manual labor and pay. Whereas many of your exports are low-churn products, that only pass through few stages of development in the country.