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Day 255: Taxes Reinvented?

Mother's Little Helper portfolio was UP today +606.63 (+0.08%).

Overall GAIN YTD: +$206,729.25 (+35.41%).

According to CNN Money our benchmark index, the S&P 500 is up +10.11% Year To Date.

After the presidential election the markets began betting on a corporate tax break or total tax reform. Investments have been rotating, a little slower lately, but still rotating in and out of stocks that are estimated to receive the greatest benefit from a tax break. 15%, 20%, 25%, enough already, I would argue it doesn’t matter if the focus is on efficiency. Let's be really disruptive and extend a massive tax break to all businesses, without changing the rate at all.

Last year, according to The Office of Information and Regulatory Affairs, US citizens spent $69 Billion and 11.5 Billion hours responding to government requests for information. $69 billion dollars filling out forms! It’s enough to drive you to drink and we only spent $57 billion on alcoholic beverages.

Time is money, so let’s look at this another way. According to the Bureau of Labor Statistics, the average worker earns $25/hour. So those 11.5 billion hours filling out forms aren’t free, that’s a very real cost being carried by corporations, small businesses and individuals; often by people earning much more than $25/hour. Let’s stick with averages. 11.5 billion x 25 = $287.5 billion dollars. Add on the $69 billion in direct costs and we’re up to $356.5 billion dollars. According to the Tax Policy Center, in 2015, the IRS collected $343.8 billion in corporate taxes. We spent more on filling out forms and supplying information than we collected in taxes. Roughly $12.7 billion more. Of the total 11.5 billion hours and $69 billion dollars, just filling tax forms accounts for $257 billion, roughly $34 billion dollars and 9 billion hours.

Removing a $257 billion burden from US businesses’ is a massive windfall that would produce greater productivity and increased wages. This isn’t even money that the government gets a chance to waste, it’s fundamentally mandated inefficiency.

So here’s the plan

Throw away (recycle) all the forms. If you want to run a business in the US your taxes have to be digital; services around this will boom in a whole new industry. Implement block chain technology at the source of all transactions to collect tax payments to the IRS, city, county, state, whatever at the time a transaction occurs. Buy an iPhone, the sales tax goes instantly where it belongs, the retailer does nothing. Payroll taxes are instantly sent to the collecting agencies with nothing extra owed at year end. Intuit, and eBay could probably have this up and running before the legislation is passed. This can be implemented for goods, services, wages, financial and insurance instruments and more. No more payroll stubs, no more tax forms, no more audits, no more estimates on tax collection, no more tax avoidance, no more tax cheating, everyone and every company is on a pay as you go system where taxes are collected at the time goods and services are exchanged and the government has its funds immediately. The IRS and state tax boards would be reduced to one big IT operation. Cash flow is king. Now the government is in charge of collecting their own taxes and we eliminate ‘tax season’. We get a whole new industry, create thousands of new jobs and US businesses get back $257 billion dollars of wasted productivity and cash. Hey, it's fun to dream.

Stay Invested

Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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