The Ilanistic Economy

 

Politicians do not run this world, as the politicians would have us believe. Economics runs the world and politicians attempt to take credit when the economy is doing good, but yet distance themselves from the economy when the economy is doing poor. The economies of the world must be left to incorruptible businessmen. The government should make sure the businessmen are acting honestly, and should not interfere in the daily operations of businesses.

            Power corrupts, but absolute power corrupts absolutely. The government must make sure businesses and government officials are not corrupted, but the government must not infringe upon the rights and liberties of the individual.

            Marxist communism is a great idea, but a very utopian idea. The Soviet Union was called a "communist" state by western governments, but the Soviet Union called itself a socialist state. The problem with communism throughout the world is the lack of choice. Like all democracies, people in communist countries woke up, went to work, came home to relax, and went to bed and the whole process started over. But was something missing? It was the ability to choose their government and laws. The Soviet Union was in a state of despotistic order, like the United States but for a totally opposite reason. Now the counties of the former Soviet Union are in a state of despotism without order in my opinion.

            Marxist communism never existed in this world and cannot exist in this world because it is too utopian. Marxist communism does not take into consideration the needs of the individual for self-improvement, otherwise called Maslow's hierarchy of needs. Soviet communism never took into account the individuals needs in the marketplace and within their own life and country. The market was driven for military production because of the insecurities of the government. The Ilanistic economy is a non-utopian economy that can, and I hope will come into existence in Latin America. The Ilanistic Economy is a capitalistic economy made humane. History has proven capitalistic economies are much better than command economies and will help take Latin America to a level of excellence.

Taxes

Everybody hates taxes, but taxes are an evil of life. Without taxes, the services the government provides to the citizens would be unavailable. The tax system and the social system should work in conjunction so the tax system does not make the rich richer and the poor poorer. The tax system presented here is not representative of any tax system currently in operation in the world. This is a brief explanation of how taxes should be levied. This type of tax system is to put everybody on fair and even playing field. The tax system does not start levying taxes until a certain wage has been met. The taxes start out with a percentage withheld being equal to 50%. This was set high with the assumption the debt of the country would be paid off first and the withholding tax can and should be lowered once the debt is paid or diminished greatly.

In this plan, many items that need to be adjusted to the culture were intentionally missing or should be changed. The marked numbers are in this documentation for explanation purposes only.

The amount of money it takes for a family of two to have a subsistence living should not be taxed, but any salary made above that amount should be taxed around 50% increasing to 90%. Everyone should not be taxed until all primary needs are met. Taxation increase should not be a linear increase, but a geometric polynomial increase, where the business can calculate the amount of tax to withhold by the use of an equation, and not by some arbitrary tables.

Assume the equation for the collection of taxes should be a non-linear equation (at least one variable with a power greater than 1 in the equation); where x is the wage and y is the minimum wage and C is a constant, as defined by the government. This tax system does not take into account people working two or more jobs. Taxation should not be a burden to the people that wish to get an extra job. The government should not hinder the desire for a person to increase his economic standard. It would be the responsibility of the employer to collect these taxes and forward the money onto the capitol

Examples:

All calculation for tax will be based upon multiples of the subsistence wage and taxes will be with held every time a person is paid. This should either do away with a large part of the government used to keep track of the collection of taxes. Most of the enforcement of with holding the taxes will be with the employer and the outside auditor. This will also take into account the change in subsistence wages because the beginning of a year may have a different wage for subsistence than the middle or end of the year. If a person makes 150 and the subsistence wage is determined to be 100 then the person is making 1.5 times the subsistence wage. The person deserves to keep 1.0 times the subsistence wage before taxation, therefore .5 of the wage will be taxed, or 50 will be taxed.

      50 -The amount to be taxed
X50% -The tax rate to be levied
   25     -The amount taken for taxes

  Therefore, instead of making 1.5 times the average salary (150), the person makes is making 1.5-. 25 =1.25 times the salary for subsistence or 150-25=125. The tax rate of this person will be (.25/1.50) X100%=16-2/3% taxed.

If the person is making 101.5 times the average salary (10150), then the subsistence salary would be removed for taxation of this salary; therefore he would pay tax on 100.5 times the average salary. The salary above the additional subsistence salary would be taxed at the maximum rate of 90%, but these increases would be on increment of multiples of the subsistence salary. Since 90% became a constant at the higher amount, then the 100.5 would be taxed at 90% as defined by the table that is not arbitrary, but for explanation purposes, a straight linear increase will be used. The table is listed here.

            One hundred times the salary has an additive tax rate of 69.30% or

            10000X69.30%=6,930
            50X90.00%= 45
            6,975

The person would pay 6,975 in taxes out of 10150 or 6,975/10,150X100%=68.72%

Even with the additive tax the person would still be making about 30 times more than the salary needed to meet all needs for life.

Businesses (Corporations) should not be taxed. Taxation of both the people and the businesses are detrimental to the well being of the society. If a business is taxed, the people pay for the taxes, because the businesses will only raise the prices of the good or service to ensure the desired profit level will be achieved. If taxes are not levied against a business, prices should fall. IN this structure of economy, businesses will give up 50% of their profits to the government. The employee’s of that company will receive 10% and the government will keep 40%. To achieve this task certain elements of the law need to be considered.

            For the government to achieve the task of 40% of the stocks for the government and 10% of stocks for the workers, certain elements of the law must be made to protect those who own the companies. The action of the government entering a company and taking 50% of stocks would only cause chaos and inequality between people, and might lead to armed conflict. Since an Ilanistic economy is capitalism made humane, the government cannot force the current owners to immediately relinquish ownership of stocks. Three laws must be made to protect society and businesses.

1.            Companies must be given time to expand the amount of stock so 50% would go to the government and divided 40% for government and 10% to be held by the government for the employees of the company. A schedule should be set up that would be adequate to meet this objective. Each time a company expands the total shares in the company, the government receives all the expanded shares or enough to maintain the 50% holding by the government.

2.   The government must not interfere with the day-to-day decisions of a company unless the company has shown continuous loses for one year and six months. The government must allow the marketplace to define which companies will survive. After that period of time (about 1-1/2 years to 5 years), the company should not have enough money to survive and the capitalistic economic system will prevail.

3.   The third law that must be made for the government must protect the individuals right to start his own business. A person may start a business and receive a maximum of 50% and a minimum of 20% from the government. The government will receive the same percentage as the government invested in the business, but once the business becomes incorporated (or over 25 employees), the same rules as has been stated for existing businesses apply to newly incorporated businesses.

            Making the employer responsible for the collection of taxes through an external auditor should discourage tax evasion. The parties will be responsible to go to jail if tax evasion occurs.

            It is much easier to talk about these concepts than to do them. I can do both. I have been able to run a simulation for about 70,000 people and the taxes were roughly 50%. The data was an exponential double declining curve. This type of curve is a fairly good representation of income distribution.

            The Ilanistic Socioeconomic plan is based on Maslow’s hierarchy of needs. The first need is a feeling of knowing your basic needs such as housing and food are met. The tax system instituted in this plan attempts to do this by making sure the person has the needed money to live before any taxes are removed. The second need is a feeling of security. This is fostered by having 40% of the board of trustees of a company as employees of that company.

            Maslow's hierarchy of needs is 5-step triangle or a triangle with up to 7 steps, but all have physical needs as the base and self-fulfillment as the peak.

International Businesses

            What about International businesses within the country? This is a very hard topic to get the absolute answer. Businesses must have an external auditor like every other business, but a government auditor will discuss the actual profits realized by the international company through the use of labor and resources.

            If the products of the International company are sold internally, 50% of the profits will be easy to calculate and do the same division as previously stated. Of the remaining 50%, 25% can be returned to their home country in the form of hard currency and the remaining 25% must be used to purchase products produced within the Ilanistic country. The products purchased must be sold externally, thereby producing a profit for the international company and ensuring jobs for the citizens of the Ilanistic country.

            If the products are sold abroad then the government auditor will get the answer on how much profit is made by the international company using the resources and the labor of the citizens. The split on the profits remains the same. If the international company has to send money from their home country to accomplish the 75% that must remain in the Ilanistic Economy, then that is how it is. If it is determined beyond a reasonable doubt to the citizens that the international company lied, then the international company forfeits all assets within the Ilanistic Federation.

            What will the government do with this money? The government wants to be good global citizens in the new and changing world, and will invest in businesses throughout the world and within the nation. This is a way for the government to help other countries and local citizens by giving the needed outside capital. The dividends and/or profits can be used for embassies and/or missions abroad and/or anything else deemed needed.

Business Structure

 

Forty percent of the members on the board of directors must be workers of that company. A worker may only be on the board of directors for 3 years. After that time, the workers cannot be on the board of directors for a minimum of three years and the worker can be on the board of directors for a maximum of 9 years.

The length of the term, and how workers are elected to the board of trustees should be left to the workers of that company. The government or company should not interfere with the decisions of the workers. The workers will choose the way the members are designated to the board of directors, but the members must be workers at that business. The stockholders of the company elects the rest of the members of the board of directors (60%). The weight of shares owned by a person will remain the same. A worker is defined here as any employee of the company (corporation)

The health and safety of the workers is to be entrusted to the workers that are on the board of directors. The full board of directors cannot understand the safety and health concerns of the workers. It will be the full board of directors' responsibility to implement the plans of the workers. If a fair attempt is not made on implementing the plan of the workers, it is the right and duty of the workers on the board of directors to have an outside arbitrator negotiate the differences. A five to ten year plan to implement some proposals is not an unreasonable time limit, although some of the proposals could go into effect immediately.

If the company has fallen on hard times, it is the responsibility of the workers to take care of each other. It is more preferable for a reduction in pay for the entire workforce than temporary or permanent layoffs. This is preferable because the employees of the company will receive quarterly or annual investment bonds for the amount of profit made by the company.

Concerning Privately Owned Businesses

The financial records of the company should be open to government auditors once a month. The government auditor and the outside auditor will have the monthly meetings. If after 5 years, and the auditor finds no profitable years, the owner will be told to return to a job as soon as possible. All assets of the company are forfeited to the government.

If the company cannot make payments of minimum wage to the employees, the needed money will be taken out of the government portion with the interest being charged equal to the inflation rate of the nation plus one percent compounded once at the end of the year. It will be the owner’s responsibility to pay this debt.

            If a government prosecutor determines that an owner tried to defraud the government, and therefore the people, with failed and corrupt businesses, it is the responsibility of the government to prosecute the owner with a minimum of one year of unpaid work for the government while the owner has another job. (2088 hours of work completed within 5 years) All assets of the owner will be forfeited to the government and any wage above minimum wage will be forfeited to the government until all debts with interest are paid. The interest rate will be 2% over the inflation rate compounded daily.

            How is this money dispersed to the employees? The external auditors will send a minimum of 50% of the bonus to the government to issue retirement bonds. The employee must ensure the amount is correct and check the amount of this bonus. The interest rate on the bonds will be calculated every time the report on the inflation rate is released. The interest rate on the bonds is equal to the inflation rate.

Factory/Business

            A business should cooperate with other businesses and build/buy town houses or high-rise apartments. Rent those to their employees at a reduced rate of about 90% of comparable value and at 100% to persons not employed by the company. This would put the worker in a central location plus give the workers a nicer place to live, let the employees interact with one another and produce a profit for the business.