31 January 2014

Stupid Math = FUBAR Sales Tax

There are times when My Brethren act like the problems We have in Puerto Rico are absolutely, unequivocally, indisputably, undoubtedly, unreservedly and entirely Our own. We act and think that nowhere else on Planet Earth is there a problem like the problem We have or a FUBAR situation like no other FUBAR situation those vaguely-existing people out there ever went through.

Most of the time I react with a restrained "Get over it" attitude, and every once in a while I'll actually engage a few people in a brief round of "Reality check: read something other than lottery numbers." The latter often gets Me a larger "Cone of Silence" than normal, occasionally hedging into "Zip Code of Indifference."

However, there are times when I have to shake My head (known in some parts as "The Crib of Jenius") and concede that, yes, We have problems that no one else on Planet Earth has. In the most recent case, Our revolting excuse for an (un)government is incapable of doing first-grade arithmetic. In their crabbed, greed-lusty, lizard-on-a-bender brains, 6 + 6 = 6.

Allow Me. The local sales tax, called IVU, as in Intravenous Urine, is 7%. However, 1% of that is a Municipal tax, with the proceeds ostensibly going back to the town coffers at some undefined point in time, often related to (A) party affiliation, (B) backdoor politics and (C) whim. The other 6% is the, ahem, National tax, charged at the point of sale.

The current scheme thought up by the Ova, (un)governor Alejandro "Deer in Headlights" García and his sub-moronic ilk, is to "align" the tax rates all over the Island because some municipalities don't charge the 1%. The new system, such as it is, is supposed to "move" the tax from one point to another, using tax credits to "stabilize" prices. So when an item arrives at an Island port, it gets a 6% tax, that the supplier charges the wholesaler (of course), who receives an equivalent tax credit. When the wholesaler sells to the retailer, he pays the tax and gets a credit, and then the customer buys the item and pays the tax. See? """It's just moving the 6% from the end to the beginning!"""

In a "search for consistency" with the acumen of a slug doing Sudoku, the (un)government wants to "relocate" the tax from the point of sale to the moment of import, extend it to all items, without exclusions, and they say that nothing will change.

Really. No, really?

Oh, they tout "the benefits." They trumpet "the simplicity." They parade "studies," none of which--none--are actually verifiable outside of their own number-twiddling.

And they are flat-out lying. Viciously lying.

In a well-oiled model of lying in the face of overwhelming facts, the Ova and his rotten yolkies are ignoring three very salient and well-documented facts:

1) Our prices are already at "6% level," meaning that they have long factored in the added cost of the tax itself.

2) That added cost is not eliminated by moving the tax. Under this scheme it increases because it now affects several steps of the transaction from port to buyer, rather than just one step. Call it "friction" and in business...

3) "Friction" is a cost that gets passed on as higher prices.

Back when The Jellyfish, Anibal "I Was Really Guilty of Campaign Funding Fraud" Acevedo set-up the IVU tax system, I predicted its impact would not be a 6%-7% rise in prices to offset the new imposition, I said it would ultimately swing prices about 13%-14% and it did.

I'm not an economist: I think for a living. But any brief search about the impact of taxation on consumer prices will show that (1) the price increase is inevitably higher than the tax itself and (2) that consumption goes down wherever the tax takes effect.

So The Ova's awful yolk of a system that """promises""" to equalize taxation is actually going to have a larger, broader impact on prices, close to another 12-15% over the course of the next two years.  And overall tax revenue--what the Ova and his rotten egg-sucking hyenas really want to filch--will go down on a per capita basis.

If they really--chuckle-chortle-scoffing guffaw--wanted to help Our economy, why not equalize the system by eliminating the 1% tax so that folks living in smaller towns get a tiny-but-useful break? If these FUBAR pinheads looked at anything beyond the length of their pockets, they'd notice that the municipalities that eschew the 1% are large, with relatively extensive economic activity. But in terms of population, they account for less than 36% of the total living here. Tax cuts stimulate growth, but they lack the sexy appeal of grabbing the cash at the onset, rather than down the longer road of potential progress. 

Great. We're bankrupt, the hyenas are still hungry, and the corpse We call Our economy will now cost Us more in order to keep hiding from Ourselves the ferocious stench of its abject failure.

Yeah, sometimes We have FUBAR situations that are uniquely Our own...

The Jenius Has Spoken.

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