THE FALLACY OF THE TAX SYSTEM

A simple classification of spending shows why leaving our money in government’s hands leads to undesirable results. When you spend, you may spend your own money or someone else’s; and you may spend for the benefit of yourself or someone else. Combining these two pairs of alternatives gives four possible summarized in the following simple table.

On Whom Spent
Whose Money You Someone Else
Yours I II
Someone Else’s III IV

Category I in the table refers to your spending your own money on yourself. You shop in a supermarket, for example. You clearly have a strong incentive both to economize and to get as much value as you can for each dollar you do spend.
Category II refers to your spending your own money on someone else. You shop for Christmas or birthday presents. You have the same incentive to economize as in Category I but not the same incentive to get full value for your money, at least as judged by the tastes of the recipient. You will, of course, want to get something the recipient will like – provided that it also makes the right impression and does not take too much time and effort. (if, indeed, your main objective were to enable the recipient to get as much value as possible per shilling, you would give him cash, converting Category II spending to Category I spending by him.)
Category III refers to your spending someone else’s money on yourself – lunching on an expense account, for instance. You have no strong incentive to keep down the cost of the lunch, but you do have a strong incentive to get your money’s worth.
Category IV refers to your spending someone else’s money on still another person. You are paying someone else’s lunch out of an expense account. You have little incentive either to economize or try to get your guest the lunch that he will value most highly. However, if you are having lunch with him, so that the lunch is a mixture of Category III and Category IV, you do have a strong incentive to satisfy your own tastes at the sacrifice of his, if necessary.

All welfare programs fall into either Category III or Category IV.
Legislators vote to spend someone else’s money. The voters who elect the legislators are in one sense voting to spend their own money on themselves, but not in the direct sense of Category I spending. The connection between the taxes any individual pays and the spending he votes for is exceedingly loose. (Ironic how our legislators do not pay any taxes yet they are the same people who decide how tax money should be spent)

The bureaucrats spend someone else’s money on someone else. Only human kindness, not the much stronger and more dependable spur of self-interest, assures that they will spend the money in the way most beneficial to the recipients. Hence the wastefulness and ineffectiveness of the spending.
Leaving our fate in government’s hand is a big mistake! Greedy legislators (who do not pay taxes) shouldn’t be allowed to control funds taken away from hardworking Kenyans.
As the chart above indicates, the best determinant of how to spend your money is yourself. You know the difficulty of earning the money, so you will most likely spend it wisely; in a way that maximizes return (whatever maximization of return may mean to you).

THE FALLACY OF THE SOCIAL SECURITY SYSTEM

Consider this statement: “The basic idea of social security is a simple one: During working years employees, their employers, and self employed people pay social security contributions which are pooled into special trust funds. When earnings stop or reduced because the worker retires or becomes disabled, monthly cash benefits are paid to replace part of the earnings the family has lost.”
If this statement is true, the present value of the old-age pensions already promised to persons covered by social security is in the billions if not trillions of shillings. That is the size that would be required to justify the statement above.

The impression is given that a worker’s “benefits” are financed by his “contributions.” The fact is that taxes collected from persons at work are used to pay benefits to persons who had retired or to their dependents and survivors. No trust fund in any meaningful sense is being accumulated.
Workers paying taxes today can derive no assurance from trust funds that they will receive benefits when they retire. Any assurance derives solely from the willingness of future taxpayers to impose taxes on themselves to pay for benefits that present taxpayers are promising themselves. This one-sided “compact between the generations,” foisted on generations that cannot give their consent, is a very different thing from a “trust fund.” It is a Ponzi Scheme!

Social security is in no sense an insurance program in which individual payments purchase equivalent actuarial benefits. Social Security is a combination of a particular tax and a particular program of transfer payment – the same way ponzi schemes work.

To make matters worse, if you are over the retirement age and decide to work; you will still have to contribute to social security (benefits that you will obviously not receive!)

So this compulsory tax for all employed people should be called National Ponzi Scheme not National Social Security Fund.

Kenya Human Resource Practices

In a country where human resource is not appreciated and valued as in other countries, one wonders where Kenya’s job market is heading.

The story of the talents in the Bible where a businessman entrusts his wealth to the care of his servants while he is away. When he returns, he evaluates each servant’s responsibility and rewards them accordingly. The owner says, “Well done, good faithful servant. You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness.”

In this passage, the businessman gives Affirmation: Good job! Well Done. Next he gives a promotion: I will put you in charge of many things. And finally he honors through celebration: come share your master’s happiness.
Does this happen in Kenya’s job environment?

In many cases, businessmen take advantage of their employees. Salaries also provide an avenue for employers to exploit their employees. Imagine working 80hrs a week under the same salary that you would get paid for working 40hrs? This is what some employers are doing…Instead of hiring more employees, they are forcing their employees to work longer hours with the same salary.

When was the last time you received affirmation from your boss? Does he/she even acknowledge that you exist? Is affirmation important to you?

Promotion comes after affirmation. It is a recognition that you have carried out your responsibilities well and you can handle more. A promotion means that you are entrusted with more.

After hard work, it is important to receive affirmation, receive a promotion and receive honor. Honor maybe financial (more money for the work that you do), maybe a party in your honor, it might be a plaque recognizing your contribution, training to prepare you for greater responsibilities, etc.

I wish Kenyan employers could borrow a leaf from the Bible and acknowledge their employers.
Human resource is the driving force of any organization. Neglect this area of any organization and you are seeking doom! Frustrated employees can bring a successful enterprise to its knees.

The role of free market system

In economics, a free market system where individuals pursuing their self-interest will somehow find a way to cooperate with one another and create a perfect system.

A free market system also works in all other aspects of our lives. “A society’s value, its culture, its social conventions – all these development in the same way, through voluntary exchange, spontaneous cooperation, the evolution of a complex structure through trial and error, acceptance and rejection.” The structures produced by voluntary exchange, whether they be language or scientific discoveries or musical styles or economic systems, develop a life of their own. Just look at Sheng, our local music (ngege, Kapungala etc), they have developed a life of their own for they allow the participants to contribute freely – and the others to use that contribution or reject it.

“Voluntary exchange is a subtle process whose general principles of operation can fairly readily be grasped but whose detailed results can seldom be foreseen” Milton Friedman

Just look at the evolution of technology – technological advances made last year are the basis of today’s development and today’s development will contribute to future developments. This is the beauty of a free market system.

Can you imagine if society allowed the government to determine all that is acceptable and what is not acceptable? Would all our peculiar habit, entertainment, business practices etc exist?

Is Religion For The Poor?

The fact is most of the people who are nonbelievers or sceptics about religion are educated people with means. They have taken the time to learn and understand sciences which can contradict the text (The Bible). They also have established “an independence” or “self-reliance” which makes deity unnecessary.
Marginalized people on the other hand rely on hope to keep them going; and they find that hope in “the word”. They may have reservations, but they dare not question religion incase this is their ticket out of being marginalized.

Napoleon Bonaparte once said religion is a necessity in a society. It gives the marginalized hope for a better future; so they accept their current situation and accept the oppressor and caste system for they have been promised a brighter future/afterlife. This acceptance ensures that the marginalized will not revolt against the wealthy few. Without religion, the status quo would not hold.
Religion also suits people in their desperate moments such as sickness, accidents or other events where earthly means cannot be of assistance. Such situations are life-turning even for the educated and well-of.

Religion has therefore become a part-time practice for many in the middle and upper-income and education levels. It is solution for “when all else fails”.

Whats your take on the issue?