An alternative way of doing business

There seems no alternative to cash....or is there? Depending on who you pay tax to, it may be possible to either pay taxes with items or at worst sell items for cash. It may be possible to barter for payment of taxes. The principle is based on this article which showed how one individual turned one red paperclip into a house through a series of creative trades. Now, the article is not to show that you simply need a drawer full of paperclips to solve your financial needs. Rather, it's to show how it may be possible to buy and sell items until there may be an item the local government needs that could be used as payment in leu of taxes.

Bartering isn't about living without working or even sponging off the government. Rather, it is a way of directly participating in the economy. Although there are significant problems with keeping the government out of transactions, bartering can still be remarkably profitable and efficient.

As a thought experiment, I had the idea of comparing a bartering operation (or one that uses cash in small non-traceable units of currency) versus setting up a static business location that processes all it's transactions tracked with the help of a bank. Here are just some of the costs the bartering operation could evade.

• Income tax (Federal, State and sometimes local)
• Sales tax
• Business license or permits
• Mandatory insurance (workers comp, unemployment, other liability insurances)
• Employer's share of social security
• Employer provided benefits such as health care plans
• Credit card transaction fees and commercial bank fees
• Cost increases for various services due to paying "business rates" rather than "consumer rates".
• Cost of accounting in time/money for simply complying with U.S. tax laws.

The last item, in my opinion, is perhaps the highest cost. It's not the money collected. Rather, it’s the cost of compliance. The simple fact is, when the cost of evasion becomes lower than the cost of compliance then individuals and businesses start changing over into System-D economic systems or Gift Economies.

So, in my opinion, if Federal and State governments want to realistically look at restoring their economy by restoring their tax revenues, they need to look at reducing the cost of compliance for micro businesses. For example, State and Federal governments may want to offer an alternative simple "safe haven" tax on gross receipts. Then, as the new business becomes more successful and can afford more complexity, the business owners could pick a later year to start itemizing using the current rules. Once a business is large enough to hire enough employees to handle the complex rules. Finally, it might be able to provide lots of employment and then evade many of those pesky taxes as these large businesses did.  However, income tax, sales tax and other fees from employees usually makes up for lost corporate taxes. Why do you think politicians want jobs, jobs, jobs!

But isn’t there another way? Do towns and cities always need to resort to corporate giveaways just to make their budgets work?  How about encouraging residents to form micro businesses instead?

Here's a practical micro-business idea. Encourage land owners to host flea markets. Each person pays a flat rate to the land owner for retail space for the day. Plot prices would be posted so Each plot renter can decide if selling stuff for a fee is worth their while. If they do, they rent a plot for a day. The retail space vendor then pays a share of the rental fee to sales tax people. The vendors who do this would not need to keep track of sales taxes (or even income tax). Just turn in (or mail) a check for the days receipts. Audits would be easy - just count spaces & multiply by a percentage of plot price. If a vendor charges too little for each plot, the vendor and taxman miss out on profit and tax revenue. Charge too much, they both miss out due to lack of spaces being sold. Charge just right, and a thriving market can happen.