Tax Warren Buffet??

A lively and healthy email debate emerged among my dear friends when one of them shared a message from regarding Warren Buffet’s recent article about taxing the super rich (I changed the names and locations for anonymity’s sake).

It all started when “Raven” sent this concise email to several friends, myself included:

Go Warren B:

To which “EconomicsJunke” (that would be myself) responded:

I had a discussion about this the other day. In my opinion, if Warren is so keen on helping the Feds out then I would suggest he donate money to the Treasury at … in my opinion he’d just be throwing money down a hole and supplying more collateral that they would only borrow more against, as they have been for centuries, but who am I to interfere in his financial dealings … =)

… to which “Sebastiani” from italy chimed in:

If I had even an inkling of faith that our elected officials would put that money to good use (e.g. pay down the deficit or fund education) I’d be all over this. Instead I believe that this type of measure will only enable said leaders to continue to elude the economic realities the rest of subject to on a daily basis – like not spending beyond our means and responsible accounting. It’s almost like they’re saying “let’s rob yet another piggy bank so that we don’t have to face reality”…not a fan.

… to which “Raven” responded:

I hear you brother. But the WB group are not and have never been taxed like everyone else. So I say let them contribute fairly to the piggy bank and then maybe it wouldn’t be so empty!

… to which “Sebastiani”, after stepping off his Vespa, replied:

With very few exceptions the federal government, and most states, has been spending well beyond its means for decades. Administrations, regardless of party affiliation or current GDP, are fully expected to increase the deficit. This has gotten so bad that parties take bragging rights for having incurred a smaller deficit increase than the other guy. What sort of sick, twisted standard is that?

As businessmen we are held accountable by one rule: make money or fail.

This is what keeps us competitive and creative and forces us to never loose touch with reality. This is what keeps us healthy and in business. Why shouldn’t our elected leaders be held to the same standard?

As for the richest of the rich being given tax breaks I’d say this:

Any relevant sports team has its star players. These players can make or break a team. They win titles and draw crowds into stadiums. They benefits are reaped not only by the team owners, but also by surrounding vendors, bars, restaurants, etc. In return for being massive revenue generators these stars are given certain breaks. If the incentives disappear, the stars will find other teams who give them the treatment they “deserve”.

The same rules apply in business. Especially in an ever more globalized business community. CEO’s of many of these companies have put it all on the line to get to where they are. They have hired 10’s of thousands of tax paying citizens and are paying billions in corporate taxes.

In my opinion the reason our piggy bank has a negative balance are not the star players, who are held accountable by market economics and shareholders, but the politicians, who are not.

… at which point Sebastiani’s wife joined the debate:

OMG! Are you comparing yourself (or other heads of enterprise) to the Michael Jordans of the world? I fear for the world (and especially myself) if Sebastiani Inc. sells for a ton o’ cash. With great wealth comes great responsibility…

Regardless, I’m all in favor of EVERYONE paying their fair share and by that, I mean flat tax system whereby we all pay the same percentage of our income and eliminate loop holes for the rich (or as the GOP likes to refer them: “job creators”). That’s the fairest solution in my book.

… at which point I thought I’d throw in a well deserved dose of voluntaryism, not that I expeceted it to change the debate or anyone’s beliefs in any way:

I like the flat tax concept. Really, really flat though. Like zero percent flat …

… at which the wife laughed:

Hahahahahaha!! That is SUPER flat. If that was a wave Sebastiani would give up surfing for good.

And at that point the debate’s back and forth was confined to the typical and oft repeated Clinton’s surpluses vs Bush’s deficits debate, so nothing much interesting there, until DJ Sparklebox, Raven’s girlfriend added:

its awesome businesses can do so well these days, shit i would like to be one of them, my argument though is an ethical one not a economic one, which is that their success doesn’t negate their responsibility to pay taxes to society.

in fact, if i were one of those big corporations i would be happy to pay taxes to my country because it enabled my success in the first place. also something to think about, if all those extremely wealthy corporations and people paid their fair share of taxes like we all do, i would be interested to see the long-term effect that may have on the distribution of wealth in this country, maybe we wouldn’t see such an unbalance and such a huge the gap between the rich and poor in America (a gap that is far larger than those seen in other industrialized countries around the world, surprising considering America still considers itself the world hegemonic power).

agreed Sebastiani’s wife. flat tax. whether you make $10,000 a year or 10 billion – pay your fucking share – nobody likes a freeloader.

death and taxes………. ???? YEAH RIGHT!!!!! NO WAY! GET REAL!!!! I’M RICH BITCH!!!!!!

And then finally “Roommate” summed it all up and supplied the closing arguments:

Executive Summary:

If the goal is a civil society which fosters the emergence of personal rights, property and wealth:

– Taxation under threat of violence is unethical and not a valid solution.
– Hording wealth to a degree which destabilizes civil society is unethical and not a solution.
– Acknowledgement of the individual’s social responsibility and their willful participation, via investments of both money and time, in programs and organizations which fosters civil society and creates the conditions for the accumulation and securing of property and wealth and emergence of rights is both ethical and the logical solution.
– The words and actions of People with unparalleled access to the media and means to contribute to a solution, who fail to understand the true issue or deceptively misrepresent the true issue, can be frustrating and detrimental to clarity.

I’m noting two main themes in this thread:

01) Those that think Warren is correct and would like to see the wealthy pay more taxes as a solution to a tanking economy
02) Those who want to point out Warren is free to pay more taxes if he wants but hasn’t done so which would itself seem to render his proposed solution invalid

It’s worth pointing out for the sake of clarity that Warren’s lack of apparent action isn’t an invalidation of his suggestion. Nor is the lack of ‘apparent’ action a true indication of a lack of action on his part. I doubt the people reflexively decrying him for not taking public action are aware of his private actions and anyone who has experience with human behavior probably has witnessed the phenomenon of the greedy being quick to point out the apparent lack of charity in others as a justification for their own greediness. That is a universal, childish response some humans grow out of.

Here is a more effective way to frame it for those who don’t understand what type of society awaits if those who are exceedingly prosperous place greater importance on amassing wealth and the concept of private property than on the health and security of individuals in their community.

Keep in mind, most of the people in this video probably aren’t starving and the shop owner may be a nice enough person without any real wealth. Imagine what is in store for those who are greedy within a society of recently dispossessed people who can’t even secure their basic needs for survival. Fleeing with their wealth to Europe will soon be eliminated as an option. If they learn a popular Chinese dialect they might have some luck there but that is also growing more improbable.

Returning to Buffet; I would not be surprised if his recent public words are actually the first part in a series of releases and actions designed to ‘reveal’ the pettiness of his critics and set an example for the wealthy people he and many others seem to take issue with. Considering how well orchestrated the progressive movement is, I would not be surprised to see him on Jon Stewart or Colbert in the next phase of the campaign. When it comes to politics, and considering how much money is at stake, there are few events left to chance. So many actions and statements are orchestrated for maximum populist effect. The timelines of these election propaganda campaigns have stretched to years now, instead of months.

I do not think increasing the tax burden on the American population, or any population, is the solution to a dysfunctional government and an uneducated/unsophisticated citizenry. On a personal level, if your bankers and investors are corrupt or incompetent, why give them more money? If the government is ineffectual and wasteful, why give them more money? That doesn’t make any sense. Giving them more of someone else’s money is not only unkind and unintelligent but criminal.

Warren’s suggestion of increased taxation isn’t wrong because he hasn’t turned over all his money… it is an invalid solution, considering the intended goal, for other reasons. At the best, the threat of taking money from the exceedingly wealthy will prompt them to invest in government approved job-creating enterprises to avoid heavy taxation, at worst it will trigger their greed and deceptiveness which will result in the hording and hiding of wealth. Being forced to invest in unwise ventures at the dictates of a government agency can result in waste of wealth and the creation of useless and unsustainable jobs/products. The former Soviet Union comes to mind.

I do not think we need to tax the wealthy more, I think the wealthy need to invest more of their wealth into research & development and manufacturing & production. And I think the incentive for them to do so will come not from their own insight and philanthropy or government coercion but from the increasing number of dispossessed citizens in this nation. Whenever the government continuously fails and a perverted sense of self interest impedes, the pissed off electorate will take its own action.

I suspect the coming era will remind the advocates of property rights and wealth accumulation that rights and wealth are not granted by a divine being thus inalienable, they are consensual and alienable. We, as individuals, have private property and wealth because others consent to it. (On a personal note; James was recently reminded the concept of private property is only valid if others choose to consent to it. I am disturbed by his loss as well because I remember how much enjoyment he derived from his collection. I am a fellow collector so I can empathize with him. It was an egregious but luckily non-fatal violation of trust, unless James Daniels finds the thief)

By offering the video above as an object lesson I’m not advocating the disintegration of civil society and property rights. It can and does happen without my endorsement. I’m simply pointing out the obvious for people who might prefer wealth and property rights to the welfare of people.

Here is an entirely plausible scenario described in broad terms:
01) Many people who are used to a particular level of affluence and conditioned to believe they have a right to it will want to restore it or an acceptable portion of it.
02) They are aware that neither increased taxation nor the government will be effective in achieving that goal because of impracticality and right-wing resistance.
03) They see others enjoying an exceeding degree of affluence and ask themselves; ‘why them and not me. I’m just as capable?’
04) They have witnessed revolutions and protests all over the world and realize there is strength and anonymity in numbers.
05) They will escalate their efforts to take what they want while the rich will reflexively employ violence to try and keep what they have, which enforces the perception the rich are at the least in different to the suffering of others and at the most are actively behaving in a manner to intentionally increase that suffering.
06) We will see a revolt in which the American wealthy class will play the role of the English royalty, at least in the minds of those who need to rationalize their use of violence.

The scope of civil society’s disintegration will be determined by how quickly people wake up to reality and work together instead of against each other. As an interesting example; The Tea Party will claim they tried negotiation but the government wouldn’t cooperate on significant, immediate and major spending reductions. Making those compromises is actually the first practical step towards an agreeable arrangement more conducive to a real solution. Their party may be riddled with fundamentalists, racists and uneducated, belligerent contrarians but their insistence on this point was not unreasonable or illogical. So they can now justify (amongst the believers in their cause) more aggressive, provocative and violent responses to what they perceive to be illegitimate government actions, policies and programs.

What I would like to see is the wealthy tap voluntarily into the entrepreneurs within the pool of unemployed and invest in business ventures which create long-term jobs and useful products/competitive ideas. This requires neither government interference, increased taxation nor a disintegration of civility and loss of the resulting rights which the participants in a civil society enjoy.

It is ultimately an ethical issue, as Sparklebox pointed out, but not one of taxation (which itself is unethical if enforced by violence). Since many of the exceedingly wealthy appear to be devoid of ethics, based on their very vocal public resistance to what others see as a charitable or fair action (as misguided as that perception may be), it seems inevitable that social unrest will arise. I think Warren and others are trying to use populist power, channeled through government coercion, to force the wealthy to share because they want to prevent the coming domestic turmoil which he and many others foresee. Thousands of pissed off wealthy people, many of whom will be afraid of outing themselves as the economy continues to tank, would be less of an immediate political and social threat than millions of pissed off non-wealthy people. See this article.

I think Warren and his supporters should be more frank in their dialog with the American media and public and I think the wealthy and their cheerleaders should spend less time diverting the discussion from the real issue. If they don’t want higher taxes imposed as a “solution” then they have to acknowledge the reality that personal social responsibility is required by all, commensurate to their abilities, if a civil society is the goal (an acknowledgement of this is required of the wealthy and non-wealthy alike). If anyone wants a relative guarantee of property rights and personal wealth, which civil society provides, and they are intelligent, they will seek to contribute to the extent of their abilities to the establishment and maintenance of a civil society. This includes the wealthy. They are not exempt and they even have a greater stake in the game.

Or they can pool their personal fortunes and invent a device which can either erase the individual’s instinctual sense of self-preservation and evolved sense of fairness from the minds of those whose productivity they derive their wealth from or a device which would allow them to create then escape into a virtual world where theories have no errors in application. Working as a QA Engineer I know how unlikely both are at this point in the evolution of our technological capabilities. There is often a startling discrepancy between the result of clicking on a button and our expectation of what will happen when we click on a button.

Having written all of the above, I would like to preempt one probable response, from those who don’t like the concept of social responsibility, which is simply a diversionary version of what the wealth-obsessed are now offering as a counter-argument: What have you done for the poor lately? How socially responsible are you? .as I mentioned before, this is to be expected from those who don’t like the solution because they may not have any sense of social responsibility themselves, outside the scope of trendy activities like charitable cocktail happy-hour events and donating to goodwill. All of which I’ve tried in my journey to define my purpose correctly. However, there can be validity in them if they are rephrased and asked by those honestly looking for ways to contribute.

What I have done, both good and bad, is known to friends and family. What I want to do is find a way to use the coming turmoil as an opportunity to step into or even create a role which has a broader, more positive impact on the society we live in. My will is engaged in a race against age on a course which is undergoing seismic shifts in its topography but will most certainly produce new opportunities to define purpose along its path.

I suspect we are all approaching another branch on the path which will allow us to participate as part of the solution. If we are and we don’t define that role, others will for us. I think that should be a main point in Warren Buffet’s message.

To which I respond: Amen to that. :)

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Incredibly Burdensome New 1099 Regulation Slipped Into Health Bill

The Purpose Behind Government Legislation

It is important to understand the purpose of any bill brought before Congress: To extort present or future money from a large majority of people at gunpoint and hand it over to friends and influential officials under the cloak of new programs, projects, and offices that operate with or without any consumer approval or effective competition so they can get rich as quickly and as effortlessly as possible.

But in order to make the hapless populace acquiesce with such dastardly schemes the bill needs to have a palatable name in its header. “Patriot Act”, “Enduring Freedom”, “Iraqi Freedom”, “Stabilization Act”, “Health Care”, it’s completely irrelevant. Any crap will do, so long as enough fools like the big shiny tag line that flashes on the news.

“I like health, so I support the Health Care bill! How can you not, you evil bastard!?” or “I’m a patriot, I support the Patriot Act, how can you not, you damn flag-burner!?”

Those self styled pseudo-intellectual liberals who whole-heatedly supported the health care bill, helped work into the hands of corruption just as much as those war-mongers who supported the Iraq war. They both unwittingly supported the side that they proudly thought to have “defeated” this time. It is they who make the scam work while proudly trumpeting their empty phrases in shallow debates. :)

The beneficiaries of this scam could really care less. Brainwashed people on the left and on the right will be smashing their heads in, while those on the receiving end rush and work day and night to add in as many earmarks as they possibly can to satisfy themselves and their investors, the lobbyists. Of course the bill has to be large enough so that no single person will ever be able to read the entire bill and get a clear picture of what’s going on. As government inevitably grows, so will the magnitude of new boondoggles.

Thus, any legislative bill is nothing but a gigantic collection of unrelated rip off schemes with an appealing and largely also unrelated title.

New Tax Nightmares

It should thus not surprise us that one of the provisions of the new health care bill requires that from now on all businesses issue a 1099 to any vendor from whom they purchase goods worth more than $600, as Chris Edwards over at CATO writes:

Most people know about the individual mandate in the new health care bill, but the bill contained another mandate that could be far more costly.

A few wording changes to the tax code’s section 6041 regarding 1099 reporting were slipped into the 2000-page health legislation. The changes will force millions of businesses to issue hundreds of millions, perhaps billions, of additional IRS Form 1099s every year. It appears to be a costly, anti-business nightmare.

Under current law, businesses are required to issue 1099s in a limited set of situations, such as when paying outside consultants. The health care bill includes a vast expansion in this information reporting requirement in an attempt to raise revenue for an increasingly rapacious Congress.

In a recent summary, tax information firm RIA notes the types of transactions covered by the new 1099 rules:

The 2010 Health Care Act adds “amounts in consideration for property” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(1)) and “gross proceeds” (Code Sec. 6041(a) as amended by 2010 Health Care Act §9006(b)(2)) to the pre-2010 Health Care Act categories of payments for which an information return to IRS will be required if the $600 aggregate payment threshold is met in a tax year for any one payee. Thus, Congress says that for payments made after 2011, the term “payments” includes gross proceeds paid in consideration for property or services.

Basically, businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a hell of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.

Tax CPA Chris Hesse of LeMaster Daniels tells me:

Under the health legislation, the IRS could be receiving billions of more documents. Under current law, businesses send Forms 1099 for payments of rent, interest, dividends, and non-employee services when such payments are to entities other than corporations. Under the new law, businesses will be required to send a 1099 to other businesses for virtually all purchases. And for the first time, 1099s are to be sent to corporations. This is a huge new imposition on American business, costing the private economy much more than any additional tax that the IRS might collect as a result.

There appears to have been little discussion before this damaging mandate was slipped into the health bill and rammed through Congress, but a few business groups did raise concerns. Here’s what the Air Conditioner Contractors of America said:

The House bill would extend the Form 1099 filing requirement to ALL vendors (including corporate) to which they pay more than $600 annually for services or property. Consider all the payments a small business makes in the course of business, paying for things such as computers, software, office supplies, and fuel to services, including janitorial services, coffee services, and package delivery services.

In order to file all these 1099s, you’ll need to collect the necessary information from all your service providers. In order to comply with the law, you would have to get a Taxpayer Information Number or TIN from the business. If the vendor does not supply you with a TIN, you are obligated to withhold on your payments.

Private transactions are the core of a market economy, and the source of America’s growth and prosperity. Now the federal government is imposing a vast new web of red tape on perhaps billions of these growth-generating private exchanges.

For what purpose? So the spendthrift Congress can shake a few extra bucks out of private industry? The business sector is the generator of America’s high living standards, but most federal legislators just see it as a kitty to be raided or a cow to be milked dry.

I’m stunned that there wasn’t a broader debate before such a costly mandate was enacted. If it goes into effect, it will waste vast quantities of human effort in filling out forms, reworking computer systems, collecting and organizing data, and fighting the IRS. The struggling American economy can’t afford anymore suffocating tax regulations. This mandate is a giant deadweight loss. It should be repealed.

Chris be blessed, but do you really have any reason to be stunned? What do you think the purpose of this whole project was?? In fact, I would be completely and utterly shocked if this piece of paper wasn’t full of many more such “surprises”!

Some people on Mish’s blog, are suggesting that the purpose of this provision is, for the most part, to pave the road for the coming national sales tax, a measure that will conveniently raise taxes for all Americans, no exceptions.

I have written about coming tax increases on the middle class and the poor under Obama, and in particular about the coming VAT:

What we are seeing now is only the beginning of a massive shortfall. I followed up on the article above in February:

Now that we have updated figures on coming expenses it’s time to update the deficit predictions:

* $1.65 trillion for 2009
* $1.6 trillion for 2010
* $1.95 trillion for 2011
* $2.2 trillion for 2012

If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new. Taxes have been rising in the US for the past century.

Taxes on all Americans, rich, middle class, and poor? Like a national sales tax? No way, our dear legislators would never consider such a rip off, would they? Why, sure they would … Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look:

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

I guess it’s pretty clear then … the VAT is coming folks, not immediately, but sometime after 2012 I think we can look forward to it.

“We Know Who You Are”

Rarely does the government advertise its cruelty as blatantly and as out in the open as in this Ad run by the state of Pennsylvania:

And the train wreck rolls on, determined in its course cliff-wards …

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“Solutions” to Deficits – The National Sales Tax

In my post What’s the Problem With Government Budget Deficits? I recently wrote:

“Solutions” to Deficits

As I explained, the ultimate damage caused by public budget deficits occurs at that point in time when taxpayers are forced to restrict their consumption and unjustly bear the cost of malinvestments from the past.

Ironically, when you look at the political stage, all you will hear in regards to “solutions” to deficits in the end, will be tax hikes. These are not solutions. They are the ultimate manifestation of the very problem at hand. They are, in fact, the precise opposite of a solution. Keep this in mind whenever you hear politicians talk about deficit solutions.

This guy over at The Atlantic is promptly jumping in to pose as a hapless example of what I described:

Here’s why we need [a national sales tax]: If you think the deficit looks bad now, wait a few years. Rising health care costs for retired baby boomers will push U.S. debt levels past their World War II-levels. But whereas WWII ended and we owed that debt to ourselves, our entitlement system is woven into American life and we owe half the resulting debt to foreign countries. Approaching this challenge will require some combination of robust growth, spending cuts, entitlement reform and more tax revenue.

Thanks, oh guy who doesn’t get it :)

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Happy Tax Day …

… to celebrate the occasion I will post nothing new, but simply repeat what can’t be repeated often enough :)

Nowhere has the essence of the State as a criminal organization been put as forcefully or as brilliantly as in this passage from Lysander Spooner’s No Treason where the actions of a robbing highwayman are compared to the government’s modus operandi:

It is true that the theory of our Constitution is, that all taxes are paid voluntarily; that our government is a mutual insurance company, voluntarily entered into by the people with each other. . . .

But this theory of our government is wholly different from the practical fact. The fact is that the government, like a highwayman, says to a man: “Your money, or your life.” And many, if not most, taxes are paid under the compulsion of that threat.

The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful.

The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a “protector,” and that he takes men’s money against their will, merely to enable him to “protect” those infatuated travellers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful “sovereign,” on account of the “protection” he affords you. He does not keep “protecting” you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy if you dispute his authority, or resist his demands. He is too much of a gentleman to be guilty of such impostures, and insults, and villainies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.

Thus economic policy, if it wants to attain its objectives, can do nothing but limit the extent to which matters are organized by government and the scope of its intrusion into the lifes of individuals within the territory it oversees, or ideally completely abolish the institution of government itself. So long as the government confines its activity to the protection of individuals against aggression and theft only little harm can be inflicted. Every expansion of governmental powers, however, will inevitably expand the use of unethical and destructive action within society.

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Death OR Taxes – The Gordon Kahl Story

I just wanted to post the moving and instructive 11 part series about Gordon Kahl, a tax protester and victim of pure evil and corruption. I wanted to write a brief indroduction about how people don’t want to see the violence of the state they live under and how maybe something like this story will at least give them a little bit of a different perspective on things. But that brief introduction took on a life of its own and is now a solitary post about childhood scar tissues. Who’da thunk? :)

Anyway, here’s the documentary:

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