If we're ever going to fix this country and get things going again, we need to grow the Economy and that requires a few things. First and foremost we need to be competitive with the rest of the world starting with our tax policy. It doesn't help that the world has an average Corporate Tax Rate 10-15% less than ours. If we're going to be competitive globally, we need to have a globally competitive Corporate Tax Rate. We should drop our rate to 15% for two years and raise it 1% per year for the next five years for a total tax rate of 20%. This would provide an incentive for Corporations to repatriate foreign cash holdings now instead of later which could lead to the consumption of goods and services and therefore create new jobs. This lower rate will also make the US more attractive for foreign corporations to relocate here, i.e. new jobs. Secondly, we need to end the government practice of picking winners and losers, read prejudice, and eliminate all deductions, subsidies and credits from our Corporate Tax Code. Allow the free market to pick winners and losers and both consumers and producers will benefit.
The second part of reforming the tax code means ending the class warfare rhetoric of a progressive tax structure. Success should not be punished with an ever increasing burden that focuses a greater and greater percentage of the taxes paid to come from the wealthier. Our tax code should reflect fairness but should also be pragmatic and simple to understand. Americans waste billions of hours filing tax documents and billions of dollars hiring tax lawyers and accountants to ensure compliance. This is a dredge on our Economy as these hours and dollars could be spent on more productive means. Our tax code should be simplified to contain a flat rate of 20% with one deduction equivalent to the poverty level income, i.e. for a family of four the poverty level income for 2011 was $22,350. So an Individual making $100,000 would pay 20% x $77,650 = $15,530 in Federal Income Taxes. Currently an Individual making $100,000 and claiming one would pay approximately $18,951 in Federal Income Taxes; claiming a spouse and two children would drop Federal Income Tax owed to approximately $15,981. The only other deduction that should be retained is the deduction given for charity and there should be no cap. Capital Gains, Dividends, Interest, Alimony and Rent should all be treated as Income and taxed accordingly. As you can see, the net effective rate on $100,000 is only 15.5% however on $1,000,000 that net effective rate increases to 19.6%, so if you treasure the idea that the wealthier should pay a higher percentage of their income in taxes, they do. This system is simple and fair, and it eliminates government prejudice when it comes to income and how it's earned and taxed.
The third thing that needs to be addressed is Regulation. Regulation is essentially an additional cost on production because it requires compliance in order to meet Federal Government guidelines and mandates. Compliance often times means having the govt. approve what you're going to do before you do it, which means costly time delays when one has a production schedule to meet or construction that's delayed. Often times these guidelines and mandates are created by bureaucrats with no relevant experience in the field they're regulating. For example, the EPA has set regulations on how much dust a farmer can produce. Do they have any idea how a farmer can plow without creating dust in violation of their regulation? No, and they don't care except that they care the farmer has to comply with their regulation. I have no idea how many other ridiculous regulations exist out there but I'm sure the CEO's of Fortune 500 companies could come up with a slew of costly regulation. A regulatory agency that I think can be eliminated is the National Labor Relations Board which sued Boeing in order to attempt to stop them from opening a new billion dollar production facility as well as putting thousands of jobs in jeopardy because they felt they have a right to regulate where and how Boeing conducts its business operations. It's quite frankly none of their friggin' business and therefore these shenanigans call into question their existence.
If we want an environment friendly to job creation and economic growth as well as making America more of an attractive origin to do business and perhaps live, then this is a good start. But it's not going to happen so long as we have a Legislature and an Administration that believes it "costs" them to cut taxes. It doesn't cost them anything, it's not their money; it's ours and they're the burden, not us.
Friday, September 30, 2011
Wednesday, June 29, 2011
Ungrateful Govt Union Thugs
In this Yahoo! Finance article, "Thousands of British schools will close and travelers will face long lines at airport immigration Thursday when three quarters of a million workers go on strike. The first test comes when 750,000 public-sector workers -- from teachers to driving examiners to customs officials -- walk out for the day, part of a growing wave of opposition to the Conservative led government's deficit-cutting regime of tax hikes, benefit curbs and spending cuts."
"The government insists everyone must share the pain as it cuts 80 billion pounds ($130 billion) from public spending to reduce the huge deficit, swollen after Britain spent billions bailing out foundering banks. It is cutting civil service jobs and benefits, raising the state pension age from 65 to 66, hiking the amount public sector employees contribute to pensions and reducing the payouts they get on retirement."
With Britain having faced a similar economic catastrophe spurned by the near collapse of the American Banking system, and having instituted a similar fix of propping up banks with low interest loans and easy money lending from its Central Bank, coupled with a loss in government revenue and increased deficits, one could anticipate the probable occurrence of Govt Unions reacting angrily to cuts in the United States. Oh wait, we've already seen it in Minnesota and New Jersey when the respective Governors took on Govt Unions. I might add that these Governors could also be classified as "Conservative".
It's no wonder Govt Unions usually get what they want, while they're "Public Servants" they also provide necessary functions such as teaching, police, fire fighters, public transportation, etc., so when they go on strike, all those services go unfulfilled creating an immediate need. It's unrealistic, in the US for example, to expect that while the private sector suffers unemployment at 9-something percent, even higher if you count the underemployed, the public servants take no raises but keep their jobs. Eventually if revenues fall enough, additional savings have to occur and most unions would rather keep members' jobs than see someone laid off for a benefit.
However, not Govt Unions, they don't want to give up anything and when you threaten to take away a previously promised benefit, despite changing economic circumstances from when that benefit was given, they go on strike causing everyone to feel their immediate need for the services they provide. This is unconscionable. This is why I believe if you have a govt. job you shouldn't be allowed to strike because your actions amount to blackmail. You already have the benefit of a secure job with little threat of layoffs and the pension you receive you know is good because it's backed by the govt. Ultimately Govt Unions need to recognize that they work for the taxpayer and if the taxpayer is taking a paycut, so should they.
"The government insists everyone must share the pain as it cuts 80 billion pounds ($130 billion) from public spending to reduce the huge deficit, swollen after Britain spent billions bailing out foundering banks. It is cutting civil service jobs and benefits, raising the state pension age from 65 to 66, hiking the amount public sector employees contribute to pensions and reducing the payouts they get on retirement."
With Britain having faced a similar economic catastrophe spurned by the near collapse of the American Banking system, and having instituted a similar fix of propping up banks with low interest loans and easy money lending from its Central Bank, coupled with a loss in government revenue and increased deficits, one could anticipate the probable occurrence of Govt Unions reacting angrily to cuts in the United States. Oh wait, we've already seen it in Minnesota and New Jersey when the respective Governors took on Govt Unions. I might add that these Governors could also be classified as "Conservative".
It's no wonder Govt Unions usually get what they want, while they're "Public Servants" they also provide necessary functions such as teaching, police, fire fighters, public transportation, etc., so when they go on strike, all those services go unfulfilled creating an immediate need. It's unrealistic, in the US for example, to expect that while the private sector suffers unemployment at 9-something percent, even higher if you count the underemployed, the public servants take no raises but keep their jobs. Eventually if revenues fall enough, additional savings have to occur and most unions would rather keep members' jobs than see someone laid off for a benefit.
However, not Govt Unions, they don't want to give up anything and when you threaten to take away a previously promised benefit, despite changing economic circumstances from when that benefit was given, they go on strike causing everyone to feel their immediate need for the services they provide. This is unconscionable. This is why I believe if you have a govt. job you shouldn't be allowed to strike because your actions amount to blackmail. You already have the benefit of a secure job with little threat of layoffs and the pension you receive you know is good because it's backed by the govt. Ultimately Govt Unions need to recognize that they work for the taxpayer and if the taxpayer is taking a paycut, so should they.
Friday, June 24, 2011
Misguided attempt at fixing the wrong Problem
In the Wall Street Journal, it's being reported that deficit/debt talks between House and Senate Republicans have broken down with the White House over the issue of taxes. The United States is $14 trillion in debt, fighting three wars (Iraq, Afghanistan and Libya) and has a military presence throughout the world. We haven't had a deficit per GDP ratio this high since we fought World War 2. We've also spent $16.5 trillion on social welfare programs, aka War on Poverty, with a negligible change in the actual poverty rate since the 1960's.
Additionally, the Federal Reserve which was created in 1913 to lessen the impact of business cycles (Read end Recessions/Depressions), which failed only 8 years later (1920-1921 Depression which was the worst in US History except that the 1930's Great Depression dwarfed it), and has failed in many subsequent recessions since then, has also managed to Quantitavely Ease the purchasing power of the US dollar by several trillion by purchasing US Treasury Securities. As a result, we're currently watching the Consumer Price Index go from a traditional 3% inflation rate to roughly double. To escape the inflation caused by the Federal Reserve, many investors hedged against it by purchasing commodities (silver, gold, oil, etc.) which recently popped (31% silver from $49 to $34 and 21% oil from $115 to $91).
Bankers and Investors have loved the cheap money created, nearly doubling the Dow Jones from its March 2009 low of 6,627 to its April 2011 high of 12,811. However, unemployment hasn't changed from its 9-something percent. Who benefited? Obviously not the poor and middle class. This isn't a class warfare, coveting thy neighbor's wealth observation. This is an argument against socializing debt and privatizing profit. There is no reason any bank or corporation should have been bailed out with TARP or with cheap money from the Federal Reserve (Read Interest Target rate of 0%). The only Industrialized Nation with a debt to GDP ratio higher than the US is Japan, and they have it solely because they did the same exact thing we've been doing to force recovery on their economy back in the 1990's. It didn't work and as a result they had a decade of lost production and stagnation. Which brings us back to the present.
There's no need to have a deficit. There's no need to have military bases throughout the world at a Defense Department cost of over $800 billion per year. There's no need to spend nearly $2 trillion (55-60% of our Federal Budget) on Social Security, Medicare, Medicaid and other Socialist programs. We shouldn't have Corporate Taxes (a cost which is shifted to the Consumer, not the Producer) let alone the highest Corporate Taxes in the world. We shouldn't have Capital Gains Taxes on those that risk their wealth in order to grow it and in return provide us with every consumer product we purchase. We shouldn't have Estate Taxes which punish those who spent an entire lifetime accumulating wealth that they could pass on to their posterity. We most definitely should not be spending 8% (currently) of our Federal Budget financing our Debt Burden.
What we need is a return to the constructs of the Federal Republic that this country was founded on. Our Constitution stipulated that we have a Senate and a House of Representatives. This allowed State Representation in the Senate and the Peoples Representation in the House. People love using a democracy, which we are not, to use their majority position to force their will on the minority. It's easy to say raise taxes when you're asking the rich to do it because they're a minority. It's easy to keep demanding socialist benefits via Social Security, Medicare and Medicaid because they're in the majority. Our country needs a return to the Federal Republic in which Senators can say and not suffer the wrath of the Voter that we can't afford it, there are consequences to squelching wealth production, there are consequences to ever increasing benefits. So these talks about deficit reduction and debt ceiling are predicated on the belief that our system as it currently stands can continue to function into the future, which is simply unsustainable and false.
Return to the Federal Republic that our country was founded on and these issues will be righted. End the Federal Government's means of directly collecting revenue from the People and force it to collect it from the States. Allow 50 experiments on the best method to raise revenue and foster growth and we'll once again be the Nation of Exceptionalism that Alexis de Tocqueville wrote about in the 1800's.
Additionally, the Federal Reserve which was created in 1913 to lessen the impact of business cycles (Read end Recessions/Depressions), which failed only 8 years later (1920-1921 Depression which was the worst in US History except that the 1930's Great Depression dwarfed it), and has failed in many subsequent recessions since then, has also managed to Quantitavely Ease the purchasing power of the US dollar by several trillion by purchasing US Treasury Securities. As a result, we're currently watching the Consumer Price Index go from a traditional 3% inflation rate to roughly double. To escape the inflation caused by the Federal Reserve, many investors hedged against it by purchasing commodities (silver, gold, oil, etc.) which recently popped (31% silver from $49 to $34 and 21% oil from $115 to $91).
Bankers and Investors have loved the cheap money created, nearly doubling the Dow Jones from its March 2009 low of 6,627 to its April 2011 high of 12,811. However, unemployment hasn't changed from its 9-something percent. Who benefited? Obviously not the poor and middle class. This isn't a class warfare, coveting thy neighbor's wealth observation. This is an argument against socializing debt and privatizing profit. There is no reason any bank or corporation should have been bailed out with TARP or with cheap money from the Federal Reserve (Read Interest Target rate of 0%). The only Industrialized Nation with a debt to GDP ratio higher than the US is Japan, and they have it solely because they did the same exact thing we've been doing to force recovery on their economy back in the 1990's. It didn't work and as a result they had a decade of lost production and stagnation. Which brings us back to the present.
There's no need to have a deficit. There's no need to have military bases throughout the world at a Defense Department cost of over $800 billion per year. There's no need to spend nearly $2 trillion (55-60% of our Federal Budget) on Social Security, Medicare, Medicaid and other Socialist programs. We shouldn't have Corporate Taxes (a cost which is shifted to the Consumer, not the Producer) let alone the highest Corporate Taxes in the world. We shouldn't have Capital Gains Taxes on those that risk their wealth in order to grow it and in return provide us with every consumer product we purchase. We shouldn't have Estate Taxes which punish those who spent an entire lifetime accumulating wealth that they could pass on to their posterity. We most definitely should not be spending 8% (currently) of our Federal Budget financing our Debt Burden.
What we need is a return to the constructs of the Federal Republic that this country was founded on. Our Constitution stipulated that we have a Senate and a House of Representatives. This allowed State Representation in the Senate and the Peoples Representation in the House. People love using a democracy, which we are not, to use their majority position to force their will on the minority. It's easy to say raise taxes when you're asking the rich to do it because they're a minority. It's easy to keep demanding socialist benefits via Social Security, Medicare and Medicaid because they're in the majority. Our country needs a return to the Federal Republic in which Senators can say and not suffer the wrath of the Voter that we can't afford it, there are consequences to squelching wealth production, there are consequences to ever increasing benefits. So these talks about deficit reduction and debt ceiling are predicated on the belief that our system as it currently stands can continue to function into the future, which is simply unsustainable and false.
Return to the Federal Republic that our country was founded on and these issues will be righted. End the Federal Government's means of directly collecting revenue from the People and force it to collect it from the States. Allow 50 experiments on the best method to raise revenue and foster growth and we'll once again be the Nation of Exceptionalism that Alexis de Tocqueville wrote about in the 1800's.
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