Tag: tax

Many Politicians Are Two-Faced When It Comes To Tariffs

Many Politicians Are Two-Faced When It Comes To Tariffs

As I write this, POTUS Donald Trump is pledging to begin tariffs on Mexico for its accused lack of assistance in the immigration crisis on the southern border of the US. Here is a quick news account from Politico:

The White House pledged on Thursday to charge ahead on tariffs on Mexico, saying the U.S. position “has not changed” after officials met for a second day to address the steady flow of Central American migrants trying to enter the United States.

Talks between Mexican and U.S. officials at the White House wrapped up without resolution. Several key officials in the administration were unavailable for negotiations. President Donald Trump was in France for the 75th anniversary of the D-Day invasion, and both Vice President Mike Pence and Secretary of State Mike Pompeo were on the road.

Just about every politician is talking out of both sides of their mouth on this issue. This includes a good portion of the Republicans (especially Mr. Trump) and nearly ever Democrat that I can think of.

To be crystal clear, I despise the use of tariffs against another country. I don’t like taxes in general and using taxes as weapon (i.e. tariffs) is simply a bad practice.

Tariffs are taxes. Plain and simple. They are taxes on corporations that import from the punished country, which in this case is Mexico.

The problem with tariffs and corporate taxes is that corporations never pay taxes. They incur costs. They pass those taxes as costs on to their customers in the form of higher prices for the product. They think of taxes as the same as wages, costs of materials, rent on their buildings, etc. It is a separate line item on their financial sheet, but it is deducted from their income the same way when calculating earnings.

It isn’t the corporation that pays the taxes, it is the consumer. Worse, the tax is regressive in that it is applied to all consumers of the product regardless of their ability to afford to pay or their income. Nearly everyone agrees that regressive taxes that take a larger percentage of poor people’s income than the percentage of wealthy people is unfair. But corporate taxes and tariffs are exactly that – a regressive tax on poor people.

Trump and most Republicans want lower corporate taxes. This, in general, is a good thing because as I said above, corporations don’t pay taxes – they only incur costs that are passed to their consumers. Corporate taxes are an evil and regressive tax against consumers.

So it is illegitimate for Trump and these anti-corporate tax Republicans to support the tariff on Mexico (and probably on China, but China is a different problem).

Democrat readers shouldn’t get too excited about the above paragraph, as they are actually worse.

Most of the leaders of the Democrat party are in favor of raising corporate taxes. This is a terrible stance since, as I stated above, corporate taxes are simply a regressive tax against the poor. The Democrats are supposed to be the party of the poor worker and yet they support regressively taxing those people. That is incredibly evil and insincere. They only do it because it plays well in political speeches. Democrats don’t really want to help poor people, they just want to be re-elected (which is also the goal of Republicans). They are willing to be for a tax that hurts their constituents rather than be truthful and lead those constituents. This is unbelievably cruel and ruthless.

But then Democrats become even more two-faced. Because they hate Trump so much they oppose the Mexican tariff. This is ridiculous if they were ideologically pure since tariffs (while very bad IMO) are simply what most Democrats espouse – higher corporate taxes.

So what does all of that mean?

Unfortunately, it is simple. Both parties are mostly evil and don’t want to help Americans. They are willing to lie and mislead their constituents simply to retain their individual jobs. The only valid option as voters is to THROW THE BUMS OUT! EVERY LAST SITTING FEDERAL POLITICIAN NEEDS TO LOSE THEIR JOB IN THEIR NEXT ELECTION!

A tax plan that would promote economic growth

A tax plan that would promote economic growth

Both halves of Congress are trying to create a more fair tax plan that will promote growth and simplify the code. I am skeptical that anything will get done though as it appears that this Congress is incapable of doing anything significant.

Since Congress will almost certainly fail, I thought I would put my suggestion on the table. As I analyze it, it is probably the most likely plan that I have ever seen to encourage employment growth.

The first step is to not change anything for individuals except to increase the amount of money saved in long-term savings without tax penalty. This should be doubled from its present rate. The government is in the retirement business, and it isn’t doing a sufficient job of managing it. The government needs to get out of the retirement business because the government can rarely do something well. Social Security is a broken plan, and we all know it – we just need to transition out of the retirement business slowly so that we do not screw up the American workers that depend on Social Security.

Currently, the government taxes employees directly via the FICA tax on each dollar earned. The government increases this tax by assessing the employer an equal amount. This direct tax exceeds 15% and is used to fund Social Security. While it is essential to finance Social Security for today’s seniors, we need to get away from this transfer of cash from working Americans to retired Americans. We need to make it financially affordable for working Americans to save for retirement so that they can live off of their own money and not their children’s and grandchildren’s money. The fact that Social Security will be insolvent between 2025 and 2034 (depending on analyst assumptions) points to the fact that the system is systematically flawed. I have ranted on this in the past.

The biggest change in the tax plan is to change the way we tax our employers. Not just big companies but every employer – be they big or small. We need to reward companies for investing in their business and investing in their employees.

Currently, the corporate tax rate is around 35%. This tax burden is massive. Unfortunately, it is unevenly allocated and most directly hurts companies based in the US, primarily employs US workers, and principally sells to US customers. This is preposterous! Why is the federal government trying to hurt the best companies, but reward those companies that have substantial foreign investments?

My suggestion is to eliminate all tax loopholes in the corporate plan except for the ones that I itemize here. Yes, that means that Congress will never go along with me since every special interest lobbyist will argue and bribe vehemently to fight my simple and easy ideas. Here are the highlights of the plan:

  • Corporate income tax is 35% for all income.
  • Income taxed in a foreign country returned to the US corporate parent is the difference between the original tax paid and 35%. This balance of tax is still available for the following discounts (as well as all US based income).
  • For every dollar that is paid to train employees plus one additional dollar, there is no US corporate tax. Corporations should be encouraged to train their employees so that money shouldn’t be taxed and additionally they should be rewarded by claiming 200% of that investment up to 35% of corporate income. This reduction in taxes is good for the company, great for the employees, and magnificent for the US economy. In the 21st century, only smart workers are valuable, and we need to increase that pool of people.
  • Today, wages and benefits to employees are already written off and not counted toward income. This expense will remain the same (as with all business expenses) however if the employer hires more workers in the US and its territories from the previous year then the company should be rewarded. The company will be able to write off that new employee’s wages plus an additional 300% up to 35% of corporate income. Please note that this is ONLY for the growth of full-time employees from the previous year to the current year. The employer doesn’t get to deduct this cost for perpetuity but only for the first year. Also, note that this doesn’t allow the employer to increase foreign-based workers, the workers have to be reporting to work in the US and its territories.
  • Any improvements in facilities are already written off, and that will continue. However, this will be accelerated in my plan as the company can write off 200% of all INCREASES in facilities, marketing costs, sales costs, etc. as long as they are spent in the US and up to the 35% cap that already exists. They will be able to write this off in the year that the expense occurs. Note that this is only for increases in those costs over the previous year. If the company doesn’t grow those costs, then it is simply held at the standard 35% deduction, but if the company increases those investments in US-based assets, then the company can accelerate those year-over-year savings.

So how is this good for the US economy and the US worker? Simple, it is all about the economic growth, the growth of employment, and improving the lives of US workers. Companies that are unable to grow their business will not get this benefit, but companies that can employ more US-based people, create more US assets, and improve their ability to market to US-based customers will thrive. It puts America first in our corporate tax policy. It rewards companies that invest in America and it doesn’t help any company that chooses to invest internationally at the expense of America.

This plan will accelerate the return of money from foreign lands back to the US. This plan will encourage companies to hire more US-based workers and will significantly increase the quality of life of Americans.

This isn’t a giveaway to the corporations or a supply-side “hope for the trickle-down plan.” It only rewards companies that truly make the trickle-down (in the form of a gusher rather than a trickle) happen. No company will be able to take advantage of this plan unless they truly change that “trickle” to a firehose of economic prosperity.

This plan will never pass. Too many lobbyists will be hurt. Too many special interest groups will not have their interest served. However, this is one plan that would almost guarantee massive prosperity for the American middle class and therefore massively increased tax revenue for the Federal government.

It just makes sense which is why it will never be adopted by Congress. Simple things that make sense never seem to get done by Washington DC.

Photo by 401(K) 2013

Democrats want lower corporate taxes just not under Trump

Democrats want lower corporate taxes just not under Trump

Don’t let the current partisan bickering on corporate taxes make it seem like both sides of the aisle don’t want this. It is good for America and everyone that understands economics understands this. The issue is that when the Democrats held power, they couldn’t effectively do this because their liberal wing (i.e. the people that do not understand economics) would crucify them in the election booth.

Suddenly, an idea that has been accepted by economists and by policymakers on both sides of the political aisle—that high taxes on business hurt investment, workers, and the economy—is considered “absurd.”

In 2012, President Obama and his advisers proposed lowering the corporate tax rate because it “creates good jobs with good wages for the middle-class folks who work at those businesses.” In 2013, Lawrence Summers, President Clinton’s Treasury secretary and chairman of Mr. Obama’s Economic Council, argued that the tax on corporate profits creates a burden without commensurate revenues for the government and that changing it “is as close to a free lunch as tax reformers will ever get.”

In 2015, Democrat Chuck Schumer and Republican Rob Portman co-sponsored a Senate bill to reduce the top corporate tax rate, which is the highest of any of the 35 countries in the Organization for Economic Cooperation and Development. “Our international tax system,” Mr. Schumer argued back then, “creates incentives to send jobs and stash profits overseas, rather than creating jobs and economic growth here in the United States.” Bill Clinton in 2016 said he regretted raising the corporate rate to its current level.

Yet President Trump’s Council of Economic Advisers is now being accused of partisanship and unscientific analysis.

This is politics for the sake of politics. Not for making America stronger or helping our citizens.

Source: A Turnabout on Corporate Taxes

Capital gains should be counted as wages–to a point

Capital gains should be counted as wages–to a point

warren.buffet.secretary.caption_picIf you pay attention to the news, you have heard Warren Buffet claim that he pays a lower tax rate than his secretary. This pronouncement has prompted President Barack Hussein Obama to propose new taxes, affectionately nicknamed “Buffet taxes” or the “Buffet Rule.”

The “Buffet Rule” is going to get a lot of press attention in the coming weeks and it will get more attention if Mitt Romney successfully wins the nomination of the Republican Party.

MittRomneyProfilePicAt this writing, Mitt Romney is running for the Republican nomination and at some time he is probably going to have to divulge his finances more fully than he has already. Mr. Romney doesn’t appear to have a wage-earning job, therefore, his daily spending on clothes, food, mortgage, and hair-styling products comes from interest, capital gains, or dividend income from his earned fortune. It appears that Mr. Romney paid less than 15% on his income where a wage earner would pay a much higher rate.

A lot of people say that the tax code is broken and I agree. Some propose a flat tax rate for all income, but that is probably a political hot potato. A flat-tax is also a little repressive as low wage earners probably shouldn’t have the same tax rate as the more affluent.

In America, everyone can have an opinion. So here is my suggestion:

  • All Americans should pay a minimum of 1% of their income in Federal taxes.  The approximately 46% of Americans who pay no taxes needs to stop. If everyone pays at least a little bit, then they all are part of the general sharing of the load. Everyone will be a bit more invested in making sure that the spending is appropriate.
  • All income, regardless of source, needs to be considered wage income for the first $500,000. The top line of your income for federal taxes needs to include all wages that come from your W2 or 1099. If that number is less than $500K, then include dividend and capital gains income up to $500K.  Why did I choose $500K? It seems like a fair number. I could make an argument that it should be up to $1M, but I cannot make a logical argument that it is less than $300K. Here is my logic:
    • Everyone has daily expenses that need to be paid. For most Americans, these expenses are covered with our income from our job. The expenses are things such as food, clothes, house and car payments, cable TV, the occasional movie and dinner out, and (since Mitt’s expenses in this area are likely quite high) hair care products.
    • Money that covers these regular expenses comes from wages for all but the most affluent Americans.
    • It is not appropriate that those that are very wealthy and do not make a wage should have the source of funds for expenses categorized as anything but wages. Even if they don’t make a wage and received the money from dividends or interest, a portion of that income is used for exactly the same thing as the minimum wage earner. Therefore, we need to classify it as a wage since that is what it is replacing.
  • FICA is currently capped at first $110,100 of income. This needs to change.  The upper cap needs to be on all wages as I have described in the previous bullet. This is fair, as well. All wages should be subjected to FICA tax. This would likely fix the problem of Social Security being underfunded for quite some time. Yes, I think that Social Security should be eliminated, but that isn’t going to happen either.

The great thing about a blog is that I can rant. There is little chance that any of the above will ever be enacted. It was fun to argue the point though and I hope that it was fun for you to read.

The images in this post are assumed to be in the public domain. I have linked to the sites where I found them. I do not own the copyright for these images.

First thoughts on the day after election

First thoughts on the day after election

The massive mid-term election of 2010 is now over. My phone won’t ring 25 times today with some computer imploring me to vote for one candidate over another. The signs that are all along the streets in my town can come down (hopefully the candidates come out and clean up their mess). Life can now go back to some sort of normal.

The Republicans evidently picked up approximately 60 seats in the House of Representatives. They also made major increases in the Senate and that house appears to be split nearly 50/50 (the exact count probably won’t be known for a couple days as Alaska will probably take a while to count due to the write-in candidate).

What does this election mean? Does it mean that the 2-year era of liberalism is over? Does it mean that conservatism is the rule of the day? Does it mean that Barack Hussein Obama will lose in 2 years? Does it mean that the Republicans have a mandate to go ultra-conservative? Does it mean that the poor and down-trodden will need to look for their medicine in the trash cans of the homes of the wealthy? Does it mean that I have to give up drinking coffee and now drink tea?

What I am 100% confident in is that it doesn’t mean any of the above! It doesn’t mean that BHO is done. It doesn’t mean that all of healthcare should just go to the wealthiest. It doesn’t mean that we should now savage the environment.

I don’t think that the newly elected Republicans have a mandate at all except for the mandate to do a good job and figure out the best way to solve each individual problem regardless of party direction.

I think it means that Americans want a government that works. We want it to work rather slowly and deliberately. We want politicians that don’t act like politicians but rather act like leaders. We want compromise to be the rule of the day. We want our leaders to read, understand, and thoughtfully debate the bills that are before them. We don’t want to find out about what is in the bill after it is turned into law – we want our leaders to know what is in the bill before they make it a law.

We don’t want stagnation. If Boehner drives the government to a stall the way that Gingrich did, that would be a mistake.

Most of all, I think Americans don’t want to deal with the federal government. We don’t want our lives to be tied up with governing. Life is hard enough with births, jobs, bills, lousy bosses, teenagers, sickness, and death – we don’t want to worry about the feds as well. I think most Americans would be perfectly happy if government would just get out of our lives with the exception of keeping us safe, making sure the infrastructure works, and helping out with the truly disadvantaged. We will pay a reasonable tax for that as long as we think it is well managed.

I raise my coffee cup in a salute to the Tea Party activists for energizing America in making their point. That point, I believe, is that we want our legislators to pay attention to us, don’t tax us to death, and spend what you need but make sure what you buy is needed. 2 years ago, pundits were saying that the Republican party was dead, now the pundits need to say, “Listen to your constituents if you want to keep your job.” 

There is no such thing as a mandate to do radical things. Extremism is a bad position no matter which side of the scale you are on.

If the grown men and women in the federal government can’t get along better than a bunch of nursery school kids, then we will take away their ball and send a new bunch of children to Washington in 2 years.