Response to Comment on Taxes...

Comments submitted anonymously came through to my email notification, but for some reason they didn't show up on the blog, so I will post them now with my responses.

Anonymous wrote:
I agree on much of what you have proposed. JOBS, I believe, is very important; no question about it. I think that putting people to work should be the main priority. I also agree that if more people are working, the more revenue the country brings in. Jobs also helps self-esteem. I believe that it makes people feel that they contribute to society and it is important that the message get across that all need to contribute.

I resepectfully disagree with you on one point. I don't believe that the only reason that companies went overseas was to avoid taxes. I believe they went for that AND cheap labor (that is discussion for another time). If I understand you correctly, you advocate for lowering corporate taxes to entice them to come back. I am not sure I agree in that GE was owed money because of the tax breaks already given. This may be an extreme case. Oil companies are making record profits and getting assistance from the Federal Government. I would also refer you to a 60 minutes piece done several months ago in which the owner of the Horizon Oil rig moved the company overseas to a post office box in Europe and now pays no U.S. income taxes. I hope this is not getting off the mark but wouldn't lowering taxes not make a difference because being offshore, they don't have to pay any taxes?

My response
You are right that companies didn't only leave America because of taxes, but taxes and regulations are a huge impact on businesses in America. There are numerous compliance issues businesses must deal with here, that don't exist in many foreign countries. Cheap labor is another reason for companies leaving and I would love to discuss that further another time.
I agree that the GE scenario of not paying taxes seems extreme and unfair. However, I call that a failure of the current tax system to apply taxes to all entities if all entities are supposed to be taxed. I don't necessarily blame the company for exercising all of its rights under the tax code. It also emphasizes how The Fair Tax would resolve this; i.e. a consumption tax would mean that corporations purchasing goods and services from other businesses would pay taxes on those goods and services, not based on the net income of the business. As for the idea that it wouldn't matter if businesses were here or not because being already "offshore" they pay no US income taxes, it actually would benefit them to return here because US would be a tax haven. Yes, there'd still be issues of labor to resolve, but it would be a good starting incentive. And for those thinking of leaving, it would deter them from doing so if the decision to leave was based on income taxes.

Anonymous wrote:
Would you agree that with all the rhetoric of cutting federal jobs would add more people to the unemployment lines resulting in more jobs needed to make up for the losses. Would you also agree that language of the government "goinng back to 2008 spending levels," makes no sense? It suggests that things cost the same as they did three years ago and does not take into account price increases? I know it is off topic but just wondering what your thoughts on that were.

My response
I agree that cutting federal jobs adds more people to unemployment if there are not private sector jobs for them to fill. I guess the question I have is; if we don't need those positions (and please don't tell me the jobs being lost are all law enforcement officers and firefighters), aren't we just using a different form of welfare? Again, shouldn't we focus on increasing private sector jobs?
As for "going back to 2008 spending levels," I say why stop there? We're talking about government spending, not yours and my grocery bills. The unfortunate reality is that if we keep spending more, there's no plan to pay that money back. Sort of like me saying; "I've maxed out my $10,000 credit card and even though my income has gone down, I want the credit card company to give me another $5,000." Since that makes no sense, why do we accept it from government?

Anonymous wrote:
Again, I think your idea of more people going back to work would be one way to help increase revenue. More also has to be done because there are more people in the country. The population has not remained neutral. I think there is much more that needs to be done. I think this arguing on both sides does no one any good. It appears that it is like children fighting that if neither one can get their way, they call each other names; ridiculous! I also believe that there are people in society that need our help and we need to help them.

My response
I'm not for all the name calling. What I fail to give into though, is the idea that increased government spending on numerous programs is good. We keep spending more and it is NEVER enough. As recently as the last 2-3 years we were told TARP and Stimulus HAD to be done to save the economy. Well, it didn't save the economy. It saved some government and auto worker jobs for a while. Then they did "Quantitative Easing" and that wasn't enough.

I agree that there are people in society that need help and we should help them. I don't believe it is the job of our government to offer so much help that it means people can continue to procreate, overeat and generally do nothing at the expense of someone else. To those who're handicapped beyond working capability, I say I will help you. To those capable of working and are living free at the expense of the taxpayers, I say; get to work and make yourself useful, like helping the handicapped.

Taxes? Or...something else?

I drafted the following on April 18 of this year. Given some recent reports, I believe my musings are particularly relevant. Additionally I believe that; for those who don't normally follow economics, it is very informative. Please enjoy and consider with respect to the United States' current economy.

Recently the US Governing bodies have been wrangling over budget and tax issues. There seems to be two prevailing opinions put forth by the news media; either raise taxes on some or cut taxes.

I believe the falicy is that neither of these is the real issue.

The real issue is JOBS! Hold on. Before you go sayin' they're two different issues, just follow my logic. The reason we have budget problems is simply spending more money than the government takes in. I happen to believe that cutting spending is a problem that must be addressed. However, as any business owner can attest to, even if you cut spending to the bare minimum you will likely be left with a need to increase revenue. Even if not for immediate needs, you'll certainly need increased revenue going forward.

If we can agree that we'll eventually need greater revenue, the question is how to get it. Since the current tax code places heavy emphasis on income tax, we would do well to have more wage earners in the system than trying to tax more on a dwindling work force. If we overhauled the tax code to move to a "flat" or "consumption" tax, we'd still be better off having more wage earners paying into the system.

Think of it this way; if you want more of an activity, make it less expensive. If you want less of an activity, increase the expense (or taxation) on that activity. That's right, we tax wages for services performed. Is it any wonder then that people have figured out how to do less (or no) work and collect a paycheck from the government?

Once we agree that we must increase revenue to the government, and if we can agree that increasing the number of jobs would do that, we can then focus on bringing those jobs to our shores.

Now that we've agreed that we want jobs here in America, we have to give businesses good reasons to come back here. Our labor costs may be more than other countries, but we have an extremely efficient (don't laugh, it's true) work force. If we were to get rid of many onerous taxes on businesses and roadblocks that prevent businesses from getting permitted in a timely manner, it would go a long way to improve the marketability of the U.S. as a manufacturing haven.

Who's Greedy? :(

I have been thinking over this posting for more than a week. I've read and heard many comments regarding businesses and how greedy they are. I've pondered statements that corporations only care about profit, regardless of the fallout.

I feel qualified to speak to this because I've been an entry-level employee, middle management, upper management and now a business owner/operator.

I believe that as a business owner/operator WITH employees, I have a perspective many do not. Lack of that perspective prevents many of the business critics from getting past the sound bites provided by the nightly news media.

People should understand the following;

1. Businesses exist for the purpose of achieving profits. We all want the companies that we have our 401k's, IRA's and other investments in, to achieve the maximum profits, thus resulting in our good fortune.

2. Most businesses are not large multi-national corporations employing thousands of people. We are often times small operators who've risked our own money, the money we've borrowed and our own credit. Many people might think we don't care about our employees because we don't provide lavish benefits. Those people don't realize that many of us would offer such benefits if the money were there. Additionally, if these businesses go under, there will be no customers, employees or critics willing to lend us a hand to get back on our feet.

3. Often times, the very businesses that are criticized as being greedy donate huge sums of money to charity.

4. Businesses also often pay large sums of money in taxes just because they're corporations. E.g. in my own business, I pay higher rates on electricity just because I'm a certain type of business. I get nothing for that money. Also when government owned utilities raise fees (such as "customer fee"), they often make the businesses pay a higher rate, so as to give the impression that government is "sticking it" to the evil businesses.

I find it offensive that so many people think it is okay that they demand high pay for mediocre work, yet the corporations, focused on profits, are the evil ones. I take offense to those people who want to lecture me about the few corporations who've been bankrupted by greedy execs, while they ignore the thousands of businesses that have worked tirelessly to offer goods and services that consumers will need and want.

What most people never realize is that the businesses (especially the small ones) will move heaven and earth to keep their people employed, keep the lights on and keep the customers coming back. These businesses will beg and borrow for enough money to make payroll and ordering needed supplies. These businesses will sacrifice everything on the desire for future prosperity of the business. Essentially these things will all be done because businesses are made up of people. People make the decisions and no business owner or CEO, worth their weight, would want the business to fail. Might we have to cut back on expenses, salaries or personnel? Yes but most of the time those cuts are necessary to prevent the total collapse of the business which would result in everyone being unemployed and investors (including those with company stock in their 401k's and IRA's) going broke.

There will be the occasional CEO or business owner highlighted in the news, who is still enjoying their yacht while the company goes down the tubes. While those are the exceptions, I say people should then be upset with the board of directors that negotiated a salary package that allowed for this.

I believe it is well past time that we in America, quit demonizing businesses as being greedy. Everyone is greedy. It is just a matter of how greedy. None of us "needs" individual houses, two cars in the driveway and big screen televisions. We "need" food, clothing and shelter. That's it.

We are hypocrites when we decry the corporation as greedy while we hold out for higher pay, surf the internet at work or demand the maximum return on our mutual fund investment.

What say you?