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Posts Tagged ‘taxes’


Twist and turns from an unpredictable Chief Justice of the supreme Court of the land – what does it mean?  While the health care mandate is struct down as unconstitutional under the commerce clause, it is Phoenix rising from the ashes as a tax, under the authority of Congress to lay and collect taxes.

What does this mean?  Simple, the Affordable Health Care Act survives mostly intact, with medicaid in jeopardy.  States cannot be punished for not expanding medicaid.  The real meaning of the Affordable Care Act decision is that the democrats in Congress and President Obama insisted, promised, that this new Act is not a tax, but when they went to court they argued that it was a tax – gross misrepresentation, again from this administration!

Since the President was adamant that this mandate was not a tax, repeatedly over time and in all forums, then argued in federal court and in the supreme Court that the mandate was justifed as a tax, will he pay the price for this massive deception?  Did he win a battle and perhaps lose the war?  The majority of americans are opposed to the mandate, and it appears that they are not opposed because it is a violation of the commerce clause, and that it really was a tax.  Americans just don’t want to be mandated by our federal government to do anything and don’t care by what means this was accomplished.

Has Chief Justice Roberts, as the swing jurist in this decision, created a mine field for President Obama?  Does the president have to explain his supreme misrepresentation to the american people?  In addition, the hidden decision here is that the federal government has been reined in under the commerce clause, limiting its commerce clause power, but unleashed as a taxing giant to use taxes to control the behavior of the citizens of this nation?

I am sure the founders never dreamed of a free nation under the thumb of the central government created by its states to make the states, as a whole, stronger, but with “limited” powers.  It appears that the federal government under the right to lay and collect taxes to influence the behavior of its citizens is now unchecked with unlimited powers – thank you, President Obama for the deception!

 

 

 

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Recent pronouncements of President Obama and a three year trend of his administration have crystallized just where he stands on economics and job creation.

First, look at the three year history of his administration.  The never-ending onslaught of regulation on business and banking under the guise of protecting the consumer and the environment have used a regulatory and lending blanket to smother the small business job generator.  Small business has traditionally generated over 70% of the nation’s jobs.  Now small business is both being smothered by regulation and a dearth of lending availability from the nation’s banks.  The latter due to new banking regulations and Federal Reserve created opportunities to earn, outside of lending, by using the spread between borrowing from the Federal Reserve and then buying Treasuries.

The EPA is single handily ripping the life out of the coal industry, and its jobs.  Oil drilling has been seriously curtailed on federal land and off shore, killing high paying jobs.  Even fracking for natural gas and oil from shale is under attack by the EPA.  Have you wondered why recent reports of EPA action indicate that the EPA has armed SWAT teams and why EPA agents now are armed?  If this is true, what is next – armed truant officers and meter readers?

Now let’s look at two of the tenets of socialism.  In socialism:

  • the government controls big business and the banking industry
  • jobs come from big business with small business being generally non-existent

President Obama has recently provided additional insight to what he believes to be job creation.  His statement that the private sector is doing just fine was ludicrous but more so indicative of where he wants to take this country.  His new plan is his old plan.  He wants to create jobs by creating more non-federal government, but local government jobs, and we already know that federal jobs are up as well. CNN-Money reports: “…The number of federal employees grew by 123,000, or 6.2%, under President Obama, according to the White House’s Office of Management and Budget…”

To be fair and the article points this out that this is just a continuation of President Bush’s job growth in the federal government. I say, more of what is not good is bad.  A word about President Bush – he expanded government, yes, and this was the start of our move to bigger government.  This does not mean that it is good that President Obama doubled down on what was not a good trend in the first place.  My mother would have said: “Two wrongs don’t make a right”.

The article also points out a greater number of regulations were introduced during the term of Bush than Obama.  Don’t go by the number, but by the severity and impact.  The Obama administration is masterful at private sector killing regulation and the regulations that place big business under the thumb of the federal government – Affordable Health Care is one and Dodd Frank is another.  Each of these laws authorizes the bureaucrats of Obama’s administration to write extensive, binding, impactful regulations that destroy small business and gives the federal government unprecedented power over big business and the banks – key tenets of socialism.

Back to Mr. Obama’s pronouncements about creating jobs.  Rather than unleash the private sector and small business to grow and truly create economically productive jobs, he is pushing for a repeat of the failed $800+ Billion stimulus which was going to create police, fire, and teaching jobs, as well as apparently non-existent shovel ready jobs, by doubling down and borrowing more money to pour into local government, government sector unions, and economically unproductive jobs.  Remember the reason why police, fire, and teachers have been laid off is the inability of local government to pay the benefits and pensions resulting from these government sector union jobs.  More socialism!

Apparently Mr. Obama is incapable of or has no desire to foster private sector jobs, even private sector union jobs, and he just has to feed the government sector unions with more stimuli.  His solution to unemployment and the stagnant economic growth is to move into the only direction he knows and believes in; and that is to grow government, foster government sector unions, minimize or eliminate small business, have the banks do the bidding for the federal government, and ultimately raise taxes.  His desired action requires more taxes and more taxes shrink economies.

I can only suggest that anyone who disagrees with me look up how failed socialist states operated.  The plan Obama is using is the failed plan of the past, worldwide.  There has not been one socialist economy in history that has improved and sustained the quality of life and standard of living of the populace.  Government jobs, while a necessary pill which must be taken in great moderation, are not economically viable contributors to the Gross Domestic Product (GDP) and the standard of living of any economy – they require more taxes and again taxes shrink economies.  Yet he steadfastly refuses to unleash the 70% job creator – small business.

 

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America needs to regain the fundamentals of a strong economy for a number of important reasons. National socio-economic health, political and diplomatic influence in the world for trade, defense, and standard of living all depend on a fundamentally strong economy. The fundamentals of a strong economy, from a non-economist’s view – mine, start with comparative advantage in world trade. This is something which our country and our leadership and labor unions have taken for granted over the last 20 years, letting this precious commodity dwindle away. We also have mistaken productivity and its usefulness toward comparative advantage with an effective trade economy. Remember, while productivity helps our trade advantage, it does little to help our trade related employment number or the quality of the trade related jobs. Simply put, the definition of comparative trade advantage is “what do we have to offer in the deal that makes us come out ahead of the other guy?”

We hear about free trade agreements and that trade is good – and it is! Entering into the world trade arena without a trade advantage or at least a trade equilibrium is just down right dumb and we have run headlong into this arena stark naked. We need to rediscover our comparative trade advantage or discover a new one, if we are to successfully compete in world trade.

Look around, the world has oil and we need it, the world has cheap goods and we need them to keep inflation down, the world has the capability to produce both quality goods and cheap goods that it could not produce 50 years ago, the world has cheap labor – shall I go on? What do we offer? Well we still have some bright minds, even though they may be heavily populated with foreigners, we still can grow food with the best of them, we still offer innovation, but we have no monopoly any longer on innovation. Our dollar is losing value which helps us produce relatively cheaper goods for the world market and thus lower the trade deficit.

A devalued dollar is a two edged sword as also it brings us a higher cost of living and a lower standard of living relative to the world. What do we plan to do about this obvious problem? Well Senators Obama and Clinton want to tax us more – mostly business and the rich – you know, tax the engines of investment and growth! Senator McCain wants to keep personal income taxes low and cut spending, but this will not bring us back to a fundamentally strong economy even though it is good start. It is how, when, and who we tax that is the problem. We are an economy that taxes income accumulation. We should be taxing the disposable money spent on “stuff” and not the money earned and used for growth re-investment.

Businesses pay a 35% Federal corporate tax rate and varying state corporate tax rates, bringing the total corporate income tax on profit to between 40% and 50% for the most part. Remember the corporations only collect the tax and anyone who buys their goods pays the taxes. If a corporation works on a 15% profit margin, and they make a set of golf clubs which they wholesale for $500, $65 is taxable profit of which the retailer pays $30 of the income taxes due on the item. When the item is resold at retail at $800, assuming a 15% profit margin, $105 is the taxable profit and $47 is the income tax due on the item paid by the end user, the consumer, you. Actually you pay a total of $77 of the corporation’s and reseller’s income taxes.

Granted, this example is clunky and probably filled with holes, but it does serve to demonstrate that when we tax corporations for manufacturing or reselling all we do is raise the price of the item. This works fine when all the competition is paying the same taxes. If does not work fine when world trade is involved, because our goods and services are then less competitive with the goods and services of other nations. We already start out with a disadvantage, in that we pay our workers more than the workers in far off lands receive, but this can be adjusted with productivity.

Unless we seriously look at our tax structure and make changes sooner rather than later – maybe move to a consumption tax or a fair tax and get away from inhibiting investment, growth, and production with income taxes, we can expect to have a lower dollar value, a lower standard of living, etc. Income taxes on domestic corporations foster a comparative trade disadvantage for us. Our government must find ways to domestically foster healthy manufacturing and servicing sectors so we can compete with the rest of the world without giving up good paying jobs. If the tax burden shifts from corporations to individuals, their will be no real change in who pays the taxes, except we will compete in the world trade markets effectively, create good jobs, and restore a fundamental of a good economy.

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Sounds confusing, doesn’t it. The cry around this country to “get those dastardly corporations – they are the cause of all our troubles” is so misplaced that it is almost like saying don’t put prisoners in prisons, because prisons are unsafe because there are too many dangerous people in prison.

Have I now cleared all this up? Okay it is simple, even if Senators Obama (now President) and (now Secretary of State) Clinton appear to not get it. Corporations factor in the income tax rate into their cost of sales and thus the price they set on what you buy at the point of sale. So, go ahead and tax the living day lights out of these corporations, they just collect their income tax for the government from you. There is one hiccup with this plan. These corporations are unable to incorporate their income tax into the price on sales overseas or in Canada and Mexico.

Senators Obama (now President) and (now Secretary) Clinton, please pay attention here as this is important and you act like you have never heard this before. When you tax a corporation and it cannot pass on that tax it either cannot survive internationally or it adapts by closing plants in the United States and opening these plants in another country. Are you still listening? When they do this, they create jobs in other nations and terminate jobs in the United States. This is called free enterprise. We could try to regulate corporations and force them to keep the jobs in the United States, but then they will not make any money and the investment capital will move to a company in another country and not here. It is like squeezing a balloon. Squeeze one end and it gets bigger on the other end – squeeze too hard and it breaks.

Our tax code and the fact that we tax our corporations at the second highest rate internationally may have something to do with out trade deficits and the loss of good paying jobs in this country. So yes, when we tax a corporation they bill us for the tax through domestic sales or sell us merchandise made in another country where the bulk of the profit is taxed at the other country’s favorable rate and the taxes go to the other country.

Senator (now President) Obama has a socialist solution for this conundrum. Instead of lowering taxes on domestic corporations so they can manufacture in the United States and create good paying jobs. These are jobs that make you more financially viable, jobs that make our economy healthier, and jobs that help us export to other nations. Senator Obama’s solution is to support the Patriot Employer Act. This act is right out of the socialist play book – we all know that the socialist economic system is failing all over the world. It is the second worst economic system, on how people benefit, only when compared to communism.

The Wall Street Journal quotes Peter Merrill whom they refer to as “…an international tax expert at PriceWaterhouseCoopers…” as saying “…Apparently Mr. Obama believes that by making U.S. Companies less profitable and less competitive world-wide, they will somehow be able to create more jobs in America.” http://online.wsj.com/article_email/SB120407121574294919-lMyQjAxMDI4MDI0ODAyNzgxWj.html

Honestly, they must have taught international economics at either Columbia or Harvard when Senator (now President) Obama attended. If he knows better and is sending us down the wrong path just to get elected, then he does not deserve to be President. If he does not know better, then he does not deserve to be President. The same should apply to Senator (now Secretary) Clinton. The solution, Senators Obama and Clinton, is to help these corporations become as competitive as we possibly can and then turn them loose on the world. This will create the right kind of jobs for this nation – we will not have to settle for jobs where you must learn the phrase – Do you want fries with that?

Senator (now President) Obama, drop your support of the misnamed Patriot Employment Act which is a form of reverse protectionism – it protects the world from us – and lower or eliminate corporate taxes. Yes, we all will personally pay more income tax which will be offset by lower prices for goods, since the tax will no longer be included in the price. This will stimulate domestic production of all kinds of goods and improve our standard of living by allowing us to hold better jobs. Aren’t you and Senator (now Secretary) Clinton about jobs?

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