Archive for July, 2011

The Perfect Tax Increase

July 24, 2011

Republicans oppose tax increases for higher income groups because Republicans suffer from the delusion that the group consists solely of small business owners. Many in the higher income group do not own small businesses and thus are not going to reduce hiring if their taxes go up or increase hiring if taxes are reduced.

Minimum wage dishwashers pay a Social Security tax. Business executives should be able to pay a tax on their income above some amount (for example, $200,000). This tax could be imposed as a temporary tax until the deficit is eliminated and the country begins paying off its debt.

The tax would be paid on gross income like the Social Security tax. Executives of “non profit” organizations would be subject to the tax as well as executives of for profit organizations.

Business owners wouldn’t be subject to the tax. It would be limited to those who are employed by others, including the highly paid “employees” of sports teams and television and movie production companies. I doubt that Charlie Sheen will cut back on his female companionship and drug use if he has to pay a few more dollars in taxes.

Business executives aren’t going to invest their money in new equipment for their employers even if they don’t pay any income taxes. Raising their taxes won’t keep them from creating jobs as Republicans claim is the case with business owners. Raising their taxes would help reduce the federal deficit.

President Barack Obama calls tax provisions allowing companies to deduct the cost of aircraft are “loopholes” even though allowing companies to deduct the cost of new equipment creates jobs in other businesses particularly in American businesses as is the case with most aircraft purchases.

If Obama wants to eliminate loopholes he should eliminate the ability of corporations to deduct the full cost of the salaries of their highly paid executives when figuring taxes. Government might allow a deduction only for the first $200,000 of each executive’s pay when determining profit. Alternatively, government might allow deduction of executive salaries when determining profit, but impose a special tax on executive pay comparable to the Social Security tax.

Corporate income has traditionally been viewed in terms of profits which are the stockholders’ income. However, the corporation is more than stockholders. Its financial beneficiaries include the people the corporation pays, particularly executives who can receive huge incomes even if the stockholders receive no incomes from the corporation.

Companies already pay taxes on their hourly employees through the Social Security system. Why should executive salaries get a tax break? Perhaps this tax provision could be temporary depending upon the size of the deficit.

Congress should replace the capital gains tax associated with stock and commodities trading with a transaction tax. Such a tax would provide a more predictable source of revenue and simplify tax collection while facilitating a tax increase during periods of high trading. There would be no provision for a capital loss deduction on stocks held less than a period of years. This change would not effect the number of jobs. The stock market in recent decades has at times been more of a gambling device than an investment facility.

The markets might drop briefly when the tax is implemented, but the markets would quickly adjust to the new cost and then ignore it.

Congress should increase the tax on casino gambling revenue and winnings. Congress should eliminate any deduction for casino and race track gambling losses on visits when losses are greater than wins. Increases in these taxes won’t impact jobs. Most people visit casinos for entertainment rather than income.

Cutting spending without adversely impacting the economy isn’t as easy as Republicans believe. For example, cutting Department of Defense purchases of equipment would mean the companies that produced the equipment would have to lay off workers. Most Social Security recipients spend all the money they receive. Cutting benefits would reduce their purchases forcing layoffs in businesses that recipients purchase goods and services from.

Major cuts will require Congress taking the time to evaluate each program to determine how to cut spending without cutting jobs in the private sector. Some programs could be dropped because the private sector could take over financing. Until that happens Congress shouldn’t start any new funding programs and should delay the implementation of major health care changes such as Obamacare until the deficit is under control.

Groups like Planned Parenthood could be financed by private donations if there is sufficient support in the private sector. Programming for the Public Broadcast system could be financed by donations or by giving commercial stations the option of broadcasting a broader range of programming or providing programming to PBS.

Many of those who study climate claim that climate science is settled. Thus there is no reason to continue spending tax money on climate research. The only reason to spend tax money on science research is to learn something new.

Since the days of Senator William Proxmire politicians and journalists have often ridiculed some federally funded “science” research. Many of these projects may have been legitimate topics of research, but there was no real reason for the federal government to borrow money to fund them. Congress should consider a moratorium on science research until it can establish guidelines for what can be funded.

Congress should immediately end all funding for operations in Libya. If the Europeans want to spend money taking control of Libyan oil they should spend their own money. Bombing campaigns are notoriously ineffective in causing countries to surrender. Many historians believe even the atomic bombs dropped on Japan in WWII were not responsible for Japan’s surrender because the government was about to surrender anyway.

GOP Doesn’t Understand “No Free Lunch”

July 18, 2011

The most important principle taught in the graduate business economics course I took at the University of Kansas is: “There is no free lunch.”

Many wealthy Republicans either don’t understand that “you can’t get something for nothing” or don’t understand how the value of their assets depends upon the federal government providing them with a safe and financially stable environment in which to make their fortunes.

The term “free lunch” comes from the practice of some nineteenth century bars placing a “free lunch” on the bar for those who purchased drinks that might have a higher price than at other bars or be watered down. The meats were usually heavily salted to protect against spoilage which could induce patrons to purchase more overpriced drinks.

The founding fathers recognized that a federal government was necessary to their economic well being. Modern Republicans don’t understand the need for a financially healthy federal government.

Americans don’t get rich solely through their own efforts, but by taking advantage of opportunities and protections within the economic system managed by government.

For example, the federal government helps finance new technology such as computers. Government protects companies that invest in new inventions by preventing competitors from copying the technology without payment.

Government provides businesses with educated employees and protects against foreign and domestic sources of violence.

One of the most important purely economic actions of the federal government is maintaining the integrity of the money supply. Effective commerce requires that everyone have confidence in whatever is used as “money” particularly when the “money” is stored in computers and transferred from computer to computer.

The federal deficit poses a major threat to the integrity of America’s money. Wealthy anti-tax Republicans don’t understand that a federal default would reduce their wealth more than a slight tax increase would. What is important is not the amount of dollars and other assets that one owns but the value of those dollars and other assets.

Allowing a default would be the equivalent of flushing money down the toilet or burning it in the fireplace.

Wealth lost through default would be gone forever. Money invested as taxes would eventually come back to those paying increased taxes.

For higher income individuals taxes are a form of investment. Individual businesses invest in government to finance those amenities such as roads and airports that all businesses share as well as financing other activities such as national defense. Businesses get a return on the investment by taking advantage of the economic environment provided by government.

Biologists talk about the food chain and how very small plants and animals become the food for small animals which are then food for increasingly larger animals. If something happens to the small life forms the larger animals will eventually have trouble finding food.

The economy has what might be called a money chain. Those at the bottom of the chain pay their money to individuals and businesses in exchange for goods and services. These individuals and businesses then purchase from those higher up on the money chain.

Some wealthy anti-tax Republicans don’t understand that cutting Social Security payments to reduce the deficit would reduce their income. Most Social Security recipients spend everything they get. If their benefits are reduced they will buy less. Some companies they purchase goods and services from may have to lay people off to cut costs. The result would be less money moving up the money chain to those on top.

Jay Leno and Other Ignorant Jury Bashers

July 15, 2011

One of the my favorite things on Jay Leno’s Tonight show is the Jaywalking segment when he has people on the street demonstrate what they don’t know. Those with the worst answers can win an opportunity to compete as a Jaywalk All Stars.

When it comes to understanding America’s legal system, Jay would easily make it as a Jaywalk All Star.

What Jay and other jury bashers don’t understand is that American law prohibits a jury from finding a defendant guilty unless the prosecution proves guilt beyond a reasonable doubt. Jurors are required to base their decisions on the evidence presented in court and prohibited from seeking the opinion of talk show nitwits about how they should vote. Those who know too much about the case before the trial or have formed opinions about the case are not supposed to serve on the jury.

The jurors who voted “not guilty” in the Casey Anthony trial were doing what the law required them to do as were the jurors in the O.J. Simpson trial.

The prosecution claimed that Casey Anthony deliberately used duct tape to smother her daughter Caylee, yet failed to prove beyond a reasonable doubt that Caylee died from being smothered by duct tape. That failure to prove how Caylee died meant there was reasonable doubt about Casey deliberately killing her daughter and the law required the jury to vote “not guilty” regardless of what jurors might have wanted to do.

In the O.J. Simpson trial the prosecution claimed that the killer wore a certain pair of gloves. When those gloves were shown to be too small for O.J., that meant there was reasonable doubt that O.J. was the killer. As Johnnie Cochran pointed out in rhyme “if it doesn’t fit, you must [by law] acquit.”

Jay sometimes refers to the Robert Blake case while ignoring the fact that the prosecution failed to connect Blake to the murder weapon. That failure meant that someone else could have pulled the trigger and thus there was reasonable doubt that Blake committed the crime. The prosecution should have waited to charge Blake until it could prove he did it.

Those who rely on the media for information about criminal cases fail to understand that in the early stages of an investigation the government has a monopoly on releasing information and can make all sorts of claims that cannot be substantiated. Some information may be provided by government officials who don’t really know anything and are passing along what is essentially office gossip. That is why people should be skeptical of any crime related information from unnamed sources. An unnamed source may want to remain anonymous because he or she is lying.

Members of media lynch mobs continue to operate on the assumption that the original information was true regardless of what may be admitted in the trial. They have already decided that the accused is “guilty, guilty, guilty” and they won’t let new facts changes their minds.

I don’t recall most of the false information about the Simpson murder case but I do recall one of the most glaring overstatements. LAPD had claimed that “there was blood all over the place” in O.J.’s residence. However, in court they were forced to admit that “blood all over the place” meant one blood drop here, another over there and still another way over there.
Incidentally, Casey’s behavior after Caylee’s death could indicate a psychological problem rather than guilt. The death of a child can have a severe psychological impact on parents. Many historians blame First Lady Lincoln’s “madness” on the death of her son Willie.

Anthony Jury Reached Correct Verdict

July 7, 2011

The Casey Anthony jury reached the correct verdict. The question put to the jury wasn’t did Casey Anthony kill her daughter Caylee Anthony, but did she deliberately carry out a plan to murder Caylee by suffocating her with duct tape.

The jury didn’t buy the prosecutor’s claim of premeditated murder and its easy to understand why they might have rejected it. When I first heard of what the prosecution was attempting to do I thought they had a difficult, if not impossible, task before them.

I could believe that Casey got frustrated because she couldn’t get her daughter to shut up and covered Caylee’s mouth with duct tape to keep her quiet rather than to kill her. Casey might have positioned the tape carelessly or the child might have had a stopped nose with the end result that Caylee was unable to breathe and died. I have difficulty accepting the claim that Casey is mentally capable of planning to kill her daughter by using duct tape to suffocate her.

Casey was unable to accept responsibility for her action and tried to cover it up. Perhaps she had difficulty admitting to herself what she had done.

American prosecutors suffer from a “disease” which causes them to try to present every wrongful death as premeditated murder. Perhaps prosecutors feel they get better publicity if they convict an evil killer then if they convict someone for doing something stupid.

I don’t know if Casey Anthony caused her daughter’s death or not, but it would be unfortunate if she will go unpunished for the death because prosecutors made the mistake of trying to turn a tragedy into something sinister.