While the attorneys in our midst plan an attach over the “obamacare” fiasco using the courts as their weapon of choice. I am advocating herein a second alternative to turn the tide of galloping socialism. (Previously known as “creeping socialism”). Hopefully if either of these first two approaches works we will not have to use the ultimate tactic of civil armed revolution.
My suggestion is to use Uniform Legislation with the aim of starving the federal government. A good source for understanding this approach is the link below. http://www.law.cornell.edu/uniform/uniform.html
The legislation I suggest is already in a form that can be quickly modified to achieve our ends. It is known as HR 24 “The Fair Tax”. Once A state has adopted this legislation their citizens and any business entities profits within these borders would be exempt from federal income tax. The only two services that are needed from the federal government are National Defense and State Department activities. Both of these federal divisions could be funded on a per capita basis based upon a running five year average of the departments initionally. The federal debt likewise could be frozen and a per capita assessment would be assessed to liquidate. All federal properties within the borders would be turned over to the states for their respective management and use.
Each state could modify their tax rate and monthly prebates as their own social tendencies dictate. The people who reside within their borders will either collectively through the voting booths prevail with common sensical regulations and laws or with their feet find a state more in line with their beliefs and values.
I realize that the above idea will need a lot of scrutiny and enhancement. But I have confidence in my motto that “ideas beget better ideas” and perhaps someone who comes across this paper will take hold of this idea and run with it. I for one am tired of preaching my conservative message as I see only regressive declination in the younger generation that follows. I was blessed with an education that taught me how to think on my own and appreciate traditional values. Evidently the institutions of learning that shaped my consciousness have all choked on their own liberalism.
Tuesday, March 23, 2010
Sunday, January 31, 2010
Corporate Tax Reform
At the risk of sounding like a liberal, I am advocating a major overhaul of our corporate income tax system with some minor changes to our individual tax system. Recent history of corporate growth has demonstrated that failure of Corporations can have a devastating effect on all stakeholders, thus the notion of too big to fail. The solution I advocate is to encourage some of them not to exist.
The affairs of state should be financed by all and accordingly be borne proportionately to each entities means or abilities. Think of a small town or city living on a river bank when a devastating flood is imminent. Would you not expect every able body to help with a new dyke. Would not the 250 pound muscular football player be expected to fill more and bigger sandbags than the feeble elderly wheelchaired or infant child. This is why we have a progressive tax system and hopefully will remain so for some time as long as both sides of the equation are fair and not too cumbersome. Our income tax system has generally followed the simple formula of I x R = T (Income times Rate equals Tax). The clearest part of the formula for both Corporate and Individual tax is the Rate side and only requires a few pages in the tax code. The complex side is the “I” side. Volumes of codes are expended here and inconsistencies further included as the “soak the rich” crowd inflict their disdain for prosperity.
Currently, federal tax revenues come from Individuals about 79% Corporations 19% Estate taxes 1%. Within the 79% individual portion there is an undetermined percent attributable to sole proprietors and Subchapter S Corporations. I see no reason to change this overall distribution burden but we need some long term tinkering that would help economic growth and fairness. However, the current provisions for the alternative minimum tax for both corporations and individuals should be eliminated.
My Suggested Corporate Brackets
Bracket Over But not Over The Tax Is Of the Amount Over
1st $0 $500,000 5% $0
2nd $500,000 $5,000,000 $25,000 + 15% $500,000
3rd $5,000,000 $25,000,000 $700,000 + 25% $5,000,000
4th $25,000,000 $100,000,000 $5,700,000 + 40% $25,000,000
5th $100,000,000 $1,000,000,000 $35,700,000 + 55% $100,000,000
6th $1,000,000,000 $530,700,000 + 70% $1,000,000,000
Present Corporate tax brackets:
1st $0 $50,000 15% $0
2nd $50,000 $75,000 $7,500 + 25% $50,000
3rd $75,000 $100,000 $13,750 + 34% $75,000
4th $100,000 $335,000 $22,250 + 39% $100,000
5th $335,000 $10,000,000 $113,900 + 34% $335,000
6th $10,000,000 $15,000,000 $3,400,000 + 35% $10,000,000
7th $15,000,000 $18,333,333 $5,150,000 + 38% $15,000,000
8th $18,333,333 $6,416,667 + 35% $18,333,333
The proposed new definition of corporate taxable income would allow for the deduction of dividends paid to investors. At the same time all interest earned on federal securities would be exempt from taxation for all investors. This change would encourage a reasonable return of 2% +/- plus inflation rate on federal securities driven by a free market as opposed to an irrational discounted rate as is currently offered. Our debt would be less attracted to foreign investors who pay no taxes but this country should have the wealth to finance our own debt. Furthermore, the 70% exclusion of dividends should be ended except for wholly owned (or consolidated) corporations and those entities that required funded investments for ongoing long term liabilities or reserves for unearned premium and losses such as insurance companies or funded warranties. These changes would enable the dropping of the 35% excess accumulated earnings provision which is never enforced in the first place probably due to vast array of loopholes.
The proposed 4th through 6th brackets could be adjusted up or down once the Congressional Budget Office scores the over all impact on federal revenues The amounts within each bracket could be changed every 5th year based upon the cost of living index or inflation. If the above bracket system is adopted the following changes should occur as the business community understands the impact.
First, most Sub S corporations will elect (and should be allowed to immediately elect) to be treated as a regular (Chapter C) corporation.
Second most new jobs, innovation, research come from the small and medium size companies who are in the first four brackets, Generally the management in these companies understand their products, processes and service far better than the super large multinationals and can react to change much quicker as the latter group become too bureaucratic and as governmentally inflexible. Some of this group like GE liken themselves as partnering with the world governments. Business has to have confidence that reasonable regulations and tax policy will continue not only in the current administrations but beyond before committing to expand the workforce and to make capital commitments. When this confidence resumes in our capitalistic sector unemployment will shrink to the lowest level realistically expected.
Thirdly, the stockholders and directors will, see that spinoffs of unrelated activities is in the best interest of all stakeholders. Just as the breakup of AT&T resulted in many new successful enterprises even while letting the weakest new entities like Agere and Lucent fail, the results was an explosion of new consumer products and no bailouts or governmental recues were required.
Fourthly, corporate governance will start thinking long term again instead of quarterly results. Sadly, the powers that be in large corporations like GM convinced themselves that they could operate best by turning their workforce over to unions. Most successful new companies see the value of treating their employees well. They then try new approaches like automation first by studying the best practices of those like the Asian auto makers. They avoid unsound accounting practices like booking as an asset future tax savings from unrealistic operating loss carryovers. These companies do as little research as possible preferring to grab like vultures the assets of start up companies like Oni Medical Services, Inc (Maker of innovative MRI for extremities that will cost about 1/4th their own MRI). What is GE protecting? They surrender to political correctness as opposed to educating the public on products that will benefit society as a whole, while making big profits on both extremes (Wind and Nuclear energy)
Finally, companies like Berkshire Hathaway will on their own cease to exist. Mr. Buffet likes to stress that his secretary’s combined income and payroll tax rates is greater than his own. Indeed that is true, for his game through Berkshire is like a mutual fund that isn’t required to pass through to investors earnings and realized capital gains. His entity exist to accumulate wealth that will be passed on to the investor heirs or causes that they supports. Few jobs are created or consumer prices decline because of that kind of growth. Yes Berkshire does pay taxes about 29.7%, and his stockholders can use their investments with him as collateral for low interest loans if they have the need for leveraged funds. They do not pay taxes on Berkshire dividends as none are ever paid. The original founders of the small closely owned organizations like Nebraska Furniture Mart & Borsheims Jewlery will always be able to cash in by either going public or find other deep pockets willing to invest or even Employee Stock Ownership Plans (Peter Kiewit & Co) Burlington Railroad will not have to pay any dividends and I doubt if our nation will sees any reduction in fright cost due to this latest megapurchase.
The Estate and Inheritance taxes are about to expire in 2011. Some advocate that this tax should cease all together. I would prefer that it continue but with much higher exclusions for individual beneficiaries . Either index for inflation or using a multiple of 60 times the individual poverty level for each named beneficiary. Restricted Foundations should be limited to $10 Billion. Then the taxable estates should be taxed using the last three brackets of 40%, 55% and 70%. These funds would be ear marked to fund retired Medicare recipients who will need to be weaned from that ill begotten program and who start their own Medical Health Savings accounts by accepting 75% of average current Medicare Advantage plan contracted “subsidy”!.
On the individual side the same last three brackets should be applied to individuals whose income reached those levels. I am sure George Soros and his fellow hedging managers would not missed the tax or perhaps they would rather have the 91% bracket reinstated. Ownership of domestic corporations could be encouraged by allowing these savers to exclude dividends for the initial amount equal to the current poverty level.
The affairs of state should be financed by all and accordingly be borne proportionately to each entities means or abilities. Think of a small town or city living on a river bank when a devastating flood is imminent. Would you not expect every able body to help with a new dyke. Would not the 250 pound muscular football player be expected to fill more and bigger sandbags than the feeble elderly wheelchaired or infant child. This is why we have a progressive tax system and hopefully will remain so for some time as long as both sides of the equation are fair and not too cumbersome. Our income tax system has generally followed the simple formula of I x R = T (Income times Rate equals Tax). The clearest part of the formula for both Corporate and Individual tax is the Rate side and only requires a few pages in the tax code. The complex side is the “I” side. Volumes of codes are expended here and inconsistencies further included as the “soak the rich” crowd inflict their disdain for prosperity.
Currently, federal tax revenues come from Individuals about 79% Corporations 19% Estate taxes 1%. Within the 79% individual portion there is an undetermined percent attributable to sole proprietors and Subchapter S Corporations. I see no reason to change this overall distribution burden but we need some long term tinkering that would help economic growth and fairness. However, the current provisions for the alternative minimum tax for both corporations and individuals should be eliminated.
My Suggested Corporate Brackets
Bracket Over But not Over The Tax Is Of the Amount Over
1st $0 $500,000 5% $0
2nd $500,000 $5,000,000 $25,000 + 15% $500,000
3rd $5,000,000 $25,000,000 $700,000 + 25% $5,000,000
4th $25,000,000 $100,000,000 $5,700,000 + 40% $25,000,000
5th $100,000,000 $1,000,000,000 $35,700,000 + 55% $100,000,000
6th $1,000,000,000 $530,700,000 + 70% $1,000,000,000
Present Corporate tax brackets:
1st $0 $50,000 15% $0
2nd $50,000 $75,000 $7,500 + 25% $50,000
3rd $75,000 $100,000 $13,750 + 34% $75,000
4th $100,000 $335,000 $22,250 + 39% $100,000
5th $335,000 $10,000,000 $113,900 + 34% $335,000
6th $10,000,000 $15,000,000 $3,400,000 + 35% $10,000,000
7th $15,000,000 $18,333,333 $5,150,000 + 38% $15,000,000
8th $18,333,333 $6,416,667 + 35% $18,333,333
The proposed new definition of corporate taxable income would allow for the deduction of dividends paid to investors. At the same time all interest earned on federal securities would be exempt from taxation for all investors. This change would encourage a reasonable return of 2% +/- plus inflation rate on federal securities driven by a free market as opposed to an irrational discounted rate as is currently offered. Our debt would be less attracted to foreign investors who pay no taxes but this country should have the wealth to finance our own debt. Furthermore, the 70% exclusion of dividends should be ended except for wholly owned (or consolidated) corporations and those entities that required funded investments for ongoing long term liabilities or reserves for unearned premium and losses such as insurance companies or funded warranties. These changes would enable the dropping of the 35% excess accumulated earnings provision which is never enforced in the first place probably due to vast array of loopholes.
The proposed 4th through 6th brackets could be adjusted up or down once the Congressional Budget Office scores the over all impact on federal revenues The amounts within each bracket could be changed every 5th year based upon the cost of living index or inflation. If the above bracket system is adopted the following changes should occur as the business community understands the impact.
First, most Sub S corporations will elect (and should be allowed to immediately elect) to be treated as a regular (Chapter C) corporation.
Second most new jobs, innovation, research come from the small and medium size companies who are in the first four brackets, Generally the management in these companies understand their products, processes and service far better than the super large multinationals and can react to change much quicker as the latter group become too bureaucratic and as governmentally inflexible. Some of this group like GE liken themselves as partnering with the world governments. Business has to have confidence that reasonable regulations and tax policy will continue not only in the current administrations but beyond before committing to expand the workforce and to make capital commitments. When this confidence resumes in our capitalistic sector unemployment will shrink to the lowest level realistically expected.
Thirdly, the stockholders and directors will, see that spinoffs of unrelated activities is in the best interest of all stakeholders. Just as the breakup of AT&T resulted in many new successful enterprises even while letting the weakest new entities like Agere and Lucent fail, the results was an explosion of new consumer products and no bailouts or governmental recues were required.
Fourthly, corporate governance will start thinking long term again instead of quarterly results. Sadly, the powers that be in large corporations like GM convinced themselves that they could operate best by turning their workforce over to unions. Most successful new companies see the value of treating their employees well. They then try new approaches like automation first by studying the best practices of those like the Asian auto makers. They avoid unsound accounting practices like booking as an asset future tax savings from unrealistic operating loss carryovers. These companies do as little research as possible preferring to grab like vultures the assets of start up companies like Oni Medical Services, Inc (Maker of innovative MRI for extremities that will cost about 1/4th their own MRI). What is GE protecting? They surrender to political correctness as opposed to educating the public on products that will benefit society as a whole, while making big profits on both extremes (Wind and Nuclear energy)
Finally, companies like Berkshire Hathaway will on their own cease to exist. Mr. Buffet likes to stress that his secretary’s combined income and payroll tax rates is greater than his own. Indeed that is true, for his game through Berkshire is like a mutual fund that isn’t required to pass through to investors earnings and realized capital gains. His entity exist to accumulate wealth that will be passed on to the investor heirs or causes that they supports. Few jobs are created or consumer prices decline because of that kind of growth. Yes Berkshire does pay taxes about 29.7%, and his stockholders can use their investments with him as collateral for low interest loans if they have the need for leveraged funds. They do not pay taxes on Berkshire dividends as none are ever paid. The original founders of the small closely owned organizations like Nebraska Furniture Mart & Borsheims Jewlery will always be able to cash in by either going public or find other deep pockets willing to invest or even Employee Stock Ownership Plans (Peter Kiewit & Co) Burlington Railroad will not have to pay any dividends and I doubt if our nation will sees any reduction in fright cost due to this latest megapurchase.
The Estate and Inheritance taxes are about to expire in 2011. Some advocate that this tax should cease all together. I would prefer that it continue but with much higher exclusions for individual beneficiaries . Either index for inflation or using a multiple of 60 times the individual poverty level for each named beneficiary. Restricted Foundations should be limited to $10 Billion. Then the taxable estates should be taxed using the last three brackets of 40%, 55% and 70%. These funds would be ear marked to fund retired Medicare recipients who will need to be weaned from that ill begotten program and who start their own Medical Health Savings accounts by accepting 75% of average current Medicare Advantage plan contracted “subsidy”!.
On the individual side the same last three brackets should be applied to individuals whose income reached those levels. I am sure George Soros and his fellow hedging managers would not missed the tax or perhaps they would rather have the 91% bracket reinstated. Ownership of domestic corporations could be encouraged by allowing these savers to exclude dividends for the initial amount equal to the current poverty level.
Thursday, December 24, 2009
Is A tax Revolt Forthcoming?
I wonder what would happen, if all taxpayers file their own tax returns reporting all income as usual but include a new or additional form. This form would be a Schedule C showing business income or loss. However, the net would be a loss sufficently large enough to bring taxable income to ZERO! One might call his new company “Geitner Insolvency Group” Business Code 523900, He might be tempted to show income of Zero but deduct as taxes all taxes he paid or had withheld for the year. Then he might deduct as a Bad Debt all Social Security taxes he had paid in since he started working as an other deduction. (At the rate the socialist are going anyone under 55 mostlikely will never collect what was taken from them) I as a tax professional would never suggest this tactic to any of my clients , but I see how anyone who files their own tax return using the free e-file tax section of WWW.IRS.Gov might be tempted to do in that way. If one was so brazen as to try this they might also be smart enough to deposit those funds in a special account and have ready to access if feds storm in!>
The Change That Destroyed America
In four years from now, the Healthcare legislation that was passed by our legislators was like a patient getting a flue shot for H1N1 and pleased that he didn't become ill. However in 2013 he discovers that the shot was laced with the Ebola virus that gave him a cruel and agonizing death. The patient however was the USA whose electorate bought into an idiotic message of change.
The Only Way to have a Just Public Option
If indeed this country can not deliver a good health system without involvement of insurance let’s broaden the options to include not only private insurance companies and the so called public option but a private option as well. This private option would be self insurance or funded Health Savings Accounts (HSA) that could buy high deductible Catastrophe Insurance with tax treatment compared to the so called Cadillac plans. This feature should soften the objection of the libertarians who opposed mandated purchase. Low income people who elect to have the private option could be granted health stamps to fund their HSA’s.
Then, continue the states authority to monitor all health insurance sold or issued in their respective jurisdictions. Continue the states obligation to see that all insurance companies issue policies that have a fair and adequate premium (this will include any public option) as well as have the financial strengths to pay all current and future claims arising out of current claims and newly discovered catastrophic conditions. This would also apply to any federal plans or their sponsored co-ops or other schemes. The states already through their respective insurance departments have the infrastructure necessary to regulate this system thus the time frame could be moved up to 2011 the same year when all new taxes and fees begin.
Individual risk that our deemed to be so adverse that no premium is adequate could be pooled and assigned to carriers. The assignment similar to auto assigned risk would be based upon each insurer’s prior three year average premium written in the particular state and further factored based upon the quintiles of profitability. These quintiles would be assigned a number of zero through four with zero the least profitable to four the most profitable. To determine profitability 100% minus the loss ratio (claims incurred divided by premiums earned) minus .12 for overhead(12% of premium maximum standard for all) would equal percent of earnings of 3%. Note, income taxes would not enter into the profitability equations as all health Insurance carriers should be exempt from income tax just as the public option schemes would be. The 12% allowance for administrative cost should be adequate to cover reasonable expenses and motivate efficiencies and innovation. The loss ratios which state insurance examiners will verify every three years will hold steady at 85%+/- if the growth in utilization and hypochondrias holds at current rate which is highly unlikely. In the event that this country’s health care cost as a percent of the Gross National Product does not decrease by two percent by the tenth year of this law then all health insurance programs (including Medicare) except HSA’s should be terminated and a direct repayment of Medicare tax to all wage earners who have paid into the Medicare trust fund.
Then, continue the states authority to monitor all health insurance sold or issued in their respective jurisdictions. Continue the states obligation to see that all insurance companies issue policies that have a fair and adequate premium (this will include any public option) as well as have the financial strengths to pay all current and future claims arising out of current claims and newly discovered catastrophic conditions. This would also apply to any federal plans or their sponsored co-ops or other schemes. The states already through their respective insurance departments have the infrastructure necessary to regulate this system thus the time frame could be moved up to 2011 the same year when all new taxes and fees begin.
Individual risk that our deemed to be so adverse that no premium is adequate could be pooled and assigned to carriers. The assignment similar to auto assigned risk would be based upon each insurer’s prior three year average premium written in the particular state and further factored based upon the quintiles of profitability. These quintiles would be assigned a number of zero through four with zero the least profitable to four the most profitable. To determine profitability 100% minus the loss ratio (claims incurred divided by premiums earned) minus .12 for overhead(12% of premium maximum standard for all) would equal percent of earnings of 3%. Note, income taxes would not enter into the profitability equations as all health Insurance carriers should be exempt from income tax just as the public option schemes would be. The 12% allowance for administrative cost should be adequate to cover reasonable expenses and motivate efficiencies and innovation. The loss ratios which state insurance examiners will verify every three years will hold steady at 85%+/- if the growth in utilization and hypochondrias holds at current rate which is highly unlikely. In the event that this country’s health care cost as a percent of the Gross National Product does not decrease by two percent by the tenth year of this law then all health insurance programs (including Medicare) except HSA’s should be terminated and a direct repayment of Medicare tax to all wage earners who have paid into the Medicare trust fund.
Saturday, November 28, 2009
First State Diner
Everyone one, especially the media, is all in a dither about Michaele and Tareq Salahi successful crashing the White House first state dinner. Does not their outwitting the Secret Service pale in comparison to the couple who fooled the American Electorate with the help of the blind media?. Michaele and Barak Obama will stay for four years not just one evening dinner! Now that is what’s outrageous!
Wednesday, November 11, 2009
Yesterday, home of the free and the brave: Tomorrow, home of the wheeps and the slave!
http://en.wikipedia.org/wiki/Yucca_Mountain_nuclear_waste_repository
For anyone who has an ounce of faith in developing technology and reducing reliance on foreign oil to avoid the pending global climate change illusion, I suggest that you become familiar with the Yucca Mountain project. (see link above) Then ask yourself, do we really want to become a third world nation? What will it take to open the eyes of the masses as to where the current administration is trying to take us?
For anyone who has an ounce of faith in developing technology and reducing reliance on foreign oil to avoid the pending global climate change illusion, I suggest that you become familiar with the Yucca Mountain project. (see link above) Then ask yourself, do we really want to become a third world nation? What will it take to open the eyes of the masses as to where the current administration is trying to take us?
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