Here’s My Idea: Taxes (Part One)

This will be the first of several entries over the next couple weeks that will offer some insight into the types of policies I would work for in the legislature.

The first area I would like to cover is taxes, as it seems to come up pretty quickly, anyway.  Let’s go ahead and get the conversation started.

More than anything that might follow, I would would like to see a renewed agreement between the people and their governments on exactly what they would like their taxes dollars to accomplish.  I don’t mean do they like pork barrel projects.  I’m asking if they like how the whole topic has become a hot button meant to attract the largest possible voting blocks, rather than as a crucial tool in the management of a national economy?  But let’s be real here.  Taxes might at best be a rudder of an economy or even just a compass.  The wind and sales are the businesses and the workers who staff them.  With that image in mind, here are a few ideas:

Business Taxes:
  I would like to see business taxes reduced in most instances and eliminated in others, particularly in the case of small and home based businesses.  Most of these types of taxes are at the state or local level, so it may not be possible to do much more than to influence the responsible legislatures to take this step.

We would accomplish a few things with these measures.  For instance, there are far too many cases where we have lost corporations and workplaces from our communities as they have moved to areas with more “favorable” tax policies.  If all states made an effort to  lower their rates as described, it would level the playing field with foreign locations and reduce the frivolous incentive for competition between the States which, though Constitutionally protected, seems like a pretty risky and ruthless tactic in the current climate.  A free market is going to work best when it is businesses competing and not our 50 States.

Incomes Taxes:  Our current progressive income tax system is actually a good starting point, in my mind.  I would like to see the rates charged at each income level come down.  There is no need to create a tax code that seems to penalize people for being productive and making money.

“Sin” Taxes:
  It seems ludicrous that the government has come to be dependent to such a large degree on our population’s vices.  The fact that the availability of new tax dollars is such a huge part of the debate on the legalization of marijuana seems almost illegitimate.  Cigarettes alcohol, gambling – who’s the addict here?  Most likely it is the taxing authority as often as it is the consumer.

Unless we were earmarking all of this tax money to pay for universal medical and mental health care, I would eliminate any sin taxes over and above those charged for goods or services of similar commercial value.  I see no problem with the existence of well regulated businesses in any of these markets.  It’s not necessary to single them out and we really need the government out of the business of passing moral judgments as part of our tax code.

Value Added / Consumption Taxes:  By now you have to be asking, “OK, how do all taxes go down?”  Well, the answer is they don’t.  I am a proponent of “Valued Added” and “Consumption” taxes.  They work something like a Sales Tax, assessed at the point of a commercial transaction.  My feeling is these taxes should be the burden of the consumer, rather than on businesses that offer products and services.  They would make customers ask serious questions before they buy a particular product, a process that would help us inch closer toward a sustainable society and away from conspicuous consumption.  These taxes should be progressive, with staples being free of taxes and “luxury” items or those that contribute most to pollution carrying a higher rate.  We might even be able to get brave and offer businesses an way to lower their product’s VAT, raising its attractiveness, by doing common sense things like adopting a common laptop adapter or reducing the amount of material used in packaging.  No more software sold in a shoe box.  And while I am at it, I’d assess a VAT tax on energy in which we can recover the cost of any military operations to protect the source of production.  Not so high for a windmill, but pretty steep for crude from the Arab peninsula.

Capital Gains:
  This would be another area of significant change.  The first is very fundamental to the incentives of found in the workplace.  I believe it should be illegal for those with executive level responsibility or members of the board of a business to own stock in that same business – either as a currently held security or an option to be exercised at a later date.  My personal experience is that the more shares are held in the executive suite and the boardroom, the more likely there will be extreme exhibits of self interested behavior that is not in the best interest of the business, the employees or any non-employee shareholders.  Pay and benefits are high enough at this level without an incentive pay plan that might even be counterproductive.

For all other shareholders, I would separate the code for Capital Gains based on whether or not the individual held a “productive interest” or simply a “financial interest” in the company.  A productive interest will mean you work there and the discretion in your job in basically limited to the task level.  An Capital Gains enjoyed by a shareholder that holds a productive interest in the company will be taxed at a very low rate.  On the other hand, Capital Gains received by a shareholder who simply has a financial interest the company would be taxed at a much higher rate.  Wall Street has morphed from a capital market into a casino.  We don’t want this part of the tax code to be so onerous that no one wants to invest, only to eliminate those who simply want to gamble.

All other financial products would have their gains taxed at the higher rate.   These products are often just elaborate math problems, rather than any tangible thing.  Simply applying the “all boats rise together” philosophy we assuming the aggregate of all gains and losses in these products basically reflects the health of our economy.  This level should be used much more effectively than it is in driving the decision to invest, spend or save.

Estate Taxes:  The final topic for now is Estate Taxes, which are assessed upon the death of the very wealthy.  This is an issue on which American opinion has changed pretty dramatically since it was originally added to our tax code.  While it now seems inherently American to feel that “I earned it, I ought to be able to pass it on,”  our forefathers were concerned that we not develop a royal class.  They also seemed to better understand that a free market, like any natural system, yearns for equilibrium.  Having experienced it first hand in the oligarchies of Europe, they knew that a concentration of wealth is not sustainable nor is it the sign of a healthy economy.  I like Warren Buffet’s view on this, though his plan is to give money away, rather than redistribute it through the government.  He has often said something like “I plan to leave my family enough to do anything they want, but not enough that they can do nothing.”  We don’t need royalty.  I’m not that impressed by rock star billionaires.   And if they do want to hand down wealth to their kids, it will be taxed like income.  The kids didn’t earn it, after all.  And since they live in America, they have every chance to blaze their own trail, rather than live off their family’s legacy.

Clearly this post can’t cover with any justice all of the issues that fall under the title of taxation.  I hope that I have been able to give you a sense of where I stand.  The basic principles are this:  Workers must be favored when it comes to enjoying the fruits of their labor.  On the other hand, individual citizens should carry more of the tax burden than intangible cooperative entities like businesses.  This shift of burden should be accompanied by an increase in the power of the people and decrease that of the corporation.  Now, if you think GM, GE, BP and Microsoft are better able to look out for your family’s interest than you are, feel free to disagree.  We can debate it one day in the unemployment line.

How to Recognize an Incumbent

The last 30 years of Michigan elections have been sort of a seesaw affair.  We give one side a shot and then the other at the Presidency and Governor’s chair.  Apparently, we have only liked one flavor of politician in our local Congressional race, giving that over to the Democrats for the entire period.  If anything, it is a pretty consistent, if not perfectly balanced history of political results.  But that’s where the problem lies – in the lack of positive results we have experienced from whatever set of elected officials we have chosen to employ.

 

During this time period, real wages in the US have stagnated, with Michigan lagging even further behind.  We have seen erosion on every front, from benefits through the quality of public services.  Every bit as important as the value lost from our paychecks, is the influence Michigan voters have lost as declining population reduced our State’s electoral votes and US House seats.

 

It seems like we hear every election cycle how “anti-incumbent” feelings are at an all time high.  Which usually means we simply swing back to whatever  equally ineffective “leader” the other side has to offer.  And the results have stayed the same.  Mixed, on their best days.

 

So what conclusion might you come to as we approach another election cycle?  What about finally accepting the fact that “they” are all incumbents?  If you vote one more time for a Republican or a Democrat, you are simply asking more of the same stale ideas and petty bickering.  It’s a predictable formula that is ill suited for unpredictable times.

 

If this election is as close as the polls indicate, we will almost inevitably end up with a collection of evenly split legislative houses.  If you really want the quickest route to returning influence to the Michigan electorate, send the tie-breaking vote to Washington or Lansing.  Vote for an alternative party.  Both sides will need us to do business.  Unless you really want more business as usual.  We didn’t think so.

Let’s Talk About Priorities

The other day I spent some time looking at the answers that my opponents in this race had provided to one of the many on-line surveys we are asked to fill out in the run up to the General Election.

It was a very simple survey, allowing for only multiple choice answers.  What struck me as I went through their responses is that every issue was “Very Important,” as was every investment and every institution.  One of the things I learned in business was pretty simple, if everything is a priority, then nothing is really your priority and nothing gets done.  And that is a result that is getting all too familiar.

So let’s talk about priorities for a moment.  Like the spending priorities as described in our 2010 Federal Budget.

Leaving out the $2 trillion dollars in “mandatory” spending for Social Security, Medicare, Medicaid and other fixed entitlement programs; let’s take a look at the Discretionary Budget for fiscal 2010.  Without accounting for any “stimulus” spending, here’s what it looks like:

Defense                           $577,245,000,000
Iraq & Afghanistan             128,000,000,000
Veterans                            109,600,000,000
Health                                 80,466,000,000
Transportation                     57,540,000,000
Science & Energy                52,124,000,000
International Affairs              51,235,000,000
Education                            46,686,000,000
Housing                               43,719,000,000
General Government             43,203,000,000
Justice                                 30,627,000,000
Environment                         27,618,000,000
Agriculture                           25,661,000,000
Community Dev.                   27,824,000,000
Total:                            $1,301,548,000,000

I don’t know about you, but those don’t look like my priorities, how about yours?

Defense is the easiest target.  At 46.5% of the world’s total in military spending, the US now spends roughly the same as the rest of the world combined.  Military spending outside our borders and the export of American wealth that goes with it is in large part responsible for the deficit spending we have employed for years.  I know a little about the value of a military base first hand, as I grew up outside the gate of an Air Force base and saw first hand what it meant to the community’s economy when it was closed.  I ‘m not simply wishing that same fate on towns all over the world, but that’s our money and we need to keep it home.

And speaking of home, when we bring Veterans home, their benefits shouldn’t be in the Discretionary Spending category.  More than anyone else, they earned them.  This line needs to be switched to the Mandatory Spending budget line, where it belongs.

If I was going to propose a top line Federal Budget that reflected the priorities of the people I speak to, I believe it would look a little bit more like this:

Defense                           $300,000,000,000
Health                               168,000,000,000
Veterans                          Moved to Mandatory
Science and Energy           104,000,000,000
Transportation                    99,000,000.000
Education                           89,000,000,000
Agricultural                        51,000,000,000
International Affairs            43,550,000,000
Environment                      38,000,000,000
Housing                             36,000,000,000
Justice                               35,000,000,000
Community Dev                 23,000,000,000
General Govt                      22,000,000,000
Iraq / Afghanistan                 5,000,000,000
New Total                         $101,355,000,000
What we’d get from this:

  • An immediate 15% budget cut, with actual budget increases for many Federal Departments
  • A drastic cut in defense spending. We’d have to get by on only 35% or so of the world’s military spending for now.
  • Incentives – in the form of shifted government spending priorities – for technology companies to move from defense technologies to those that will improve quality of life, not destroy it.
  • More money for Health Care in the form of research, direct benefits and training of new doctors.
  • An immediate investment in energy, both new alternatives and in efficiency for existing investments
  • A shift from road spending to light rail between close population centers (e.g. commuter routes between Midland – Saginaw – Bay City).
  • An immediate increase in education spending to help cash strapped schools.
  • Increased investments in agricultural infrastructure
  • An increase in funding to fight corruption and white collar crime
  • Large reductions in “General Government” and only enough money for Iraq and Afghanistan to get the heck out of there.

Some might ask about the decrease in Community Development money.  That particular item is as symbolic as the large cut on the Defense line.  The current budget model requires that we send money to Washington so they could decide how it should be spent when they send it back to our local community.  The budget model I propose includes around $200 billion in reduced spending (remembering that we are guaranteeing Veteran’s as it shifts to the Mandatory Spending).  That $200 billion will stay at home and we can spend doing out own community building.

I know as much as anyone that the devil is in the details and there is always that little issue of execution, but this is where I’d start.  It might not be an exact reflection of my priorities, but it is far closer than the current budget.  From what I am gathering on the “campaign trail” it’s probably closer to the opinion of the average American, as well.

Women’s Health News

Here is an article from MLive about  the “Right to Life” endorsement, that went to John Kupiec.  Dale Kildee has had this endorsement for virtually as long as it has been offered.

The real news here is that means I am the only firmly Pro Choice candidate in this race.  I’m not going to seek any endorsement on this fact.  I am simply going to report it.

Please feel free to pass this on.

http://www.mlive.com/news/saginaw/index.ssf/2010/09/right_to_life_of_michigan_endo.html

The Bad Guys are Still Winning

Frank Rich asks a lot of good questions about the financial meltdown that precipitated this recession and why the Obama administration has let those that committed obvious fraud and other offenses off the hook, generally with their ill gotten gains intact.

New York Times – Frank Rich on The Lack of Accountability in the Financial Markets