CAPITALISM

RISK TAKERS MADE THIS COUNTRY

A REBUTTAL

Dec. 2, 2007 (From SAWYER2008.com): Conservatives, notably Rush Limbaugh, Bill Kristol, the Wall Street Journal, will justify tax cuts for capital gains on the specious argument that those entrepreneurs who are risking everything to start a new business, are providing new jobs. Capitalism and good old fashion entrepreneurship is what made this country, say they. Not so fast, say I.

America has had entrepreneurs for over three centuries. A few lived in stately manors or large prairie ranch houses while most ordinary citizens lived in hovels, rented houses or sod huts. We had "entrepreneurs" during the Great Depression, but most Americans barely scraped by. Until 1945, this country did not have a middle class. After World War II, the American Economy was one of the few left intact. The demand for U.S. goods created a demand for U. S. workers. Previously scorned, labor unions were allowed to organize the workforce, and wages soared. The standard of living for the working class greatly improved. For the first time in our long (entrepreneurial) history, the people who manufactured consumer products actually could afford to own those products.

For the first time, an American middle class came into existence. Workers bought cars and built houses away from the core cities. Suburban shopping centers sprang up. Interstate highways populated with motels and fast food restaurants were constructed. People could afford vacations, and weekend homes. Most importantly, ordinary folks, who never dreamed that they could own their own businesses, opened restaurants, started up retail stores, became builders, and sent their kids to college.

The new middle class became the new entrepreneurs, only there were a lot more of them. (more about "entrepreneurs and risk takers below)

SO WHAT HAPPENED?

Starting in the 1970's American manufacturers started moving their operations overseas where labor was cheaper, taxes lower, and regulation less obtrusive. Good manufacturing jobs began to disappear. While our politicians, Republican AND Democrat, and our political pundits, like Limbaugh, Hannity, Cavuto, those two Fox business analysts (the one with the big ears and the big guy named Charles (who reminds of my cousin Bobby)) assure us that "free trade is good for everybody," I have to wonder where they got their Economics Degrees.

Basic Economics: People grow food and manufacture products for their own needs. Anything grown or produced above their personal needs is called surplus. Surplus is then traded with other people and other countries in exchange for their surpluses. That is the simple basics of free trade. It is called reciprocity - the basics of which most of us learned during the first week of College - Economics 101. In recent years, America has experienced a trade deficit of around $800 Billion. Republican, Democrats, Mssrs. Limbaugh, Hannity, Cavuto, big ears and Cousin Bobby, just what part of reciprocity do you not understand? Where did you get the idea that $800 Billion in deficits is a good idea? Free trade my ass.

Do the math: A manufacturing job pays, what, $40,000 per year? At $800 Billion in trade deficits (2006), that comes to 20 Million good jobs we have shipped overseas. This is free trade?

We have a trade deficit with China of about $400 Billion per year (2006). Wow ! ! With that much money, will China eventually own the Earth? Well maybe. First let me tell you something that you (and the smart people above) don't know. Well, maybe Cavuto knows. China runs a trade DEFICIT with the rest of the world. Uh huh. We ship our jobs and spending money, to China and they buy THEIR stuff from someone else. Why? Mr. Cavuto? Mr. Hannity? Big Ears?

Your concept of free trade sucks.

Indebted to the labor unions, the Obama administration has threatened a tariff on Chinese Steelmakers. In retaliation, China has threatened higher tariffs on several American products. Can you say Smoot-Hawley ? Tariff wars prolonged the Great Depression and they have no place in today's world.

SO, knowitall, WHAT NEEDS TO BE DONE?

Glad you asked. In the last twenty years, during a time of stagnation in the European Union, there has been one success story to report; One European Nation leads the EU in per capita industrial output; and is second (to Luxembourg) in per-capita income. Industrious Germany? Nein. France? Non. Switzerland? Non, nein, and no (ask someone)? Nope . . .

IRELAND

What are you smoking, Sawyer ?!? Yes Ireland. In just over a generation, Ireland has evolved from one of the poorest countries in Western Europe to one of the most successful. It has reversed the persistent emigration of its best and brightest and achieved an enviable reputation as a thriving, knowledge-driven economy.

Living standards and economic stagnation has been left behind. Ireland now has the second highest gross domestic product (GDP) per capita within the European Union (after Luxembourg), one-third higher than the EU-25 http://www.heritage.org/Research/WorldwideFreedom/bg1945.cfm" \l "_ftn1#_ftn1" \o average, and has achieved exceptional growth. In the past 20 years every major world corporation has located facilities here. Nicknamed the Celtic Tiger, the Irish Economy is booming.

Recent data suggest Ireland has a higher gross domestic product per capita than Denmark, Canada, the Netherlands, Japan and Britain. How in the world did Ireland do it? Many explanations have been offered for Ireland’s exceptional economic performance:

1. Macro-economic stability resulting from the decision to attack the debt by controlling public spending, rather than by increasing taxes: For a small, open economy, curbing public spending proved to be the productive way forward. It created room for tax cuts while simultaneously lowering the debt ratio. Lower taxes and a more stable macro-economic background translated into a huge burst of private sector activity, employment, and confidence in the government. After the cessation of civil war in the Eighties, the newly-elected conservative government did three things:

(A) They acquired a line of credit from the European Union (can you say stimulus package?).

(B) They slashed pension benefits, and

(C) They reduced corporation taxes from 22% to 15%. Always obsessive about education, Ireland then could provide good workers and lower taxes. Then after prospering for the ensuing 9 years, what did the Irish do (Barack? Barney? Nancy? Harry? Karl? Vladimir?) Raise taxes? Nooooooooo.

THEY CUT TAXES AGAIN

Ireland cut its corporate taxes - yet again - to 12%.

2. Social partnership through a unique model of wage determination, involving extensive consultation and agreement among the social partners: The two key elements were wage restraint in return for income tax cuts and ongoing participation in economic decision-making through social partnership committees.

Domestic interest rates plunged as investor confidence grew, triggering a rare occurrence in modern economics: an expansionary fiscal contraction.

3. Foreign investment: Favourable corporate taxation is the main fiscal incentive for foreign direct investment. Ireland offered a preferential tax rate of 10 per cent on corporate profits from export-oriented manufacturing and services.

By the way, when you heard John McCain and Fred Thompson discuss Ireland's success during the 2008 election, know that they got their information from my website (Sawyer2008.com)

(October 6, 2009) With unemployment hovering around 10% and the deficit at a record high of nearly $1.5 Trillion (three times the "unacceptable" standard set by the Bush deficit last fiscal year), what does the Speaker of the House suggest as a cure? The Value Added Tax (VAT). This tax is used in all European Union countries, as well as many other countries.

Simply put, VAT is a charge on various stages of production of goods or commodities. In most countries, VAT is a tax in lieu of a sales tax. The "value added tax" has been criticized because the burden of it relies on personal end-consumers of products and is therefore a regressive tax (the poor pay more, as a percentage of their income, than the rich). Just like the corporate tax on my MAXX SS.

Defenders claim that excising taxation through income is an arbitrary standard, and that the value-added tax is in fact a proportional tax in that people with higher income pay more at the same rate that they consume more. Classes of goods are taxed at different rates. Therefore VAT is at most a flat tax. Baloney ! ! The VAT effects younger people more. Older people are more likely to have big ticket items, cars, refrigerators, houses, etc. already paid for. Younger people aremore likely to be purchasingthese items in the near future.

So, I suppose Nancy Pelosi wants to eliminate the sales tax altogether and impose the VAT tax sort of like the 'fair' flat tax? I can live with that. Ahh, ye of faith. VAT would be assessed - but all of the existing taxes would remain.

In the United States, only Michigan used a form of VAT known as the "Single Business Tax" (SBT) adopted in 1975, as its form of general business taxation. It is the only state in the U.S. to have used a VAT. I owned 17 retail stores in Michigan, and that tax put me out of business. VAT really worked well for MIchigan, didn't it Nancy?

I digress.

The top corporate tax rate in the United States is 35% - the highest in the world now that Japan in September 2009 finally dropped its top rate to 32%. And with the proposed increase in the Obama tax plan, our top rate will go to 40%. Wow ! ! Is that incentive to attract more business to the USA, or not Mr. Obama?

AN EPIPHANY

I had lunch the other day with Harry Reid and Michael Moore and as they handed me the check. they told me that corporations aren't paying their fair share of taxes.

I used to drink that Kool-aid too, but one day I had an epiphany. I had driven 1288 miles to NW Arkansas to buy a 2006 Chevrolet Malibu Maxx SS, a car no longer manufactured (morons), from Steve Smith GM. After I left the dealership, I noticed that I had left my credit card behind. Rushing back, I was surprised to find my Salesman reading a newspaper; the receptionist eating lunch; the Sales Manager picking his nose.

Pres: What's going on here?

Salesman: What do you mean?

Pres: Shouldn't you be passing the hat?

Salesman (dialing security): for what Mr. President?

Pres: To pay the corporate taxes on the car you just sold me.

Salesman (waiving off the security guard): The tax is figured in the sticker price.

Security Guard (holstering his weapon): Everyone, except liberals, knows that.

Then I had an epiphany - Corporations don't pay taxes, people do - their 'fair share' is figured in the price of the products we buy. Huh.

WHAT WOULD I DO?

(No 2,700 page bill needed here, Congressman)

ELIMINATE CORPORATE TAXES ON ALL MANUFACTURING and ALL EXPORTS and ALL "S" CORPS. The taxes we get from our manufacturing amounted to 4% of our budget. 4% !! Our deficits are infinitely higher. And, I just told you corporations don't pay taxes anyway. Corporation taxes are a tax on the people who buy their products - you and me.

If Ireland can attract manufacturing with 12% taxes (10% on favored exports), manufacturers will flock to the USA with 0 taxes. No tariff wars, no unfair competition, no huge deficits, no 2,000 page legislation. Just doin' business in the freest country on the planet. Just the return of those well-paying jobs to the good ole U.S.A.

DEATH TAX

January 2, 2010: Fox News Sunday. Quoting economic sage, Warren Buffett, Congressman Darryl Issa, says "The 'Death Tax' kills hundreds of jobs every day." Buffett's warning supports the notion (with which I strongly disagree) that when a business (or farm) owner dies, his heirs will be burdened with a high inheritance tax. To pay off the tax, they must sell the business (or farm). Thus the business closes and people lose their jobs. This opinion is vociferously defended by most Conservatives, and most elected Republican officials.

In the name of "fairness," Democrats support high estate taxes in pursuit of their goal to re-distribute wealth (yours and mine, not theirs), a position with which I take severe umbrage. If someone works hard to grow a business and pays annual taxes on that business, why is it "fair" to tax that business owner twice just because he has the misfortune to die, and pass it on to someone who would consider it 'chump change' to work for that same business owner?

It isn't fair.

But does my opposition to Inheritance Tax entitle me to give phony testimony on behalf of my opposition? In the interest of integrity, i think not; and as a general philosophy (the theme of my entire website and of my political aspirations), if we don't get the facts right, we can't fix the problem. While Warren Buffett rails against the death tax in between his saintly statements about how the rich should pay more, and that he would be more than willing to pay higher taxes, you can bet that HIS heirs won't be paying those taxes. How is that? Because Buffett has his fortunes all vested in some complicated trust funds by some very skilled tax attorneys, so that his heirs can get his dough without the government grabbing most of it.

Wait a minute. If ole Warren can avoid taxes, why can't a business owner/farmer do the same thing? Actually they can, herein destroying the myth about losing hundreds of jobs when the "business owner/farmer" dies: Almost all businesses are incorporated. If they are not, why not? The smallest businessman can incorporate for about $75.00 online through their State Website; it takes 10 minutes (and a check for $75.00), and no weasely lawyer is required (although if your business is large, I suggest hiring one).

The businessman (farmer, independent contractor, just about anyone can form a corporation), creates what is called an (click here) "S Corp." The business is no longer a 'sole proprietorship,' operated by the owner, but becomes a corporation, operated, well, by the same owner. What changes? Not much. The proprietor still owns the operation, but he is the owner of stock. When he incorporates, the owner places a value on his business (say a million dollars). Then he establishes the number of shares he will own, and places a value on each share. Typically, in this scenario, he will issue 1 million shares to himself (or wife, or children, or Warren Buffett), at a par value of $1.00 per share.

So what happens to the business after said businessman dies? NOTHING. Did Sears & Roebuck cease to exist when Richard Warren (Buffett) Sears died in 1913? Or when Alvah Roebuck died in 1948? No. They left the stock in their company to their heirs, who in turn paid taxes on their inheritance (I guess) and the business continues to this day. Corporations don't die - nor do they pay death taxes. NY Congressman, Anthony Weenie was technically, if not arrogantly, correct. The people who inherit the stock pay the taxes. The heir can pay the taxes and continue as owners of the business or they can sell their stock and pay their taxes.

Farmers are free to incorporate.

Either way, the corporation continues business as usual - no one loses their job Mr. Buffett; Mr. Issa, Mr. Hannity, Ms. Ingraham. Please for once, can't people (at least thinking people, like Conservatives) get it right?