Archive for December, 2006
Tax terrorists. By taxing gasoline. The tax should be implemented incrementally to allow adjustments to spending and driving habits and raised enough to reduce demand purposefully. Americans are directly financing hostile political activities because dinosaurs made the unfortunate decision to die in regions that sprouted unfriendly regimes. Profits from the sale of gas profit some terrorists. That must stop.
The consumption of much gas in America really does not result in the production of any goods or services; other countries consume gas to produce goods and services. Consuming gas while driving to work results in the production of some goods and services, yet driving alone is inefficient. Gas must be used more efficiently. The market is the answer.
The market will respond in particular if there is certainty that the tax increase is permanent. The higher resulting price for gas alone will spur research and investment into other sources of energy without the need to create any additional specific tax credits and deductions. (There should be a concensus that the Terrorist Tax is not to be coupled with any specific tax credits or deductions. Otherwise, a lobbyist will grab a representative’s ear and obtain an earmark for some pet technology that may not otherwise be marketable.) The tax revenue can be used to address our obscene national Debt of almost Nine (9) Trillion ($9,000,000,000,000.00) dollars or for other purposes.
To his credit, Bush spurred debate by noting in his State of the Union address that America is “addicted to oil.” “Addicted to Oil” is a documentary narrated by Thomas Friedman addressing the world’s competition for a decreasing pool of crude oil. “A Crude Awakening – the Oil Crash,” a recent film directed by Basil Gelpke and produced by Ray McCormack, explains why the collision of insatiable demand for oil and the “limits of geology” is producing dire consequences. Others have written about the problem; see the Internet.
Others have made the argument that taxes must be increased. Mr. Friedman has championed the cause for years. Dispensing credit for the idea is less important than selling the idea to the public. Implementing the tax is economically and politically painful, yet failure to implement the tax is economically and politically fatal. Paying a substantial tax on gas is one of the most patriotic sacrifices each one of us could make. Convincing the American public to accept the “Terrorist Tax” will require astute and bipartisan statesmanship. Those Americans who believe that taxes should be raised during a time of war may be the first to enlist in the campaign. Present it as a tax that provides a double punch. A single dollar provides a double return because we keep it and the terrorists don’t get it.
There is only one person who could pull it off in the short term. Bush could shock the world by announcing the Terrorist Tax as a means to 1) deny funds to Terrorists, 2) confront global warming, and 3) generate much needed revenue. The sales campaign requires an observation that some sympathetic countries provide oil to the United States; this country does not need to generate more enemies. “Tax Terrorists Today.”
The words “meth” and “marijuana” should not be used in the same sentence. Too many politicians are treating them as one menace. Meth is evil. Meth is poison. Meth is the devil incarnate. No joke; no irony. Nasty stuff.
Meth is even more addictive and destructive than coffin nails (cigarettes). The drug consumes the soul and contorts the body. Even Trout Unlimited is involved because of the grave consequences to kids and brown trout from production and distribution of the stuff in home-made labs.
Booze makes one violent. When a cop (constable on patrol) responds to a dv (domestic violence) call, he/she encounters a male, often clad in undergarments, quaffing booze and releasing demons.
Marijuana tends to make one passive. When a police officer responds to a domestic disturbance call involving loud music, they usually encounter some kids peacefully sitting on a couch listening to terrible music at a deafening volume. Or to a loud tv show. There may be a tv, but there is no dv. Okay, they are high. The kids. Nobody really gets hurt, except one’s sensibilities and ear drums. Marijuana may not be the best thing, but it is not the worst thing.
A libertarian might say that it is an individual choice, right or wrong. The danger with Meth is that the decision to use it is often the last act of free will. After that there are no real choices, just a consuming desire to consume more Meth and thus one’s body and soul. Meth is the hand maiden of poverty. Attack meth with a continuum of policy responses from education to prevention to detention to incarceration to _______tion to education. Strike fear in possible users and also offer them hope and alternatives. Attacking poverty helps. However, at the same time, decriminalize marijuana. Stay focused on the real problem.
(Next week – another national addiction)
When the technology bubble burst in March, 2000:
1. Individual investors who had invested post-tax or pre-tax (SEP; IRA; 401(k), etc.) funds often were left with marginal or worthless investments;
2. The invested funds were transferred to those individuals, usually Americans, who were clever or tenacious enough to sponsor an ipo (“initial public offering” of stock) and offer their “blue sky” ideas to the public;
3. They spent some of the money on yachts, polo saddles and large vacation homes and likely on other productive investments that spurred economic growth;
4. A few of the ideas endured, gained traction and contribute to growth and productivity today;
5. The taxes on the economic expansion resulted in more bountiful federal and state treasuries for a time;
6. The investors who lost money soldiered on and consciously or unknowingly delayed some purchases and/or other investments and deferred their retirements by a few years; and
7. Life went on.
Direct tax impact: The federal and state governments taxed the earnings each year and added substantially to their coffers. The decline after March, 2000 negatively impacted federal and state revenue. The local governments typically do not tax earnings; a few may have benefited from revenue sharing provided by the state. Some taxpayers are able to take capital losses of up to $3000 a year on their federal returns which impacts somewhat on federal tax revenue.
As the real estate bubble deflates and bursts today:
1. The last domestic American industry (the real estate industrial complex) which was jump-started by the Fed (Federal Reserve) in 2001 ran its course by 2006 [See the e-ssay dated April 25, 2005];
2. Many houseoccupiers are saddled with investments they are not be able to afford particularly those who purchased at the peak with interest-only or adjustable rate mortgages (ARMs) and those who used the houses as an ATM (automatic teller machine) to finance other purchases [See the e-ssay dated February 7, 2005];
3. The size of the average house may be too large for the typical family, unless the house is occupied by two or three generations of a family [See the e-ssay dated April 24, 2006];
4. The house likely is not as energy-efficient as economically possible and desirable which is impacting and will impact the economy/environment for decades [See the e-ssays dated May 8 and June 19, 2006];
5. The structures are in the nature of durable consumer goods not productive investments that provide jobs and growth;
6. The financiers, both domestic and foreign, likely will confront many foreclosures and suffer substantial uninsured losses;
7. The resulting dislocations and forced moves will weaken families and undermine community ties and involvement (PTAs, Little Leagues, etc.);
8. The Bankruptcy Code is now a more expensive and inaccessible safety valve [See the e-ssays dated March 21, 2005 and October 16, 2006];
9. Consumer spending remains the double-edged sword because it drives current economic growth but also increases personal debt owed to foreign nations [See the e-ssay dated January 17, 2005];
10. The taxes on the appreciation in the value of real property filled local and some state treasuries while negatively impacting federal tax revenue slightly;
11. The federal deficit and debt are growing exponentially while the unfavorable trade deficit continues to expand;
12. There is no other major domestic industry to stimulate; and
13. Life will go on, because it goes on; however, it will go on very differently.
Direct tax impact: The federal government does not tax real property, but it does allow homeowners to write-off local and state property taxes which may cost the federal government as much as 20 billion dollars a year. State governments typically do not tax real property. Local governments typically tax real property and received a tremendous influx of funds from the inventory of more expensive real property within their jurisdictions. However, as the value of the houses declines, the local tax revenue will decline.
The “Marketplace” radio program produced by American Public Media and available on National Public Radio presented a program “Local budgets rise and fall with housing” on November 29. The program notes that the public desires roads without pot holes and safe streets without additional tax increases. “This dilemma is motivating some like [Scott] Peterson [with the National Association of State Budget Officers] to look at how governments are funded: cities and counties mostly count on property taxes. States, on the other hand, tend to rely on sales and income taxes. And it was just a couple years ago that states battled horrible budget crises as those revenues plummeted after 9/11. Peterson believes it shouldn’t be boom for one and bust for another. So he’s taking a tax proposal to Indiana’s state legislature that would allow local governments to also charge sales or income taxes if they cut back on property taxes. The state, in turn, would get a share of cities’ property taxes. These are big new ideas.”
Bumper stickers of the week:
If it can’t go on forever, it won’t.
If it sounds too good to be true, it is.