Random Stuff
I’m taking a page from my compadre and posting a few random thoughts about the economy and the runoff election in Georgia.
First, there was a report issued by the National Bureau of Economic Research that states the US has been in a recession since December of 2007. That’s right, it’s taken almost a year for the NBER to figure out what the American public has known for quite some time. What was it that clued them in? Was the housing crash? The financial crisis/credit crunch? The drop in the Dow? Hard to believe that these academics are almost a year late in determining that we are in a recession. Further proof that you college folks shouldn’t take everything your professors say as gospel. Do they teach you some good stuff? Yes. Are they the foremost experts on every economical and political issue? No. They spend too much time patting themselves on the back for their perceived intellectual prowess to realize what’s going on in the real world.
Up next: Ford. Ford’s CEO, Alan Mulally, must have giant brass balls. He has stated that he will work for only $1 a year if the government supplies them with bailout dollars to keep the company afloat. That’s a very generous gesture. I’m assuming that it would be modeled after Ed Liddy’s contract at AIG ($1 in salary but loads of company stock). Here’s the problem. If Mulally really wanted to see Ford succeed, he would have cut executive salaries and reduced his own salary long before Ford hit rock bottom. Instead, he has waited until it looks like his company might not get the tax payers money and made one last desperate grab at our money. He sacrificed everything he could before he was willing to cut his own bloated salary. And anything over $0 is bloated for a man who has helped destroy one of the largest companies in the world through poor management. Sadly, I think that Congress will fall for this move and give Ford and the other automakers $25 billion of our money.
Finally, Georgia held its runoff election today between Democrat Jim Martin and incumbent Republican Saxby Chambliss. As of 9PM, Chambliss leads Martin 59% to 41% (50% of precincts reporting). This lead is good for 2 reasons. First, if Saxby retains his seat, then the Democrats will not have a super majority in the Senate. This is good for the long term health of our country. Nothing would be worse than a liberal president and more than enough votes in the Congress to back anything he wants to do (like expand social programs and government run health care). Second, and perhaps most importantly, there will be no more Chambliss and Martin campaign ads on TV. And after enduring 6 months of these ads, I’m sick of seeing them.
The Truth About the FairTax
Like my cohort mentioned in his last post, Democrats in Georgia (and likely in other states as well) are using inaccurate or incomplete information regarding the FairTax to misrepresent their opponents position regarding taxes. Since many Americans simply don’t bother to educate themselves on the issues in an election, most will see this ad and think that Saxby Chambliss wants to increases taxes by increasing the sales tax. And that’s not the case. Here’s a brief explanation of the FairTax. Eventually, I’ll do a detailed post (maybe around April 15th), but for now, here’s the basics.
The first thing you should know is our current tax code is incredibly complex. If you don’t believe me, try doing your taxes by hand next year (using Turbo Tax doesn’t count as “by hand”). The code is written in several thousand pages and can be confusing even for the smartest CPA’s to follow and know all the ins and outs of the code. The FairTax would eliminate all those complexities. It’s very simple to understand and easy to follow. When signed into law, the FairTax would repeal the: individual income tax, the alternative minimum tax (AMT), corporate and business income taxes, capital gains taxes, social security taxes, medicare taxes, the self-employment tax, estate taxes and gift taxes. All of those taxes (and the associated tax codes) would be replaced by a simple consumption tax – a single-rate sales tax on new goods and services.
This single-rate tax will be about 23%. Consumers will pay an embedded personal consumption tax (the 23%) at the retail level (it will not be imposed on the sale of used goods). Now you are probably saying “So the price of goods will go up 23% – how is this good?” Well, that’s not the case. Under the current tax code, companies are required to pay a corporate income tax. I hate to break it to you, but companies don’t pay income taxes – you pay them for the company. Companies embed their taxes in the price of the goods they sell (much like your trash pick-up company passed along the increased cost of gas to you by raising rates), so they are able to pass along their tax burden to you.
Under the FairTax, companies would no longer pay corporate income taxes. If they aren’t paying those taxes, then they have nothing to pass along to the consumer (you and I). By not having these corporate taxes (and some other stuff) embedded in the price of the goods you buy, the price of goods would drop by roughly 23%. Now where have we heard 23% before? That’s right! The tax rate of the FairTax is 23%. So, while you would see a 23% sales tax on goods, the price of goods would not increase (they would most likely drop slightly) under the FairTax plan.
Now, I haven’t gone through the full FairTax plan, but that’s by design. I just wanted to address the incomplete information in Jim Martin’s campaign ad. Jim Martin is correct that the FairTax plan supported by Saxby Chambliss will implement a 23% increase on everything we buy. What it leaves out is that this same plan will abolish the income tax burden on corporations – a burden they pass along to you and I. By eliminating this, the prices of goods and services will drop by roughly 23% (if not more). So the 23% would be a wash in terms of the price you will be charged for retail goods.
Be on the aware America – politicians are trying to deceive you. They will use your ignorance against you by passing off lies and half-truths as fact. Don’t let them get away with this – be informed about the issues. Time to educate yourself, America.
(PS – I’ll do my best to educate you, so check back later for a complete break down on the FairTax. In the mean time, check out www.fairtax.org or The FairTax Book by John Linder and Neal Boortz.)