Three Stories

2011 October 23
by SJ Leeds

Three stories this week…

Follow-Up to Cain’s 9-9-9 Plan

Last week’s blog was based on simple intuition: if we’re going to raise the same amount of tax revenue, that means we’re simply shifting the burden.  My belief is that lower-income people will pay more if they pay a 9% income tax and a 9% sales tax.  We already know that half of workers only pay 7.65%.


Cain has been under a lot of pressure from both Republicans and Democrats.  Now, he’s changing his plan.  Here’s a quote from the Associated Press:


“Cain’s shift on zero exemptions comes after an independent analysis showed his tax plan would raise taxes on 84 percent of U.S. households. The Tax Policy Center, a Washington think tank, said low- and middle-income families would be hit hardest, with households making between $10,000 and $20,000 seeing their taxes increase by nearly 950 percent.

Households with the highest incomes, however, would get big tax cuts. Those making more than $1 million a year would see their taxes cut almost in half, on average, according to the analysis.”


We don’t know exactly what his new plan is.  But, based on what I’ve read, here’s what it sounds like to me…different tax brackets (based on income levels) with virtually no deductions, credits or exclusions.


Now what are my thoughts…this is exactly what I said (in last week’s blog) I could love.  If you give me progressive taxation and eliminate all of our tax expenditures, that’s awesome.  We could (potentially) put together fair tax brackets (where we don’t increase the taxes of the poor) and we simplify the tax code.


While we could do this (and I love a plan that would do this), what are the chances of this actually happening?  I’d put them at 0-0-0.  We’d be taking away all of the power of the politicians.  It’s not going to happen.  But, it’s worth talking about.


I’m not going to be someone who votes for Herman Cain, but if he gets his plan to a progressive tax with no tax expenditures, it’s a great thing.  If he gets our country actually thinking about this type of issue, he’s done something great for our nation.


How to End the Deficit by Buffett

Warren Buffett said the following:
“I could end the deficit in 5 minutes.  You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.”


I’d probably take it a bit further and say that if the deficit is greater than 3% of GDP, sitting politicians are not allowed to receive or spend campaign funds.  Buffett is right – we have to give people the incentive to do the right thing.  Right now, the only incentive that politicians have is to spend more money and bring home the pork to their district.

If you want to see Buffett make this comment, here’s the link.  It’s right after the five minute mark on the video.


Where’s the Money?

What do you think is the wealthiest metropolitan area?  Would you guess New York, Chicago or San Francisco?  Maybe the plastic surgeons have pushed LA to the top?  Oh, I’ve got it…Silicon Valley!  Did you think that?  Well, if you did, you’re so “last year.”  They were number one in 2009.  In 2010, Silicon Valley came in second to Washington D.C.  The average household income in DC is $84,523.  The median household income for the US was $50,046.  This should make you feel good.  We want our politicians, government employees, lobbyists and lawyers to be taken care of.   Here’s the link  to the story.


I remember the days when being a government employee meant a lower salary and better benefits.  Now, it seems to mean a better salary and better benefits.  Of course, I’m old and I remember when stock options were used by start-up companies to compensate employees for below-market salaries.  Of course, then we found out that options were something that some companies used to re-price or backdate in a way to shift wealth from shareholders to management.


If your eyeballs haven’t popped out or your head hasn’t exploded yet, here’s another great number (from the same story).  Last year, $3.51 billion was spent on lobbying.


Have a great week.


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