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BACK TO SCHOOL

July 21, 2011

Take notes. There will be a quiz.  🙂

I was watching/listening to Joe Scarborough’s “Morning Joe” TV show about two weeks ago while getting ready for work. They were discussing why revenues are an important part of improving our country’s financial health. Yes, the former Florida Republican Congressman agrees with President Obama on this issue.

Naturally, the conversation turned to taxes with the left and right leaning guests debating. During that debate, I heard Pat Buchanan ask, “Can someone please tell me how increasing taxes in a bad economy helps to create jobs?”

Much to my amazement, no one answered his question.

Picture a middle-aged man, standing at the sink in his bathroom, looking into the mirror while simultaneously shaving and yelling at the television in another room at 7:15 in the morning.

“Seriously! None of you guys can answer that? You’re just gonna to let that go? I can’t believe it! Put me on that show! I’ll answer it!”

Yup. That would be me. Sad, I know, but true.

After a few seconds I regained my composure, sort of. Truth-be-known, I was still grumbling about it under my breath while driving to work.

Since no one on Scarborough’s show would (or could) answer Pat’s question, I will. God knows I had plenty of practice working through it that morning. But unlike TV, where everyone is trying to say the singular clever sentence that will be carried through the rest of the news cycle, I’m going to lay it all out.

To my Republican family members and friends: please read with an open mind. This is not about politics, it’s about our country.

Knowing Our History 

Over the past several decades, arguments that raising taxes on the rich and regulating industry hamstrings employment have been disproven time and time again.

These concepts were shredded in the 1930’s under Roosevelt, in the 1950’s under Eisenhower and in the 1990’s under Clinton. Yet, for some inexplicable reason, the discussion continues nearly a century later. When I ask anyone for some evidence that illustrates lowering taxes and de-regulating industry somehow creates jobs, they have no evidence. Furthermore, there is no history that backs these theories.

We know we must invest in our country if we want this experiment in freedom called America to be successful. We created a Constitution which provides for a government that sees “…to the general welfare of the United States.”  This clause includes assessing and collecting taxes and then using that revenue on behalf of the union, “…to assist national needs in agriculture or education, provided that the spending is general in nature and does not favor any specific section of the country over any other,” according to Alexander Hamilton, whose assessment of the clause is predominant in case law.

Our Government’s Responsibility

In order to get our economy back on track, we must get the middle class back to work. When the private sector fails to do so, as it has done for the last decade, government must step in, as it did two decades ago. Now I know this seems like socialism to some of you, but I promise you, it’s not. We have only one socialist (government-run) program in this country – the Military/Veterans’ Administration. Our government trains, houses, feeds and pays our soldiers. It also builds hospitals, pays the doctors and staff and all other related expenses. Social Security is an insurance program and Medicare and Medicaid are reimbursement programs. Neither is socialism.

We (the government) can create middle class, private sector jobs by investing in our country’s infrastructure, technology, research and development and education. We subsidize (invest in) the states so they can rebuild their roads, bridges and public buildings by contracting private companies to do the work. We invest in technology, much like we did in the 1990’s, to help develop businesses in new areas heretofore untouched and we invest in scientific research that helps us with education, healthcare and agriculture. All of these investments create millions of jobs in the private sector. These new employees are paid by private employers, not the government. As this cycle begins to take hold, government involvement ends.

Ulitmately, these investments by government result in thousands of small, unrelated, private businesses (like the restaurants my parents owned and operated) expanding because more people are working and therefore have money to spend on things like going out to dinner, or a vacation, or a house, or a better education for their children, and so on. As these small businesses hire more people to meet the demand for their goods and services, they also add to the employment numbers, which helps to create an even larger middle class. As the middle class starts to prosper, everyone up and down the income ladder benefits.

Meeting Our Obligations

The return on our investment is always far greater than the initial outlay of funds due to the tax revenues generated from the jobs created. Add to this the revenues that come in from jobs created solely in the private sector and we have a large net gain that helps get our finances in order. It allows us to provide the safety net for our seniors and those less fortunate by making sure Social Security and Medicare/Medicaid are solvent for future generations. It also eliminates our deficit spending as well as reduces our debt. Once the inital investment is recouped, there is no need for the government to continue to invest at the original level. The jobs created through building, re-building, repairing, inventing, researching and developing will continue to grow because demand for newer, better, and more inovative ideas will always be there. Any further investment would come in the form of grants, funding for additional research and development and small business loans, all of which are already in the annual budget.

Making sure we have a thriving middle class is the only way to keep our country strong, safe and united. In addition, this creates opportunities for many of those who would otherwise “fall through the cracks” by providing early childhood care, a decent public education, low-cost financing for college and good employment possibilities after graduation from high school or college.

The Truth About Tax Cuts for the Wealthy

If it was true that tax cuts for the so-called “Job Creators” really created jobs, why were there only one million private sector jobs and 2 million public sector jobs created from 2001 to 2009 when the tax breaks for the top 2% were at their lowest since 1945? In the previous decade, 23.1 million jobs were created, when taxes were higher on the same income group.

Why is it fair to allow hedge fund managers and CEO’s of large corporations – that make millions every year – to only pay a tax rate of 15%, while the rest of us pay anywhere from 20-35% in federal taxes on our income? Most everyone reading this does not fall in the top 2% of income earners. So why would you be supportive of a system that exponentially rewards our wealthiest citizens while the rest of us see higher living costs (as a percentage of our income) and stagnant wages? It doesn’t make sense.

The idea that we can’t afford to invest in our country is ludicrous. When the ultra-wealthy and the large corporations paid much more in taxes, we were in great shape (i.e. the 1930’s, 1950’s and 1990’s) and everyone prospered. Now that those revenues are not being collected, look where we are: state governments shutting down; lending for small businesses at a stand-still; unemployment at 9% because there is no demand for goods and services; home foreclosures at an all-time high; teachers, firefighters, first-responders and policemen being laid off; programs like food stamps and unemployment benefits being slashed; roads and bridges crumbling; public buildings in desperate need of repair. Even with the tax breaks the Obama administration has given to small businesses as incentives to hire people, there is no reason for these businesses to add more employees when there is no demand for their products.

Get people back to work and demand for goods and services goes up, putting even more people back to work. It’s a ripple effect that benefits the entire economy. Get rid of the tax loopholes and subsidies for the wealthy so that those who have denied our government its revenue over the last ten years, can start paying their fair share, and we can be out of this mess in the next ten years. 

The Envy of the World or…

The quality of any government is judged by the health and welfare of the country it governs.

We can be the America that is the envy of the world, taking care of our elderly and providing opportunities for the less fortunate and mentally or physically challenged to help lift them up. We can be the America that continually improves its infrastructure, invests in R&D, and is a leader in new technologies, medicine and education. We can be the America where ‘can’t’ is not in our vocabulary and we meet our challenges and obligations together, knowing we are “…indivisible, with liberty and justice for all.”

Or, we can be the America that continues to allow our politics to divide us and eventually become the country the rest of the world used to envy.

The quiz has only one question: What kind of America do you want to be?

Sincerely,

www.MichaelKontras.com

2 comments

  1. I almost responded in haste to your latest rant and checked a couple of facts first. I was sure you were wrong about the tax level of 15%. You’re not. The high bracket is indeed supposed to be 35% for the highest echelon but as you pointed out, the “loop-hole” reduction to 15% for specialized gains is certainly significant and definitely abused. Would the middle class be able to make use of such a loop-hole?

    All I know is that my FULL taxation level (taking federal, social security, state, local, sales, gas, property taxes) is beyond 50% approaching 60% and therefore the prospect of increased taxes falls very short with me, country loyalty and patriotism not-with-standing. Then, since social security is “underfunded” and company pensions are going the way of the dinosaur, I have to attempt to assure future survival by contributions to 401K or the like. And while the health insurance companies realize they are about to have major increases in their outgo for valid claims, they are increased their rates as much as 30% in one year to garner their future under the new health care plan. Do you realize (you probably do) that between my employer benefit and my own contributions that my health insurance costs about $13,000+ a year? And that’s for a $5,000 deductible plan! That’s nuts! What would happen if we did away with the American institution of health insurance and required everyone to actually pay their own doctor bills. This after cleaning up the fictitious rates charged by the medical profession AND drug companies so fair charges could be assessed.

    Factor in major increases in food, energy, gas and all the other things that the government DOESN’T count in their “inflation rate computation” (to make things look less bad), I am rapidly being squeezed between the proverbial rock and a hard space. I used to think I earned a reasonable living. The solution is not simply “increased taxation” but responsible, more efficient use and distribution of government “attained” funds through wisdom instead of unabashed greed. It has been observed that while the general public is enduring financial struggles during present times, that our illustrious congress members (regardless of party) seem to be enjoying the “fruits of their labors” to the tune of 165% average increase in net worth during the same period. For lack of a more eloquent, reactionary phrasing of my conclusion, I will simply say… this sucks! From all that I can observe, it seems that our congress has become a liability to the future progress and security of our nation. For the record, this problem is bi-partisan. But I digress…


    • Hi Geoff,

      WOW! Great comments!

      Anyone who is getting dividends from their investments can take advantage of the 15% rate on that income. But what the CEO’s for these large corporations are doing is requesting that nearly all of their pay be in dividends so they can keep from having to pay the 35% on their annual wages. (Plus, the corporations can now write-off what they pay to their CEO’s, even if the majority is coming from dividends, which is not the way it used to be.) Hedge fund managers get nothing but dividends for wages, so they can use the 15% rate for ALL of their income. We’re talking about as much as a BILLION dollars in some cases. In addition, some of them borrow against those dividends and live off of borrowed money, and therefore don’t have to pay ANY taxes on their income, because they didn’t cash out. (Yet, another loop-hole).

      The tax increases I’m talking about are for those who make $1M or more a year (in salaries and dividends), not those below. Nearly 99% of us fall way below that mark, but we don’t have lobbyists protecting our interests in Washington like the fat-cats do. This is why unions are so important. They are the only voice a middle class worker has to protect their wages and benefits. Now, it’s true that in the past, unions went too far in protecting the worker and ignoring management, but that’s not the case today. GM got back on its feet, not just because they were given a loan from the government (which has been paid back with interest, by the way), but because unions realized they can’t continue to ignore the needs of employers who need to keep costs contained. The employees agreed to the new structure of lower wages that started at $15 an hour, and for the first time in nearly two decades, these employees were given bonuses that amounted to nearly a billion dollars world-wide from GM, because they are now operating profitably. They stuck with the company, took a cut in pay to keep their jobs, and it paid off. Other major corporations could learn a lot from this example, and keep jobs in this country, rather than moving everything overseas.

      Part of the healthcare reform that angers those on the right and some on the left is the mandate, which means that everyone has to buy some sort of coverage. If they can’t afford it, they can file for a subsidy, but the idea is to get everyone insured, which helps bring costs down. The other element that would have really brought costs down would have been the “public option,” which is nothing more than Medicare-for-all. This would have given the health insurance companies REAL competition. Then, you would have seen prices drop dramatically, but there wasn’t enough votes to get it passed, so Obama didn’t force the issue. Some tried to label it “a government take-over of the healthcare industry,” but that was simply not true.

      The good parts about the plan is that there is no more “pre-existing conditions” clause. Health insurance companies HAVE to take you, regardless of your health. Also, children can stay on their parents healthcare plan until the age of 26, which is very helpful to employers, who don’t have to worry about covering them as soon as they graduate from college and start working. Another good thing about the plan is that at least 85% of every dollar you spend on health insurance has to go towards patient care. Before, there was no minimum, which gave the owners of the corporations huge amounts of money for salaries and bonuses, oh yeah, and stock options, which the CEO’s loaded up on. Other parts of the plan, like the mandate, don’t get implemented until 2014. Health insurance companies are tickled pink about that, because that gives them about 30 million new customers. This is also why the “public option” was important. It would have allowed that as an optional choice and because it was there, health insurance companies would have to compete with it for the customers. I’m hoping it happens in the not-too-distant future. The competition would definitely bring premiums in line.

      Social Security is not at fault for our “debt” crisis. There’s $2.2 trillion in the fund right now. It is fully funded for another 27 years. The best way to keep it funded forever is to raise the cap on those who don’t have to pay into it after the first $106,000 and it would be solvent for generations. The other thing that has to happen is the monies borrowed from the fund need to be returned.

      As for wages, that’s what I was talking about when I said that our cost of living keeps going up against stagnant wages.

      MK



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