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Thursday, January 24, 2008

16. Tax The Rich!!

At the recent debates in Iowa, the democrat candidates made their position clear – the nation’s ills can be cured by raising taxes on the rich and those greedy multi-national corporations. Apparently, redistribution of wealth has worked so well in other socialist countries, such as Cuba and what was once the USSR, that the Left wants more of it here.

As a “polarized” person on the conservative side of economics, I completely disagree. In fact, I want to see the entire system revamped and I’m certain I’m not alone. But, I don’t want to force my conservative, pseudo-Christian beliefs on anyone, I want each person to have a choice. So, here’s my modest proposal: Split the United States into two countries – one secular-progressive/socialist (SPS) and one conservative/capitalist (CC). The SPS States of America will increase taxes on the rich, on corporations and on inheritance as has already been proposed by most of the candidates on the left. The CC States of America will implement the plan proposed by Neal Boortz in The FairTax Book. Under Mr Boortz’s plan, there will be no income tax for any individual or corporation nor will there be an inheritance tax. The only tax will be a national sales tax on both goods and services. Mr. Boortz proposes a rate of 24% to continue to feed the current government’s voracious appetite. But I’m going to be more modest and propose a rate of only 12% because I would like to see an ocean of ineffective, bloated and unnecessary government agencies and services simply disappear. What also will disappear in the CC States is the high cost of tax preparation and compliance. According to the Tax Foundation (as referenced in Mr. Boortz’s book) cost of tax compliance in the US in 2002 was $194 billion. Once we add in opportunity costs, this number soars to over $500 billion a year. Also eliminated would be the IRS which costs taxpayers over $10 billion a year.

So let's review:
SPS States CC States
(current to hist. max)
Personal Income Tax39% to 90%0%
Corporate Tax34% to 53% 0%
Inheritance Tax 45% to 90% 0%
Cost of tax prep. unknown$0
National Sales Tax 0%12%

As the nation splits into two, both individuals and corporations will decide in which country they will live and conduct business. Profitable corporations and working individuals of all income brackets will look at the above numbers before making their decisions. Which do you think they will choose? Those that choose the CC States will not only eliminate the income taxes they would pay in the SPS States, they also eliminate the costs of CPAs and tax attorneys. Corporations would no longer need to spend billions of dollars on lobbying efforts seeking favorable tax breaks.

It won’t just be current US corporations that consider moving to the CC States, corporations across the globe will take a long, hard look at relocating their companies to this newly formed country and taking advantage of its simplistic and fiscally favorable tax structure.

As much as the Left loves to malign corporations and wealthy Americans as evil, nothing generates wealth other than business and no business comes into existence without venture capital. Where does the venture capital come from? Yep, from other corporations and those greedy, wealthy Americans the Left loves to punish with higher and higher taxes.

With such a favorable tax structure, investment money would also flow in from abroad as foreigners seek tax havens for their money. This money would “trickle down” into the economy creating new businesses and ventures. The reality is that money is already flowing out of our country to such tax havens as Switzerland, the Cayman Islands, Lichtenstein and Panama. These funds would quickly be repatriated into the economy of the CC States.

So who would remain in the SPS States of America? Those compassionate liberals of the current American economy? I doubt it. Already those in Hollywood who espouse such liberal principals as unions and higher taxes regularly produce movies in countries with lower, non-union wages and a more favorable tax status. What about liberal icon Ted Kennedy? Well, his family trust sits on the island of Fiji avoiding scrutiny of all kinds from the Federal government and the IRS. It would be interesting to discover just how much money from other prominent liberals resides in foreign accounts. Using the internet, electronic transfers are available to all working people trying to maximize their return and minimize their tax liability.

The rest of the world is already moving forward. Ireland, whose economy was in shambles decided in the mid-1990s to dramatically lower their corporate tax rate from 32% to 12.5%. Ireland went from being the poorest country in Western Europe to the richest per capita. Eleven countries in Eastern Europe have a flat corporate tax rate of 25%. Bulgaria has a rate of only 10%. Kuwait recently slashed its corporate rate from 55% to 15%.

The Left’s disdain of corporations and profits reminds me of a quote from “Gone With The Wind.” At the Twelve Oaks barbeque, Rhett Butler says to the southern gentlemen discussing war with the North, “I think it’s hard winning a war with words…I’m saying…All we’ve got is cotton and salves, and arrogance.” Just as a country cannot fight a war without artillery an economy cannot thrive and taxes cannot be collected without commerce. Yet we continue to give corporations reasons to do business elsewhere in the world rather than here within the USA.

If my modest proposal is actually implemented, how will the SPS States of America survive as corporations and money flow to the CC States? Anyone who believes it wouldn’t happen is deluded – it is already happening in our global economy. We need to decide if we want to be on the receiving end of corporate dollars – or the end which continues to be depleted. If arrogance and idealism fueled economies it would stand to reason that those under Lenin, Stalin and Castro would have risen to be the most powerful in the world. Instead, the altruistic dream of Lenin has already collapsed and Cuba hangs on a thread waiting for Castro to die. A similar fate awaits all nations that continue to attack wealth and commerce with progressively higher and higher taxes.

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