5
Get ready for another round of stimulus
Economic stimulus checks are prepared for printing at the Philadelphia Financial Center on May 8, 2008 in Philadelphia, Pa.
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TEXT OF STORY
Scott Jagow: Believe it or not, the government is talking about another economic stimulus package for the fall.
Stacey Vanek Smith explains.
Stacey Vanek-Smith: Democrats like House Speaker Nancy Pelosi and would-be president Barack Obama want a second stimulus package of around $50 billion.
But don't expect another check from the IRS. This round would focus on new infrastructure projects as a way to jump-start the flagging economy.
Karen Shaw Petrou is with Federal Financial Analytics.
Karen Shaw Petrou: Employment in the construction and building trade, production of the goods and materials needed in infrastructure spending. That's good for the economy.
But government spending has its critics. Gerald O'Driscoll is a senior fellow at the Cato Institute. He says these projects cost a lot of money and that money comes from one place: Joe Q. Taxpayer.
Gerald O'Driscoll: You're either going to have to raise taxes or sell bonds and in either case you're extracting resources from the private sector.
Either way, O'Driscoll says we shouldn't hold our breath. He says little is likely to happen before the presidential election in November.
I'm Stacey Vanek-Smith for Marketplace.
So it's jobs you want? You want to see a boost in the economy that would create new jobs? Well, let me tell you what isn't going to do it. That would be those stupid $300, $600 or $1200 checks the government has send out to us in May.
Jobs have left this country because of our tax structure and regulation. Our tax structure takes the majority of the blame here. Roger Smith, the former HMWIC of General Motors told the Congress many years ago that the embedded taxes in the price of every car coming out of Michigan are having an adverse impact on the auto industry. Congress didn't listen then .. and isn't, for the most part, listening now.
Let's start with a few facts that you might not be aware of:
First .. there are $13 trillion dollars that belong to U.S. citizens and businesses working offshore. These dollars are working offshore to escape our punishing tax system. In some cases U.S. based businesses and individuals earn these dollars overseas and just leave the money there, knowing that if those dollars come home the tax collector will be waiting. So they are invested overseas. Think about it. We have $13 trillion dollars working overseas and not working here in this country to create jobs and boost our economy for one reason. Just one. Our tax code.
Then we have the cost of complying with our current tax code. These tax compliance costs are estimated to be anywhere from $300 to $500 billion dollars .. and that's a cost that is incurred every year. The average U.S. taxpayer spends close to 60 hours working on their tax record-keeping and tax returns every year. This is time that is taken away from either leisure activities or income-earning pursuits.
Now this is so simple that everyone ought to be able to understand it. If you eliminate corporate and individual income and payroll taxes and if you eliminate the need for any business or individual to file an income tax return with the federal government, you are going to reduce the cost of complying with our tax code to almost nothing. This would mean an infusion of somewhere between $300 and $500 billion dollars into our economy every year .. money now spent on tax compliance costs.
It takes $100,000 to create a job. Lower tax compliance costs by just one billion dollars. Let that one billion go to work in our economy, and what do you have? Enough money to create 10,000 jobs. Pour hundreds of billions into our economy .. money that can be invested rather than wasted on tax compliance .. and just how many jobs do you create? And we're just talking about tax compliance costs here.
What happens when businesses can operate in the United States with no tax component on either capital or labor? That question was asked of the leaders of about 400 huge corporations not headquartered in the united states. Over 300 of these business leaders said that they would immediately open their next manufacturing or distribution facility in the U.S. What would that mean? Jobs, that's what. By the way, the remaining corporate heads said they would go ahead and move their headquarters to the U.S.
There's your job program. There's your economic stimulus plan.
And let's not forget the $13 trillion in offshore deposits. As soon as we lift the tax burden on Americans and American businesses that money starts coming back home. That money ends up being invested in American businesses and financial markets. Now I'm no economist, but I do have this wild idea that trillions of dollars flowing into this country and into our business and financial markets is going to have a positive impact on our economy.
Now is the time to talk to your Senators and Congressman and tell them that you want them to support the FairTax. This is the only way that the U.S. is going to have a real stimulus plan. www.FairTax.org
Ronald Hernly
North Charleston SC
rhernly@netzero.net
FairTax/Jobs?
So it's jobs you want? You want to see a boost in the economy that would create new jobs? Well, let me tell you what isn't going to do it. That would be those stupid $300, $600 or $1200 checks the government has send out to us in May.
Jobs have left this country because of our tax structure and regulation. Our tax structure takes the majority of the blame here. Roger Smith, the former HMWIC of General Motors told the Congress many years ago that the embedded taxes in the price of every car coming out of Michigan are having an adverse impact on the auto industry. Congress didn't listen then .. and isn't, for the most part, listening now.
Let's start with a few facts that you might not be aware of:
First .. there are $13 trillion dollars that belong to U.S. citizens and businesses working offshore. These dollars are working offshore to escape our punishing tax system. In some cases U.S. based businesses and individuals earn these dollars overseas and just leave the money there, knowing that if those dollars come home the tax collector will be waiting. So they are invested overseas. Think about it. We have $13 trillion dollars working overseas and not working here in this country to create jobs and boost our economy for one reason. Just one. Our tax code.
Then we have the cost of complying with our current tax code. These tax compliance costs are estimated to be anywhere from $300 to $500 billion dollars .. and that's a cost that is incurred every year. The average U.S. taxpayer spends close to 60 hours working on their tax record-keeping and tax returns every year. This is time that is taken away from either leisure activities or income-earning pursuits.
Now this is so simple that everyone ought to be able to understand it. If you eliminate corporate and individual income and payroll taxes and if you eliminate the need for any business or individual to file an income tax return with the federal government, you are going to reduce the cost of complying with our tax code to almost nothing. This would mean an infusion of somewhere between $300 and $500 billion dollars into our economy every year .. money now spent on tax compliance costs.
It takes $100,000 to create a job. Lower tax compliance costs by just one billion dollars. Let that one billion go to work in our economy, and what do you have? Enough money to create 10,000 jobs. Pour hundreds of billions into our economy .. money that can be invested rather than wasted on tax compliance .. and just how many jobs do you create? And we're just talking about tax compliance costs here.
What happens when businesses can operate in the United States with no tax component on either capital or labor? That question was asked of the leaders of about 400 huge corporations not headquartered in the united states. Over 300 of these business leaders said that they would immediately open their next manufacturing or distribution facility in the U.S. What would that mean? Jobs, that's what. By the way, the remaining corporate heads said they would go ahead and move their headquarters to the U.S.
There's your job program. There's your economic stimulus plan.
And let's not forget the $13 trillion in offshore deposits. As soon as we lift the tax burden on Americans and American businesses that money starts coming back home. That money ends up being invested in American businesses and financial markets. Now I'm no economist, but I do have this wild idea that trillions of dollars flowing into this country and into our business and financial markets is going to have a positive impact on our economy.
Now is the time to talk to your Senators and Congressman and tell them that you want them to support the FairTax. This is the only way that the U.S. is going to have a real stimulus plan. www.FairTax.org
Ronald Hernly
North Charleston SC
rhernly@netzero.net
Because of the looming budget deficit and already established national debt, many politicians argue that three tax cuts now in effect but due to expire in two years should not be renewed. These are the $174 billion package of individual and business tax cuts and expanded child and education credits, the $81.1 billion Alternative Minimum tax, and the $50 billion death tax. After all, the “stand alone†effect of letting these tax cuts expire will add $305.1 billion to the treasury in the year 2011 alone. However, the ripple effects on our economy should be considered lest we add more to our debt than the revenue the tax expirations generate. Congress is facing an exploding budget deficit in dire need of revenue and an ongoing need for fairness. Postponing a decision is not one of their options.
The medicine Congress needs to heal our country is right under their noses. It is, however, a bitter pill for them to swallow. It would represent the largest transfer of power from government (Congress) to the governed (American citizens) in our history. There sits stalled in committee for several years now a bill known as the FairTax bill. The committee won’t even allow it to come to a vote. This bill would eliminate all federal taxes and replace federal revenues dollar for dollar with a consumption tax. No one would even pay a dollar in taxes for consumption up to the poverty level. Top economists have demonstrated that this plan would double our economy. They have devoted over 10 years and $22 million in research and development. They know what they are talking about and have the facts to back up the plan. Former Treasury Secretary John Snow, Nobel Prize economist, Dr. Milton Friedman, Former Federal Reserve Chairman Alan Greenspan and noted economist, Dr. James Poterba provide backup that the FairTax plan is delighted to have. That’s more than we can say about the spin that comes out of Congress.
There would be many benefits to passage of the FairTax Bill but let us just show Congress how enactment of the FairTax bill would solve the problem of losing $305.1 billion in 2011 if the aforementioned tax cuts are allowed to expire as scheduled in the next two years. Right now it is costing the treasury $945 billion per year to provide income tax deductions, tax preferences, loopholes, credits, and favors provided by the current tax code. Only those who qualify for these breaks and itemize their returns receive these tax benefits and 70% of filers do not itemize. Under the FairTax plan ALL Americans receive monthly prebates to reimburse consumption taxes paid up to the poverty level, guaranteeing that no American pays the 23% FairTax to purchase the basic necessities of life. These prebates would cost the treasury $489 billion. Thus, there are two vast differences in the tax breaks under the current income tax code and under the FairTax plan. First, only tax payers who qualify and file an itemized return receive the former. All American citizens with a social security number receive the latter. Second, there is the fact that the current income tax system doles out $456 billion more to “favored†taxpayers than the FairTax prebate plan would give to all, playing no favorites. The net effect of the prebates is to lower the marginal tax rates for all Americans. So do the arithmetic. Just by funding the government through the FairTax plan for one year we can cover the $305.1 billion lost by keeping the tax breaks due to expire over the next two years and have an extra $150.1 billion to spare. That would become $150 plus $456 billion or $606 billion over two years.
Imagine what a boost the American economy would experience if taxpayers were handed a virtual $400-billion-per-year tax cut! This amount of extra money in our pockets would work to grow the economy. Further imagine that even with this virtual tax cut, the government would continue to be funded at its current level. The treasury would merely have to collect federal taxes by a simpler, more transparent, and fairer system than that of our current tax code. The Fair Tax bills before Congress would replace the IRS with just such a system.
To look at the money spent just to comply with the current tax code from the point of view of its purchasing power, I will quote the report of President Bush’s Advisory Panel on Federal Tax Reform published in late 2005. The report states that the money spent by Americans filling out their tax forms would fund “the Department of Homeland Security, the Department of State, NASA, the Department of Housing and Urban Development, the Environmental Protection Agency, the Department of Transportation, the United States Congress, our federal courts, and all of the federal government’s foreign aid.â€
This same advisory panel noted that widespread noncompliance costs each honest taxpayer an extra $2000 in taxes yearly. It further notes that due to the arbitrariness of the code increasing your income by 50% can increase your tax burden by 140%. It shows that marginal income tax rates can now rise over 30% for a family earning just $30,000 per year. That’s does not include the 15% payroll tax. A 45% marginal rate on a $30,000 yearly income is happening today! This comes straight from the advisory panel experts. Who in his right mind can prefer the current system to the 23% Fair Tax?
If anyone in congress is REALLY interested in stimulating the economy, there is one solution all ready sitting in Charlie Rangel’s W&M committee that can provide relief for numerous issues requiring "economic stimulus"… that’s ‘The FairTax…HR-25.
How about a MONTHLY prebate check for $300-$600 for every family instead a one time ‘stimulus’ check for $1200? Or virtually eliminating the high cost of compliance imposed by our tax code, or reversing the flight of businesses leaving our country for ‘cheaper’ labor markets overseas? Elimination of corporate and business taxes would attract massive capital, business and investment back to our nation as well as making our exported products far more competitive once the embedded tax costs are eliminated. Removing this embedded tax cost would lower the price of all consumer goods & services so as to offset a substantial portion of the new national sales tax.
Our complex tax code and draconian corporate & capital gains tax rates are driving businesses offshore (Who better than the CEO to explain why Ingersoll Rand corporate HQ is in Bermuda and why it would not be repatriated to the U.S anytime soon. Fast forward to the last 90 seconds of this CNBC interview of this corporate CEO:
http://www.cnbc.com/id/15840232?video=763441703 )
Note that the average worker in the 25% tax bracket pays almost 33% of his/her paycheck to the fed once FICA is considered. With the FairTax, the worker takes home their entire paycheck.
All of these issues could be remedied by simply abolishing our existing tax code and replacing it with "The FairTax". BTW, HR-25 currently has over SIX DOZEN bipartisan cosponsors (compared to just four cosponsors of a 'Forbes style' Flat Tax). Informed voters support The FairTax by wide margins every time it’s on a ballot.
Both Obama and McCain say they are for ‘change’, but both of them spout the same old bromides of “cutting taxes†for their favorite chosen group or ‘class’ while increasing taxes on the most productive producers in our society. It’s no wonder that our investment capital is following our business leaders to overseas tax heavens and our dollar is in the dumper.
Joe Lolli
Edisto Island
