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What's New

2011-12-27 08:30:04

Maybe all of this is God’s will

Q: What’s new?

A: I am always glad to be asked. I’ve got several things that have been like “pin balls” bouncing off the sides of my mind. I know I can handle and accept anything that is God’s will. These things don’t seem to me like they would be, but they might. First, the other day I was listening to President Obama address some factory workers in Ohio. He said, the American Dream should be able to be realized by everyone. I could not agree more. He went onto say, “It should be able to be realized by not only the owners of the manufacturing plant, but by those employees working on the floor as well.” Again, I could not agree more. But as his speech went on, I found that wasn’t what he meant. He meant that instead of those employees working on the floor doing whatever it took to put them in a position to get ahead through more hard work, entrepreneurism and/or relationship building, the owners of the plant should share the majority of their profits with each of them so they all got ahead together. Really? I guess we are not to give any credit to the owner of the company who came up with the idea for the business in the first place; who did the research and development of the products and/or services before starting the business; who borrowed every dime he/she could borrow to begin the business, from an institution, his/her family or another lending source, or gave away a sizeable chunk of equity in the business to someone in exchange for the funds to underwrite the capital and operational costs. Are we to forget all of this? Are we to forget too that the employees got a guaranteed wage and benefits for working and had nothing at risk, while the owner of the business received no guarantees and had everything at risk? According to our President, the owner is still supposed to take his/her profits and share them with the employees. This doesn’t sound like equal “opportunity.” It sounds more to me like equal “outcome.” This was scary by itself, but when he didn’t bat an eye while saying it, it got even scarier. God, after more than 235 years of it being the other way, is this now what You want? A few days later in Osawatomie, KS President Obama gave a speech talking about the extension of the payroll tax credit under the title of “fairness” and a “make or break moment.” He talked about Theodore Roosevelt standing at that very spot 101 years ago, advancing the same agenda. He said he was called a Socialist and a Communist. He smiled as if to say, “That’s okay. If that’s what it is…that’s what it is.” This tax credit for 2011 comes as $130 Billion hit to Social Security, which is already insolvent. The money must come out of the US Treasury to pay for it. The US Treasury is more than $15 Trillion in debt. If it is renewed for 2012, it will be another $130 Billion. My wife always tells me, “Never ask a question if you can’t handle the answer,” but God, is this what You want? Is it Your will that we go broke? My next “pin ball” is closer to home: What are we going to do in Kansas to get more revenue so the state doesn’t go bankrupt, and businesses and individuals are standing in line to locate here, instead of serving notice on us to leave? But maybe this too is God’s will that the state go bankrupt…that people and businesses move out of the state. Maybe it’s all supposed to end this way. When answering the question on what we’re going to do, I am sure my liberal friends would say, “Increase taxes on all of those who make more than “X” dollars per year.” I must say, I am getting really sick of this answer for both the national deficit and debt problems, and the ones we have here in Kansas. Not because of it being a solution that will work that I don’t agree with, but because it is not a solution. It will not work. Let me explain. Do you know that 48% of all Americans pay no Federal Individual Income Tax at all, and 8% pay $500 or less? That 56% of all Americans paying $500 or less in Federal Individual Income Tax? The other 44% of all Americans pay all of the Federal Individual Income Tax. How much more must they pay? Really…how much more do they have to pay? And what did President Obama mean in Osawatomie when he said, “I see an America where everyone does his or her part?” Increasing the taxes on this 44% by another 25% (which those wanting the increase are not even advocating, as they are only advocating increasing the top bracket from 35% to 39%, an 11% increase), will not get anywhere close to taking care of the problems we face nationally and statewide? It will not solve the problem. You don’t believe me? Follow this math. 44% of all Americans pay 100% of all individual income taxes, for a total of $1.5 Trillion annually. We are spending $3.5 Trillion. Even if we raised taxes on all of this 44% by 25%, we would only collect another $375 Billion! This wouldn’t cover but a fraction of the annual deficit…and remember…no one is espousing a 25% Federal Income Tax increase. Yet this is the only solution you hear from President Obama and the majority of the Democrats. We do not need tax increases. We need instead…gigantic tax reform…both in Kansas and the USA. Let me begin here in Kansas with some numbers you should have no problem digesting. The Gross Domestic Product of Kansas for 2011 (the sum of all new goods and services produced and sold to consumers, businesses and government), will be $146 Billion. Of that amount, 81% is personal consumption (purchases of new products and services by people, not businesses). This represents approximately $111 Billion per year. The State of Kansas is now $22 Billion in debt. Our present tax revenue in Kansas is approximately $5.9 Billion. It comes from several sources, including the following: • $2.7 Billion from Individual Income Tax • $2.0 Billion from Retail Sales Tax • $225 Million from Corporate Income Tax • $142 Million from the Tax on Insurance Premiums • $30 Million from Corporate Franchise Tax • $22 Million from the Taxes on Financial Institutions The rest come from 15 other taxes. Here is a solution that will work. It is called, Triple Zero + 6.3. It is akin to the FairTax plan for America I advocated in my column in the September ’11 issue, which you can find at www.theqandatimes.com. Call this the FairTax plan for Kansas. It will work. What will it do for us? 1. It will cancel and replace the 6 taxes listed above, the largest two of which are the Kansas Individual Income Tax and the State Retail Sales Tax. 2. It will cost an estimated 22% less to collect, monitor, report and enforce this tax than does our present retail sales tax, primarily because of there being no exemptions. This 22% equates to $418 Million per year, half of it saved by businesses and the other half saved by the government. Put this $209 Million together with the $225 Million saved by businesses with cancelling the Corporate Income Tax, and the $30 Million Corporate Finance Tax, and you have a climate that will cause private sector businesses in Kansas to immediately become more competitive; existing companies will expand; and out of state firms will be more likely to relocate to Kansas, adding jobs and greatly boosting the Kansas economy. 3. It will stop the “sweetheart” deals, explained below. 4. It does not link to the Federal Income Tax as a starting point. 5. It will grow the GDP of Kansas each year, taking care of our future revenue requirements well into the future. How does it work? It establishes a 6.3% personal consumption tax paid on the final sales of all new products and services, collected at the point of sale, with no exemptions of any kind. There is no consumption tax paid on used products and services. There is no consumption tax paid on business to business transactions. The consumption tax required to pay for all essential products and services up to the Federal Poverty Level is prepaid to all Kansas citizens having a valid Social Security Card. A payment for this amount comes each month to the household…not one payment to each individual, but one payment to each household. But you say, “6.3% is the same rate as what the state retail sales tax rate is. How is this new tax going to increase revenue?” I am glad you asked. Remember those numbers earlier that “the ‘dog’ is hunting on?” The 6.3% retail sales tax is being collected on only $35 Billion of the $111 Billion worth of personal consumption of new products and services. Why? Because the rest is presently either exempt, or taxed then rebated back in “sweetheart” deals. In this article, we’re not going to go into what we all know as these “sweetheart” deals. They exist. We all know they exist. Instead, I want to focus on what makes up the $111 Billion of exempt products and services that would now be taxed under the proposed Triple Zero + 6.3 plan. Now stay with me because this is the easy and fun part. If the 6.3% consumption tax were collected on the $111 Billion worth of personal consumption of the dollar amounts specified above on these products and services, it would equate to $7 Billion!!! Yes, our present total revenue going into the State General Fund (SGF) is $5.9 Billion. $7 Billion is $1.1 Billion more than what we need to balance the budget. What do we do with the surplus? That’s a happy problem, isn’t it? “Whoooooaaaaaaaa,” you say. “That means I am going to be paying this 6.3% consumption tax on things I haven’t been paying sales tax on before.” You’re going to have the money to pay for it because you are no longer going to be paying any Individual State Income tax, AND you are also not going to be paying what you have been paying on State Sales Tax. Businesses are no longer going to be paying any retail sales tax on business to business transactions, and they are not going to be paying any Corporate Income Tax. This personal consumption tax will be collected only once, at the point of sale. But you continue to ask… “So I am going to be paying this 6.3% consumption tax on my bill from the dentist?” Yes. “My doctor?” Yes. “The architect who draws up new plans for our room addition?” Yes. “My trash bill?” Yes. “My insurance premiums?” Yes. Then you ask, “Well how am I going to be able to afford to do that?” Again, glad you asked. Suppose your annual household income is the average in Kansas, which is $47,250. The average Kansas Individual Income Tax paid on this average gross household income, after average deductions, is $1,982. You will not pay this tax…any more…ever again. Further, you will not pay the Kansas Retail Sales Tax ever again, which amounts to an average of $1,613 annually to an average household income of $47,250. This totals $3,595 in taxes you will no longer pay. But now you will be paying the 6.3% consumption tax on new products and services consumed by those in your household. What is the dollar amount of personally consumed products and services you could buy before you use up all of the $3,595 in taxes you are no longer paying? It would be $57,063.49 ($3,595 divided by .063). Guess what? You don’t have that much in your household income to begin with…and besides…this doesn’t take into account the payment your household receives each month from the State of Kansas to pay the consumption tax on essential products and services up to the Federal Poverty Level. What does this mean? This new personal consumption tax would actually reduce the amount of total state taxes the average household in Kansas pays. Where does the revenue come from then? The households with higher incomes, spend more, thus they will pay more, and now they will pay more on most all personal consumed products and services. But they too will have the Individual Income Tax, current Retail Sales Tax and the monthly payment their household receives from the State of Kansas to pay the consumption tax on essential products and services up to the Federal Poverty Level, as savings, to use to pay this personal consumption tax. How long has it been since you heard the term, “dynamics” mentioned while talking about taxes, except in a negative way? Let me list again what the dynamics of the Triple Zero + 6.3 plan will do positively: 1. It will cancel and replace the 6 taxes listed above, the largest two of which are the Kansas Individual Income Tax and the State Retail Sales Tax. 2. It will cost an estimated 22% less to collect, monitor, report and enforce this tax than does our present retail sales tax, primarily because of there being no exemptions. This 22% equates to $418 Million per year, half of it saved by businesses and the other half saved by the government. Put this $209 Million together with the $209 Million saved by businesses with cancelling the Corporate Income Tax and you have a climate, that will cause private sector businesses in Kansas to immediately become more competitive; existing companies will expand; and out of state firms will be more likely to relocate to Kansas, adding jobs and greatly boosting the Kansas economy. 3. It will stop the “sweetheart” deals, explained below. 4. It does not link the Federal Income Tax as a starting point. 5. It will grow the GDP of Kansas each year, taking care of our future revenue requirements well into the future. Regarding #5, those much more qualified than I have projected what this plan will do for us into the future. Conservatively…it will easily increase the GDP of Kansas by 7% each year. Presently we are #31 of all 50 states in GDP. In five years with this Triple Zero + 6.3 plan, Kansas could have a GDP of $204 Billion, #21 on today’s list. In 10 years, our GDP could be $287 Billion, nearly double from what it is now, and #15 on today’s list. By this time we would have ran a surplus for these 10 years, taken care of all of our responsibilities, paid off all of our debt, drawn thousands of businesses to the state and be well positioned for the future. Now this is what I call a solution. How about you? You know what God, if for some reason You do not want it all to end, and you want us to use the talents You gave us to figure this thing out…will this work in accordance with Your will?