Thursday, June 10, 2010
Random thoughts from a warped and fevered mind...
Desperate times call for desperate measures. Financially our country is in desperate times, and Congress is considering some dramatic changes to the tax code to raise revenue at the federal level. One such item under consideration is the elimination of the mortgage interest deduction for any household making over $250,000 per year to a significantly lower deductible amount. Meg Reilly, spokeswoman for the Office of Management and Budget said, "The proposal will correct inequities in our tax code that allow millionaires to benefit from higher itemized tax deductions than middle class families enjoy." Only in Washington can a household that makes $250,000 per year be considered a millionaire. In response, Senators Judd Gregg (R-NH) and Ron Wyden (D-Ore) have proposed lowering the tax rates across the board but eliminating many of the exemptions that currently exist in the code. They would, however, retain, the mortgage interest deduction. Think the talk of eliminating deductions ends with mortgage interest? This is the U.S. Congress we are talking about, folks! Also in discussion are eliminating the exemption from taxable income the 401(K) contributions many of us make; raising all tax rates; and introducing a value added tax. Nowhere in the discussion has our government talked about cutting spending, waste, and reforming the massive entitlement programs that are in place. Pay attention to the budget discussions in Washington this year.
I have always wanted to be the last man on earth just to see if all those women were lying to me.
Discussions are going on in the Federal Trade Commission about how to "reinvent" journalism. The FTC released a draft proposal May 24th that cites the rise of the internet and the myriad information options that are offered as damaging to traditional media, and it has forced many media companies to have to adapt their delivery systems. Sounds like the free market at work, doesn't it? And for our government, that is a problem. A proposal is being floated that would create a tax on news websites (why is every government "solution" centered around a new tax?) such as the Drudge Report and redistribute those monies to various newspapers. There has also been a proposal to exempt traditional newspapers from taxation; as well as a 5% levy on devices like laptops, I-Pads, and Kindles that allow people to read the news on-line. Do you see the conflict here? Having the government responsible for the salaries and overall financial health of the traditional media destroys any semblance of objectivity and independence. Should this come to pass, this would represent nothing more than government ownership of the press.
My wife is like nature, she abhors a vacuum.
People respond to incentives. A statement that sounds like a blinding flash of the obvious to you and me seems to be totally lost on government. Don't believe me? The top nine states in the U.S. in terms of economic are growth are the states that do not have a state income tax. Or how about auto sales spiking upward when the "cash for clunkers" program was enacted? Auto sales dropped markedly after this incentive program ended. People respond to incentives. So what do you think will happen when 2011 rolls around and the tax cuts enacted in 2002 expire, leading to higher taxes? Will businesses invest in new employees and expand their operations in the U.S.? Will consumers have more to spend on discretionary items? Knowing that tax rates will rise next year, do you think that income and economic activity is being shifted into 2010 with its lower tax rates? I do, and if I am right, that means that the economy is poised to sputter and contract next year. People and companies can and do respond to incentives, and in 2011, the incentives to earn, save, and invest will be greatly reduced.
Mirrors don't lie and, fortunately for me, they can't laugh either.
And that, my friends, is my view.