Tag Archives: regulations

The Real Cost Of Taxes

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

Government, in order to do the people’s business, must pay for itself. Currently, we achieve this by a myriad of taxes such as:

  • Income taxes, which I would argue are a penalty for success.
  • Sin taxes (or social engineering taxes) on things like alcohol and tobacco, that are over and above normal sales tax,  which are designed to deincentivize people to buy these products because somehow, that’s government’s business?
  • Estate taxes, because now that you’re dead, you don’t need that money, and you’re family certainly doesn’t deserve it more than government.
  • Fuel taxes like those on gasoline which also go over and above normal sales, which are designed to drive certain markets in favor of others.

    Gas Pump Tax Label
    Gas Pump Tax Label
  • Property taxes, because just buying the property shouldn’t make it yours to keep.

This list is by no means complete.

In a previous post, I wrote that I supported a consumption tax like that proposed at Fairtax.org. Something that is simple and easy to understand for people and corporations alike, then get rid of all this other nonsense. After that, use fees as much as possible, such as when you buy a driver’s license or plates to shift government income to fees for what they do instead of taxing everyone for something not everyone benefits from. But why do I believe this is important?fairtax[1]

Because government has its tentacles in everything, it can often hide disturbing practices in an over-complicated tax code and regulatory structure.

For instance; subsidies for an industry that can clearly survive on its own which are conveniently hidden in tax write-offs. Or a federal law that serves one locality greater than another. Why should people in Florida pay for a bridge in California for instance?

Between the taxes one is required to pay, the write-offs one needs to know about in order to keep as much as possible of what they’ve earned, and the regulations they must abide by, this creates expenses that destroy businesses, stress households, and wreak havoc on our economy.

As a former small business owner, I can tell you that the idea of borrowing/investing nearly $100k was infinitely scary. But at the early stages of 2007, the economy seemed quite strong, and I decided to go for it. Bad luck for me, the economy collapsed within months after I started and long before I was stable enough to weather such a tough downturn. Sadly, my business failed within 2-1/2 years as a result.

So what makes a business fail? We can debate about certain principles, but the one inarguable truth is that their income was lower than their expenses, and this was my experience.

The problem with our tax structure isn’t just the taxes themselves, it’s the complexity with which it is administered that add additional costs over and above the taxes themselves. If I didn’t have to file for licenses and worry about massive regulatory compliance issues, I could have saved myself a lawyer’s fee. If I didn’t have a myriad of tax codes and write-offs to deal with, maybe I don’t need to hire an accountant.

On a personal level, you and I pay taxes, but then at the end of the year, many of us are forced to hire an accountant for this as well, and this is in essence, a tax on a tax.

These are thousands of dollars I’m talking about, and I was the sole employee of my tiny corporation.

Would it had saved me? Maybe not. But I was close to surviving, and coupled with a lower tax burden, there’s a good chance it very well could have.

A Fortune 500 sized company however spends millions on lawyers and accountants for compliance and tax purposes. This is money that could be used to hire other people and produce more products at a lower cost. While I’m not insulting tax accountants and lawyers as if they aren’t jobs in their own right, both are noble professions, but the fact is they don’t produce anything for the business.By-The-Book-Taxes-CT-1[1]

If my company makes widgets, the lawyers and tax accountants do nothing to increase my widget output nor even assist with customer service or sales of them. They simply make sure I understand an overcomplicated legal structure and tax code that if done properly by government, I would understand without their help.

As always, I understand that the intentions from Democrats and Republicans alike are often altruistic when they pass laws, but laws were supposed to be about one thing; protecting rights. Not social engineering or market influence.

I should generally be entrusted to understand that throughout the course of doing business, I am or am not infringing on someone’s rights without needing a lawyer and an accountant to explain it to me.

A simplified tax code and a federal register that hasn’t ballooned from a mere 11 pages in 1935 when it was the Federal Register Act was enacted, to an astounding 79,435 pages in 2008 would do wonders to help reduce the intimidation of starting a small business, and help those struggling to make it work on a shoe-string budget. I would bet 99% of these laws violate the tenth amendment alone.

Can we really call ourselves a free nation with 80,000 pages of laws on the federal books? I don’t know about you, but the thought of it doesn’t make me feel very free. I suspect I’m a criminal already and don’t even know it.

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Job Emigration – Place Blame Where It Belongs

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

This past election, Barrack Obama and the DNC-loyals were attacking Mitt Romney and other business people for shipping jobs overseas. Like most patriotic Americans, it upsets me to see jobs leave the United States as well. But was this really a fair criticism of business owners?

No FartingAs a former entrepreneur myself, let me give you an analogy. This criticism is akin to farting while sitting next to me, then getting upset when I leave because you’ve made the room smell like three-month-old milk and despair.

If we were a statist nation like former Russia, China, Cuba, etc., businesses would exist to serve the state; something many on the left seem to wish were the case here—you know, the people who supported millionaire capitalist Michael Moore by attending his movies bashing capitalism yet fail to see the hypocrisy in that?

The reason I believe this idea is so ridiculous, is because despite my requests, not one of these people can name a statist nation whose people don’t live in absolute squalor. Note that Russia’s GDP has nearly quadrupled in the last 12 years, and they’re budding ideas on capitalism are still being ironed out. So I’ll be happy to consider statism a practical system of governance for maintaining quality of life and basic human rights when a successful example arises.

In our capitalist system however, businesses are the product of a risk an entrepreneur takes to offer a good or service to the public to make a living for themselves, as opposed to working at the behest of someone else. We all know that the greater the risk, the greater possibility for reward. This carrot on a stick is what makes entrepreneurs take such a risk.

Carrot On A StickSo to explain my flatulence analogy; America has the third highest corporate tax rate  on the planet. We also have one of the most intrusive regulatory networks as well, thanks to NHTSA, OSHA, the EPA, and other federal and local legislations and regulators. Add labor unions to that, which infect businesses like a cancer feeding off the host until the Hostess dies. All these roadblocks make America a very expensive place to do business. So how is it fair to blame people who leave America when we make it such an inhospitable place to do business?

Let’s ignore all the ideology for a moment and think about this skeptically and empathetically. What are some of the issues of doing business outside the United States?:

  • There are regulatory issues of your home country and the one you’re doing business in, requiring you to hire a plethora of compliance lawyers and staff just to make sure what you are doing is even legal.
  • Language barriers exist for nations that do not have English as their primary language.
  • Shipping, tariffs, and customs expenses increase.
  • Massive expenses in building a new facility and moving operations from a U.S. based plant to a foreign one.
  • Travel expenses increase for those headquartered in the United States that have to often visit overseas facilities.
  • Loss in quality assurances due to lack of direct oversight.

These are but a few issues I can think of off the top of my head; certainly there are many more. So if all these issues exist, why even do it? Because doing it is still more profitable than doing business here in the United States. Stop and think about that for a minute—let it fester in any liberty-minded bones you have in your body. If you’re like me, it should offend you to the core.

Because we are one of the richest nations in the world, American workers are not going to work for the pennies a day that some third world nations consider a reasonable salary, so if we intend to compete in the world market, you’d like to think our legislators would make every effort to overcome our higher wage demands by keeping corporate taxes and regulations as unobtrusive as possible so we can be competitive. Greater expenses make it more expensive to the consumer. Yet, during the election, the people like Mitt Romney were vilified as heartless rich bastards for attempting to rectify this.

I propose we start calling out those who want to bash the rich, playing the hero while doing it. This pure ignorance of economics, history, and logic is offensive. Our economy depends on people with money investing in American products and workers. But why would they when we treat them like dirt, tax them to hell and back, and regulate them like a dog on a choker chain dying to run ahead of its master?

Dog Pulling ON LeashIf you’ve ever been in the middle of a productive task and had someone interrupt to “help” you, only to slow you down and make matters worse, then you should inherently understand what government does to entrepreneurship every single day.

Unless we vote for liberty minded candidates, entrepreneurs will observe the basic physics principle of taking the path of least resistance. We have no one to blame but ourselves for electing and re-electing those who are content to push them away to pass “feel-good” legislation that is a product of jealousy as opposed to evidence based hypotheses. When emotion trumps logic, we all lose.

 

The Won and Done Act

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

If you’ve read any of my posts, you know I love blue sky thinking. Coming up with new and innovative ideas that while may at first seem radical, are founded in logic and reason.

So with that in mind, I propose the Won and Done Act; and no, it’s not a typo.

The Won and Done Act I am proposing is legislation that would force government agencies to decrease in size and scope through time.

One of the problems is that like any group of employees, because they like a steady paycheck, they work hard at justifying remaining on the payroll—sometimes long after they’ve accomplished their mission. As a result, instead of agencies closing down after they’ve succeeded, or at least shrinking into a maintenance role, they continue to expand endlessly; competing for taxpayer dollars instead of showing concern for how that money is spent and what liberties are being taken away from the people paying for it.

EPA-LogoA most egregious example is the EPA. Before you think I am saying we should abolish the EPA altogether, I promise I am not that radical. Our government has a duty to protect us from anyone who threatens our rights. The EPA provides a very valuable service in this vein, because for example, we can’t just allow corporations to dump toxic waste into the river after all.

However, even though the EPA has largely thwarted America’s worst polluters and achieved their goals, they continue to grow like the Blob, and are equally terrifying. For instance, they raise Corporate Average Fuel Economy (CAFE) standards for the automotive industry in an attempt to decrease fossil fuel usage when the free market should be the only thing influencing this—then require components to reduce emissions that negatively impact fuel mileage. On top of that, NHTSA continually adds regulations which require components that also add weight. Physics dictates more weight results in more energy needed to propel it.

So in case you missed that nuance, the EPA mandates greater fuel mileage on new cars, then NHTSA and the EPA mandate weight adding and efficiency reducing components which ultimately reduce the overall fuel mileage. It’s like requiring someone to eat a dozen donuts then requiring they lose more weight. General-Motors_11There is little wonder GM had to be bailed out and file for bankruptcy with Uncle Sam leaning on them like that.

So here’s the concept of my Won and Done Act:

If I begrudgingly accept non life-saving government agencies, all  such government agencies should have a stated and specific goal as well as a time limit to achieve that goal. All such government positions should be temporary whenever possible.

Once an agency’s goal has been achieved or the allotted time has expired, the agency may not reinvent itself, redesign itself, or search for new ways to keep relevant unless otherwise voted and approved by the legislature or the people. If their mission is WON, then they are DONE. If they cannot complete their mission, then the mission is aborted. We must incentivize elected officials to eliminate jobs wherever possible.

No government agency should be allowed to add staff or regulations at their own discretion either. Instead, let’s create incentives for them to literally work themselves out of a job. Here are a couple of ways to accomplish this:

  • Implement a completion bonus for achieving their goal, so that when their job is eliminated, they get a reasonable bonus to allow them time to find new employment, and if they find one quickly, the bonus is just money in the bank.
  • Implement a bonus for self-elimination. If an employee can make a case that his/her job has become unnecessary, they could apply with management to eliminate their own position. We would assume they would already have another job waiting in the wings and just take the bonus.
  • Provide bonuses for management to reduce staff where possible, although this one should also include a bonus for the eliminated.

One shining example of this ideal is the US Military. United States MilitaryYou find that this sentiment is quite prevalent there. In times of conflict, people step up to do their civic duty, then once the mission is accomplished, a few will reenlist to keep the peace, but the rest return to civilian life.

So then why doesn’t the rest of government have that same mindset? There are a number of factors. The military isn’t unionized first and foremost, and the military isn’t notoriously a cushy job either. The military is run quite strictly, it’s full of men and women with courage and conviction, they are very goal oriented, and they generally signed up for the honor of serving, not because it’s a gravy job. When’s the last time you felt that sense of diligence from the people giving you your driver’s license exam?

Government service is supposed to be an honor, not a career you do until you retire. As long as they are unionized, with greater than private sector wages and benefits, they will continue to grow as more and more people fight to take advantage of those massive benefits. These incentives for government to expand must be stopped if we care about liberty and freedom.

So while my Won and Done Act may not be 100% practical, it could at least start a discussion that changes the mentality of government leaders making the decisions about how agencies operate.

Getting rid of labor unions seems like a pipe dream as well, but with successful reforms in Wisconsin, and right-to-work legislation passing in Michigan and elsewhere, we’re at least headed in the right direction. But sadly, there is currently no incentive for government agencies to work themselves out of a job, so they just keep growing. Don’t believe me? The president is touting out job growth, but he’s not so forthcoming about the fact that 73% of that growth is in government.