Tuesday, September 29, 2009

Capitol Hill Switchboard Used For Partisan Purposes

Did you know that if you call the switchboard for Congress, the number you'd call to be put through to your Congressman or Senator's office, you get a short message selling Obama's healthcare policies before being transferred to the switchboard operator.

The number to call Congress is 1-800-828-0498. The message is:

"Thank you for calling your Representative and your Senators. Please urge them to vote yes on health insurance reform. Because the American people can no longer wait for more choices, lower costs, and coverage we can count on."

This does NOT sound proper to me. What do you think?

Comparing Health Care Plans - Focus on Costs Still Needed

Yesterday, US Budget Watch released "Comparing Health Care Plans: A Guide to Health Care Reform Proposals in the 111th Congress." The paper offers detailed summaries of the three major health care reform bills being considered in Congress, and their fiscal implications. http://usbudgetwatch.org/document/comparing-health-care-plans-guide-reform-proposals

They have maintained their insistence on cost control:

"Expanding health insurance will be extremely expensive, notably, at a time when the federal budget is already facing huge fiscal imbalances. Merely offsetting the new costs of a bill will not be sufficient to make a reform plan fiscally responsible since those offsets could otherwise be used to help close the longterm fiscal gap. Instead, a fiscally responsible plan must include aggressive measures that would help slow the growth of overall health care spending and reduce health care costs for the federal government. As debate and negotiation continues, we urge a strong focus on cost; not just over the next ten years, but over the long-term."

Five Step Program to Kick the Tax and Spend Addiction and Grow Jobs

Business Leaders want Michigan to be a Top 10 state for job and economic growth. Read their report, which has many ideas on what can be done, both short term and long-term. Their five step turn around plan includes:

STEP 1: Changing the Way We Manage Our Finances
STEP 2: Right-sizing & Enacting Structural Budget Reforms
STEP 3: Getting Michigan Competitive To Attract & Retain Jobs
STEP 4: Making Investments That Create A Great Job Environment
STEP 5: Accelerating Job Growth Through Innovation & Entrepreneurship

Download the full plan from the Business Leaders for Michigan website for the specific actions under each step, along with the rationale. This is a good place to start, even if we might not agree with all of the specifics.

How to Fix Michigan - Business and Political Leaders Weigh In

Tom Gantert in his Reporting Michigan news article Some of the biggest names in Michigan business and politics say how they would fix Michigan lists six suggestions made by the leaders speaking at the Republican Leadership Conference on Mackinac Island September 25-27:

* Make the regulatory system friendlier to businesses
* Adopt right-to-work legislation
* Fix Detroit
* Regionalize and consolidate local municipalities
* Get rid of the Michigan Education Association, the teacher’s union
* Get rid of term limits on politicians

Other posts in my blog will deal with most of these points, to get to more specifics on each of these. Stay tuned! Meanwhile, check out Tom’s report.

Democrats Confused About Business Taxes. Or are They?

Tom Gantert in his Reporting Michigan blog GOP state representatives are against a health care tax on physicians’ gross receipts reports:

“The Republican state representatives criticized a Democrat plan to tax health care in order to help balance the state budget, according to a GOP press release.
House Bill 5386, which is currently in the tax policy committee, levies a 4 percent tax on physicians’ gross receipts.

“It is astounding to me that right now when we are in the middle of a national discussion about lowering the high cost of health care, Michigan Democrats are actually pushing for a new tax on doctors that will make medical treatment more expensive,” said House Republican Leader Kevin Elsenheimer, of Kewadin, in a press release. “Doctors are going to have to pass these costs onto their patients, making the cost of health care go up.”

The GOP estimates that, if approved, the tax would raise health care costs in Michigan by nearly half a billion dollars annually.”

This attempt by the House Democrats reveals a fundamental misunderstanding many Democrats have about taxes levied on businesses or professionals. Anyone who understands economic theory knows that in general, businesses don’t pay taxes – individuals do. In the long run, any taxes levied on businesses get factored into the prices for the products the businesses produce or the services the business provides. An exception to this rule may be in the case of a small business in which the “profits” are actually the wages the sole proprietor or small business owners take home as a residual of what left after paying the business’s expenses. And, even in this case, in the long run there is less of this product or service provided which raises prices to consumers of those products or services.

Another possibility is that the Democrats are simply confused about business. Many Democrats equate a “business” which makes profits as “evil”, and therefore should be punished by extracting taxes to be redistributed to those they perceive as more worthy. The quest for profits is what makes the capitalist system work, and the capitalist system has been proven to provide abundance. Would anyone care to try the Soviet experiment in the United States? Profits are the wages for the small business owner. Big corporation profits go to the shareholders, who are you and me, owners of many corporations indirectly through our ownership of shares in our mutual funds, 401(k)’s and other investments.

The bottom line is that the Republicans in the Michigan State Legislature are justified in resisting further taxes on businesses, even those the Democrats perceive as “filthy rich, greedy physicians”. We must resist such class warfare.

Comments? Arguments?

Friday, September 18, 2009

The Michigan Fair Tax Looks Fairly Good

It is time we begin to rethink our Michigan tax structure if we wish to create a better business climate to attract and grow jobs in the State. My listening tour with the Michigan Chamber of Commerce, National Federation of Independent Business, Michigan Farm Bureau, and the organizations representing the realtors, bankers, home builders, restaurant owners and the associated builders and contractors all echoed the same message - we need a more business friendly tax structure.

More specifically, we need to fix the Michigan Business Tax (and the accompanying 22% surcharge). They also mentioned we need to reduce or streamline the regulation of businesses in the state – with the initial focus on the permitting processes performed by the Department of Environmental Quality - but that is another subject which deserves its own posting.

Rather than tinker around the edges, making minor changes that don't really address the problems, we need to take a hard look at the "Fair Tax" proposed by the http://www.mifairtax.org

Their proposal would:
  • "Replace Michigan’s current complex and unfair tax system with a simple retail sales tax.
  • Eliminate current sales tax, personal income tax, Michigan Business Tax, Personal Property Tax, 6 mill State Education Tax on business and sales tax on all business purchases and replace them all with a simple retail sales tax.
  • Save MI taxpayers billions of dollars now being wasted in complying with the current tax code.
  • Significantly lower the cost of goods & services produced in Michigan by removing the cost of
    business taxes and tax compliance costs that are hidden in today’s prices.
  • Make Michigan products more competitive with foreign products and return jobs to Michigan.
  • Provide a more stable revenue source and raise the same amount of money for Michigan government with the imposition of a fair/no loophole retail sales tax on all new goods and services with an effective tax rate of 0 - 9.75%.
  • Return to MI families 100% of the sales tax up to the poverty level by monthly “prebate” payments to all Michigan citizens’ households. No MI citizen will pay taxes on the necessities of life.
  • Constitutionally guarantees revenue sharing."

I have long favored a consumption tax because it does not discourage earning, saving and investing. The Fair Tax also has the virtue of being visible, a virtue the value added tax does not possess.

At a federal level, to reduce deficits, I fear significant tax increases will be imposed. In an attempt to avoid discouraging earning and investing, there will be a strong push for a value added tax as an alternative. A Fair Tax would be a much better alternative, due to its visibility. Otherwise, a value added tax would be too easy to creep up and up, similar to the 1% income tax initially imposed.

I am an announced candidate for State Representative for the 55th Legislative District, which stretches from Pittsfield Township south through Whiteford, Bedford and Erie Townships on the Ohio border. I would expect significant opposition from the retail business community to a Fair Tax imposed in Michigan in the absence of a similar tax in Ohio, fearing loss of retail sales in Michigan to nearby Toledo, the city many in those township already are more oriented to than Michigan. This would especially be true on high cost items, such as automobiles, furniture, etc.

I have asked the Michigan Fair Tax Organization the following: What are the considerations here? Countervailing arguments? I can see that the retail businesses would avoid the MBT and its hated surcharge, and personally avoid the current Michigan income tax, but would the net effect be negative for these border retail businesses?

If I can get satisfactory answers to these questions, it would appear that the Fair Tax is something highly desirable. (Of course, if a Fair Tax were imposed on a national level, this concern would be moot.)

Dr. Gary Wolfram, from Hillsdale College (you might remember him if you attended one of the Health Care Reform forums he spoke at) and Dr. Bruce Ikawa have prepared a report entitled "An Analysis of Fiscal Effects from the MI Fair Tax", and believe that the revenue stream from the Fair Tax is about the same as the current level from the various sources. Thus, it appears feasible. And, the indirect effects of a more favorable business tax climate could have enormous long-term favorable impacts. It certainly merits discussion and study. It may be a radical change, but we need to "think outside the box", to use a cliche'.

Comments? Concerns? Am I missing something?