Post WWII Economic History in a Nutshell

Much is made of the impact on federal government spending and debt of different administrations and political philosophies, but the major driver is much bigger. Our economic environment experienced a fundamental change in the mid 1970's, and our climbing debt is a result of failure to acknowledge and deal with that change.

Before the mid 70's, we had oil at a controlled $3/barrel and faced little competition from Europe, Japan, China, and other emerging economies.  We were an export powerhouse, slowly paying off the huge debts we had accumulated during WWII.  We were relatively young and had social benefits that consumed a negligible portion of our national resources.

Since the mid 70's we have faced world market oil prices and severe competition from Europe, Japan, and the emerging economies.  We have to pay a price, beyond the MSRP, for all those Lexus and Mercedes and Toyota vehicles we are driving.  And, we have aged and put in place social benefits that take an ever-increasing portion of our national resources.

So, at a time when we should have begun tightening the national belt and focusing on improving our competitiveness, we encouraged outsourcing and importing, and we expanded government services and spending and began building debt.  Now we may be forced to deal with the economic realities we face.

Here is a picture.  Click on the chart for a readable view.

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Catholic Hospitals, From a Child's Viewpoint, Then and Now

I clearly remember being warned by one of my peers, about sixty years ago at age 9, that when I grew up and got married and my wife was having a baby that I should make sure she does NOT go to a Catholic hospital because they would let her die rather than allow any harm to come to the baby. I’m guessing my friend heard that from his parents. At least we know it didn’t come from TV. Well, that was the Southern Baptist environment of the small East Tennessee town I grew up in, just one tiny and very suspicious Catholic Church in the entire county, its members probably all Yankee transplants brought in by Alcoa. Aside from the misconceptions about Catholicism though, it is pretty neat that even as little boys we were talking about our future responsibilities as husbands and parents.

Catholic hospitals are in the news now because the Obama administration has determined that they must provide “free” chemical birth control and chemical (maybe) abortions to their employees as part of the health insurance plans they offer. Of course the Catholic Church, as I, a relatively new Catholic understand it, is not opposed at all to birth control and family planning. It just teaches that sex is for married couples, is primarily for procreation rather than recreation or stress relief, and that is it fine for such couples to engage in sex on a schedule or even at an age that makes pregnancy unlikely so long as they are aware of and open to the possibility of new life resulting from the encounter. The Church is opposed to chemical or mechanical, maybe even electrical, prevention of conception for the purpose of recreational or therapeutic sexual encounters. And of course the Catholic Church, along with Southern Baptists, is staunchly opposed to abortions. (Yes, I'm aware that many Catholics don't practice what the Church preaches and that lots of Baptists drink.)

So, what is the administration thinking? Is the objective to test the resolve of Catholics? Is it to put the Catholic health care providers out of business as part of the federal takeover of health care in the United States? Or maybe they are just thinking that it will be a great tragedy if, in the future, nine year old boys will have to warn their peers not to ever have a girlfriend who works at a Catholic Hospital or whose parents work at a Catholic hospital because, if they do, they may have to pay for the birth control pills!

Please, can we get a little relief from government overreach?

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Self Esteem, Sackcloth, and Ashes

Channel surfing while on the elliptical machine in the gym yesterday I ran across a panel discussion from David Axelrod’s University of Chicago Institute of Politics. One of the panelists was columnist David Brooks and he was saying that, in his opinion, what we have lost over the past fifty years or so is what might have been called a culture of effacement, a general attitude that none of us, in spite of different skills, educations, talents, accomplishments, and levels of wealth, is fundamentally better than anybody else. The data offered by Mr. Brooks in support of his hypothesis was a Gallup poll which periodically asks the question “Are you a very important person?” In 1950, 12 % of high school seniors responded “yes” to that question. In 2005, 80% accorded themselves that lofty status. It’s like in Lake Woebegone where all the children are above average. You can hear Mr. Brooks’ comments at about 54 minutes in this video.

Of course there were obvious, though unmentioned by Mr. Brooks, 1950’s exceptions to that culture of effacement, but I believe he argued correctly that it was after that time that what might be known as the “self esteem movement” took root and we made a gradual shift to a culture of self aggrandizement and the accompanying narcissism, conspicuous consumption, and self righteousness which have become hallmarks of life in America today. Even McDonalds, in a 1970’s effort to get us to eat more burgers and fries, began proclaiming that we “deserve a break today.” They never identified the merit on which that deserving was based.

I recall as a young adult, at the beginning of the self esteem movement, that the phrase, “God don’t make no junk,” from Ethel Waters’ autobiography, I believe, became popular among the youth in our church. Biblical evidence of mankind being created in the image of God and being loved by God and being wonderfully formed in the womb would be cited. And of course all that is true, but, while it may be helpful in bringing a defeatist to a more optimistic outlook, it is not a message needed by the majority of us today who already tend to think quite highly of ourselves. A much more important message might be about purpose, that as St. Paul wrote (Ephesians 2:10), “we are what he has made us, created in Christ Jesus for good works, which God prepared beforehand to be our way of life.” Well, it is difficult to reconcile narcissism and conspicuous consumption and self-righteousness with that. (Let me hasten to add that, lest you think I have become a socialist, the invention, development, and commercialization of products and services and the creation and growth and management of companies to accomplish that and to create opportunities for us to earn livings (jobs) serving each other are, in my opinion, very good and essential works indeed.)

During Mass this morning, listening to the reading from Jonah about his preaching to the people of Nineveh, I had a flashback to the Brooks comment. It’s not obvious what the people of Nineveh were up to, but I am suspecting narcissism and conspicuous consumption. Maybe even self righteousness. The reason is that the response of the people to Jonah’s very simple message, “Forty days more and Nineveh shall be overthrown,” was that they “…believed God; they proclaimed a fast, and everyone, great and small, put on sackcloth. When the news reached the king of Nineveh, he rose from his throne, removed his robe, covered himself with sackcloth, and sat in ashes.”

Many people of faith see the messages of the Bible as timelessly true in principle. If they are, probably an excellent way to defuse the escalating class war currently being promoted by politicians and activists in the United States would be for us all to quit pointing fingers, tone down our narcissism, conspicuous consumption, and self righteousness, shift our focus to service and good works, and maybe even proclaim a fast and put on sackcloth. Only the president, apparently, will need to go so far as to sit in ashes.

If we can’t do that or otherwise change the borrowing and spending track we are on to national bankruptcy, I fear that in forty years time, or maybe less, our grandchildren will pay a heavy price for the demands and wretched excesses of their grandparents.

And, if you can stand the salty language, here is George Carlin, a man who probably really didn't think that much of himself, on self esteem. 

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"Pay Me Later" - Mitt Romney

It appears that Mitt Romney is not as shrewd a financial manager as Warren Buffett because, rather than take his income as earned, paying taxes as received, and then investing it, he put it in deferred income accounts and made his very successful investments within those accounts. According to the WSJ this morning, Romney has tens of millions of dollars there, all untaxed…so far.

I like that conservative, delayed gratification approach. I used it myself, always believing that in retirement I would have lower income tax rates and that the value of compounding tax free for decades and paying the income taxes later would be a smart move, even though it was endorsed by the federal government.

Of course nobody, except maybe Warren Buffett, knew that there would be a dozen years with two market meltdowns and no net gains in equities and that dividends and capital gains in after-tax accounts would be taxed at only 15%, much lower than the likely rate on capital gains and dividends that accumulate in deferred income accounts.

Romney was born in March, 1947, and will reach age 70-1/2 in 2017. That is important because that year he will have to begin withdrawing and paying taxes at ordinary income tax rates on all that deferred income. At that age, the IRS assumes a distribution period of 27.4 years, so, if Mr. Romney’s balance is $100M, he will have to withdraw and pay ordinary income tax rates on $3.64M. Who knows what the tax rates will be in five years, but it is safe to say they won’t be any lower than 35% for incomes at that level. So, for as long as he lives, he will be paying income tax bills of well above a million dollars a year.

Here’s the nice thing about Mr. Romney. I don’t believe those tax bills will bother him in the least. He has always played by the rules, taken a conservative approach, and emphasized family financial security over piling up income and wealth or conspicuous consumption. And, he has apparently met his objectives though it must bother him a bit to know that the money in those deferred income accounts is not really his, yet, and that the federal government could decide that a 90% marginal rate would be appropriate for such a rich fellow.

Still, in a presidential candidate, I will take conservative over shrewd any day.

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REALLY Boosting Buffett's Tax Bill

(Yes, I know I said I was going to back off on blogging but some things just demand commentary.)

In August I wrote about a simple way to meet Warren Buffett's request for an bigger tax bill.  What I proposed, elimination of deductions, exclusions, exemptions, and credits combined with lower marginal rates, would have tripled Buffett's tax bill but still would have caused him no pain.  In today's Wall Street Journal, Ronald McKinnon makes The Conservative Case for a Wealth Tax, a change that would get Mr. Buffett's undivided attention and send his accountants and financial planners scrambling in a search for pain remedies.

What McKinnon proposes is a 3% tax on wealth above $3M.  Now here is something we can all get on board with, at least all of us with less than $3M.  In the case of Warren Buffett, it would have meant a tax of $1.5B last year on his $50B of total assets instead of the $6.9M he claimed, in his Charlie Rose interview, to have paid.  I know Mr Buffett wants to pay more, but I bet he wasn't thinking of anything like 200 times as much.   Still, I think McKinnon has a good idea if combined with much lower marginal income tax rates and elimination of other wealth (property) taxes.  Taking three percent of a rich person's wealth makes a lot more sense to me than taking a third of a working person's income.

Of course what I expect is that somebody in Washington will think that this is not an either-or situation and that doing both would be a really good idea.


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I Liked and Like Ike

Dwight David (Ike) Eisenhower was the president of my youth, age 10 to 18 approximately, but I knew nothing of and had no interest in politics at the time. I was aware that he was a Republican, whatever that was, and that my parents were also Republicans, and so I assumed, quite logically, that most of the world was Republican. I was shocked, but tried not to show it, when a classmate told me that Democrats, whatever they were, controlled both houses of Congress and that Republicans were powerless. I guess his parents were Democrats. At least we were all Baptists.

The 1950’s served up the same political issues we hear about constantly in today’s news. There were budget crises, unemployment concerns, wars and threats of wars, and incessant demands for more social benefits, tax cuts, expanded civil rights, and diminished civil rights. There were power struggles and back stabbings, but there was no gridlock. Political concerns and issues were important, but national concerns seemed to have the priority, and compromises were reached and the country moved, in the opinions of most people, forward. At the end of his first term, after two years with Democrats holding majorities in the House and Senate, Eisenhower had 70% approval and 20% disapproval ratings.

Eisenhower ended US combat in Korea, which had begun under President Truman, and prevented US combat in Vietnam, which was to begin under President Kennedy. We will never know what prevented outbreak of nuclear war during the tense cold war nuclear proliferation and posturing of his administration, but many reasonably give credit to Eisenhower’s staunch positions that there would be no limited use of nuclear weapons and that if Russia were to begin nuclear war, the US would end it immediately with certain devastation of both nations.

Eisenhower oversaw the construction of the St. Lawrence Seaway and the Interstate Highway System, both significant employment and economic boosters, without bankrupting the country. He launched NASA and committed to the space race. Still, he “inherited” a federal debt equal to 75% of GDP and left behind one equal to 56% of GDP. The federal deficit during Truman’s last year was about 3% of GDP, but there was a small surplus in Eisenhower’s last year. That would not happen again for forty years. Of course those were glory days for the US economy with GDP increasing 50% from 1951 to 1959.

Ike expanded civil rights for African Americans with signing of the Voting Rights Act, less than some wanted but a lot more than zero, and he sent federal troops to Little Rock, Arkansas, to enforce the integration of the schools. And he changed McCarthyism to “McCarthywasm.”

But of course, it’s never just the president and it wasn’t just Eisenhower. It was our government in Washington that accomplished all the above with a focus on the common good and a spirit of optimism and compromise, encouraged and supported by Eisenhower’s focus on finding the middle way and avoiding extremism of any kind.  Just to give full credit, this was the line-up for those eight years.

Eisenhower didn’t seek the presidency as a personal ambition, probably the last not to do so, but was drafted into service, and when his term ended, he did not capitalize on the experience but asked to have his former title, General of the Army, reinstated and used that for his remaining years. In his farewell speech, he wisely warned about many of the bad things that happened to our nation in the following decades. Then, stung somewhat by the political attacks of John F. Kennedy and his declarations that, “…the torch has been passed to a new generation of Americans…,” and that a promise to, “…pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, to assure the survival and success of liberty,” would replace his own approach of balance and quiet, behind the scenes, expression of America’s power, General Eisenhower returned to Gettysburg with his wife, Mamie. I guess he must have observed with dismay Kennedy’s failure at the Bay of Pigs and commitment of troops to Vietnam, and Johnson’s launch of the War on Poverty, promising that the nation could afford both guns and butter.

For an enjoyable overview of Eisenhower and his time, read Eisenhower: The White House Years by Jim Newton. It’s a new book, published in 2011, and is my primary source and inspiration for these thoughts on Ike.

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Slowing Down, Taking a Breather, Relaxing a Bit

Thinking back over 28 months of blogging and 375 posts on www.permanentfixes.com it seems pretty clear to me that I have said about all I have to say on my most frequent topics and have begun repeating myself. I may post once in a while, but am expecting a significant reduction in frequency. I’m going to just relax a bit and hope for change.

I looked back over the 375 postings and categorized them.  It is pretty clear that Health Care was foremost in my mind due to the Patient Protection and Affordable Care Act.  Of course that will have a huge impact on Government Spending, the second largest category.  Below you will find a listing of all 375 posts by topic.

Topic	No.	%
Health Care	78	20.8%
Government Spending	54	14.4%
Personal	45	12.0%
Government	31	8.3%
Taxation	31	8.3%
US Economy	31	8.3%
Politics	21	5.6%
Education	14	3.7%
Investing	12	3.2%
Media	11	2.9%
Business	9	2.4%
Climate Change	9	2.4%
Culture	8	2.1%
National Debt	6	1.6%
Poverty	6	1.6%
Marriage	5	1.3%
Management	4	1.1%
	375

Perhaps in a couple of years I will find very happy things to write about such as a national debt shrinking as a percent of gdp, an economy growing 3% to 5% per year, a new simple income tax code that is fair and reasonable, no US involvement in any wars, CD interest rates of 5% or so to allow retired folks some income on their lifetime savings, shrinking demand for unemployment and food stamps, senators and representatives focusing on the United States rather than on their own constituencies, a president of all the people, CEO's focusing on their businesses instead of looking for favors in Washington, and patients talking to their doctors and making their own decisions about health care. I’m not holding my breath.

I’m hoping that people will continue to read the blog from time to time and will give me some comments and feedback. Below is a list of all 375 postings with date and title and grouped in general categories. It would have taken forever to make all these hot links so the best way to find one of the posts is to type a portion of the title in the “Search This Blog” box at the upper right of this page.  Maybe I'll find some time later to hot link my favorites.

Business
9/23/2009 Where Have All the Profits Gone?
10/9/2009 Executive Pay - A Corrupt System
1/22/2010 Separation of Business and State
3/1/2010 To Profit or Not To Profit
4/28/2010 Bonuses, Variable Pay, and Unintended Consequences...
8/21/2010 Shrunken Kodak and Its Southern Offspring
2/8/2011 Teachable Moment Flubbed
4/27/2011 Getting to the Bottom of Things: Universal Toilet ...
7/21/2011 Apple and Peter Lynch Big Winners, But Not I
Climate Change
9/16/2009 Global Warming Considerations
12/6/2009 Climate Change Questions and Concerns
12/10/2009 NBC Joins Time Magazine in Global Warming Battle
12/11/2009 Fishy Global Warming Story
12/13/2009 US Warmer Than 110 Years Ago
12/14/2009 350 PPM, A Goal Snatched From the Air
1/7/2010 Geoengineering and the Coming Ice Age – Word from ...
1/20/2010 Balmy Breezes in January!
2/16/2011 Where Can I Apply for Carbon Credits?
11/5/2011 What's the Weather Going to Do?
Culture
12/8/2009 Values, Morals, Virtues, Jesus, Paul, Tiger Woods,...
1/6/2010 Population Age Distributions Interesting
8/5/2010 Sheltering Women - Making New Ways
8/16/2010 Language, Culture, and Mosque Difficulties
8/23/2010 (Not) Growing Up In America
8/28/2010 The Residual Burdens of Slavery, Civil War, and Op...
9/2/2010 Moderate Muslims and Religious Tolerance
9/19/2010 Feeling Crowded and Frustrated?
9/26/2010 Looking For a Few "Diverse People"
Education
1/29/2010 Education Reform?
4/25/2010 Rating the Teachers
5/10/2010 Education Report Cards and the New High Schools
5/12/2010 Education in America (Well, Tennessee Anyway) - 100 Yrs Ago
5/14/2010 Personal Experience, Logic, Data, and Ideas
5/17/2010 Multiple Choice Tests and Education Spending
5/26/2010 MHS - Secondary Education Success Story
6/5/2010 False Hopes and Student Loan Sharks
10/30/2010 Lady Gaga Course Offered at USC
12/6/2010 Public Schools, Private Schools, and the Voucher Q...
12/26/2010 Poverty And (Or of) Education
6/14/2011 Higher Education Higher and Higher
10/11/2011 When Averages Matter; When They Don't
11/1/2011 Education Essentials (For Getting A Job)
11/6/2011 Future of Education - Khan Academy
Government
11/2/2009 Socialism Not All or Always Bad
11/10/2009 Please, Please Don't Privitize Social Security (ch...
11/23/2009 Postal Service Woes and the Public Option
1/4/2010 Unionization of Government Employees
1/14/2010 All Eyes on Washington!
2/6/2010 Shatterproof Pub Glasses – A Permanent Fix?
3/15/2010 Supersize That Combo!
3/19/2010 Peggy Noonan and Chris Matthews on Baier-Obama Int...
4/19/2010 Legislate or Regulate, What Shall We Do?
4/26/2010 To The Parents of Darryl Williams
4/30/2010 Enough?
5/5/2010 My Obesity Challenge to Congress
5/13/2010 (CDCEACMB) Confusion and Depression Caused By Expensive Acronyms Created by Massive Bureaucracies
5/25/2010 Gulf War Complex, Many Combatants, Fuzzy Organizat...
6/14/2010 Voters, Pay Attention!
6/24/2010 Getting Early Morning Stimulation From The News
6/25/2010 Theological and Financial Reformation Issues
7/7/2010 Giving Up on Fox News?
7/9/2010 Forgive Me. I Used To Be a Chemical Engineer
8/18/2010 Social Security Projections Mysterious and Controversial
10/1/2010 That Regrettable Ruling Mentality: CNN Lets Cat Ou...
11/30/2010 Secrets
2/4/2011 Government Barriers, Government Bridges
2/22/2011 Japan, Saudi Arabia, and the USA
2/27/2011 Social Security "Privatization"
3/5/2011 Noonan to the Point
5/3/2011 Tweaking the Social Security Wage Cap
6/8/2011 Theology of Wealth Spreading
6/12/2011 Feral Cats, Hardwood Floors, Guns, or Butter
9/7/2011 Postal Problems Persist
9/25/2011 Congressional Suggestions and Executive Actions
Government Spending
8/18/2009 A River Runs Through It
9/30/2009 Government Policy Driving Up Prices
10/22/2009 Long Term Trends in Government Spending and Transfer Payments
10/23/2009 Government Income and Spending Diverging
10/29/2009 Changing Demographics/An Aging Population
11/4/2009 War on Poverty in America
11/12/2009 False Choices
11/13/2009 Kristof Column Followup - Analysis of Comments
11/24/2009 Now I Get It! (Why Some Prefer Government Insurance
11/29/2009 Pistol Creek Days
12/1/2009 Grant Writer Extraordinaire
1/19/2010 War at Stalemate, Costs Rising! Now What?
1/20/2010 US Subprime Debt Set To Explode
1/21/2010 Foreign Aid - How We Have Helped (Let Us Count the...
1/26/2010 Preliminary 2009 Federal Spending and Income Figur...
2/1/2010 Every Tub on It’s Own Bottom – Except for Earmarks…
2/2/2010 Now We Are All on Welfare, Even if Not on "Welfare...
2/3/2010 Deficits Not Always Bad
2/4/2010 The Money Is in the Budget, But Is It in the Bank?...
3/25/2010 Taking Care of the Poor and Everybody Else
3/29/2010 Total Government Spending and Debt As Percent of G...
3/30/2010 Used Appliances For Sale (Not)!
4/9/2010 Update on Federal Spending, Transfer Payments, Rec...
4/13/2010 What? No Income?
4/15/2010 Culture Shifts?
5/3/2010 Don't Worry. Clean-Up Funds Available...Maybe
6/23/2010 Oh, What a Debt We Owe...
7/28/2010 Prices of Electric Cars to Soar, Stoked by Governm...
8/15/2010 Social Security and Medicare Distrust Funds
8/30/2010 Defense Spending Trends
9/24/2010 Response to Republican Pledge: Forget Cutting Taxe...
10/5/2010 Inflation's Not the Problem (For Education and Hea...
10/21/2010 Inheritances and What to Do With Them
10/30/2010 Democrat Congressman Retires, Sees the Light
11/7/2010 Government Dairy Products, Inc.
12/11/2010 Federal Spending as Percent of GDP
12/11/2010 Beltway Back Scratching
1/27/2011 Our Great National Sickness
1/31/2011 Trimming the Federal Budget
2/2/2011 High-Speed Rail - Coming to America!
2/15/2011 National Debt a Moral Issue
2/28/2011 If Only...
3/9/2011 Drinking or Thinking?
4/30/2011 Federal Income Tax, Government Spending, and the National Economy
5/21/2011 Living In an Imperfect World
6/21/2011 Federal Lottery Announced
7/5/2011 Reduced Deficit = Increased Debt
8/2/2011 Following the Rules; Changing the Rules
8/6/2011 Anniversary Post - Cash For Clunkers
8/25/2011 Deficit Watch - Just the Facts
8/27/2011 It'll Be a Brighter Day Tomorrow...Maybe
9/5/2011 The 38% Problem
Health Care
8/20/2009 Aetna's River of Money
8/21/2009 Articles and Blurbs Available Online - Good and Ba...
8/24/2009 Medicare - Evolving to Silliness
8/28/2009 Health Care Olympics - Norway vs. USA
8/31/2009 South Carolina No. 3 In The Nation
8/31/2009 Health Care Reform and Government Fiscal Responsibility
9/2/2009 Free The Doctors!
9/3/2009 Flu Shots and Tooth Maintenance
9/4/2009 Looks like everybody is in bed together but the patient
9/28/2009 It's The (Lack of) Competition, Stupid!!!
10/2/2009 Universal Food Stamps: Next Big Thing
10/12/2009 OK, But What Happens in Year Eleven?
10/12/2009 What Do You Mean, “Quality Health Care”
10/14/2009 Spending Too Much On Health Care?
10/15/2009 Medicare Annual Mail Deluge and Related Retiree Musings
10/28/2009 "Public Option" to Drive Out Profits? Give Me a Break
10/30/2009 We The Customers...
10/31/2009 Medicare Chart Book and the Henry J
11/1/2009 Really SERIOUS Health Care Problems We CAN Solve O...
11/3/2009 Doctors vs. Lawyers (Fixed Game on Capitol Hill?)
11/5/2009 Medical Care Costs, Prices, and Accounting Systems...
11/7/2009 Not In Good Hands
11/8/2009 Medicare Troublemaker
11/15/2009 Death Panel Op-Ed in Today’s New York Times
11/16/2009 Urinary Tract Infections and Medicare Waste
11/18/2009 PSA Tests, Mammograms, and Universal Health Care
11/21/2009 Senator Al Franken in Senate Health Care Debate To...
11/25/2009 Antitrust Problem With Private Health Insurers
12/7/2009 Medicare Premiums, Homeland Security, and the Righ...
1/27/2010 Oh Death!
2/5/2010 "Elegant Solution" for Health Care Mess - No Duct Tape Allowed
2/8/2010 Health Care System Analysis – A Good Read
2/19/2010 Don't Just Do Something. Stand There!
2/22/2010 Those Obscene Profits of Health Care Insurers
2/23/2010 WSJ vs. NYT
3/4/2010 "Real" Insurance for Irresponsible Americans: The Health Care Summit
3/9/2010 The Innovator’s Prescription by Clayton Christense...
3/11/2010 Doctor Raises Rates; Patient Refuses to Pay
3/13/2010 Low Life Expectancy
3/13/2010 Please Recommend a Book for Me
3/17/2010 Can't Afford Health Insurance? Let me see.
3/19/2010 Panic over the Donut Hole – Bad News for America -...
3/21/2010 Things I Like and Don't Like, As If It Mattered
3/22/2010 New Game In Town – Who Wants to Play?
3/24/2010 Good Health and Improved Quality Are Their Own Rew...
3/26/2010 Whatever Happened to Fair Play and Good Sportsmanship
4/3/2010 Constitutionality of the IRS Rules and Regulations...
4/8/2010 Now We Can Know What's In The Bill (But It Doesn't...
4/9/2010 Abortion Insurance?
4/14/2010 Grant Writers and Job Seekers, On Your Marks!
4/23/2010 Just In Case You Are Happy (With the Health Care L...
5/4/2010 Physical Activity and Physician Reimbursements
5/30/2010 A Message from Kathleen Sebelius
6/8/2010 Government Sponsored Corruption
6/17/2010 "Doc Fixes" and Economy Fixes
7/11/2010 Health Care Improvement Through TQM - Seattle Chil...
7/19/2010 The Berwick/Godfrey Book – Curing Health Care
7/20/2010 Repeal Health Care Reform? Not a Chance!
7/29/2010 Skipping a Visit to Your Doctor?
8/11/2010 More On Evil Profits (And the Jobs They Make Possi...
11/1/2010 WSJ Reveals Some Secrets About Medicare RVU Determ...
11/18/2010 Health Care Free Market Non-Existent (And that is ...
12/8/2010 Medicare Treatment Options for Prostate Cancer
12/16/2010 Just Thinking Out Loud…About Healthcare Legislatio...
12/17/2010 Imagining a Better Healthcare System
12/29/2010 End of Life Counseling - The Last Word?
1/5/2011 Irrational Exuberance (About Health Care)
1/24/2011 The 80 - 20 Rule and Why It Doesn't Apply to Healt...
2/4/2011 OK, I Was Wrong, Partly (About Health Insurance)
5/6/2011 Supplementing My Medicare Supplement
5/31/2011 Senator Schumer Offers to End Medicare As We Know ...
6/3/2011 Social Benefits for the Elderly In Trouble
6/27/2011 Medicare Medicaid Overlap - A Simple Permanent Fix...
7/16/2011 Suicide by Living
7/18/2011 Congressional Beliefs and Prerogatives
10/19/2011 Oh, What a Tangled Health Care Web...
11/15/2011 What About the Doctors?
Investing
9/21/2009 Buying Gold?
5/1/2010 Real Estate Investors Caught With Their Values Down
5/2/2010 Suck It Up!
7/30/2010 A Sobering Look at the Nikkei Average
8/14/2010 Investing or Speculating?
9/6/2010 Silly Sales Slogans - GOLD!
10/7/2010 Gold Price Update
11/5/2010 Stock Market Excitement
7/17/2011 Reality Check on Gold
7/19/2011 Boost Retirement Income with Kodak Bonds? (A Lesso...
8/7/2011 Conquering Greed?
9/1/2011 Real Estate Recovery Complete
Management
1/4/2010 Six Sigma Theory and Airline Terrorism
1/5/2010 Airline Safety and Health Care - A Link!
5/29/2010 Organizing vs. Community Organizing
6/16/2010 Good Management Not Easy
Marriage
8/16/2009 Church and State in Avoidable Slow Motion Collision
9/25/2009 Paying for Marriage – A “Welfare” Idea
10/3/2009 Follow Up on Civil/Religious Marriage (Plus Nuclear Energy)
6/26/2011 Marriage: "Ticket for Entitlement"
8/14/2011 Margin Matters and Motivates, Even in Marriage
Media
10/13/2009 Quick Highlights of Morning Newspaper
11/20/2009 Flash: Wealthy and Famous Guys Argue on Television...
12/6/2009 Time Magazine Opinion Piece (Disguised as a News Story)
4/25/2010 Interesting Op-Ed on The Boy Scouts and Lazy Minds...
5/16/2010 Looking for Editorials in All the Wrong Places
7/13/2010 Media Bias?
8/25/2010 In a "More Perfect Union"
10/22/2010 On the Other Hand… “News” Reporting
1/22/2011 Time Magazine Gets It Right - On Loughner
9/13/2011 Leonard Pitts Jr. Draws SRO Crowd in Columbia SC
10/2/2011 Leonard Pitts Striving for Fair and Balanced?
National Debt
10/25/2009 Making Bad Choices
11/19/2009 Continued Reckless Driving Not a Good Idea
2/16/2010 Our National Debt, and the Lenders We Owe
2/16/2010 Here's an Idea...and an Offer – A Personal Note
3/7/2010 OK, Maybe I'm Wrong Again (About the National Debt…)
3/27/2010 "Figures Don't Lie, But Liars Figure"
Personal
8/16/2009 Introduction to www.permanentfixes.com Blog
8/23/2009 Weekend Edition - Black Pepper Headache Fix
9/14/2009 Irish Vacation Report - Photos at Link Below
9/18/2009 Ireland Health Care - Personal Experience
10/20/2009 Signs Of Sobriety in The Big Apple
11/10/2009 Why Blog?
11/11/2009 Government Stimulus Program Works - Creates Lastin...
11/15/2009 New Blog - Last of All or Last to Fall
11/30/2009 Making a Difference - The Personal Touch
12/2/2009 Last Of All Posting
12/9/2009 Update on Black Pepper Headache Fix
12/16/2009 Christmas Celebration, Home Repairs, and Vacation
3/5/2010 Home Works of America: A Big Winner
3/22/2010 John Bull, Poet
3/30/2010 Dillard L. Williams And The Confederate Flag
5/8/2010 Safer Drilling - Back of Envelope Design
5/18/2010 Prisoners of Our Cars?
5/24/2010 Shared Experiences and Common Ground - Lessons Fro...
6/3/2010 Restoring Hope to Elderly Homeowners - Home Works ...
6/26/2010 Church Shopping?
6/28/2010 Columbia Remembers the Doolittle Tokyo Raiders - E...
7/8/2010 Ace Hardware!
8/1/2010 My Daddy Drove Fords
8/3/2010 Outrageous Statements from this Blog and Links to ...
8/9/2010 Second Thoughts on the Electric Car
9/14/2010 Sevier County, Tennessee, "Taliban"
9/22/2010 Bedbug Stimulus!
9/29/2010 Carrying the Mail
10/11/2010 I Like Dick Cheney; We Have Some Things in Common
10/19/2010 Pushy Atheists and Weak Christians
10/27/2010 "Repairing Homes/Restoring Hope"
12/20/2010 Home Works of America 2010 Columbia Christmas Brea...
12/21/2010 Any Old Excuse (Secession or Reformation) For a Pa...
1/22/2011 "Giving Back" vs. "Paying Forward"
3/9/2011 Giving Something Up
5/11/2011 Errors of First Kind Not Necessarily Worst Kind
5/19/2011 Bleeding For Each Other…And Ourselves
8/22/2011 Little Red Shack Out Back
9/16/2011 Granddaddy Williams and the National Economy
10/2/2011 The Irreversible Penalty
10/24/2011 Dying to Get In to Avoid Being Left Behind - Cemet...
11/16/2011 Free Camping on Public Property
11/25/2011 I'm Part of the 99%, and These Are My Demands
12/5/2011 Reading the Comics
12/11/2011 William Starrett's Columbia City Ballet
Politics
10/7/2009 Embarrassed Again by the Republican National Committee
10/9/2009 A Gift For the President
12/3/2009 Strategy Revelation Is No Virtue
12/14/2009 Good Quotes from President Obama
12/23/2009 Statesmen or Elitists, Givers or Takers
2/27/2010 John McCain, United States Senator, 123-45-6789
8/24/2010 A Promotion for the President?
10/4/2010 Thoughts on the Upcoming Elections
10/29/2010 Brooks' Recovery Plan for the President
11/3/2010 Election Reflections
11/14/2010 I'm Not Excited (But I am Hopeful)
11/27/2010 Partisanship Out of Control?
11/28/2010 Compromise or Corruption?
12/1/2010 Toxicity Reduction Plan for Entitlement Cuts
1/11/2011 Congressional Reform Through Constitutional Amendm...
1/13/2011 Notes from The Simpleminded
1/15/2011 Partial Realization of Hope
5/23/2011 The Power of Pronouns (and Banners)
7/29/2011 Staying Out of the Ditches
8/3/2011 Territory Protection
11/4/2011 Football and National Politics - The Big Pictures
Poverty
10/18/2009 Disrespecting The Homeless
12/15/2009 To Bank Or Not To Bank
4/1/2010 Letter to Mayoral Candidates, City of Columbia
9/2/2011 Methobapterians in Union, SC?
9/10/2011 Adding Value, Making a Difference, Even if Homeles...
9/21/2011 Paying, and Receiving, a Fair Share – Conquering Poverty
Taxation
12/9/2009 Nonpayers
1/11/2010 High Earning Folks and the Taxes They Pay
2/25/2010 Complexities of the Tax Code and Why Congress Loves It
3/17/2010 Only Use for Fair Tax Movement is to Scare Congres...
7/3/2010 Tax Talk for Independence Day
8/10/2010 They Just Can’t Help It (Tax Code Tinkering)
8/13/2010 Doing Away With the Mortgage Interest Deduction?
8/27/2010 Federal Income Tax Fading In Significance - Replac...
11/1/2010 Proposed Richland Sales Tax Increase
12/8/2010 Government Speak on Taxes
12/10/2010 Estate Tax Considerations and Maybe a New Idea
12/14/2010 Class Warfare and Why A Million Dollars Is Not Wha...
1/2/2011 More Careless Tax Language
3/3/2011 Tacks Time Again
4/24/2011 Three Simple Truths
5/6/2011 Letter to The State Newspaper on Amazon Sales Tax ...
5/13/2011 More On Careless Tax Talk
5/15/2011 A Big Whine From The New York Times
5/18/2011 Amazing Amazon - High Tech Company
8/5/2011 Lessons From a Real Estate Investment Gone Bad (Wh...
8/17/2011 Zero Marginal Tax Rate in China?
8/19/2011 Buffett Highlights Payroll Tax Problem
8/21/2011 Even Warren Buffett Can Think Fuzzily; Maybe Keyne...
8/29/2011 Lack of Interest
8/31/2011 Boosting Buffett's Bill
9/21/2011 TaxVille!
10/6/2011 Tax Reform Now, Seinfeld Inspired
10/7/2011 What Do You Mean, "Long Term?"
11/2/2011 What In the World is Senator Reid Talking About?
12/1/2011 SC Sales Tax Reform Needed Badly; Courts Can Help
12/18/2011 The Sacred Tax Deduction
US Economy
9/5/2009 Something to Share
10/5/2009 Why So Many More People Than Jobs?
10/27/2009 How's the Economy Doing?
10/28/2009 Cash for Clunkers Update: Needy Cars; Also Bob Her...
11/17/2009 US Trade With China - A Sore Thumb
1/24/2010 Manufacturing Jobs
2/13/2010 Creation or Intelligent Design
5/6/2010 Color TV's, Inflation, and Government Spending
5/19/2010 Easy Money and Easy Living...For a Time
5/27/2010 How About a Two-Armed Economist?
6/8/2010 Economics: Science Skewed by Selfish Self Interest...
6/10/2010 Unemployment Is Not a Problem! It's a Symptom.
7/7/2010 Trade Talk
7/14/2010 New Biography of Cornelius Vanderbilt – History Le...
7/27/2010 Consumer Spending...on Imports!
8/12/2010 Free Them Up - Let Them Work
8/19/2010 Long Term Trend for US GDP Growth
10/7/2010 Mourning Manufacturing in America
1/10/2011 Texas 25, New York 19
1/26/2011 Take This Job and Do It
3/5/2011 Fundamental Problem with the US Economy
5/9/2011 Neither Employed Nor Unemployed
5/17/2011 Industrialization of America - A Refreshing Story
6/5/2011 Bubbles Never Have Soft Landings
6/17/2011 Fathers' Day Shopping and Consumer Spending
7/9/2011 Good GDP, Bad GDP
9/12/2011 Assessing the President's Plan
9/14/2011 Samuel Clemens’s Job Getting Strategy for the Unemployed
11/7/2011 Life Lessons from Yogi Berra and Jesus
11/30/2011 Hard Times
12/3/2011 Jobs, Prosperity, and Psychological Profiles

The Sacred Tax Deduction

Since early 2009 the Obama administration has been proposing tinkering with the charitable giving deduction as a way to increase taxes on high income folks and increase government revenues, primarily for health care spending. Here is one of the earliest of a torrent of objections, all protesting any reductions in incentives for giving. Just Google “charitable deduction news” for other similar pleas from beneficiaries of the rule. I too am staunchly opposed to any such tinkering with our outrageously complex and unfair income tax code, but I would love to see this and all other deductions, exemptions, exclusions, and credits die as part of a comprehensive reform that would significantly reduce marginal rates, thereby providing economic stimulation, while increasing current tax revenues and giving our budget crisis some immediate relief.

I have always taken advantage of the income tax deduction for charitable contributions and just figured that the government was willingly helping fund my favorite charities, mostly the church I happened to be a member of at any given time. That was when our national budget was pretty close to balanced and our debt was not too burdensome. With the financial crisis we are facing now, I have realized that it is not the government that is helping fund my charities. It is you, my fellow citizens, and I suspect quite a few of you are doing it unwillingly. I know I am not too happy helping fund some of yours.

Entities which qualify for tax-deductible contributions are known as 501(c)(3) organizations, named after the section of the Internal Revenue Code in which regulations for them are found. These organizations must have one of several qualified purposes, and the lists of those purposes and of the qualifying organizations have grown over the years and, without fundamental reform, will continue to do so under continuous pressure of lobbyists and special interests. Below is the current list available at the IRS web site.

The exempt purposes set forth in section 501(c)(3) are
     religious,
     educational,
     scientific,
     literary,
     testing for public safety,
     fostering national or international amateur sports competition,
     preventing cruelty to children or animals.
     charitable,
          relief of the poor, the distressed, or the underprivileged;
          advancement of religion;
          advancement of education or science;
          erecting or maintaining public buildings, monuments, or works;
          lessening the burdens of government;
          lessening neighborhood tensions;
          eliminating prejudice and discrimination;
          defending human and civil rights secured by law; and
          combating community deterioration and juvenile delinquency.

You can probably tell right away why this list concerns me. The strangest idea is government funding of organizations with the purpose of “lessening the burdens of government.” Too many of these purposes sound like titles created to fit something somebody wanted to fund or raise money for. Did Consumer Reports have anything to do with lobbying for the special tax treatment of “testing for public safety?” And I wonder how the efficiency or effectiveness of an organization with the objective of “combating community deterioration” or “advancement of religion” or “lessening neighborhood tensions” will be measured. And while I have a great deal of interesting in promoting the Gospel of Jesus Christ, which involves a lot of giving, not to the government, but to our neighbors, I have no interest at all in the “advancement of religion” which, as the late Christopher Hitchins so eloquently argued, can be quite counterproductive. “Advancement of religion” even seems to me to be a goal inconsistent with our constitution. I’m especially concerned now that global warming seems to have taken on some of the characteristics of a religion.

There are some non-profits which participate in politics or lobbying and therefore cannot accept tax deductible contributions. I’m thinking that a lot of “religious” and "educational" organizations should fall in that category because, while they may not endorse specific candidates, many take positions on political issues that pretty much rule out all the candidates but one. It happens on both the left and the right so this is a non-partisan complaint.

Only taxpayers who itemize deductions and whose contributions plus other deductions fall within certain guidelines established by the IRS benefit from the charitable contribution deduction. In 2009, the most recent year for which such data are available, there were only 34M returns with deductible cash contributions, and they claimed total contributions of $130B. That is 24 % of the returns filed and a little over 10% of total deductions claimed.

The Obama administration proposals leave me with the feeling that the president believes that the purpose of this and other tax deductions is to help tax payers and that these higher-income folks don’t need any help and should therefore have less deduction. It seems to me that the theoretical underpinning of the charitable contribution deduction is not to help taxpayers but to incentivize them to give more. Of course the higher the marginal tax rates the more encouragement such a deduction gives. So the idea of eliminating this and other deductions in conjunction with significant lowering of marginal rates which makes the deductions less valuable seems to me to be a workable strategy for helping solve our debt and unemployment crises. And then we can all take full credit for our giving without depending on our fellow taxpayers to help fund our favorite charities.

And I promise that if such a plan is put in place and begins a steady long-term decrease in our debt as a percent of gdp, I will give away just as much without the charitable tax deduction as I have been giving away with it. If we can get the economy going so I can get a little more income, I’ll give even more. I hope you will all join me in that, regardless of how convoluted our tax code becomes as the tinkering continues.

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William Starrett's Columbia City Ballet

I always leave performances of the Columbia City Ballet with a smile on my face, and last night’s Nutcracker performance did not disappoint.

It’s not what I would have expected when, in spite of my lack of interest, we started buying season tickets several years ago. I am not a patron of the arts, not even football or basketball, and tend to fall asleep when in spectator mode. I need to be doing something.

And the plots of some of these ballet performances are completely beyond my comprehension and seemingly unrelated to anything happening on the stage. Every year I read the plot summary of Nutcracker at the beginning of the performance and declare it nonsense. My wife tells me to use my imagination, that it is a dream of a little girl. I can be creative about certain things, the little utility trailer I have been building for hauling my tools and kayak and fishing tackle around for example, but that kind of imagination is not familiar to me. Don’t even mention Dracula!

But here is the thing about Mr. William Starrett’s Columbia City Ballet productions. His combination of magnificent sets, beautiful and colorful costumes, complicated choreography, talented and attractive dancers, and creative tweaks always results in visual experiences that alternate between dramatic and mesmerizing. I’m always wishing they allowed cameras and that I had mine in hand.

And that is why I always leave with a smile on my face, hoping that each performance is being captured on video for future enjoyment. They are truly worthy of preservation. And, I am glad my wife instigated our participation.

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Reading the Comics

Sometimes I get confused about which section of The State Newspaper I am reading. This morning, for example, I didn’t see anything about the soaring costs of college educations, but in the Metro/Region Section there is a humorous item about the elliptical exercise machines in student fitness centers at Furman and The University of South Carolina now being equipped with generators and connected to the university power grids for the purpose of generating “carbon-free electricity.” The power generated is metered and continuously displayed, at Furman, on a flat-screen TV to motivate the student exercisers. I’m pretty sure I know why the article does not reveal the installation and maintenance costs or the value of the energy generated, but it does sort of let the cat out of the bag with this statement: “A typical 30 minute workout can power a laptop for an hour.” Probably the laptop in question is powered up back in the dorm room during the exercise. You’d think the students would at least learn something about the waste and futility of such projects, but this quote from one raises serious doubts: “It’s a great thing. It’s a way all students can give back.” Hey, students, if you want to do some giving, I have a better idea: Visit and get acquainted with an elderly or disabled person and mow their yard or rake their leaves.

There is a funny story in the Nation Section about planned changes at the USPS, including a change in standard first class mail delivery times from the current 1-3 days to 2-3 days which would “eliminate the chance for stamped letters to arrive the next day,” and could mean that a “birthday card mailed first-class to Mom could arrive a day or two late, if people don’t plan ahead.” Who are these people who need to plan ahead if my birthday card to Mother is to arrive on time? If it is I, don’t I already have that burden of planning ahead to get her card there on time? Anyway, it bothers me not at all to give up that “chance” of next day delivery.

Referring to a whole bundle of changes proposed by the USPS to get its financial house in order, the AP writer declares that, “The changes which would provide short term relief, ultimately could prove counterproductive, pushing more of America’s business onto the Internet.” I think, for the nation as a whole, that would be classified as productive rather than counterproductive.

Don’t worry too much about these proposed changes in postal service though. Although the USPS is an “independent agency” that “does not receive tax money” and is supposed to be self-sustaining, the rules do not allow it to make significant changes in service without congressional approval and it is allowed to borrow, if not “receive,” tax dollars. I expect congress to step up to the plate soon and loan some more money.

In the Nation Section, there didn’t seem to be any major stories about the facts that our Social Security Trust Fund has no money in it and that benefits payouts are now exceeding receipts from Social Security taxes, but there is an item, worth a chuckle or two, or maybe a groan, about Senator Harry Reid pushing for an extended cut in the Social Security Payroll Tax. Is he thinking this will help? He says he has worked out a compromise with Republicans and that the cut will be “paid for,” but nobody on the Republican side seems to know anything about it. On second look, it’s not “news,” but economist Robert Samuelson does have a column on this general subject on the Editorial Page titled The Welfare State’s Reckoning. Nothing funny there…just cold hard logic.

The Sports Section dominates as usual with five full pages, excluding ads but with large pictures admittedly winning out over text. In addition, the top third of the front page is dominated by a sports picture and a few words about upcoming Orange and Capital One Bowl Games for Clemson and USC. USC, it is revealed, will get $4.6M just for participating. With that kind of payout, they should be able to equip all the team exercise equipment with generators and get them all hooked to the USC grid. Now that could generate some power!

I think I know where the writers for The Onion get their ideas.

Oh, and on the Comics Page, Zits, as usual, is hilarious, especially for anybody with even dimly remembered experience raising teenage boys.

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Jobs, Prosperity, and Psychological Profiles

During my first two or three years with Eastman Chemical (late 1960’s), parent Eastman Kodak decided to submit a sampling of new professional employees to a battery of psychological tests and then track their career progress over the years in an attempt to determine the best psychological profile for future new hires. (Kodak was the premier practitioner of paternalism.) That turned out to be a bad idea because, early in the process, it was determined that personnel files could no longer be kept secret from employees, and the threat of having to reveal the result of all that psychological profiling resulted in rapid project abandonment and file destruction.

But I was in the first wave and went through the testing, including the infamous Rorschach Inkblot test, and one follow-up interview a few years later. I don’t remember what I saw in the inkblot, but I clearly remember only one thing from the battery of tests and interviews: I was asked what I feared most, and, as a young married father, my answer was that I most feared being unable to work and earn a living to support my family. It wasn’t concern about getting a job, as I recall. It was more about disability of some kind. Well, the only point of this little reflection is that I have always put a high value on being able to work, having a job, and supporting my family and have a great deal of sympathy now for anyone unable, because of our weak economy, to do so. So don’t label me a heartless conservative.

Still, I am skeptical of and unable to get excited or too concerned about the employment data released periodically by our government. Yesterday, for example, we were told that 120,000 new jobs had been created in November and that unemployment dropped from 9% to 8.6%. Good news for President Obama’s re-election possibilities, maybe. As explained in this NPR report, those numbers are questionable estimates from two different sources and, depending on causes, could be either good news or bad news.

Is unemployment down because people got jobs or because they decided to quit seeking employment for now? It could be either one. If they quit seeking, was it because they are depressed and contemplating suicide or just because they really don’t want or need to work unless the right job comes along? An interesting quirk is that a sudden improvement in economic outlook could increase unemployment because lots of folks would decide to announce they are looking for work.

And there are questions about the new jobs “created.” Were they of lasting value in stable industries or were they holiday retail sales jobs, destined to disappear after December 25? Remember when there was a big uptick in employment because of the government census jobs? And what is the definition of a job? Does 20 hours a week at minimum wage count? And, finally, given the normal variability in the measurements, are these reported changes statistically significant.

I went looking for some raw data in the Bureau of Labor Statistics website, but everything there is still subject to these same questions. The best I could do was to provide some historical, big-picture, context as in the chart below: Workforce, Employed, and Unemployed as a percent of population for 1950-2011.

The only big print headline that can be generated from this chart is the increase in workforce, the total of those working and looking for work, from ~40% of the population to ~ 50% of the population, between 1970 and 1990. Of course the major factor was women entering the workforce. That, in the absence of greater increases in GDP, was enough to assure little if any increase in average compensation during that time period. I guess one could say that it did "spread around" both the wealth and the work, but didn't create much wealth.

A look at the tail ends of these curves shows that since the bursting of the real estate bubble in 2008, both workforce and employed have dropped as a percent of the population. I don’t doubt that is currently a serious problem for lots of folks wanting and needing to work and unable to find jobs, but it is also a general trend that is sure to continue for a couple of decades as we age, resulting in increasing percentages over 65, and as we delay the maturing of our young folks, increasing the percentages living in their parents’ homes and staying on their parents’ health insurance policies for longer times.

I see two options. One is to accept the idea of continually diminishing wealth and figure out how best to spread around what is left. The other is to get our tax and regulatory structure and energy strategy cleaned up and competitive and start taking back some of the work we have lost to those countries from which we now import. We can live with either option, but giving up now seems to me to be squandering the opportunity we have to continue as the world’s first choice land of freedom and opportunity. If we don’t do it, who will take our place? Mars maybe?

I know one thing for sure. Sort term tweaking of the payroll tax, income tax surcharges on millionaires and billionaires, and other similar trivialities will not revitalize our economy. But it may be that the national psychological profile we have developed will be able to accept such strategies much more easily than the risk involved in the major policy changes that would be required for true economic revitalization.

The BLS data I plotted can be found here.

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SC Sales Tax Reform Needed Badly; Courts Can Help

I just traded in my 2006 Lexus RX330 for a 2012 Mercedes GLK, smaller, tighter, firmer ride, a bit more aggressive looking, improved technology, and clean as a whistle. I enjoyed the Lexus, which I unfortunately bought about a month before beginning volunteer work with Home Works of America, a commitment which pretty much demands hauling around a bunch of tools and construction materials. I should have bought a pickup. Anyway, by the time I traded, the Lexus, while trouble-free for 86,000 miles,  had accumulated a lot of dirt and some strange smells which I am sure the expert detailer brought in for the task has completely eliminated. And, by the way, I have built a little utility trailer to keep tools and construction materials out of the Mercedes. I hope it works.  At least I had fun putting it together.

The GLK is a low end Mercedes, sticker price around $40,000 or so. In South Carolina the sales tax on purchase of cars is limited to $300 or 6% of the first $5000, a trivial expense in the scope of a higher priced car but pretty significant to the individual looking for a good used car. Admittedly, that benefit is offset by a pretty high personal property tax on newer cars, but that is another story.

The sales tax exclusion of any automobile price in excess of $5000 is one of dozens of South Carolina sales tax exclusions, all worked out over the past several years in negotiations between industry spokespersons, lobbyists, and legislators. Some are logical and reasonable, though unnecessary, and some don’t make any sense at all, rabbit food for example. The $300 limit also applies to boats, airplanes, RV’s, motorcycles, etc.

South Carolina’s current sales tax rate is 6% on non-exempt sales, and it has been estimated that about half of all retail sales are exempt from the sales tax. Local option sales taxes can raise the total to as high as 10% as is the case in downtown Columbia restaurants and hotels. Here is the fundamental problem: The more exemptions there are, the higher the rate on the non-exempt sales has to be to deliver needed revenue.

Here is a link to the 106-page document outlining all those sales tax exemptions which, for 2008-09 totaled $2,753,712,595. Currently a lawsuit challenging the legality of these special exemptions is being argued before the South Carolina Supreme Court. The challengers are worried about lost revenue and are saying such special treatment for certain industries is not legal. Legislative leaders are saying that the exemptions are legal and that tax policy should be established by the legislature and not by the courts.

As you will see in the Letter to the Editor of The State newspaper, reproduced below, my message to the legislature is to concede the lawsuit and hurry up to change the sales tax rate to make the package revenue neutral. Tax all retail sales in the interest of fairness and set the rate at about 3%. Doing so will cut down lobbying expense and time, direct legislators’ time to more critical issues, and position South Carolina as a low tax state, thereby encouraging more retirees and businesses to move on down here and boost our economy and tax revenues.

And next time I buy a $40,000 car I will pay $1200 sales tax instead of $300 and will do so happily. The tax will still be regressive with respect to income probably, but much less so than now.

Letter to Editor of The State:

As a fiscal conservative, I strongly support the lawsuit challenging our 78 sales tax exemptions. Now, if objecting Republicans, House Speaker Bobby Harrell and Senate President Pro Tempore Glenn McConnell, will just get busy and pass a sales tax rate cut to make the combined package revenue neutral, we can make a great leap forward in reducing crony capitalism and making South Carolina a far more attractive place for individuals to live and businesses to invest, thereby increasing future tax revenues.There is a downside, however. Such a simplification could put some lobbyists out of business and eliminate some opportunities for state legislators.Darryl K. Williams

Read more: http://www.thestate.com/2011/12/01/2064407/thursday-top-republicans-should.html#ixzz1fIIvC3IL


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