The tax discussion is just a way of avoiding real change.

Why do politicians think that all the revenue collected by a small business is taken as Salary?

A small business has many choices available for how to account for the profit generated from their business. It so happens that with the historically low federal income tax rates available currently, the most advantageous model is often to take everything as salary.

But that is not the best way for the economy and jobs. Surely we would be better off as a country if it was more advantageous for a business to re-invest it’s profits into growing the business, hiring new employees and building new things as opposed to taking everything as personal income immediately.

And remember the term “small business” is not just used for what you and I would consider small businesses.

Having said all that depending on where you live, $250,000 of personal income is not rich anymore, and the breakpoint for taxes should be much higher, I’d suggest $500,000 or $1,000,000 would make more sense.

Of course adding more taxes on the salaried income on the richest makes very little financial difference to the total collected by the feds, but it will change how they account for profit on revenue. But all the ways that income can be made outside of salary are worthy of consideration (tax on capital gains, a tax on stock trades, foreign investments, tax on multiple properties etc).

In some countries great schemes exist for alleviating taxes for actions that support the countries economic or social goals. For example in Germany you don’t pay taxes on a mortgage if the property is well maintained and rented at reasonable rates. This encourages investment and helps everyone live in nicer houses.

In other places businesses get a huge tax break for creating products locally. Locally designed, locally sourced raw materials, locally sourced production, but not for local final stage production. This encourages the use of the countries full range of industry and doesn’t reward the old technique of making everything in China and brining it all together for local final assembly just to avoid taxes.

There are a million techniques to use taxation to drive up the economy, and still allow business owners to be just as rich as they are today (or even richer).

In a perfect world the amount of people working would be as high as possible, and all of them earning enough to pay taxes. And the rich would be encouraged by the tax code to grow their businesses in ways that grow the economy.

Personal taxes are just an avoidable inconvenience for the richest, and any change to federal tax rates will have minimal impact on them! Why is it an issue being discussed? Well if we were not discussing this we would be thinking about the deeper issues.

Personal taxes on the rich are just a distraction technique.
A fight that really doesn’t matter, but allows politicians to scream and shout and excite their bases without really changing anything that truly matters.

I dream of a world where politicians all work together for the benefit of the country they serve, and not fight each other for personal gain at the detriment of all the rest of us.


Living within our means.

We all run households, and we know that the first rule is to make sure that the money you spend each month is no more than the money you bring in each month.

There are of course times when all of us use credit cards, and there may be a few times when you don’t pay the full balance off at the end of the month. But if you find yourself using the credit card continually to run up debts that you have no way of paying you know you have an issue that must be solved.

So there are two very simple rules when running a household:

1. First do whenever you need to do to make sure that your bills are no more than your income (eg. noodles for dinner, drink water and not the fizzy stuff, hold off on the new telly or holiday, and cancel the cleaner and the gardener if you have to).

2. Don’t run up credit, and if you have due to a tough time, stop running up any new debt and work out how to pay of the credit card bills as soon as possible (never just pay the minimum balance, put the cards away and don’t use them if you can’t afford to pay for them)

We all know these ideas. It’s quite basic. So how come businesess and (even worse) the government don’t seem to be able to grasp these rules.

Were hearing a huge amount about reducing the deficit, and were hearing all kinds of stories about fiscal cliffs, but I’m not hearing anything that makes much sense.

There are a million great ways to reduce the amount of money being spent to do the critical things without actually cutting those critical things, but of course if you spend less on stuff then some businesses will get less income (or government departments will lose employees). So there are continual fights between factions over which bits to cut, and it comes down not to the most practical solutions, but which businesses fight best for their corner of the pot of government cash.

We hear a lot about funding for education (for example), but instead of getting the bureaucrats out of education, government comes up with even more regulation continually, and ideas such as “for-profit” education.

For-profit education doesn’t hire better teachers, actually most for-profit systems pay teachers less, and require less professional teacher training. So the end result will always be poorer.

Teachers get paid crap to be teachers, they do it because they really want to.

So how about this for an idea, keep schools not-for-profit and let the teachers teach, remove 90% of the regulation and the overhead that goes with it.

This will reduce costs and maximize the quality of education for the kids, and surely that’s the goal.

Across every government run or supported function there are simple, practical ways to reduce waste and at the same time increase value.

And there are some government functions that are no longer needed. Do you know that the US government still funds a department of rural electrification. 100% of the US has electricity, but there is still money put aside every year to do more.

There are ways of managing the budget, so that the cost does not exceed the income. Doing these things can balance the books.

And there are things that can be done to encourage companies to invest in America. Tax is a great way to incentivize businesses and people to do the right thing. If jobs are brought back to America and businesses actively invest their profits in creating new business, there can be reductions in tax to reward this behavior, and conversely when companies and people choose not to invest their profit in things that increase the economy then they can be made to feel a greater tax burden.

Taxation that is aligned to the strategic goals of job creation and capital investment can go a long way to improving the economy.

So firstly balance the books and stop borrowing money, and then secondly drive up the economy to increase the overall revenue (and hence the collected taxes) to pay down on the debt.

There are no easy options, but you will notice I haven’t mentioned massive tax cuts as a way of driving up the economy. Taxation needs to encourage the right behavior.

If people do the right things, create new businesses in their home country and actively reinvest wealth in innovation, manufacturing and distribution, then the economy will grow. Reward the right actions and punish the wrong actions, that’s when taxation works best.

This is not a partisan issue, everyone knows the rules, so government (all of you) wise up and act like sane members of the human household.


Why the hell is there an MTA tax on my cellphone bill!

The last time I checked, there was absolutely no cellphone reception on the New York City Subway. No phone calls, no Internet access nothing!

Yet hidden away on my cellphone bill is a tax code for the MTA. I was on a call with AT&T a few weeks ago, to perform my yearly check to see if I have the best deal on the service I consume (if seems that unless you call them around once a year, the charges you pay start to either rise or at least don’t take advantage of newer plans). I asked the usual questions:

1. Please look at the service package I have, am I getting the best deal you offer for these services?
2. Is there some new way of configuring my bill to lower the costs?
3. Can you confirm that my minutes that I pay for are close to what I use?
4. If I were to move to your competitor would they offer me a better deal? And would you like to just compete proactively to save me having to do that?

The result is always a reduction of some part of the plan, same or better service, but with a lower price (and it seems they always waive upgrade fees if I choose to upgrade my phone more often than once every two years)

I do the same thing with cable, home insurance, car insurance and banks. Just 15 minutes every couple of months saves many hundreds a year (and yes I do like GIECO).

Anyway while I was on the phone with AT&T, since the call went so well and was quick I thought I’d ask about some of the taxes on the bill. One was labeled MTA, I was sure it wouldn’t be the Metropolitan Transport Authority for New York City, as they offer no cell service. But I was wrong, it is them! Just a few cents every month, but since there are millions of cell users in the area, this is a big ticket item on their budget.

I’m sure it’s a hangover from the days when cables ran through subway tunnels, and they have just kept it going.

Here’s hoping that’s the reason and they are not in fact investing in cell phone services on subways.

Can you imagine how annoying it will be if everyone has to shout over the noise of the trains at each other.

And of course since the emergence of reality TV, where everyone shouts into their speakerphone (so the camera can pick up both sides of a conversation), everyone below the age of 30 feels the need to always answer their phones that way.

If you want to look really stupid, try walking down a street shouting into the screen of a cellphone. It actually makes people who talk into a Bluetooth headset seem sane by comparison.

So now imagine these same reality TV saturated phone junkies screaming into their slab of glass on the subway platform or even the subway, it will not be pretty.

If the number of fights per month on the subway system increases dramatically, I suspect that will be a good indication of the ability to make calls while down there.