Eliminate The Corporate Tax Rate?

I just looked at my statistics for my blog. I had 4,400 folks look at my blog over the last year, which I am pleased with. However, the one statistic that really amazed me was the number of countries my readers represent. I have had people from 88 countries throughout the world read my blog. I am humbled and thankful that so many people have read my blog. I have two goals for next year in relation to my blog. I want to increase my readership, and I want to increase my number of countries. I plan on reading Paul Sohn’s ebook on how to increase your blog readership. I will also read other recommendations to increase the reach of “It’s Business and Personal.”

What I want to address today is the topic of a Corporate Tax rate. I just read an article that discussed ten reasons for eliminating taxes on corporate taxes. When I first saw the title I immediately thought, or great another greedy person who is looking for the government to give them more advantage with the promise of better economic growth for all, but never seeing the promise emerge, but when I actually read the article I now find myself agreeing, but with a qualifier which I will discuss shortly.

John Steele Gordon, an author, wrote a commentary today in the WSJ giving the top ten reasons to abolish the corporate income tax. He argues that with a tax rate of 35%, the highest in the world, the United States is actually hurting missing an opportunity that could be gained if the tax was eliminated. I was skeptical until I read his argument.

I think any of us that pay attention to tax revenues and deficits recognizes the complexity of our current system. Within our system there is a huge need for tax preparers and consultants that help people, an corporations find the loopholes. Gordon argues that if we eliminate the corporate tax, the consultants, lobbyists, go away, and I can see the benefit of that and the opportunity to have an incredible amount of money that could be used for other things.

The second reason given by Gordon is connected to the first. Management is focused on profit. If they are good managers they will be looking at a multilayered income statement that will help them focus their efforts on controlling costs. Gordon states that managers focus on after tax profits, and rely heavily on consultants to minimize taxes and increase after tax profits. I would hope that these managers would not just focus there, but earnings after tax is important. With the elimination of the corporate tax that effort is replaced with a focus on the actual creation of wealth, which is not a bad idea.

Currently, taxpayers are hit by two different tax rates. One is related to wages and the other capital gains. Long-term capital gains, stocks held longer than 61 days, are taxed at a 15% rate, whereas short-term capital gains are considered income that is taxed at a higher rate depending on how much money you make. By eliminating the corporate tax rate “there is no reason to tax dividends at the lower level.” Which means more revenue for the government.

Another by-product of this elimination would be increased profits that could be shared with investors and other stakeholders. With increased income more investment could occur thus increasing capital budgeting for most companies. More investment means greater growth in the GDP. Greater growth in GDP means great income for people that means a greater tax foundation which means more state revenue. More state revenue means stronger social programs. Hmm, seems like everyone wins.

Another outcome, according to Gordon, is increased stock prices. This in turn leads to larger 401(k)s, meaning better retire accounts, thus creating the wealth effect leading to more consumption. This means a stronger economy, which means higher tax revenue, which means more cash for social programs.

Gordon’s sixth reason is very interesting to me, especially in light of my thoughts about social entrepreneurship being the new model for meeting social need. Gordon states, “the distinction between for-profit and nonprofit corporations would disappear. So nonprofit corporations would not have to jump through hoops to qualify for that status.” Anyone who has been through that process knows how difficult it can be. This reason does intrigue me.

Gordon’s seventh reason also seems compelling. This reason involves the $2 Trillion that is sitting offshore to escape taxes. With the tax requirement eliminated this cash could be moved to the United States increasing our liquid capital. Hmm, money in our checking account.

One of the reasons for US company inversion is to escape the tax rate. If the rate is eliminated there is no reason to go elsewhere. In fact, with the reduced cost of business, and our trained workforce, many foreign companies may choose to relocate here. This is another really good point. A related point involves competition. Foreign countries would be forced to reduce their rates also, which would help the world economy. Hmm, very interesting.

Gordon’s tenth reason involves the elimination of crony capitalism. If the corporate tax rate is eliminated then there is no reason for politicians to dole out favors for money. The favors are usually tax breaks for corporations. This could also include subsidies, etc. All of this would go away, at least in the mind of Gordon.

The argument Gordon presents is, at least to me compelling and interesting, but it is a long way from implementation. I can think of several problems that could occur because the new system would be too simple. Lobbyists, and other consultants, maybe even tax preparers may see it as a threat. Therefore they will fight this type of change. Or, maybe corporations would view this as a loss of power. Thus seeing power as a competitive advantage. They might feel threatened by a level playing field. However, I also believe in the fallen nature of man and our ability to mess things up. I also think this would work better if we went to a flat tax rate. I do think the elimination of tax loopholes and the implementation of a flat rate would be a win win for all.

And that is my thought for the day!

Is The American Dream Dead?

I ask this question because of several articles and books I have read lately that has motivated me to think about the subject. “Malcolm and Martin and America” has helped me to see that the American dream is not the same for those who don’t look like me or live in the suburbs. Other articles have helped me to see the dream is a little harder to realize today than when I was younger. However, another article has helped me to see it is still possible.

First, why do I say the American dream may not be the same for someone who doesn’t look like me or live where I live? Many of the issues that Malcolm and Martin dealt with are still relevant today. The poverty associated with living in inner city, for lack of better term, ghettos, still create hard to escape situations for people of color. Educational opportunities are limited, resources to develop social skills needed to be successful in our society are often lacking, positive male and female role models that impact day to day living are skewed, and jobs that pay a living wage are minimal. Therefore, the system of poverty could be considered a perpetuity.

As much as we want to say they that the people who live in these environments just need to pick themselves up by their bootstraps, we must realize the system is detrimental to that type of change. Therefore, there must be some type of intervention to ensure that change occurs, but the question continues to be how?

I do agree with articles that say it is a bit harder to gain the dream, but I don’t agree with those who think it is dying. I do think that it is harder to get ahead financially. Due to wage reduction and increased costs associated with education it is more difficult to climb the social ladder. To get ahead many families resort to two family incomes. This puts a strain on children. Parents are required to be much more organized in their homes to ensure positive child development occurs. We are in the “Two Income Trap.”

I also agree there is a growing wealth gap. The owners of capital, stocks, etc., have much larger access to the means of wealth than the worker. This allows some Americans to have more of an ability to be debt free than those who attempt to live on a low wage and are required to have debt to live day-to-day. This also applies to our higher ed students who are acquiring levels of debt that will make it hard for them to gain financially for much of their life.

Think about the last vacation you took. For some, vacations are trips to Europe, for others, a trip to Disneyland, and for some, it is a staycation. Try to take a budget vacation for a family of four and you can see how much is involved. Many vacations today are traveling to see family, if you can afford the gas.

Don’t get me started on health care costs. My wife just had surgery, and if we did not have really good insurance I don’t know what we would have done. This is one reason that our life expectancy is not the highest in the world. We have people that continue to practice risky eating habits, and many have substandard insurance.

And lastly, what about retirement? The baby-boomers are probably the last generation to enjoy the traditional pension. And even many of the boomers have lost the benefit. We are all asking what will social security look like in twenty years? For the younger generation retirement will look very different than it did for previous generations.

With all the challenges though I would agree with Ester Cepeda, “The American Dream is down but not out.” First, Cepeda asks the question what is the American dream? I really like her definition, “life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement, regardless of social class or circumstances of birth.” OK, I can buy that one. It is not about wealth, the American dream is about what constitutes a good life. Cepedea ends her op ed with, “Just like this Founding Father [Benjamin Franklin], the American Dream’s strength is its ability to transform in whatever way is needed to ascend from modesty to greatness. Whether it represents a dollar sign to some or the comfort of globally envied personal freedom to others, its strength gives it the ability to be either catalyst or comfort.”

To me the American dream is alive and well, although maybe a little sickly at the moment. However, the American dream will live because of we the people want it to live. We can make fun of our leaders, and not end up in a prison some place. We can protest, peacefully, the injustices of systematic racism to make things better. We can attend church and not worry about being arrested for believing in God.

However, it is a bit more difficult financially to get ahead. It does take a little more skill to navigate the treacherous white water of the economy. Those with greater skill need to put their mask on first, and then help the others who cannot help themselves. If we do that, even the difficult economic issues of the American dream can be available to all! You may think I am naïve, but I choose to believe.

And that is my thought for the day!

The Answer!

In some of the groups that I associate with Evangelicalism is used as a pejorative term. Some of these folks would consider themselves Christians, but I find it very interesting they are so negative when it comes to the evangel. I find myself thinking don’t they believe in the “good news?” I have found myself thinking about this almost every day now. I think about this in light of my thoughts about authentic and servant leadership; I find myself thinking about this as I grapple with racism in this country; and I wrestle with this as I think about my own personal problems in my family; as I worry about the eternal residency of my children and grand children. However, I do think this agonizing is a good thing. It tells me God’s Spirit is at work in my heart. So, I raise a couple of questions this morning, what is the answer to all of this hate in the world today? We have just finished Christmas, and every year it seems to be more secular every year. So are we missing the point, are we losing something as we mature?

What is Evangelicalism? One definition that I found states that “Evangelicalism is a worldwide movement within Protestantism, maintaining that the essence of the gospel consists in the doctrine of salvation by faith in Jesus Christ’s atonement.” I have no argument with this definition, nor do I see any need to use the term as something negative.

The following is from the Evangelical Alliance:

We’re evangelical. We’re passionate: about God, about the Church and about the Bible.
We’re evangelical. We’ve decided to live our lives with Jesus –the saviour of the world and son of God –at the centre.
We’re evangelical. We humbly and lovingly believe that the best thing for our families, friends, neighbours, nation and world is that they live their lives with Jesus too.
We’re evangelical. We believe that God is with us and empowers us by His Spirit. We’re evangelical. We love the Bible. It bears witness to God’s revelation in Jesus Christ. It invites us into the story of God and the world. It guides us in how we live our lives and has so much to say about what it is to be human and how we should do life together: with God and with each other.
We’re evangelical. So we just can’t keep quiet about it.

Again, I see no problem with this! This is a straight forward understanding of what it means to be a follower of Jesus Christ. So where does the problem lie? Some of it is related to conservative politics, and the association of Evangelicalism with Republicanism, even more it is related to the debate between pro-choice and pro-life and the societal conversation about being Gay. On other words, the culture war, which I do think the Church is losing by not responding to these modern day issues in a manner that Jesus would respond.

Philip Yancey does an excellent job reflecting on our current situation is his new book, “Vanishing Grace: Whatever Happened to the Good News.” I have just started it and have found it refreshing. I have also found it has reinforced the conclusions I have come to as I have pondered the many subjects mentioned above.

Yancey describes the great divide between non-Evangelicals and Evangelicals with a story. “I got a taste of the passionate feelings behind the culture wars when I posted a quote from the late Andy Rooney on my Facebook site.” He attributes to Rooney the following, “I’ve decide I’m against abortion. I think it is murder. But I have a dilemma in that I much prefer the pro-choice people to the pro-life people.” Yancey received many responses to this posting, which represented both sides of the fence. However, what I would like to focus on is what Yancey learned. “In short, the responses underscored Andy Rooney’s point. Would I want to eat dinner with the flame-throwers who posted comments on my site? I replied [to the flame-throwers] that the issue is not whether I agree with someone but rather how I treat someone with whom I profoundly disagree. We Christians are called to use the weapons of grace, which means treating even our opponents with love and respect.”

So what is the answer to being an authentic servant leader; to confronting institutionalized systematic racism; the eternal residency of my family, and the issues associated with LGBT? I think is goes back to what I learned very early in my life as a Christian. If I am to be an accurate and effective evangelist in this day and age, I need to live in, through, and for Jesus Christ. If I am to be an authentic servant leader He can be that in me, and help me be it in the world that I move within. If I want to impact my family then it must be through love and not judge. For me to love as Christ has love means I need to be close to Him. And if I am going to confront racism as I see it, then I will need the strength that can only come from walking with Jesus in this life. And if I am going to make sense of the LGBT issues in our society today I need to see and tell people about this guy, Jesus, that can love people the way they need to be loved.

Many years ago the Church used to tell people they had a God shaped void in their lives that they were seeking to fill the void with sex, drugs, and rock-and-roll. Yancey saw something similar to this in a meeting with Henri Nouwen years ago. In his meeting with Nouwen, Yancey learned that Nouwen had just returned from San Francisco where he had spent time visiting AIDS patients. This was when AIDS was a sure death sentence. After this experience, Nouwen relearned what we used to say so long ago. “Nouwen went on to say that his prayers changed after that week. As he listened to accounts of promiscuity and addiction and self-destructive behavior, he heard hints of a thirst for love that had never been quenched. From then on he prayed, God, help me to see others not as my enemies or as ungodly but rather as thirsty people.”

May that be our prayers in this New Year, I know it will be mine.

And that is my thought for the day! With the help of Philip Yancey.

Rent Seeking!

Our current semester is done. As college professors we now have time to renew our strength and get ready for the Spring semester. On top of this it is Christmas time, and lots of family activity will occur. I can’t say this is my favorite time of the year, but I always love to see my family.

When I first got married many years ago we paid rent. Eventually we bought a house, and except for one short year, have owned ever since. What got me thinking about rent was a book by Joseph Stiglitz and an editorial discussing Chairman Jeb Hensarling, a Republican from Texas. He is actually known as “K Street’s biggest opponent.” Now what the heck is K Street? I had never heard of it before. It appears that K Street is a major thoroughfare in Washington D.C. where all of the lobbyists are located. If you don’t remember what lobbyists are, they are the remora of our political system. They are the one’s who are responsible for “crony government programs that reward the well-connected business elite.” The philosophical reason for doing this is based on a mercantilism and a belief it is the government’s role to increase wealth even if it hurts individuals. This to me, and to Jeb Hensarling, is problematic.

Last May, Jeb spoke to the Heritage Foundation arguing “that the world of earmarks, subsidies, and tax preferences has caused many to view success with suspicion.” These earmarks and subsidies are nothing more than economic rent forwarded by cronyistic politicians to their very rich contributors.

The classic definition of economic rent is “the excess payment made to or for a factor of production over and above the amount expected by its owner.” Investipedia gives a couple of examples. If a worker is willing to work for $15 per hour, but because they belong to a union they receive $18, the $3 difference is considered rent. Another example of rent is the huge salaries the CEO’s receive. Rent occurs when someone is given something for nothing. Stiglitz does a good job in his book, “The Price of Inequality,” explaining the adverse affect of rent seeking and its relationship with cronyism.

Stiglitz believes that much of our inequality today is “a result of government policy, both what the government does and what it does not do.” Hmm, this sounds interesting. What does he mean? To understand what his argument is we have to go back to economic rent, which he calls rent seeking. “Rent seeking involves the many ways by which our current political processes help the rich at the expense of the rest of us,” thus the reason why I brought in the word mercantilist. Our government has created “hidden and open transfers” to their friends, created laws that favor certain competitors, and “statutes that allow corporations to take advantage of others or to pass costs on to the rest of society.”

Walmart is a classic example of this. Forbes recently reported that U.S. Taxpayers are paying about $6.2 Billion providing public assistance for Walmart employees. If anything is rent seeking it is this. This is why I think Mr. Hensarling is doing the right thing. He is attempting to do away with the rent seeking so prevalent in our Capital, and it doesn’t make any difference who is in the White House, they all do it (Although, I may not want him to do anything about the Export/Import Bank, for obviously purely selfish reasons).

We have so many problems in our country right now. It seems like we have lost our way. I think we need more people like Mr. Hensarling who believe in the free market and are willing to work hard to keep in free, and reduce the rent seeking that large business wants to keep in place. Even the famous Peter Drucker has a problem with rent seeking.

“Drucker was not reluctant to criticize large companies, saying for instance, that outsize packages for CEOs were a scandal and that taking big salaries while firing workers was morally and socially unforgivable.” Interesting, although he may not have made the connection, but it appears he was against both cronyism and rent seeking.

Drucker also understood problems with government. He did not trust government initiatives, and “was critical of public-sector welfare programs.” He also said that free enterprise “could not be justified as being good for business, only if it was good for society.”

We all recognize the importance of business in our society, but we also recognize the problem of an unfair advantage given to someone just because they are powerful and a friend of our politicians. Jeb, keep up the good work, tear down the walls of rent seeking, and make our business system fair once again.

And that is my thought for the day!

Lesson From The Words Of Martin Luther King!

I am reading a book about Martin Luther King and Malcolm X. The title of the book is Martin & Malcolm & America: A Dream or A Nightmare. This wonderful book by James H. Cone explores the evolving philosophies of Martin and Malcolm. I have found the book enlightening, especially with our current issues in Ferguson, Cleveland, and New York City. What I want to focus on today is something Martin felt was important. According to Cone, “King believed deeply that the Negro is God’s instrument to save the soul of America. He urged his people to accept their redemptive role by pursuing five objectives: self-respect, high moral standards, whole-hearted work, leadership, and nonviolence.” King felt these objectives were critical in the fight against racism, and from my little knothole I would say it makes sense, but I would also like to say that these objectives are important to all. Please don’t think I am being disrespectful as I discuss this topic, but all of us can learn from these words.

Cone states, “King declared that Negroes must maintain a continuing sense of dignity and self-respect.” King also stated “Let no force, let no power, let no individual, let no social system, cause you to feel you are inferior.” As an integrationist, King made self-respect the center of his philosophy. King also stated, “we must have the spiritual audacity to assert our somebodyness. We must no longer allow our physical bond-age to enslave our minds.” As I read and write these words I can say that I have no idea what it feels like to be considered less than something, but I can also see the power of these words, and how they are filled with encouragement.

All of us need to raise our game a bit in this area of self-respect. It seems to me that we are willing to accept lower standards of living than we have in the past. We allow video games, pornography, and other diversions to steal our vitality and self-awareness. We have allowed the spirit of this age to rob us of the recognition that we were created in the image of God, forcing us to lose our self-respect as we degenerate into unthinking robots.

The second objective involved high moral standards. “King emphasized that Negroes must make ourselves worthy of the respect of others by improving our personal standards.” After making that statement Cone then shares statistics about crime, etc. I know this may come across as curmudgeon like, but I think we all can learn from King’s comments here. The moral standards of our country have declined. I am sure the generation before mine said the same thing. However, this age seems to becoming more like Sodom and Gomorrah everyday.

King’s third objective is whole-hearted work. “King also urged Negroes to make full and constructive use of the freedom we already possess.” He also stated that they should “refuse to use our oppression as an excuse for mediocrity and laziness.” King painted words pictures to make his point. One of those pictures involved a street sweeper. “If it falls your lot to be a street sweeper, sweep streets like Michelangelo painted pictures, like Shakespeare wrote poetry, like Beethoven composed music; sweep streets so well that all the host of heaven and earth will have to pause and say, Here lived a great street sweeper, who swept his job well.”

All of us can learn from these words. I fear that this is another aspect of our modern age that has become deficient. We have lost the ability to work hard, and our expectations concerning free rides have become greater. Rediscovering the wonderful experience of hard work is important.

King also recognized the importance of leadership. Cone describes this, “In his Prayer Pilgrimage address, King also emphasized the urgent need for strong, courageous, and intelligent leadership from the Negro community. He urged Negros to shun both the Uncle Tom, who acquiesced to the system of segregation, and the hot-headed rabble-rouser, who is led astray by emotionalism. We must realize that we are grappling with the most weighty social problems of this nation, and in grappling with such complex problems we must be sure that our hands are clean in the struggle.”

Hmm, these are words all of us need to heed. The lack of positive leadership in this country is well documented. Even now in Clark County we have leaders who, just because they don’t like a Charter are going to attempt to destroy a person who has been involved in county leadership for years. I find this appalling and disgusting and horrible leadership. I hope our state Attorney General put these so-called community leaders in their place.

And lastly, King emphasized nonviolence. Cone describes how King’s adherence to nonviolence developed. “Yet King did not begin the Montgomery bus boycott with a personal commitment to nonviolence. This commitment came later as he shifted the primary focus of his thinking from justice to love. Before his shift to the primacy of love and following the bombings of his house; King had armed guards around his house and even applied for a permit to carry a gun in his car. But when he made the shift to love, nonviolence became more than just a practical way for an oppressed people to achieve justice; it also became a way of life, a total commitment.”

Our willingness to physically and emotionally brutalize one another is violence. We cyber bully, we make fun of, which are simple acts of violence, and we physically hurt one another. I think we can learn something from the nonviolence of Martin Luther King.

So there you have it. Words from Dr. King that I think we can learn from. His five objectives: self-respect, high moral standards, whole-hearted work, leadership, and nonviolence are just as important today as they were in the 50’s and 60’s. In many recent events we have heard the words “never forget,” I would echo these words as we think about King’s five objectives, “NEVER FORGET.”

And that is my thought for the day!