Thursday, November 30, 2017

'Not Top 10' Reasons To Not Run For Public Office

There really are not a lot of great reasons for
great people to not run for public office.
(first published in North State Journal 11/29/17)

ESPN ran their ‘Not Top 10’ sports moments for 2017 which showed the bloopers and mistakes made over the past year in the sports world.

Have you ever heard the 'Not Top 10' reasons why people will not run for public office?

I run The Institute for The Public Trust which tries to find, recruit and train great people to run for public office across North Carolina.

We all acknowledge our need for the very best people in our communities and state to run our representative democratic government. It has been that way ever since the founding of our Republic in 1789 with Messrs. Jefferson, Madison, Hamilton, Adams, Washington and Franklin to name a few.

When sane people watch the news and see only the sordid side of politics, most say not only 'No!' when asked to run for city council, state legislature or Congress but an emphatic 'Hell No!'

Why should they? A candidate or incumbent has to raise money all the time; they have to suffer the slings and arrows of outrageous fortune and vicious attacks, sometimes true but many times not; and they basically have to take a vow of poverty to serve the public unless they are independently wealthy.

Want to run for the North Carolina General Assembly? The pay is $13,951 per year, roughly $3 per hour.

 Here are 5 common reasons why good people don’t run for office:
5. 'I am too busy'
Of course you are. You are busy at being great at what you are currently doing in your business, avocation, family and charity work. That is why we want you to take your immense talents and put them to work for the common good as our elective representative. 
Just like Mr. Jefferson, Mr. Madison, Mr. Hamilton before you.
4. 'I don't like to lose'
Of course you don't. No one does. Does that exempt you from trying to run for public office where you could elevate the public debate and discourse because you actually know what you are talking about and once elected, you can actually do something about the immense problems facing us?
3. 'I don't know the issues well enough'
If you are highly intelligent, talented, educated and experienced and don't understand the big issues facing our state and country, you probably should stay on the sidelines and let someone less qualified take your rightful place in our elective representative government structure.
2. 'I am afraid of the media'
Join the club. Hopefully, if you are as qualified as others think you are, you are not a felon; a miscreant; a liar; a chiseler; a deal-welsher; or a two-faced baboon as opponents called Abraham Lincoln, of all people. 
You should have no problem with the media if you are none of the above.
1. 'I am sure someone else will do it so I won't have to'
Have you been paying any attention at all to what has been going on in our collective elective government over the past 30 years or so? Name the top 10 people who have served in public office that you think were cut out of the same bolt of cloth as Mr. Jefferson, Mr. Madison or Mr. Hamilton long ago.
There are not many most people can name off the top of their head.

We admire and salute everyone who has run for office and those who have been elected and served. It is a very tough job, hands-down one of the toughest 'dirty' jobs anyone can ever undertake.

However, we need our best to serve. Mr. Jefferson considered public service to be the highest calling any person could be called to perform.

Help everyone by finding a good reason ‘to run for office’. Not away from it.

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Wednesday, November 22, 2017

'I'll Take Odd Tax Facts For $2000, Alex!'

(first published in North State Journal 11/22/17)

Since all the attention is on the US Senate now to see if they can pass a tax bill and get it to conference and to the President's desk before the Alabama special Senate election on December 12, consider the following facts about the US tax code in the following couplets:

  1. 45% of all taxpaying household units in America pay no federal income tax in the progressive tax structure.
  2. 100% of all taxpaying household units that reported earned income paid federal payroll taxes in what is essentially a 'flat tax' on everyone.
  3. 70% of all taxpayers choose to use the standard deduction instead of itemizing deductions.
  4. Roughly 2.2 million people who use the standard deduction 'overpay' their tax liability by not itemizing which leads to an overpayment of approximately $1 billion in federal taxes.
  5. The average annual 'tax gap' or the difference between collected taxes and potential tax revenues is about $450 billion/year due to under-reporting of income or flat-out fraud.
  6. 0.86% of all 136 million tax returns were audited by the IRS in 2016.
  7. The income tax was made constitutional by ratification of the 16th Amendment in 1913.
  8. Mandatory withholding of federal income and payroll taxes started in 1943 during World War II.
  9. There is more tax revenue sheltered by deductions, exemptions and credits, roughly $2.2 trillion and not paid to the US Treasury, than the amount of income taxes collected each year,  $1.8 trillion from individuals and $355 billion from corporations.
  10. Corporate income taxes amount to 10% of all tax collection all of which is paid for by customers in the form of higher prices.
Other than winning bar games or perhaps beating Ken Jennings on 'Jeopardy' with 'Odd Tax Facts', what does all of this tax trivia mean today?

There is a vast amount of disinformation out in the public about our tax system.

We have a progressive tax system that really doesn't 'gouge' the rich since the uber-wealthy can afford so many tax shelter unavailable to most taxpayers.

We have a second 'flat tax' system that is completely regressive since it takes 15% (half from the employee/half from the employer; 100% from self-employed) from dollar $1 earned by each and every salary wage-earner in the country, from the poorest laborer to an NBA star, up to $127,500 for Social Security and unlimited in Medicare.

2.2 million people don't know they are paying too much in taxes by choosing the standard deduction instead of itemizing deductions such as mortgage interest, charitable contributions and state and local taxes.

Millions of taxpayers who do use the standard deduction are getting a good deal if they A) rent and don't have a mortgage on which to pay interest; B) don't contribute a lot of money to charity or C) live in a state without an income tax. With the standard deduction going up to $24,000 for married couples and $12,000 for individuals, millions of taxpayers will get the benefit of tax deductions even if they don't do anything specifically to earn them.

99.2% of all taxpayers each year will not be audited by the IRS. The IRS does not have the time, resources or manpower to go after all but the largest discrepancies in the higher income categories. If every person had to pay 1 huge check on April 15 each year, we would have the largest tax revolution since 1776.

We are leaving at least $400 billion per year on the table in uncollected tax revenues. When you factor in the black market and illegal trade in America, it might be triple that number.

This tax reform package needs to be passed this year. But it should not be the last tax reform package we ever see.

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Wednesday, November 15, 2017

'Oh No! The Republican Tax Plans Will Explode The National Debt!'

To Balance Any Budget, You Gotta Obey
The Rules of Double-Entry Accounting
(first published in North State Journal 11/15/17)
Get your recording devices out.

The same people who did not say one word about federal debt doubling from $10 trillion to $20 trillion under President Barack Obama are now suddenly fiscal hawks screaming about how bad the GOP tax plans are because they ‘will explode the federal debt!’

The competing Republican tax plans have a lot of shifting shapes and moving parts but we do know that, in general, both will be scored as lowering future tax revenue intake below projected budget baselines over the next 10 years anywhere between $1 trillion to $2 trillion based on preliminary estimates.

Let’s call it $1.5 trillion.

Which means future debt accumulation will be about $1.5 trillion more than the amount already projected to be added based on past actions, or inactions, of Congress and Presidents dating back to at least 2000.

What is the current amount of additional national debt projected by CBO to be incurred based on past decisions, or indecisions, by Congress and Presidents George W. Bush 41 and Barack Obama before the election of Donald Trump in 2016?

$11 trillion.

$11 trillion in additional debt was already expected to be added on top of our existing
federal debt of $20 trillion whether Donald Trump, Hillary Clinton or The Tooth Fairy was elected President in 2016.

The inaction of Congress and the last 2 Presidents to reduce spending or cut deals to avoid such enormous debt accumulation has been a far greater problem than what the addition of another $1.5 trillion in debt would be over the next 10 years.

We already have $20 trillion in federal debt today. One day, it won’t really matter if the United States has $50 trillion of national debt simply because the gravitational forces of international finance, accounting and economics will take over and start to make decisions for us in terms of inflation, currency value and interest rates instead of Congress and our President making legislative decisions in our democratic republic as we have done over the past 228 years.

That will be a truly scary moment for every US citizen living at the time.

What can be done to arrest the growth of national debt solely because of these tax reform bills now before Congress?

Remember the health care reform bill that Senator John McCain deep-sixed with his nay vote a few months ago?

Embedded in that enormous reform bill was between $1 trillion and $2 trillion in federal spending savings over the next 10 years due to the reduction of the subsidies and other federal outlays to prop up ACA exchanges and insurance companies in that massive bill passed in 2010.

Let’s call it $1.5 trillion in savings.

$1.5 trillion in federal ACA savings could be used to offset the loss of $1.5 trillion in tax revenues over 10 years to produce a deficit-neutral status quo budget going forward. With respect to adding on more debt, at least.

If you are a long-time budget deficit hawk or a Johnny-come-lately budget deficit ruffed grouse, you should welcome the chance to pair the tax reform bill with reform of ACA to make sure we don’t add more debt than the $11 trillion we are already on schedule to add on top of $20 trillion our children and grandchildren now owe.

We have to do something about curtailing entitlement spending to start to see any diminution of our national debt.

Boomers and their parents have been great at loading up debt on the backs of our children and grandchildren.  Maybe we will have the common sense to stop it beginning with this tax bill.

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Wednesday, November 8, 2017

The 'Real' Miracle in Philadelphia, 1787

'We coulda set up a monarchy,
you know, but we didn't'
(first published in North State Journal 11/8/17)

A young person said this recently:

“The Founders were all white privileged men”

To which the answer was: “Yes. And your point is?”

“They wrote the Constitution to protect their interests. It was stacked for rich white men from the beginning.”

Which is also mostly true at the time.

“Do you know what the ‘true’ Miracle was in Philadelphia in that hot summer of 1787?” he was asked.

The real miracle was that they did not establish a kingdom or an oligarchy forever. Which they very easily could have done and some, including Alexander Hamilton, wanted to see done.

The Founders turned to the writings of John Locke and other classical liberal thinkers not only to set the predicate for the Constitution with the immortal words “all men are created equal” in Jefferson’s Declaration of Independence in 1776, but also to pour the concrete foundation of our country with principles to establish the first free democratic republic which has been copied the world over to set people free for the last 228 years.

Our Founders had every power at their disposal to set up a parliamentary government to serve a king. But they didn’t. George Washington voluntarily retired to his farm and distillery at Mount Vernon and set the paradigm for citizen-politicians ever since.

Our Founders had every power at their disposal to set up an oligarchical form of government similar to the ancient Greeks in Athens. The “rich white privileged men” in Philadelphia didn’t have to mention equality for everyone or free speech, religion, press, assembly or the right to petition the government for anyone else but members of the oligarchy, but they did.

Instead of 100 percent serving their own narrow interests, they fought tooth-and-nail over provisions in the Constitution to enable a free flow of commerce and trade, a strong centralized national defense and individual freedoms and liberties unlike the world had ever seen before. Their aversion to total concentration of power in the hands of King George III led them to go to the other end of the spectrum to set up a system of government that does its darndest to frustrate and prevent capricious actions on the part of a president or even small groups of one faction or the other in the U.S. Senate versus the U.S. House.

Granted, many rights were restricted to landed gentry early in our history. But the other part of the “Miracle” in Philadelphia is that they set up a means to amend and change the very Constitution they ratified so that over time, the new republic could grow and adapt to where we are today.

I had the opportunity to speak to the government of Estonia in 1995 after they declared freedom from Soviet Union dictatorship in 1990.

We were told to bring a suitable gift to give to the leader of the parliament as a gesture of friendship. I bought a copy of James Madison’s “Notes on The Constitution,” which had been kept private in his and wife Dolley’s hands for 51 years after ratification of the Constitution and only published after the fourth president passed away.

Upon opening the gift, the leader of the Estonian parliament literally broke down in tears.

“You Americans don’t realize how special your Constitution is to us or any other nation now freed from the Soviet Union,” he said. “We are doing everything we can to have a free democratic republic here in Estonia as Mr. Madison and the other Founders did in America long ago.”

The United States may not be perfect today in your opinion. The U.S. Constitution was not perfect in its original form either. But we all owe it to each other to keep working on the American Experiment until everyone can be proud to say they are American.

They gave us a gift. It is worth preserving.

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Wednesday, November 1, 2017

Why Not Add a 70% Marginal Tax Rate For The Uber-Wealthy?

Professional Athletes Making Millions Are A Few of the US Taxpayers
Who Pay the Highest Marginal Income Tax Rates on Salary Each Year
(first published in North State Journal 11/1/17)

Supporters of the progressive income tax think it is the greatest thing since sliced bread because it makes taxes more ‘fair’.

Wrong. It just makes everyone who supports class warfare feel better because they think they are 'sticking it to the rich' when, in reality, it doesn't on very high net worth individuals.

The proposed new tax brackets would collapse the existing 7 tax rates down to three: 12, 25 and 35 percent. There is speculation that the tax package now under consideration by Congress will not reduce the highest tax rate for multi-millionaires from 39.6% and might, in fact, raise it on them.

It won't matter. For reasons discussed below.

The top marginal income tax rate is 39.6% today and is effective on taxable income of $418,400+ for single filers and $470,700+for married couples filing jointly.

The premise behind keeping a 4th bracket at 39.6% and/or adding a much higher tax rate for the super-wealthy is that 'rich people should pay more in taxes!' without really specifying how much more would be satisfactory.

The real question is: ‘Would a super high income tax rate on the uber-wealthy bring in a lot more tax revenue to pay for all the stuff we want our federal government to pay for?'

Probably not.

Uber-wealthy people have access to unbelievably smart and clever tax accountants, estate planners and tax lawyers. If you don't believe it, ask one of them.

As long as we have a tax code rife with hundreds of specific personal and corporate tax deductions, exemptions and credits, very wealthy people will be able to hire enough tax accountants and lawyers to drive their 'effective' tax rate down to whatever level they choose to pay.

If there is a very wealthy person actually paying 39.6% on any income, they need better tax accountants and lawyers.

Why is this true?

Most very wealthy people do not take any salary once they reach a certain point in wealth accumulation. Therefore, many do not pay ANY income tax at all. Period.

No federal or state income taxes are paid since they don't take any income in salary. No payroll taxes are paid into Social Security or Medicare Part A withheld each pay period because they don't get paid like the majority of other taxpayers who earn a paycheck every week.

They collect income in the form of capital gains or qualified dividends which are taxed at the 20% rate, not 39.6%. Many capital gains are offset by tax losses on other investments or in like-kind exchanges in which case, no tax revenues are generated from asset sales by many rich people in a given year.

They invest in tax-free municipal bonds for example. Hard to collect taxes from tax-free incomes.

The number of legal tax schemes available to the super-wealthy in America today to offset non-salaried income are legion. Why any colossally-wealthy people pay any tax every year except for perhaps public relations purposes is mind-boggling.

Since CBO doesn’t use dynamic scoring, perhaps Congress should add on a super-duper marginal tax rate of 70% on everyone in the highest earned income salary levels since static scoring would presume little-to-no change in behavior, although we all know it does.

Based on other similar projections, CBO might up with a score of at least $1.5 trillion of increased revenues over the next 10 years at least on paper. Technically, that would make this bill ‘budget-neutral’, even though hardly any of these projections would come true.

The people who would be thrilled with this new tax bracket, besides advocates of the progressive income tax, would be the very same tax accountants and lawyers who have already figured out how to minimize tax exposure for super-wealthy people at 39.6% today.

They can do it at 70% or above, too.

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