TWO BAD PRESIDENTS

I’ve completed the data preparation portion of my upcoming post on Income Tax. In studying the chart, I had a thought. There’s no question in my mind and in many others, Trump was the worst president we have had. What became clear to me was number two must be Reagan. When you combine what he did to the FCC Fairness Doctrine and the tax cuts he pushed through, the stage is set for the arrival of Trump and the ensuing economic blight and hatred he has brought on this country.

It is going to be a monumental effort to unwind this mess and just get back to a reasonable starting point. I remember waking up the morning after election day in 1980 and thinking: “OMG, what have we done?” Now we know.

WEALTH REDISTRIBUTION

One of the people I happen to follow on Twitter is Richard Saunders. On May 18th, he Tweeted a thought that mirrored one of my thoughts, so I am just going to quote him here:

“Stand back fellow citizens and get some perspective. If there is not an immediate, massive redistribution of wealth in America to cure the overwhelming inequity which exists for all to see, our institutions including our form of government will continue to buckle and then fail”.

Just think about this for a while.

MONEY IN POLITICS

The biggest problem in US politics is sources of money. Our political system is extremely expensive. Money buys outcomes not consistent with the wishes of most of the population. Look at the unexplained increases in wealth of many of the more influential people in government such as McConnell or Kavanaugh. This is a self-perpetuating, self-defending problem that has more thorns and traps than imaginable. To make any real progress on the betterment of the population, this is a problem that must be addressed and fixed. The technicalities of enforcement of any reform are formidable. I don’t have a ready-made solution. The influence purchasers are very resourceful. The reason I bring this up is I don’t want us to lose sight of this amongst all our other problems. This is the actual source of most of our problems.

TAX REFORM

When I was getting my education in accounting and economics, I was taught tax policy had two functions: revenue collection and social policy. How taxes are collected affect social behavior. This is an important point and is often overlooked. They economic system will adapt to any changes in the tax code with corresponding social consequences. There is also the issue of unintended consequences.

I believe our spending priorities and tax policies are long overdue for change. If we don’t make choices that will be very unpopular with the large political contributors, we are doomed to wallow in the quagmire of social discontent and suffering for the foreseeable future.

As it is nearly impossible to detach social policy from tax policy, my comments over the next few posts will touch on both. I have several ideas ping-ponging around in my head, which I will be sharing. I haven’t written them down yet, so I don’t know how many there are. I will try to make each post short and digestible because I know the technicalities of tax law can be very boring.

One final note today: When I see lists of Western countries with high tax rates and list of countries whose population is relatively happy, there seems to be a high correlation. One of the axioms of statistics is “correlation is not causation”, but I think in this case, there is. The social safety net these tax revenues can provide relieve general stress levels of most of the population and allow happiness to shine through.

Accumulated Earnings Tax

Someone is probably going to tell me why this idea doesn’t work, but I don’t see a reason now. Section 531 of the IRS Code levies a tax on excess accumulated earnings. I will quote from an IRS document here: (https://www.irs.gov/irm/part4/irm_04-010-013)

Accumulated Earnings Tax (IRC 531)

  • The purpose of the accumulated earnings tax is to prevent a corporation from accumulating its earnings and profits beyond the reasonable needs of the business for the purpose of avoiding income taxes on its stockholders.
  • Liability for the accumulated earnings tax is based on the following two conditions:
  • The corporation must have retained more earnings and profits than it can justify for the reasonable needs of the business
  • There must be an intent on the part of the corporation to avoid the income tax on its stockholders by accumulating earnings and profits instead of distributing them
  • Any corporation within a chain of corporations can be subject to the accumulated earnings tax. A subsidiary corporation can be subject to the accumulated earnings tax even though the parent corporation is not subject to the accumulated earnings tax and vice versa
  • The accumulated earnings tax is computed on the corporation’s accumulated taxable income for the taxable year in question
  • The accumulated taxable income is the corporation’s taxable income with various adjustments. These adjustments are made primarily for the purpose of arriving at an amount that corresponds more closely to financial reality and thus, measures more accurately the corporation’s dividend paying capacity for the year.

The audit guidelines for this specifically exclude “sleight of hand” type adjustments that don’t affect their ability to pay dividends. The tax is 20% of excess retained earnings.

I would submit that share buy back programs are prima facie evidence the corporations have excess earnings that should have been distributed as dividends and thereby subject to income tax. My “quick and dirty” analysis shows this might generate $100B in revenue per year. This would not require any new legislation, just enforcement of existing law. Why hasn’t this been investigated?

END GAME

Most of us have seen what the end game of capitalism looks like. Just the think about the old board game “Monopoly”. One person with all the marbles. We are in an accelerating phase of this process. If we don’t want to all end up de facto slaves, we need to erect some boundaries very soon. Just something to think about for awhile and then take what action you can. I leave you with a couple of poems.

POEM 3

Love envelopes you like a cocoon

To its powers we are not immune

Love delivers warmth to make it through the night

Love creates forgiveness

Love is the foundation of empathy

Love bonds in strength

Love is the nemesis of stress

Love is the opioid of humanity

Love is never wanting to say goodbye

Love rolls in like fog, quietly, unstoppable

Love is support in trying times

Love accepts the differences

Love heals wounds, old and new

Love can make you crazy

Love is the glue that holds life together

Love is indescribable bliss

Love creates serenity

Love creates its own glow

Poem 4

Life is what happens when making other plans

The trick is to avoid too much strife

Relax into the wildlife

Live now, not in the afterlife

Life is yours to live

You only have one life

Make life your basis for fun

Live the life uncommon

Any occasion is cause for fun

Keep everything in proportion

Don’t succumb to superstition

Life can meet the definition of heaven

A healthy attitude is the only condition

Don’t spoil life with too much ambition

Attitudes are meant to be flexible, not frozen

Don’t let responsibilities become a prison

In your life, nay-sayers are the villain,

Just attack with a happy disposition

Life was not meant to be lived in isolation

Join with your partner in celebration

It’s time to surrender to the joys of life

Let the glimmer of happiness shine on you

With your happiness, don’t be a gambler

Be at peace, enjoy the rapture

Being happy is not sappy

Happiness is about understanding

Life is about collecting experiences

Life is about accepting the differences

Live your best life

Don’t deal with regrets

Another day

When I post, my intention is not to tell you what is on my mind. It is to encourage you to think, to create your own meaning. I am posting a poem without a title specifically because I want you to create your own meaning.

No one can put it in words

When it brings a moment of joy

When it kicks us in the teeth

We keep coming back, we know it’s worth

Man gains resolve from it

Woman lives with it in her blood

It’s the force that created civilization

It’s the crucible of life

It gives us the will to continue

Denying it makes it stranger

It’s the cement between people

It’s the motivation to create

Don’t think about it, be it

Don’t watch it, live it

Don’t shun it, receive it

Give it, it feels great

Accept the feeling, roll around in it

Smell its sweetness

Taste its bitterness

Touch its force

See its bliss

Hear its softness

People live for it

People die for it

Wanting it to end belongs to neither

Try to live without it