Stimulate Me – How Obama Could Win the Economic War
Now that we’re starting to get an idea of what President Obama’s economic knowledge is like, it’s starting to get a little worrisome. Taxpayer money is being thrown at hundreds of projects, like museums, sidewalks, libraries, and a trolley in Puerto Rico. Pushes for more “green energy” projects will do more to raise energy costs, which tends to hurt the economy as that cost is reflected in the price of milk and bread. Even Obama’s so-called tax cut is designed to cause hardship, as taxes aren’t being cut. When your income tax withholding is reduced, but the actual tax rates are not adjusted, it isn’t a tax cut at all. It’s a deferred payment, because you’ll either have to pay the money back in April 2010, or have your refund reduced.
So … is there a stimulus plan that could work? Is there an idea that could put an immediate cash infusion into the American economy? Could we, with one or two quick decisions, take action to put our economy on the fast-track again, while costing no more than the estimated one to three-and-a-half trillion dollars that Obama and the Democrat-controlled Congress have allocated so far?
Yes.
Before I get into the solution, I’d like to tell a short story. Not so long ago, I operated a small business in my hometown in North Carolina. The business was located in a small, rustic little downtown Main Street area that needed some stimulus. A bunch of the business-owners started a group to try to improve the area, and we began meeting regularly. It didn’t take long for ideas to start flowing, and one of them was beautification.
It seems that the city had a beautification program that we could take advantage of. If we would purchase the cement planters to place around our little downtown area, the city would fill them with flowers, and take care of the upkeep. Not a bad deal, all in all. We all thought it was a great idea, so the next question was, how to get the planters, and pay for them. The head of the group, a Republican, was pushing for a special tax district for our area, with a small additional tax being paid by the building-owners that would go into the coffers of our group, the designated business association. The tax money could then be used to purchase planters, as a first project.
The tax-district idea had been put forth in multiple meetings. It wasn’t popular. Honestly, I did my part to make sure I talked to everyone that hated the idea, and make sure it couldn’t be pushed through. When it was brought up yet again, in reference to the planters, I stood up to say exactly how stupid I thought the idea was, and where I thought the district lines should be drawn so that I was excluded.
The leader of our group looked at me, and asked a simple question. “Without the tax district, and the money we would get from it, how would we pay for the planters?”
I stood my ground, and presented my idea. It was simple. We call around, and find suppliers of the planters. We find the best price, and any business owner that would like a planter can buy one, two, or however many they need. We just collect the money, and go pick them up on a truck.
You would have thought I had slapped the guy’s sister. While others in the room nodded at my suggestion, our leader blustered something about how not everyone would buy them, and we would have planters in front of some stores, but not others.
My response to his objection was, yet again, simple. If everyone doesn’t buy planters, then not everyone gets planters. Those who don’t get them will see them appear in front of the other stores, and they’ll want them too. Before much time passes, a second order will need to be made for those that don’t buy-in the first time.
Well, my idea won, and his idea lost. Money was collected, planters were purchased, and flowers were planted. The tiny improvement made a huge difference, and lots of people talked about how nice the planters looked. Those that didn’t buy on the first round saw the benefit, and a second round of planters had to be purchased.
The point of the story is that we could have gone the tax route. Money could have been taken from profits to pay the tax. The tax money could have gone to the city, until the time came to pay the business owner’s group the proceeds (100% of the tax would have gone to the group). The group would have had to pay costs of accounting, and decide how to spend the money. Some day, perhaps months down the road, we would have been able to purchase planters for everyone. Instead, we simply allowed those who wanted the benefit of the planters to buy-in, and we got a good deal. Peer-pressure worked on the stragglers, and they soon paid for planters as well. No taxes, and great benefit in two weeks, rather than months.
How does this story apply to today’s economic issues?
Right now, our government is taking taxes at every level. They take a personal income-tax, which you pay out of your paycheck. They take a corporate income-tax, which you pay in the price of the goods and services you receive. They take tax in tariffs, duties, and licensing fees, all of which increase the cost of goods and services you receive, and so you’re the one paying them in the end.
Looking at the bills Congress is passing, and Obama is signing, that tax money isn’t being spent well. It’s paying for streetscaping, trollies, libraries, museums, sidewalks, “Totally Teen Zone,” fairgrounds, ferries, a swamp canal, a water-taxi service, a Historic Jazz Association, aircraft displays, lobster research, catfish research, and many, MANY, more non-stimulus items. For the record, there’s even at least one downtown revitalization project in there.
All this, and Obama is talking about tax increases “for the rich.”
What if we took a little different path. What if we cut out the middleman. It seems to be a good idea for business to cut out the middleman, and passing the savings on to the customer. The customer pays the money, and the customer gets the benefit of the purchase. YOU are the customer. YOU pay the taxes, and YOU are supposed to be the beneficiary of all the good that government does. The government is the middleman.
Let’s do something simple. Let’s go back and cancel the “Porkulus” bill, that is disguised as stimulus. Let’s cancel the spending bill with 9000 earmarks. Let’s replace them with a simple, effective stimulus plan that we can agree on.
Here’s the plan. We cut the 2008 personal income tax to zero.
That’s it.
I can’t take credit for the idea. Rush Limbaugh is the one I heard mention the idea, but as I keep thinking about it, it sounds better and better. Here’s how it would work.
Starting as soon as possible, all federal income-tax withholding would be stopped from your paycheck. This would result in an immediate boost in available cash to every working person in America. How much of your paycheck each payment period goes to federal income taxes? Is it 25%? Let’s just take that as an easy number to work with.
If 25% of your check goes to federal income taxes, and your tax rate is cut to zero, your $1000 in take-home pay will rise to approximately $1330. That’s enough for a payment on an affordable car. $330 per week for a year is over $17,000. That’s enough for a nice downpayment on a house, or a full purchase on a slightly-less-affordable car.
In April, anything you’ve paid into the federal income tax withholding before the wittholding was stopped would be refunded to you. If the plan went into action on April 1, then your refund would be almost $4000 based on the numbers above.
What’s the cost to the government? It would cost one trillion dollars. That, conveniently enough, would be offset by the cancellation of the last spending bill. What’s more, unlike the spending bill, the tax cut would actually stimulate the economy.
What would YOU do with your federal income-tax money back?
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment