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How Forrest Gump Would View the Tax Plan

GumpI’ve taken a number of college level economics classes. I found them enlightening and enjoyed them a great deal. However, I don’t pretend to be an economist. Admittedly, I sometimes get a somewhat inflated opinion of my understanding of economics when I compare myself to others who know little of the subject, but this isn’t a piece to be focused on the current resident in the White House.

Thirty-five years ago, I founded a computer software company. I’m proud to say that over the years, it grew to become a very successful enterprise. As you might imagine, I used my knowledge of mathematics, engineering, business and … economics on the road to success. As I look back on those years, I find that much of the current “tax plan” proposed by Trump’s minions doesn’t make a lot of sense to me. Aside from the fact that the lion’s share of the tax benefits go to the rich, there are other red flags that amount to nothing less than sleight of hand intended to appeal to and fool the gullible.

Time, space, and your patience don’t permit me to expound at length on the proposed tax plan. I did actually meet Arthur Laffer, the economist who is one of the chief proponents of the plan. His famed “Laffer Curve” of the Reagan years has been proven to be a failed theory. I suspect he’s misspelling his name too.  With the track record of his policies, I’m pretty sure his name is actually spelled Arthur “Laugher”. Nonetheless, I’ll stick with one particular aspect of the proposed plan – corporate tax rates.

I’ve heard Donald Trump proclaim that we are the most heavily taxed country in the world.  One phrase comes to mind when I hear this – bull shit! That’s patently false. It’s nonsense, ridiculous, drivel, rubbish. If the Trumpster believes that, he has no business in the White House. If he doesn’t believe it, he’s lying again. Then I hear the refrain that our corporations are the most taxed in the world. Again … pure, unadulterated crap. It’s entertaining when some of Trump’s supporters with the evolutionary remnants of a conscience are cornered, they admit that almost no corporation in the nation pays anything close to the highest tax bracket on the books. I heard a reasonable estimate that the average tax rate for a corporation in this country was somewhere in the vicinity of fourteen percent.

The propaganda ministers in the Trump administration know that in the ears of most Trump supporters, the “corporation” is an evil monster set on sucking the blood out of every hard working American patriot. They now peddle the concept that corporations must have their taxes reduced so they can give the profits to the middle class. Still evil, but now beneficently evil.

But this whole thing doesn’t square with my recollection of growing my small business. In fact, it’s diametrically opposite my experience. Here’s how it worked with me. There was a line where my corporate profits fell into a substantially higher tax bracket. Every year when I enjoyed a good profit, i.e., every year, my thinking changed as I approached the higher tax bracket.

I could either give my further profits to the government in the form of higher taxes or I could spend those profits on things like hiring employees, giving raises to existing employees or I could expense the profits on things that would grow my business, things like employee training.

If the next tax bracket were dramatically reduced, a big part of my incentive to grow the business would have been removed. I would have been more inclined to spend the profits on dividends for my stock holders (which in my case was me).

So by lowering corporate tax rates as proposed, corporations experience greater profits. Where are they going to put those profits? Here’s a hint … they’re not going to write checks and send them to the working people of America. The profits will go into the hands of the stockholders in the form of dividends. I happen to live in a sort of fantasy world on the border of Scottsdale and Paradise Valley, Arizona where a lot of people live in humble little 10,000 sq.ft. bungalows. Most people living in this neighborhood are not only struggling financially, even their servants are so poor, they can barely afford new tires on the Lexus. So if Trump’s tax plan dramatically increases corporate profits, they’re going to delight in their increased dividend checks. Maybe they’ll use the extra money to hire more servants and grow the economy.

However, the average Joe (remember “the plumber”?) doesn’t normally return home after a hard day of toil and pop a cork on a bottle of Dom Pérignon and review his massive stock portfolio. Quite the contrary, he’s the guy who’s trying to figure out how to buy groceries and pay the rent. Cutting corporate taxes isn’t going to help this guy. He’s just going to scratch his sweat covered forehead and wonder why the rich seem to be getting richer while he’s sinking deeper in debt.

Help the middle class? Run Forrest, run.

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Trump’s Trolley Kills Five

trumpyWell, America … you have murdered the trolley workers. Their blood is now on your hands. Let me be clear; a minority of Americans can rest peacefully, albeit, fearfully. They at least tried to pull the lever. They just couldn’t get enough help from their fellow Americans who “voted their consciences” or didn’t vote at all.

Ok, I get the feeling your face is dressed in confusion. “What the hell trolley is he talking about? Who died?” Let me back up and explain.

The “trolley problem” is a well-known thought experiment in the field of ethics. You remember ethics? They used to be common in the halls of government in this country.  In the trolley problem, you are confronted with a serious dilemma.

A trolley car is out of control and careening down the tracks where five workers don’t see or hear it coming. If nothing is done, the five workers will assuredly die. You see this and happen to be standing by a large lever. If you quickly pull the lever, the trolley will be directed onto another track where you see one worker who will unquestionably be killed. Do you pull the lever to save five lives at the expense of one life?

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Econ 101 – He Never Saw it Coming

Sometimes people just don’t look both ways. That’s how wrecks happen. In this country, the level of economic expertise is pathetically low. We don’t mandate even basic economics classes in most high schools. The average American doesn’t have a clue how the economy works or what the Federal Reserve does. If the paycheck clears the bank, the economy must be good. If our collective ignorance didn’t have such a monumental influence on our future, it would be funny. But when some people listen to the likes of Glenn Beck for their economic knowledge, our future is bleak indeed. Tea baggers sit in judgment of President Obama, Ben Bernanke, Tim Geithner, Barney Frank and myriad others who provide direction to our economic policies, yet few could tell the difference between their economic philosophies and Shinola. It truly portends of a dismal future.

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Satan – My Personal Banker at BMW Bank of North America

A bit hyperbolic? You be the judge. This is a true story about the decay in the moral code of the American banking system. It’s not restricted to the banking industry; sadly, it permeates much of American business ethics. But in this case, the scene plays out in the offices of a diabolical brotherhood of banditos headquartered in the nation’s scam capitol, Salt Lake City, Utah. Utah has a lengthy history of producing some of the country’s most colorful criminals, thieves, hawkers and hacks. Butch Cassidy and the Sundance Kid and Frank and Tom McCarty (my wife’s family) engaged in a similar form of banking from their Hole-in-the-Wall branch office for a long time. I wouldn’t be surprised to learn that my wife’s superior cooking abilities were passed down from Aunt Zinnia who was the gang’s cook. Utahns can hold their heads high in knowing that BMW Bank is maintaining that tradition in the grandest style.

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