Today I feel like ranting – call me Ranting Andy Junior. Here in Miami, I get the Minneapolis Star Tribune on my Apple computer every morning. Today’s headline read, “Dayton: Widen Sales Tax, Increase Top Income Rate.” Minnesota is one of the most liberal states in America. The Democrats control our legislature. Our governor, Mark Dayton is a Democrat. We have a $38 billion budget but with a Democratic legislature and governor, we were only able to cut $225 million in spending. Dayton is proposing a new fourth-tier tax bracket for the top 2% which will raise the state tax on those earning over $250,000/year (couples) to 9.85%. Minnesota is following Obama’s lead – tax the rich!
In April 2006, Time Magazine rated Dayton as “America’s worst overall Senator.” (Jesse – Ventura – where are ya when we need you?) He was labeled “The Blunderer” for his erratic behavior. With those qualifications, he became Minnesota’s governor on a platform of tax the rich. He has no idea how to run a business and, as a member of the Dayton family, one of the wealthiest families in Minnesota, he grew up in the midst of vast wealth and was nurtured with a golden spoon. He married a woman from a prominent national bloodline whose wealth exceeds his own. It’s so easy for the ultra-wealthy to be generous with other people’s money.
If the new state sales tax laws he is proposing take affect, then the tax will expand to advertising, accounting, legal fees and clothing over $100. If passed by our very liberal legislature, companies like General Mills, Target, Best Buy and other mega-employers will be forced to consider re-locating to states like Wisconsin or South Dakota that have much friendlier tax laws toward business. What a fool our governor is!
Raising taxes on MY income, on Miles Franklin’s legal and accounting bills and advertising will not cause me to relocate my business, but you can be sure we will not be doing any new hiring or spending any unnecessary money on business improvements. Between the State of Minnesota and the Obama Administration, a war is being waged on those who are successful and create jobs. I don’t see things improving. We will all adjust by spending LESS, which will mean fewer jobs and reduced tax revenues. What wonderful wisdom we are blessed with from our politicians!
Years ago, when I worked for Champion, selling athletic uniforms and workout gear and printed sportswear to schools and retailers, (you all have seen the Champion brand on t-shirts, underwear and socks on the shelves at Target and Costco) they came up with a new commission rate. 6% on sales up to $1 million and 1% on sales over that number. This kind of stupid policy destroys incentive to work harder and earn more. And it is now morphed into our tax structure.
Using back of napkin math (the only kind I am any good at), on all earnings in excess of $250,000 there is an increase in the Federal tax (with the new Obamacare law) to somewhere around 52%. In Minnesota, the state tax will be 9.8%. Add to that, hefty real estate taxes and sales taxes. For many of us, we will be lucky if we get to keep twenty cents of every dollar we work hard to earn, after taxes. Where is the incentive to grow our business, or hire new employees or expand or upgrade office furniture and computers? Higher taxes on the rich and small business owners will lead to LESS spending, less hiring and LOWER tax revenues. What fools we vote into office!
At least I have been lucky enough, through hard work and a few good business decisions, to put some money away. For those who have not set aside a nest egg yet, lot’s of luck to ya. Maybe you can still get ahead with monster gains in gold and silver, providing the bleeding hearts don’t decide to tax it all as “obscene profits” – which were actually the result of investing smartly to avoid the demise of the dollar, created by Washington’s horrible policies and decisions.
I was talking to a lady in our building who is a nail tech. She said she plans on retiring at some point, and is saving $5,000 a year. Who is she kidding? In 30 years she will have set aside $150,000, and since interest rates are so low, there is virtually no compounding affect, she will have to risk it in the stock market or end up with a very low amount to retire on. Based on the rate of inflation and the certain increase in the rate as time goes by, she will be lucky if every dollar she takes out that she set aside this year is worth $0.15 or $0.20 and I may be generous here. Maybe if she is lucky, her 30 years worth of savings will buy her a couple of years. Then what???
The middle class is vanishing. Retirement for most Americans is no longer an option. Worse, if the senior citizens have to continue to work to make ends meet, where are the job openings for the young kids coming into the workplace?
What most Americans have yet to figure out is that this is a zero-sum game. We do not create wealth by taking it from the rich and giving it to the poor. In fact, the opposite happens. As my taxes go up, I cut expenses. I may give up a vacation, the purchase of a new car, more expensive office space, and more sales people. We may think twice about eating out, and start going to fewer movies, sporting events and concerts. We can cut back by buying fewer new clothes, cut back on the cleaning lady, the handyman, the people who do yard work, the list is endless. The result is LESS taxes collected and we go even deeper into the hole and the clueless politicians will try and raise our taxes even higher.
One thing that seems certain is that people spend up to their income. They create a need for income commensurate to their earnings. When they have to absorb a hefty tax increase, it becomes difficult to meet their monthly cash flow needs. Something has to give. People earning $300,000, $400,000 even $500,000 a year spend every cent. How will they deal with the increased taxes? By cutting back on their spending, that’s how! These people are NOT RICH, they are, by today’s standards, upper middle class.
Using a simple analogy, a Mercedes 280-SL cost $10,000 in the early 1970s. A new Corvette cost $4,500. Today the Mercedes costs well over $110,000 and the Corvette probably around $60,000 or more. Let’s be conservative and say it cost ten times more to buy the same thing today than it did 40 years ago. Today’s $250,000 is nothing more than the $25,000 a year I earned in 1971 selling industrial chemicals. And I wasn’t rich then either. When I was growing up, a million dollars used to be the standard for being rich. Not today. Put a million in the bank and try living off of the interest – $10,000 or $20,000 a year. Everything is so screwed up and upside down. I feel for my grandchildren. They will not experience a world with endless opportunities that I was blessed to be born into. My timing was perfect – theirs is not.
Pretty soon, all that will be left are the super rich – and everyone else. The banks get trillions and Main Street gets welfare. Obama is not offering hope, nor new jobs; he is offering people a way to get by for free, without work or effort. That’s where the votes are. If you want to see how this ends up, visit an Indian reservation and see what decades of welfare has done to initiative and motivation. When you don’t work, your self-esteem suffers. Don’t our leaders understand that you teach people how to fish; you don’t give them a fish?
I don’t recall hearing about people starving on the streets before welfare. Families helped out. The church and charities helped out. It was not socially acceptable to live on welfare (nor to have a child out of wedlock). People would get a job, any job in the name of dignity. There are jobs out there, many are of the minimum wage variety, but at least they are jobs. Virtually anyone who wants to work can find something to do. But why bother when the government will pay you for doing nothing?
Wait until the inflation that Jim Sinclair talks about hits us. It’s coming, and all those folks on the dole will find out that their government handouts will not put sufficient food on the table or heat their homes in the winter, when prices of food and energy start to explode. Hey, even now, 15% of all Americans need assistance and are on food stamps. Try taking the handouts away. Some would say we are headed toward class warfare. Envy and hatred will surface and it will be focused on the “rich.” Who are the “rich?” Why, they are anyone making more than you do.
Today, there was an advertisement on Moneynews.com. It is titled, “The End Game for U.S. Quantitative Easing: A Death Knell for Gold Prices.” What do I think about this advertisement? Well, if you actually believe that the Fed can stop QE and you disagree with my analysis – or that from Jim Sinclair (QE to Infinity), then sell your gold and go for their sales pitch. The second the Fed stops buying our bonds, the following will come into play; interest rates will start to rise, the real estate market will plunge, the stock market will crater, the interest on the debt will increase at the rate of over $160 million per percentage point of the rise in interest. That will compound the problem of trillion dollar annual deficits. Do you really think this will happen? If you do, I have a bridge to sell you – in Brooklyn. No politician nor Fed head will allow this to happen on their watch; you can count on that. Moneynews.com, shame on you for publishing this trash.