Friday, August 29, 2008

Pookie's World

An acquaintance here in the 'hood, nickname Pookie, made a comment weeks ago that I've been mulling over ever since. Not a particularly bright man and uneducated by any standard, he does run a successful auto detailing and body shop, and in the last few years has tripled his business. His comment : "I'm votin' republican 'cause when them dems get in, the folks with money holds their money tighter to themselves."

His success at small business makes it apparent he has innate good sense, is intuitive, and his comment has the ring of logic. He also admits to not voting - doesn't have time for politics. We need more Pookies.

You might say Pookie's logic is what progressives have scorned as the "trickle down" effect. Not that you ever really hear installed Democrats complain seriously about corporate tax cuts - but those Dems running for office promise tax relief for the lower and middle class will be achieved by raising taxes on the rich, the corporations, etc. And for 8 years we have been bombarded with the mantras that Bush tax cuts are a break for the rich, blah blah blah. Rich folks like Bill Clinton claim that, even though he did not need it, he benefited from BushCo tax cuts. Didn't see him giving it back to Uncle Sam though.

Supporters of corporate tax breaks claim corporate tax breaks are necessary in order for American companies to compete globally, blah blah blah. Opponents would have you believe the rich are getting richer off your money (even though you don't have much money to begin with, if the rich paid more taxes you would somehow get more - it doesn't work that way because it's a rigged game but democrats/progressives would have you believe you'll win the Utopian scratch-off if you just vote for them).

It's all jingoistic b.s. politically oriented to get elected - leaving Bubba and Joe Average with a lot of spin and little reality of economics. This "tax the rich" mantra every 4 years is a ploy for the poor - because anyone with even a little money knows how to legally avoid paying much more in taxes, and wait it out until the next election.

So, I've been searching around for a way to explain Pookie's insight. I'm not sure I can, but will continue on with this blog post anyway.

The average family focuses on visible taxes such as property taxes, sales taxes on purchases, and personal income and payroll taxes. All of which, other than Federal income taxes, are determined at the state and local level. Some states have no income tax, some have no taxes on food products, some state, county, and city sales taxes are higher than the next state or county; the neighborhood you're in determines property tax.

Generally when corporate taxes are higher the cost is passed on to the consumer. You may or may not agree with this depending on the brand of political soap used to wash your brain. The corporate cost will be passed on in higher prices, lower wages, fewer benefits, lost jobs, etc. If you don't believe me, just remember that most manufacturing jobs bled out of the US under Clinton.

Now, you might argue that a company such as say Walmart should pay more taxes. Or you could argue that had progressives been on the ball they would have ensured unionization to fight for better wages and benefits, or perhaps politicians should have fought to keep manufacturing jobs at home. While Democrat pols swear support for union labor they vote for NAFTA, CAFTA, go mum on halting the outsourcing of jobs; not to mention support and sympathy for immigrant labor - your low-wage competition.

You could say one administration plows and plants and the next administration reaps the harvest - it's how the two-in-one party system works. Clinton did a lot of plowing for BushCo.

Meanwhile, rather than tell you the truth, both parties jump on the most stupid unimportant out-of-context comment to sensationalize and distract you from what they're really doing on the Potomac. The mainstream media, and 99.9% of the "alternative" media, go on and on about nothing that will make any change in the status quo (follow the funding).

I found an interesting article at the Tax Foundation site on the cost of corporation taxation to Mr. and Ms. Average. This appears to be a nonpartisan website but that's for you to decide; I doubt anyone is completely nonpartisan - other than those few souls who stand back disconnected from the duplicity in all political partying. Someone has to fund "foundations" and the hands doling out the funds always expect a certain doctrinal tilt to the results.

Tax Foundation economists Andrew Chamberlain and Gerald Prante have some interesting charts, most interesting is the corporate tax burden by congressional district.

Tax Foundation: "From a political perspective, it is interesting to note that four of the top five districts with the highest per-household corporate tax burdens are all represented by Democrats. However, looking at the top 25 districts, or even the top 50 districts, shows that the parties are roughly evenly represented. The bottom end of the rankings, by contrast, is heavily tilted toward Democrats. Eight of the 10 districts with the lowest corporate tax burdens are represented by Democrats. Of the 25 lowest districts, only four are represented by Republicans."

These lowest places include Yuma, El Paso, Chico, CA. One of the highest is the 14th, Silk Stocking district in NY, represented by congresswoman Maloney.

According to Chamberlain and Prante ... "... low-income households pay more in corporate income taxes than they pay in personal income taxes. Geographically, households in largely urban congressional districts and metropolitan areas bear a disproportionate share of corporate income taxes today and, thus, would receive a significant boost in living standards if the corporate tax burden were reduced."

While the average per-household burden of the corporate tax is $2,757, a disproportionate share of the burden falls on urban areas where households have higher wages and more capital income. However, lower-income households tend to pay more in corporate income taxes than they do in personal income taxes. This indicates that a general cut in corporate income tax rates (or other taxes on capital) would provide a greater benefit to low-income households than would further rate cuts in individual taxes. Indeed, there are 43 million Americans who already have no income tax liability after they take advantage of their credits and deductions. Those households would benefit most from a cut in corporate taxes.

Does the average progressive Joe Blow understand how taxation works? I don't think so and what he thinks he knows is backasswards. But Pookie understands, even if he doesn't articulate it very well.

What Pookie sees is that when Democrats (or Republicans) promise to cut his taxes - they lie - because your state, county, city, sales, property tax are determined locally, and have you ever seen a reduction in your paycheck taxes under any administration? Raising the taxes on mega corporations does not return money to your pocket or living standard because Big, Inc. will pass the tax cost on to you every time. Small to mid-size businesses like Pookies are sometimes taxed out of business. Big, Inc. and government are fine with that too; wouldn't want too many independent folks out there.

What Washington, D.C. does with this extra tax money from the rich, when and if they "raise taxes on big business" is fund new or existing bureaucracies that are here to help you - although after administrative costs, graft and corruption Joe Average will see little to none of it. These extra tax dollars from "the rich" should flow to the local level from the Feds, which could make your standard of living better, but such funds always peter out by the time they reach the town council level, and then local taxes rise to repair those potholes and playgrounds. Pookie will pay more local taxes to keep his business going. Those "richer" folks across town will pay more local tax and use Pookie's services less often. Big, Inc. corporation will raise prices for the products necessary for Pookie to do business; his insurance rates rise along with local fees and taxes.

But you might ask - then how come the cost of energy/oil, which drives up the price of everything, is so high? The war? Tax breaks for the rich? Falling dollar?

Maybe you agree with Michael Greenberger:

The Commodity Futures Modernization Act of 2000 or CFMA (Public Law 106–554, §1(a)(5) [H.R. 5660], December 21, 2000), was passed by the United States Congress and signed by Bill Clinton in December 2000 to allow for the creation, for U.S. exchanges, of a new sort of derivative security: the single-stock future. Also known as the "Enron loophole" as it exempts over-the-counter energy trades and trading on electronic energy commodity markets. The "loophole" was drafted by Enron Lobbyists working with senator Phil Gramm.

The Enron loophole, so they say, allowed oil speculators to drive up oil prices. It sounds logical but is it true? Doesn't seem to be, and speculation can continue on in London, Singapore, other locations outside the NYSE.

While pols continue to promise you hope and change by taxing the rich - they conveniently omit the cost of living has little to do with forcing the "rich" guy across town to pay a few hundred or thousand more in taxes and more to do with buddy legislation where both parties cooperate to the fullest with any PAC or lobbying group who donates the most. In 2000, Only 4 members of the House, 1%, voted Nay on the CFMA, 2 republicans and 2 democrats, Ron Paul was one No vote. Progressive favorites voted Yes on the Enron loophole - Kucinich, McKinney, Murtha, Barney Frank, Patrick Kennedy, Barbara Lee, etc.

You have to really wade around in these govtrack and Thomas bills. Often, if tabled or voted down, a bill seems to change numbers and resurface, or attached to another bill with little to no change, and then pass into law.

Some experts say legislation to curb global trading by speculators would cut oil by $30-60 per barrel, or bring it down to $2 per gallon, which in turn would lower the cost of everything else, overnight they say. Bipartisan efforts worked to repeal the "Enron loophole."

In May of this year the Farm Bill which Bush vetoed closed the Enron loophole, but the senate voted to override Bush's veto. Oil hasn't dropped dramatically but maybe the effect needs a few more over nighters. What little price drop at the pump we've seen - is it because of closing the speculator loophole or because it's an election year? It apparently did not have any effect on food or energy prices. Did they lie about oil prices being tied to speculators? Apparently someone lied somewhere. The IEA says there's no connection between speculators and oil prices.

Who can you believe?

Should Big Oil pay more taxes? Sounds good to me. But will you see your standard of living rise if they pay more tax? Or will the "trickle down" trickle out in the last pocket of a bureaucrat's suit? Will Big Oil simply pass more legislation so you subsidize more oil production?

What has government done directly in the last 30 years that raised your living standard to any degree?

Am I defending big business? Hardly. If I had my way Walmart would not be using sweatshops in China. If I had my way any oil pulled from American soil would be nationalized. If I had my way PAC/lobby groups would be illegal. If I had my way there would be term limits and hard prison time for corruption. If I had my way higher education would be free; we would have unquestionable fool-proof voting methods; we would have more direct legislative participation and less need for lying politicians.

When things change economically for Pookie he adapts and works around it because he knows all political parties exploit him, and work together to do it. We need more Pookies, who are too busy living to waste time on phony political carnivals.

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