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Higher taxes are not the answer

Published July 14. 2012 09:01AM

The Obama Administration continued its assault on productive Americans by again raising taxes. The Administration has divided our country into two classes: those who receive government handouts and those who fund those handouts. By failing to renew the Bush tax cuts on single people making more than $200,000 and families with more than $250,000 in income, the President is declaring class warfare on our most productive people. If higher income families reduce their spending then the economy will not expand and there will be no job growth. By specifically targeting successful small businesses for his tax increase, President Obama and his cronies are taking money from productive people and giving it to those who choose not to work. It is a great strategy to get the President his second term, but overall it will have a negative impact on our economy.

I strongly support government pensions for those with disabilities. This is not welfare; it is financial assistance for those who are not physically able to work. Social Security is not welfare; it is the return of a payroll tax to retired individuals after a lifetime of work. My concerns are focused on those who are ready and able to work, but choose to take welfare or unemployment insurance instead. Taxing the rich to give to the poor will ultimately result in more poor people and fewer rich people to support them. This week I noticed a television commercial suggesting that people apply for food stamps. We do not need more people on food stamps. We need to get them back to work. Instead of the food stamp commercial, I would prefer that the government fund a program that offered small businesses support to hire people and take them off of food stamps and the welfare roles.

Continuing to raise taxes punishes those who work. In addition, approximately 49 percent of the working population pays no income taxes at all. This places an onerous burden on the rest of us must pay the full cost of government. Rather than raise taxes on the top 2 percent of the population, I suggest that all working Americans pay income tax. Those in the lower income levels can pay an income tax of four or five percent of their earnings. No one should be forced to pay more than 35 percent of their income in federal taxes. Another alternative would be to implement a flat tax where everyone pays 15 to 20 percent of his or her earnings to support the federal government (with no tax deductions).

The reason I want all people to pay taxes is to ensure that everyone feels the pinch of taxation. Government will continue to expand as long as they have the power to tax. Those who do not pay any taxes want handouts from the government. Once these people feel the burden of taxation, they will take more of an interest in the cost of government. They will vote for representatives who will reduce the size of government and their tax burden.

Instead of increasing taxes, We The People should focus on cutting the size of government and eliminating wasteful federal processes. One of my most popular seminars before I retired was Auditing For Profit. The concept behind this presentation was analyzing business processes to identify and eliminate waste. I suggested that we review all processes in an organization to identify why we were performing those processes. (Why are we doing what we now do)? Do they add value? Do they contribute to the bottom line? (What value does this process add to the organization)? Are these processes required for compliance to regulations? In many cases, we found that we were performing labor-intensive processes because we always did them in the past. To encourage people to identify wasteful processes, we ensured that they understood that their employment was not in jeopardy. The specific jobs they performed might change, but they would still be employed. Once the fear of layoffs was removed, my clients were able to successfully streamline their businesses and eliminate needless overhead. They were able to redeploy existing staff to more profitable endeavors.

It is time to bring this process to the government. Employees who identify wasteful processes or unneeded programs should be rewarded with a bonus. Rather than increasing taxes to pay for the cost of government, let's reduce the size of government. Based on my consulting experience, most departments could easily handle a 20% staff reduction. In some cases, entire departments could be eliminated. The Department of Education and the Department of Energy are two departments I would target for elimination. From a constitutional standpoint, education is the responsibility of the states, not the federal government. The Department of Energy was founded in 1977 to ensure our energy security and availability. After 35 years, our nations energy supply remains fragile. Critical projects such as the Keystone Pipeline that would provide a stable source of energy for decades to come have been rejected by the Department of Energy. It is time We The People eliminate useless government bureaucracy.

These are difficult times for those who are unemployed. Small businesses are reluctant to hire new staff due to the unconscionable cost of ObamaCare. If a small business expands to 50 employees, then they either have to provide health coverage or pay the largest tax ever imposed by the government. In this environment, who can blame small business owners for restricting their growth? Change this burdensome law and put Americans back to work. In November we need to elect people who will overturn ObamaCare and reduce other taxes so that the American economy can grow and expand.

Rather than paying healthy people not to work, we should bring back public works projects. In addition to building highways and bridges, the new public works effort could be focused on helping other citizens. The unemployed could assist our senior citizens by cutting their grass, painting their houses, doing their laundry or cleaning their houses. They could also pick up the trash that abounds on the sides of roads and in our parks. In exchange for two ten-hour days of work each week they would receive their welfare checks or extended unemployment benefits. They could spend the rest of the week looking for full-time employment. Just about every small business I visit is seeking part-time or full-time help. They are having difficulty hiring workers as they can't compete with unemployment insurance and welfare. My solution is to reduce the number of people on welfare. The President's solution is to increase taxes on our workforce. Which one makes more sense to you?

When taxes increase significantly, some people will migrate to states with lower taxes. I left California 6 years ago to avoid their onerous taxation. I was not alone. Four million people left California, driven out by excessive taxation. They migrated to Oregon, Washington State, Arizona, and Texas, all lower tax states. Some like me decided to come to Pennsylvania because of the low state tax rate (when compared to California), job opportunities and the chance to experience four seasons.

This week the State of Maryland is dramatically increasing taxes. Single taxpayers earning over $100,000 a year will pay a state income tax rate of 8.95% compared to Virginia's top tax rate of 5.75 percent. Maryland considers "rich" people to be single people earning over $100,000 and families earning $150,000. The state representatives are clearly out of touch with the cost of living in Maryland. Their tax increase was called the "get out of Maryland tax act". And get out they are. People who live in Maryland but work elsewhere, say in DC or Virginia, are migrating to lower tax states. When the last tax increase took effect in Maryland in 2007, 31,000 taxpayers left the state. This resulted in a direct loss of $1.3 billion in tax revenues. Their solution to make up the tax shortfall was to raise taxes! When will they learn?

We The People can no longer afford tax increases. Many of us are now retired and living on a fixed income. Our elected representatives need to decimate government payrolls to balance the budget. Even deeper tax cuts and regulatory reductions will be required if we want to encourage small businesses to expand and increase their hiring. Taxes and regulations will not get us out of this recession. Only a growth oriented small business environment can make that happen.

© 2012 Gordon Smith - All Rights Reserved

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