Taxes


This post is by Jeff Carter from Points and Figures


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Taxes are on the minds and lips of everyone these days.  In Washington, it looks like a portion of the Democratic Party favors a 70% tax on the wealthy.  Stupid idea, bad economics but in this day and age where we penalize and try to tear down successful people good politics.

I’ll go along with a 70% rate if you bring back all the deductions we had prior to Reagan.  People forget, Reagan reformed the tax code getting rid of most of the loopholes.  What people fail to realize, is that most people no matter their bracket pay what’s called Hauser’s Rate-around 19%.  Prior to 1986, if you were a commodity trader you could work it so you paid 0% tax by rolling your profits year after year.  Senator Dole closed that loophole.

Politicians from both parties pay lip service to the debt with no real intention of solving it. of the problems is if you cut a program, the fear mongering starts and the other side uses it as a wedge issue.  It sort of doesn’t matter who is President, they still have to get it through Congress.

In Chicago, our mayoral election is heating up.  Chicago has a gigantic budget deficit, and a gigantic pension deficit.  Not only that, but the county of Cook and the state of Illinois have similar.

There isn’t one candidate for mayor that is calling for massive cuts in the budget and laying off city employees.  Not one is calling for automation of services.  There isn’t one candidate calling for less regulation to ease the burden on businesses so they can hire more people.

Candidates forget that people can avoid a lot of the taxes they propose.  If they can’t avoid them, they will total up the costs vs opportunity costs and decide whether to stay or move.  For the very rich that the candidates target, their tax planners can figure out ways around the taxes to limit their liability. Only the schmucks wind up paying the taxes.

I am in Nashville right now and have run into a lot of ex-Chicagoans on the street.  Blackhawks hats, Cubs hats, Bears hats, Sox hats.  They aren’t retirees.  I was in Atlanta and didn’t run into too many there.  South Florida is full of them, but they are retired.

Here is what we have heard so far and all of these ideas are bad:

  1.  City income tax
  2.  Real estate transfer tax on homes of more than $1MM
  3.  City head tax on employees.
  4.  Commuter taxes on people working in the city
  5.  Limiting increases on property taxes which are about the highest in the nation already.
  6.  User fee increases

Almost all the candidates are connected to the Chicago Machine in one way or another.  There are precious few that are not.  Those are the only candidates sane Chicagoans can support.  A vote for a Daley, a Preckwinkle, a Chico, a Mendoza is guaranteed more of the same.

I worry about the city, because if the corruption doesn’t stop the startup community will be affected.  It will be yet another hurdle to jump over.  Frankly, entrepreneurs have enough hurdles to jump over without corrupt politicians getting in the way.

Stay warm today Chicago.  I empathize with the weather.  I have lived through the coldest day in Chicago history and feel lucky that we aren’t there today.

 

True Story

34 years ago I was working for 3M and living in an apartment out in Rolling Meadows.  My girlfriend now wife slept over.  She was working for Ortho.  Her car wouldn’t start.  I didn’t have jumper cables. It was the coldest day in Chicago history.  -27.  Before the wind-chill.

We called my uncle who lived bearish and he jumped her car.  She went out and made sales calls that day and so did I.  I wrote some orders and I am sure she did too.  People showed up for work.

Chicago people are great.  They are tough.  The cronies and people associated with the Machine not so much