Jamcleat

America will likely wake up Christmas morning with a terrible hangover.
The Senate seems hell-bent-for-leather to get some sort of health reform bill passed. Or maybe that is slip one past. The vote set for Christmas eve will give Americans no health, no reform, no care, and a huge bill.
Nominally the bill is to reduce cost by reforming the health care industry and the way that insurance against illness is paid. But because of concessions to special interest groups, the tax payers will end up footing the bill for universal insurance for the indigent while the “Cadillac” health plan covered folk escape paying the proposed fees due to carve-outs and special exceptions.
Medicare pays so little for many procedures that many caregivers will not accept new patients if their only insurance is Medicare. If all patients fees are regulated at the same rate, the level of care will decline, if only because doctors and other personnel leave the system to find something they can afford to do. No there will not be death committees, but you may have to wait so long for care that you do die or wish you could.
This is not reform. This is more of the same nonsense that caused the problem in first place.
My recommendation:
End the deductibility of payroll health insurance. This should be taxable income to the recipient. This gets non-health care business out of the health care business.
End the limits that states can put on health plans sold in state. This would open the markets to all comers and give consumers price and coverage choices that are not available today. Existing consumer protection laws could be used to prevent fraud and abuse.
Have individuals pay for all medicine and procedures. Have insurance companies reimburse the individuals if they are insured. This will ensure that, where possible, families will shop for value, achieving a balance between level of care and affordability.
Publish the secret codes that describe medical procedures. This would allow consumers to ensure that they are billed for the care actually administered. Today the codes can only be used by those who have purchased the copyright license to the code book. As a result, it is impossible to determine what was billed for, insure accuracy in billing, or negotiate for a better price. Insurance companies pay more, consumers cannot assist in reducing cost. The code monopoly needs to end.
Allow purchasing insurance for all coverage with an exclusion for an existing condition. A phase in of coverage for a controlled existing condition could be an option.
The best outcome for the existing bill is that it will self-destruct in conference committee. The likely outcome is that it will get even more expensive.

I saw a new-ish school bus the other day.  In South Carolina, the state taxpayers buy and maintain the buses for the local school districts.  The new buses are flush-front (like a city bus), yellow with black letters and accent stripes. And it has strobes and LED lights to make sure you stop when lights are flashing.

The part I like best are the mirrors.  Instead of the long flat rear-view mirrors on a tube frame, the mirrors are mounted in a black molded plastic  extention that drops down at the end to hold the long mirror and round convex wide-angle mirror.  The whole thing has an appearance like bee antennae. The buses are like big yellow and black, wingless  bees.

[Car Allowance Rebate System (CARS) aka Cash for Clunkers was a dumb idea to begin with.  Now the bozos in DC are talking about adding to it.  I say how about some rewards for those folks who were smart enough to buy a car that gets good mileage and maybe a dope-slap for those who were dumb enough to buy, say, a Hummer.  I have been driving a car that gets better than 26 mpg for 14 years.  I could use a little help buying a new car that gets even better mileage.  Instead, I get to help a gas-waster get a slightly less wasteful new car.  The program should only apply to new cars that get 35 mpg or better and it should apply to all comers who have been driving the old vehicle for 3 years or more.  Or even better, just forget the whole Cash-for- Clunkers-subsidies-for-the-thinking-impaired idea altogether.]

I had set the above post to publish 4 hours from now.   The news on the way home implied there was some sort of crash program to make more Cash-for-Clunkers.  I guess I underestimated the ability of the current House to pick my (and your)  pocket.  Zippered pockets is my fashion prediction.   You are going to need them.

If you like taxes, you are in pig heaven. Pelosi’s and Waxman’s Cap and Tax Bill pig has flown. Of course it will do nothing to reduce carbon use, which has little to do with global warming. But it does promote the liberal agenda. Tax the poor to support the politicians. That’s what the Democrats have always done. Check the facts and do the math. (That is modern talk for “The proof is left as an exercise for the reader”.) Better, starting this fall and leading up to November 2010, ask the hard questions. You will not be any cooler and you will be somewhat poorer. Make the culprits squirm.

Far too many of the new President’s appointments have turned out to be tax cheats.  For us, a couple that has prepared their own tax returns for the last 28 years, this is very disappointing.  These, after all, are the bozos who created the laws that make preparing tax returns so complicated that most people hire it out.  “Innocent oversight” and “minor misunderstanding” have no weight with the IRS for peons like us.  The IRS is merciless if you are regular folk.  If anything good comes from this, it will be a simplification of the tax structure.  Any tax system that you have to pay someone else to understand cannot be fair.  And apparently it makes it way too easy for the fat cats to cheat.  President Obama, the glove is down.  Accept the challenge.  Fix this mess.

The current U.S. tax law provides a special rate for capital gains. This should be eliminated. The implied purpose of the tax savings is to encourage risk taking through capital investment. But since the term for these “long-term” capital gains is only one year, I fail to see how they are different from ordinary gains or losses on inventory. And no more risky than choosing to work at a non-capital trade.

Besides what else is a person with capital going to do. They can spend the money on consumption, they can loan the money to a borrower, or they can purchase ownership in an income producing asset.

Spending the money provides income to those who produce the items consumed.

Loaning the money provides a stream of income through the interest charged.

The income producing asset may or may not provide additional jobs for others.

For example, investing in the stock of a company does not provide any capital to the company that issued the stock after the initial public offering (IPO). It can provide an opportunity to issue new shares to raise capital but the original shares are just the right to collect the income stream from that original investment (and particpate in liquidation should that occur). The jobs have already been created through the initial investment or through business growth provided by retained earnings.

Starting a new business takes capital. And there is a risk in starting a new business. It is hard work and requires a bunch of time and attention. But the statistics show that about 1/3 of businesses started make money, 1/3 break even, and 1/3 lose money. But should the taxpayers be part of the reward structure? I don’t think so.

It is time to treat capital gains, regardless of term as ordinary income. The gain can be declared when recognized or when realized. This means that you can work out the number every year (and every business person already does this) and pay the tax on the increase or subtract the loss from your income. Or you can save it all up and take it all at once when the business is sold or liquidated. Of course you might not have any income to deduct the loss from when you go bust so you might want to use the pay-as-you go method.

Here is another tax idea. Real estate taxes are based on a “fair market value” assigned by a person who is an alleged expert in assessment. As a result, the fair market values are completely unrelated to the actual market value and completely unrelated to the “recently sold in your neighborhood” value. As a result, I (and you) pay much more (or much less) real estate tax than is proper. I have little faith in the government determining what is “fair”.

The new idea is that the owner of the property sets the value, not some government functionary or contractor. The basis of the idea is that the owner is the one best qualified to estimate the “real market price” of a particular property. The owner of the property would set a “public offering price”, file a report with the taxing authority (city or county) and that would be the basis for all real estate taxes.

Wait! I hear you cry. Joe down the street would say his house was only worth $10,000 and his taxes would be a pittance. Ah I say, that is why you need to understand that it is a Public Offering Price. When the value is declared, you are saying “If you pay me this price, I will sell it to you”. There is a TV show that sort of does this. With the self-assessment idea, everybody does it. Beg or borrow $10,000 and buy Joe’s quarter-million dollar mansion. He can’t refuse if you’ve met his price. Re-sell it and pocket the $240,000 (minus the transfer tax), move up, or rent it out to Joe who still needs a place to live.

“But I don’t want to move” – Build in enough “profit”, “excess”, “value added”, whatever to discourage people who do not want your house but see it as a good investment. Sorry but you will have to pay taxes on this additional value. But should you not? To you it is real value. Besides, everyone else will be doing the same thing (recognizing the real value) so the rates will be lower. The county will still collect the same amount of taxes, it is just that the distribution will be owner determined, not arbitrary.

“Businesses will not pay their fair share” – Most businesses are expensive to move. They are also good at determining costs. They will use a sharp pencil to make sure that that “location, location, location” is not bought out from under them.

Did I mention that part. Public Offering Price means just that. If you get a valid offer to buy, you must sell at that price. Well maybe not. If you decide that you have previously made a mistake in valuation, you can declare a higher value now. When you file the higher value, just pay the taxes on the difference for this year and the last 3 years. Simple.

Eminent Domain? No problem. The price is set. The you and the government agreed on the correct price when the government accepted the taxes. They cannot pay you less.

“The market won’t pay my price and I need to sell.” No problem, sell at any price you like. The selling price becomes the default value until another POP is declared. Sorry, no refunds on taxes. Buyer, make sure you do not get caught with a market clearing price. Declare the margin that made you see it as a good deal, file, and pay that tax promptly.

Real Estate Agents and Assessors out of work? Hardly. The Agents still can advise on proper pricing, facilitate sales and all the things they do. Assessors can still work but they will have to be a bit more accurate that they are today. No more “drive by” assessments. And banks are not going to be wanting to write a mortgage on an incorrectly valued property.

So talk up self assessment when your County Council Election comes up. You may have to wake up your state legislature as well. They will all tell you dozens of reasons why it can’t be done. Now they have control. With self assessment, you begin to take it back.

Income tax time again. The politicians recognize that the tax system is way too complicated. And they all have a proposal to simplify the tax system. Here is mine.

First some definitions. Income is what you have coming in. It does not matter what it is, it goes on your “W-2″ effectively in that it must be declared as income. Wages, salaries, and tips. Investment income, capital gains, gains from sales of property and cars. Airplane trips won in contests, airplane trips won gambling, airplane trips provided by you or your employer that go to exotic places for no real purpose. All income.

And you pay taxes on it. That is unless you get someone else to take it and put it on their “W-2″. You can give it to them, employ them, anything you want but it has to get to them from you. It has to actually go to somebody or some organization. That could by your housekeeper, your brother-in-law, your church, the Church-of-It’s-What’s-Happenin’-Now-Baby. It does not matter as long as it is not just you disguised as something else. If you keep it, hold it, retain it, its yours. This year. Income to you. It is no good buying something (except labor) with it because you still retain what you bought.
So how much tax? Well only two numbers matter in my system. What amount of income should result in NO income tax. Let’s call that number “b”. All of the rest is taxed at the same rate. To calculate your taxes, subtract b, the minimum income from your income. Multiply the result by the tax rate the Congress has set. Send in the money.

It is way too simple to sell. For one thing, there is no place for rich people to hide their money. So it will t-off the rich. And it does not gouge the rich people with a higher rate so the little guy will not like it either. But the fact of the matter is the little guy pays most of the taxes because he has no place to hide the money today. And the rich people do hide it, so the higher rate does not really impact them. One rate, one starting point. A fair and simple tax.

And what about all of those now-unneeded-tax-advisors and form-checkers. They can be gainfully employed keeping track of everyones money so everybody knows just how much they have when the music stops on December 31.