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Questions of Fairness and Rectitude

Posted by Larry Doyle on February 8, 2012 6:45 AM |

Stephen Moore wrote a commentary entitled A Fairness Quiz for the President in the Wall Street Journal yesterday which generated hundreds of comments. The comments seemed to break down largely along party lines. I think most of those commenting might not grasp the full picture.

With our nation in the midst of an increasingly confrontational political debate, I think it useful to promote serious questions of fairness and rectitude. In doing so, I would like to reference a fair bit of Mr. Moore’s commentary while passing over some of his more overtly political statements. Additionally, I include my own ‘sense on cents’ and add some of my own questions at the end.

I am interested to see what people may think and hope readers will respond to the questions posed both by Mr. Moore and yours truly. Let’s navigate . . .

Is it fair that the richest 1% of Americans pay nearly 40% of all federal income taxes, and the richest 10% pay two-thirds of the tax?

Is it fair that the richest 10% of Americans shoulder a higher share of their country’s income-tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden?

Is it fair that American corporations pay the highest statutory corporate tax rate of all other industrialized nations but Japan, which cuts its rate on April 1?

Perhaps we should reintroduce to those in Washington whom manage our tax policy the economic principle of diminishing marginal returns on both capital and labor. Think there might be some real disincentives at work in the American tax code as structured today? I do.

Is it fair that Americans who build a family business, hire workers, reinvest and save their money—paying a lifetime of federal, state and local taxes often climbing into the millions of dollars—must then pay an additional estate tax of 35% (and as much as 55% when the law changes next year) when they die, rather than passing that money onto their loved ones?

I will admit that this estate tax strikes me as the most egregious tax of all taxes imposed by Uncle Sam. The money has been taxed once. Why does Uncle Sam think it right and fair that he can take another slice of the pie?

I do believe the 15% rate paid by those within the financial services industry who have generated earnings via ‘carried interest’  should see that rate increased to the levels of ordinary income taxes. Might the tax rate on carried interest be the massive payoff for all those campaign contributions going to so many on both sides of the political aisle?

Is it fair that Treasury Secretary Tim Geithner, former Democratic Senate Majority Leader Tom Daschle, former Ways and Means Chairman Charlie Rangel and other leading Democrats who preach tax fairness underpaid their own taxes?

NO, MOST DEFINITELY NOT!! I find it hard to believe that there are not Republicans who have also underpaid their taxes.

Is it fair that roughly 88% of political contributions from supposedly impartial network television reporters, producers and other employees in 2008 went to Democrats?

Media bias, anybody??

Is it fair that those who took out responsible mortgages and pay them each month have to see their tax dollars used to subsidize those who acted recklessly, greedily and sometimes deceitfully in taking out mortgages they now can’t afford to repay?

Violations of moral hazard? The bailing out of banks and debtors comes with very real long term costs and a wide array of unintended consequences.

Is it fair that federal employees receive benefits that are nearly 50% higher than those of private-sector workers whose taxes pay their salaries, according to the Congressional Budget Office?

Can you spell racket?

Is it fair that soon almost half the federal budget will take income from young working people and redistribute it to old non-working people, even though those over age 65 are already among the wealthiest Americans?

We are well set up for a major generational battle as those just entering the workforce and the political realm decide that they WILL NOT pay the bills with which we have left them. You can bet on this.

Is it fair that in 27 states workers can be compelled to join a union in order to keep their jobs?

Why do people need to deal with such strong arm tactics?

Is it fair that nearly four out of 10 American households now pay no federal income tax at all—a number that has risen every year under Mr. Obama?

If people have no ‘skin in the game’ so to speak, then human nature begs why they should care if the government is wasteful in providing support.

My response to many of the questions posed by Mr. Moore is not whether the points highlighted are necessarily fair, but rather are they right and optimal in terms of generating maximum revenues, output, and productivity for our economy.

My personal take is that we need a much flatter tax code to generate greater output and revenue. I also STRONGLY believe we need a significantly revamped regulatory and legislative process that truly protects our investors and consumers. We are a long way away from either of these realities. I do not envision a Democratic administration providing the former, nor a Republican administration providing the latter.

On that note and in the spirit of fairness and rectitude, I would ask the following:

1. Is it fair and right for our financial regulators to be captured by the industry which they are charged with overseeing?

2. Is it fair and right for a documentary exposing egregious sales practices within the ARS market on Wall Street to be blocked from being aired?

3. Is it fair and right for an industry engaged in practices which can only be compared to racketeering to pay fines with NO meaningful individual penalties?

4. Is it fair and right for politicians from both sides of the aisle to feed at the trough which has abused so many of our citizens with little meaningful recompense?

These questions are not meant to sway people to one side of the political aisle or the other. Folks, the fact of the matter is we are largely very much alone in confronting large segments of the political and financial industry elites in our nation. Together they have consorted to fleece us like never before . . . and they have been doing it for a LONG time!

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.


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