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Most small business owners in the United States structure themselves as a business entity in the simplest way possible – sole proprietor or simple partnership if they have a low liability risk, LLC or subchapter-S Corporation for greater liability protection.

These four main business structures all feature something few are talking about today – the flow-through of all income to the owners personal income and his 1040.

How the proposed budget and other potential changes may affect his budget can and will directly affect those (s)he employs because the bottomline is the owners income.

Let’s set up a hypothetical couple, married, two kids.  The husband is the primary earner since the kids are small and his wife helps with the business, but isn’t an employee.  His business nets him an income of $300,000 a year.  After federal taxes, social security and medicare (which he must pay both sides of, employer and employee) and living in a no state tax state, taking nothing but the standard and personal deductions, takes home $209,181 each year.  Note, he paid out, in various taxes $90,819 of his earnings from his business.

A very respectable take home at the end of a year of hard work – taking home about $17,430 a month.

How will the family situation change, if the proposed changes take effect?

All things remaining the same, except his federal taxes going up, his take home will be reduced to $196,741; stated another way, doing the same exact thing he’s always done, he’ll now have to pay $9,440 more to the government, taking $787 less home each month.

Would your budget be affected if you had to take a $787 hit on your take home money?

Could it get worse for our business owner?

Sure could, especially if the powers that be decide to remove the cap on social security taxes – abolish the limit that currently exists that taxes the first $106,800 of income so that all income is now taxed.

Doing that, on top of the above hike in federal taxes now will take another $23,957 out of his household budget because right now he pays $13,243 for his social security contribution and will, if the cap is removed, then have to pay $37,200 instead.

Now this couple isn’t simply taking a $787 monthly hit on their income for their household, they’re now taking $2783 LESS home each month, with their annual take home reduced to $172,784….or a 28% reduction in his take home, taking his taxes and social security from $90,819 for a year to $127,216!

Now yes, there’ll be naysayers who can’t quite fathom why this is potentially a problem in our economy, they’ll say this couple should pay the higher amount, they can afford it. 

How many out there can truly say, with a straight face, they can easily take a 28% reduction in their take home pay?

If the hypothetical business owner doesn’t figure out how to adjust income to pay less taxes, he and his wife are going to sharply cut spending (they no longer have the same disposable income) and likely will begin to look at whom to layoff in their business since the wife can step in and do that work instead of their paying someone else to do it.

Either way the economy loses – be it through spending less on services and convenience, or by someone getting laid off to make up the $36,397 in additional tax burden the couple will have to face and deal with.

Take $36,397 out of this couple’s disposible income equation and you’re likely to be hitting the service sector – they’ll reduce meals out, salon services, cleaning services, etc. because they have $3,033 LESS to spend on services each month – and it will domino through the economy as each service provider makes less, they’ll need to cut back on their own use of services, and so on and so on.

Just food for thought, especially when you consider that in an interview, Obama told Fox News:

“In terms of raising the cap on the payroll tax, right now everybody who’s making $102,000 or less pays 100 percent of payroll tax on 100 percent of their income. There are about 3 percent to 4 percent of Americans who are above $102,000 in income every year. So if you want to talk about who’s middle class, me giving cuts to folks making $60,000 or $70,000, and potentially asking more from friends of mine like Warren Buffett. That’s a debate I’m happy to have…because it’s the people making $75,000, $50,000, $60,000 who are hurting.”

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We see and hear a lot of reasons presented why we need to adopt a universal healthcare model in the United States.  The most frequently cited is that if we look at other developed nations, they have universal healthcare and spend less of their GDP on healthcare than we do; that if we adopt a model similar to theirs, our healthcare costs will be lowered and the delivery of healthcare will improve.

The Walker Report makes the case using the newly signed stimulus package as a cost comparison:

If we adopt any one of the health care systems used by the dozens of first world nations with universal health care, we would save the equivalent of one stimulus package a year.

The article above even goes so far as opining that if we could only be as efficient as Luxembourg or Finland, our healthcare system would be great…but that might not be an attainable goal, so maybe doing as well as  Germany, France, or Switzerland might be our best goal for now.

One thing I love about the internet is quick access to numbers and statistics.  While GDP serves as one measure, perhaps a better one is actual dollars spent per capita in US dollars?  That way we’re comparing real dollars to real dollars rather than an abstract percentage of gross-domestic-product.

Nation Master is a neat site that lets you define out statistics by category and includes the category “health” for the nations in its database.  When we do a search for across the board “health” and then  “total expenditure in US$” we are returned statistics that reveal that in 2004 (latest data available for all reporting countries) the following was spent, in US-dollars, by each country in the list, sourced from the World Development Indicators Database:

United States:  $6096 per person annually

Luxumborg:  $5904 per person annually

Finland:  $2664.30 per person annually

France:  $3464 per person annually

Germany:  $3521.4 per person annually

Switzerland:  $5571.90 per person annually

I’m left scratching my head about why Luxembourg is considered more efficient when they only spend $194 less per person each year?  I mean Finland is obviously spending less – with only $2664.30 per person each year, that’s $3,431.70 less spent per person each year.

How do they do it?

Well, another interesting statistic can be had on Nation Master – how often a population visits the doctor, and in the United States we average 8.9 consultations with physicians each year per person; in Finland they consult with a doctor just 4.3 times a year per person. 

So in Finland they use their system about half as often as we do across the population, thus spend about half as much as we do.  Interesting.

Are they really “efficient” as Walker Report thinks they are?

If we spend $6096 on average, for each person each year, and they see the doctor 8.9 times on average in a year, then we’re spending an average $684.94 per doctor visit (or whatever encounter you have – ER visit, hospitalization, etc.)….compare this to Finland, spending $2664.30 per year, per person for 4.3 doctor visits each year – or $619.60 per doctor visit…..now it’s only a difference of $65.33 per doctor visit – not significantly different or more efficient than the United States, huh?

Yet we won’t see these numbers in the media, nor will we hear them on the radio – but the numbers and statistics are out there if you want to find them!

No doubt our healthcare system can be improved – but let’s not rely on myths to reform the system. 

We need facts and data to be able to make good decisions, not myths!

The word “profit” comes from the Latin, to make progress. 

Profit is the difference between the price something sells for and the cost of bringing to market whatever is sold, be it a product or service. 

Within the healthcare debate, we’re told profit is bad, it is a dirty word, it must be eliminated from our healthcare system so that we can deliver quality healthcare to all Americans.

The problem is one of semantics; any business endeavor, whether it is classifed as “for-profit” or “non-profit,” must generate enough revenue to meet its financial obligations like operating expenses and salaries. 

In the for-profit business model, revenues that exceed the cost of doing business are “profits”, whereas the same excess in the non-profit sector is termed “surplus”. 

No matter what you call it, it’s the same thing, more money in than money going out. 

The damning of profit however is an extremely effective way to terminate any discussion of alternatives or options to the current system we have because no one from within the healthcare system is going to step up and say “but profits are good” or anything related to money.

It’s manipulation pure and simple – carefully crafted and designed, then repeatedly executed well, by those who wish to keep the focus on establishing a single-payer universal healthcare system in the United States.

How can anyone have a meaningful discussion of the state of our healthcare system if you don’t talk money?

There is indeed much discussion on the demand side of the equation, that is the cost to those who need healthcare and virtually no discussion about the supply side of the equation, the costs to those delivering healthcare.

We absolutely must open the discussion up, take it beyond its cost to patients, and look at all sides if we are going to fix the areas in our healthcare system that need fixing and address the issues that are important to us all – the quality of our healthcare, how and where to better manage costs, and how to reach out to and provide affordable coverage to those uninsured among us.

Share your thoughts on this matter in the comments!

As Wikipedia notes,

Even though there is no universally accepted definition of ‘democracy’, there are two principles that any definition of democracy includes.

The first principle is that all members of the society have equal access to power and the second that all members enjoy universally recognized freedoms and liberties.

There are several varieties of democracy some of which provide better representation and more freedoms for their citizens than others.

On this page we find a number of varying styles of democracy, all sharing similar fundamentals like free elections and universal freedoms and liberties. Within the framework of democracy lie differing execution of socialism. Here it is laid out as,

Socialist thought has several different views on democracy. Social democracy, democratic socialism, and the dictatorship of the proletariat (usually exercised through Soviet democracy) are some examples. Many democratic socialists and social democrats believe in a form of participatory democracy and workplace democracy combined with a representative democracy.

When we read through the various definitions of each style of socialism, it’s clear the United States was not and is not designed for socialism.

Yet, we are a democracy.

But what form?

Later on that same page we find a section about a Republic,

The Founding Fathers of the United States rarely praised and often criticized democracy, which in their time tended to specifically mean direct democracy; James Madison argued, especially in The Federalist No. 10, that what distinguished a democracy from a republic was that the former became weaker as it got larger and suffered more violently from the effects of faction, whereas a republic could get stronger as it got larger and combats faction by its very structure. What was critical to American values, John Adams insisted, was that the government be “bound by fixed laws, which the people have a voice in making, and a right to defend.” Also, as Benjamin Franklin was exiting after writing the U.S. constitution, a woman asked him Sir, what have you given us?. He replied A republic ma’am, if you can keep it.

Aha!

We learned this in school, the United States is a Constitutional Republic!

What then is a Constitutional Republic? 

From Wikipedia we learn a Constitutional Republic is,

A constitutional republic is a state where the head of state and other officials are elected as representatives of the people, and must govern according to existing constitutional law that limits the government’s power over citizens. In a constitutional republic, executive, legislative, and judicial powers are separated into distinct branches and the will of the majority of the population is tempered by protections for individual rights so that no individual or group has absolute power. The fact that a constitution exists that limits the government’s power makes the state constitutional. That the head(s) of state and other officials are chosen by election, rather than inheriting their positions, and that their decisions are subject to judicial review makes a state republican; should the judicial review be maximized.

[…]

John Adams defined a constitutional republic as “a government of laws, and not of men.” Constitutional republics are a deliberate attempt to diminish the perceived threat of majoritarianism, thereby protecting dissenting individuals and minority groups from the “tyranny of the majority” by placing checks on the power of the majority of the population. The power of the majority of the people is checked by limiting that power to electing representatives who are required to legislate with limits of overarching constitutional law which a simple majority cannot modify.

Yes, I know, this is the very basics we learned in school, but it can’t hurt to lay it out again.

I often wonder how many people truly understand the principles of our form of government?

How is it that so many seem to recognize we are a form of democracy, yet fail to understand we’re a Constitutional Republic in form and function? Or, at least, we’re supposed to be.

What has happened to us, as a nation, that we stray so easily from our founding principles?

Perhaps you’d like to share your thoughts on how we’ve arrived where we are now?

One reason I started this blog is because I’m concerned about the direction our country is headed.

While I’m a registered Republican, I can’t say that I identify with the Republicans of the last eight years. Nor can I say that Democrats are to be ignored on all things simply because they’re Democrats.

I tend to judge people on their actions, not their rhetoric. What do they really do when put to the test? As far as I’m concerned, both Democrats and Republicans are cut from the same cloth these days, two sides of the same coin, simply two different styles of rhetoric with little difference in action at the end of the day.

When I turned 18, I chose to register as a Republican.

Not for the ideology per se, but because in principle the party stood for independence, personal responsibility and the idea that if you work hard you’ll reap the rewards of your hard work. At the time I turned 18, I’d already, with the help of my father, managed my own business for three years, so I’d come to appreciate how true it was that if I worked hard, I could advance myself in life and reap the rewards of my hard work – not only did I manage a business, I graduated with honors and headed off to a top school for college with a comfortable bank account for my needs while advancing my education.

Now in my 40’s, I’ve not only worked hard, but have what many would call a comfortable life. My lifestyle wasn’t just given to me, I’ve earned it by making sacrifices along the way, saving, investing and paying attention.

My husband and I waited to buy our first house, waited until we could afford not only the mortgage payments, but the responsibility that comes with maintenance and upkeep of a home. Of course there were times we were quite tempted to jump in and buy when the housing market seemed limitless, ever increasing in value, with everyone, it seemed, worried if one didn’t buy “now” they’d be forever priced out of owning a home. Despite favorable “teaser” interest rates, we passed and waited; and the wait was worth it since we found the house of our dreams and can afford it. It wasn’t an easy decision to wait and pay rent, but for us it made financial sense, something it seems many Americans have lost sight of these last eight years.

Rather than take a long hard look at how the govenment, banks and consumers all contributed to the housing mess, we focus on the banks – let’s blame the banks and the bankers, it’s their fault. If only they’d had more regulation, more oversight, more rules, we wouldn’t be in the mess we’re in. It’s easy to do, but that doesn’t make it true.

How many people, now troubled financially by their increasing mortgage payments, actually did the math for the worst case scenario (interest rates rise to maximum cap on the loan) before signing on the dotted line for their ARM or interest-only loan?

I’d guess few to none. We did though and took a pass on the ARM offered because, in the worst case scenario our mortgage payment had the potential to double – yes double – within seven years of the loan start date. That was simply unacceptable, so we took the 30-year fixed even though it appeared to cost us $50 more a month for the payments from day one. I’d much rather pay $50 a month and know I can afford our mortgage for the long-term than try to guess where interest rates will be in the future. I remember the 80’s and I remember 18% interest for a mortgage!

So, while the banks promoted their loans and the government encouraged homeownership for everyone, few are taking a long hard look at the responsibility of the homeowner – and their lack of personal oversight of their financial situation.

What I’m getting at with this very long post is that I’m very much about personal responsibility. I’m not heartless when it comes to those less fortunate; in fact I do think we who are fortunate have a great responsibility to those around us – I don’t think it is a responsibility of the government necessarily, but of families and the community.

I come from a blue collar family, parents who worked hard to provide for us, buy a home, live the American dream; whom pushed us to do better, which me and my sister indeed accomplished – we both went to college and worked hard for where we are now, something my parents are infinitely proud of us doing.

It wasn’t by government mandate we received a college eduction, it was by my parents working hard and setting examples of personal responsibility, holding us accountable for our actions, expecting us to do well in school and to continue our education beyond high school.

These days it seems we hold a fear that if the government doesn’t take the lead no one will.

What I find most disturbing is our march toward socialism, under the use of terms like “progessive;” a term used to imply we’re doing a good thing, making progress, advancing our thinking and policies….progessive policies are socialist policies and few in the media are defining the terms in use for the average American!

Which is why I opened my blog by providing the various definitions of the word “change” – when the politicians speak of “change” we have no definition of their meaning, we’re left to interpret the meaning ourselves and wind up with a mish-mash of understanding across the population. If we want to understand just what they mean by change, we have to examine their stated agenda – tease it apart, look at the long-term goals, and then decide what their “change” means.

In looking at the agenda set forth on the White House website, it’s clear to me that “change” is moving toward a socialist structure for government. I hope that here, in my blog, I can articulate where I see these policies shifting and offer alternative options to consider. I’m no expert on government or politics, but I am my own expert on life – if we fail as Americans to avert the policy changes in the air, we’ll have no one to blame but ourselves when we find we’re living under a system never intended by our Founding Fathers.

My blog is neither Democrat or Republican, it’s American. While I’ve identified myself as a registered Republican, I am more a Libertarian these days. I won’t abandon my party though, for I do have hope that we can get the party back on track and move things back in the right direction. For that, I do have hope.

On the White House website, under the Agenda for Family, we find the following:

The American dream is increasingly out of reach for many people. Americans with incomes below $100,000 have experienced stagnating wages, declining health care coverage, erosion of pension protections, rising personal debt, and jobs disappearing as a result of global competition and rising housing costs. Further, the gap between America’s richest and poorest is at its widest points in at least 25 years. At a time when costs are rising and Americans are working harder just to keep up, President Obama will provide relief for the middle class and support for working people. In addition to his health care and tax relief plans, Obama will make college affordable, reform our bankruptcy and credit card laws, protect the balance between work and family, and put a secure and dignified retirement within the reach of all Americans. President Obama has been a strong advocate for working people throughout his public life, and he will stand up to special interests and bring America together to reclaim the American dream.

Can you spot the false dichotomy? 

Share your thoughts in the comments!

Smoking Mirrors sums it up with:

Hope and change are the slogans of a product that promises results than cannot be delivered. They are a call to arms against an enemy who is yourself. Hope is best defined in the phrase, “wish in one hand and shit in the other.” Change and the promise of improvement are best understood in the belief that you can achieve different results by doing the same thing over again. But you do not want to hear this. This is like fingernails drawn down a blackboard. This provokes the rage behind your denial and though it is never different, you believe that this time it will be different.

Here we have a lawyer with no practical grasp beyond his profession who intends to change your world without either the tools or the skills to accomplish it. Therefore these tasks will be handed over to the very elements that have brought you to where you are today. His chief adviser is an on site representative of a foreign nation which is the greatest enemy your country has beside epidemic ignorance and a childish enthusiasm for magic wands and miracle products. You have my sympathies.

When you hear someone in the government, or our President, promote the idea of change, what do they mean?

change    (chānj)  
v.   changed, chang·ing, chang·es

v.   tr.

    1. To cause to be different: change the spelling of a word.
    2. To give a completely different form or appearance to; transform: changed the yard into a garden.
    3. To lay aside, abandon, or leave for another; switch: change methods; change sides.
    4. To transfer from (one conveyance) to another: change planes.
  1. To give and receive reciprocally; interchange: change places.
  2. To exchange for or replace with another, usually of the same kind or category: change one’s name; a light that changes colors.
    1. To lay aside, abandon, or leave for another; switch: change methods; change sides.
    2. To transfer from (one conveyance) to another: change planes.
  3. To give or receive the equivalent of (money) in lower denominations or in foreign currency.
  4. To put a fresh covering on: change a bed; change the baby.

v.   intr.

  1. To become different or undergo alteration: He changed as he matured.
  2. To undergo transformation or transition: The music changed to a slow waltz.
  3. To go from one phase to another, as the moon or the seasons.
  4. To make an exchange: If you prefer this seat, I’ll change with you.
  5. To transfer from one conveyance to another: She changed in Chicago on her way to the coast.
  6. To put on other clothing: We changed for dinner.
  7. To become deeper in tone: His voice began to change at age 13.

n.  

  1. The act, process, or result of altering or modifying: a change in facial expression.
  2. The replacing of one thing for another; substitution: a change of atmosphere; a change of ownership.
  3. A transformation or transition from one state, condition, or phase to another: the change of seasons.
  4. Something different; variety: ate early for a change.
  5. A different or fresh set of clothing.
    1. Money of smaller denomination given or received in exchange for money of higher denomination.
    2. The balance of money returned when an amount given is more than what is due.
    3. Coins: had change jingling in his pocket.
    4. A pattern or order in which bells are rung.
    5. In jazz, a change of harmony; a modulation.
  6. Music
    1. A pattern or order in which bells are rung.
    2. In jazz, a change of harmony; a modulation.
  7. A market or exchange where business is transacted.

Phrasal Verb(s):
change off

  1. To alternate with another person in performing a task.
  2. To perform two tasks at once by alternating or a single task by alternate means.


Idiom(s):
change hands To pass from one owner to another.

Idiom(s):
change (one’s) mind To reverse a previously held opinion or an earlier decision.

Idiom(s):
change (one’s) tune To alter one’s approach or attitude.

[Middle English changen, from Norman French chaunger, from Latin cambiāre, cambīre, to exchange, probably of Celtic origin.]