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The GOP seems to be in the middle of an identity crisis.  They’re looking to re-brand and re-package their message to motivate the base back to the tent.

The biggest problem, in my mind, is that they haven’t simply had a few bad years – they’ve totally lost their way and no amount of re-packaging and re-branding is going to do much until they get back to basics.

The number one basic they’ve totally lost sight of – LIMITED GOVERNMENT.

Not only have they abandon the very principle, they’ve reached a point where they’re really no better than Democrats when it comes to spending, expanding government and imposing more regulations on individuals lives.  These days the Democrats and Republicans really are no more than two-sides of the same coin, with very little difference at the end of the day in how they actually operate.

Actions speak louder than words.

If you say you’re conservative and want limited government, but then spend like there is no tomorrow, increase the size of government and such – well, your actions betray you – you’re no better than the tax and spend Democrat you’re attempting to win against!  In fact, you’re just a tax-and-spend politician calling yourself a Republican.

The Republicans can try to re-brand – but until they start to frame things based on conservative principles, they won’t get much traction with the populace since they’ve allowed themselves to be sucked in by the idea that the government should be regulating social issues, medical procedures and ideas.  They’ve allowed themselves to come to the belief that the Federal Government should be calling the shots, when the reality is that so much of what’s been going on in Washington should have been left to the states to decide.

Until the Republicans start to frame things in terms of how a particular issue involves government, little is going to change and I won’t be voting Republican.  (I won’t be voting Democrat either)

A good example of what I’m talking about – the stimulus package.  Both Democrats and Republicans started from the point of the stimulus package as being a done deal, the quibble was in the details of just how much money they’d spend and on what it would be spent. 

The Republicans failed to step up and clearly articulate that stimulating the economy was not the job of the Federal government; that if anything, the Federal government should be looking for ways to encourage the private sector to work things out so that the economy could get moving again.  They didn’t do this, instead they simply argued over how much money to spend and where.  They joined the chorus of doomsday, that without the stimulus package, the US would collapse.  They joined the Democrats and worked together to achieve the goal to spend more and expand the government rather than step-up and do their duty to work to limit government.

If the Republicans want to get back on track and get back the base of voters whom are truly conservative – their question for each issue MUST be: 

WHY IS THIS SOMETHING THE FEDERAL GOVERNMENT SHOULD DO? 

And then:

WHERE IS THE FEDERAL GOVERNMENT TASKED WITH DOING THIS?

If they can answer the “why” but can’t answer where they’re justified, they need to step back and hold the position that for whatever the issue is, it’s not the business of the Federal government. 

Period.

End of Story.

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President Obama decided that three pressing issues require attention this year – healthcare, energy and education; curiously, each sector is among the best performers in the current economic climate.

With regard to healthcare, we’re spoon-fed the idea that our healthcare costs are out-of-control, that we have too many uninsured among us, that we spend an astronomical amount compared to other nations ($7,439 per person on average), and that we need to overhaul the entire system to not only deliver healthcare to all but to also reduce costs.

For a while now I’ve been trying my best to fully understand why this is now a centerpiece issue for the new administration. While many are quickly concluding that this is due to Obama looking to socialize medicine in the United States, I think it’s something else.

Something that few are willing to seriously discuss.

Why exactly might the government be pressing so hard to reform healthcare now?

The most compelling reason may be the fact taht while government programs provide coverage to 27.8% of the population, government spending accounts for 45% of all healthcare expenditures in the United States.

Basically the government is in a terrible financial position at the moment, and the situation isn’t getting better, it’s getting worse.

One quick and clever way to fix the problem is to make the issue a crisis for all of us, make it appear we’re all paying too much, getting too little and the government is able to resolve this problem.

And the way they’re going to attempt to resolve this is by sucking healthy people into the government system, to capture dollars that would otherwise be spent in the private sector – where private insurance is held by 67.5% of the population with expenditures toward healthcare costs at about 43% of the total expenditures in the United States and the remaining 12% are out-of-pocket as either co-pays, deductibles and/or those without insurance paying for their medical services.

So here we have:

Government programs – 27.8% of population; 45% of spending
Private insurance – 67.5% of population; 43% of spending
Out-of-pocket – 12% of spending

The government obviously has a problem and despite lowering reimbursements, shifting administration costs to the private sector, increasing compliance requirements for reimbursement and a host of other ways to frustrate the system, it has not, and can not reduce its financial load without healthy individuals contributing toward its ever increasing burden with our aging population.

Some interesting statistics that you won’t find all in one place, but need to go searching to bring the puzzle pieces together for a look at the bigger picture here:

80% of Americans utilize less than $1200 a year in healthcare services
10% of Americans utilize $1200 to $3500 a year in healthcare services
10% of Americans utilize more than $3500 a year in healthcare services

5% of Americans utilize more than 50% of all healthcare costs each year
1% of Americans utilize more than 27% of all healthcare costs each year

In 2007, medicare spent an average $5,694 per beneficiary on healthcare, medicaid spent $6,120 per beneficiary. That’s just “average” though and does not include that medicare spends an average $22,107 per beneficiary in their last year of life or the $14,858 for blind/disabled beneficiaries with medicaid and $14,058 on aged beneficiaries with medicaid in addition to medicare!

Is it any wonder seniors and senior advocacy groups are concerned about how various changes will impact those 65 and older?

As it is right now we have about 40 million seniors in the United States – in ten years it’s projected we’ll have 55 million, and even if we increase the age of eligibility for medicare, the projected 25% increase of eligible seniors is untenable – unless the government can convince us to suck healthy individuals into its system to capture those dollars.

When we begin to look at the even bigger picture – the $5,400 average for an individual health insurance policy and the $12,500 for a family policy, the bucks start to add up very quickly as we realize that if that money is captured by the government, effectively taken out of the private sector, it’ll be a boondoggle for the government financially – especially when you consider that 80% of the population needs less than $1,200 a year in healthcare.

When you do the math, it’s a no-brainer why the government is so hot on reforming healthcare – taking control of the current flow of money that’s within the private health insurance sector, capture those dollars to cover their butts since they’re going to go broke without those dollars and creating a crisis now is an effective way to convince us the entire system is broken and needs fixing.

Could our entire system need some reform? Sure – but it’s certainly not the crisis the government is making it out to be, except for the government programs themselves right now.

In future posts I’ll attempt to tease out changes that can make a difference and delivery better for the American public – and I can say, it’s not through expanding government programs!

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.”

Last night Keith Olbermann railed Mitch McConnell, naming him ‘Worst Person in the World’  for suggesting that

“When our good friends on the other side of the aisle say raising taxes on the wealthy, they really mean small businesses,” in an interview on CNN’s Late Edition.

Here is what Olbermann ranted on about:

“…more importantly, if you own a small business and it pushes your own income over 250-grand and you haven’t incorporated and you haven’t been able to enjoy lower taxes that result and you’re still treating it as your personal income, you better ask to see your accountants diploma because in the vast majority of cases either you or he is crazy.”

Olbermann simply failed to do his homework, and instead relied upon supposed fact checking that wasn’t complete.  Instead, he referred to the statement as “Joe the Plumber crap” and said that checking the facts revealed only 2% of small businesses would be affected. 

If we poke around on the net, we find an article where “facts” were presented to support Olbermann’s opinion, in the CNN article Fact Check: Plumber Joe’s Taxes.  The CNN article isn’t factually incorrect, but it suffers the sin of omission, which is why Olbermann’s rant last night irked me as a small business owner!

In the CNN article, it says that “…[the] broad definition of what counts as a small business, including everyone who files a Schedule C, E and F. ”

“In 2005, there were 21.5 million Schedule C returns filed, according to the IRS.”

Since most Americans have no idea what a Schedule C is, they wouldn’t know that the CNN article fails to include Schedule K filings.  A Schedule C is for Sole Proprietors ONLY, that is, a business owned legally by one and only one person that remains unincorporated.  If you ask me, 21.5-million folks filing a Schedule C is a lot of sole proprietors out there.

But what about Schedule K? 

Schedule K is used to file Partners share of income, deductions, credits, etc. in partnerships, joint ventures, LLC’s and S Corporations – basically anyone doing business not as a full c-Corporation. 

In 2001 there were 23-million Schedule K filed with the IRS.  Taken together with those filing Schedule C, this is now no less than 44.5-million small business owners – a far cry from the CNN articles use of SBA data suggesting that based on the Census there were “6 million small businesses in 2005.” 

The IRS is a far more accurate agency for small business data than the Census Bureau; and the Census data also says that  “a firm is defined as the aggregation of all establishments owned by a parent company” – meaning if a person has a parent company and one or more subsidiary companies at the same time, they’re included as only one company in the data.

So was McConnell making a boldly wild statement when he suggested that “[w]hen our good friends on the other side of the aisle say raising taxes on the wealthy, they really mean small businesses”?

Nope – he’s dead-on…and Olbermann is the one who should have done his homework so he wouldn’t look the fool who knows nothing about small businesses, their owners, and how they have to structure their businesses legally in the United States.

Obviously Olbermann has no clue that doctors, lawyers and others classified as “professional service providers” have little choice but to organize as an LLC or S-Corporation – if they incorporate as a C-Corporation, they’re subject to the highest corporate tax rates because they’re defined as a personal service corporation, not simply a traditional corporation!

Olbermann is oblivious to the fact that it makes little sense for many business owners to go the route of incorporating as a C-Corporation due to the increased reporting required (translation: more time consuming paperwork) by the IRS and the very real double taxation they may face going for a C-Corporation. 

Here’s an idea – perhaps it is Olbermann that needs to sit with an accountant to get some facts before he speaks?

Let me spell it out for Olbermann about corporate taxes!

If a corporation makes between $100,000 and $335,000 – their tax rate is 39% (higher than if the owners kept their business as an sole proprietorship, simple partnership, LLC or S-Corporation).  Next time you hear the likes of Olbermann claiming small business owners are stupid, crazy or poorly structured in business -just remember, if they listen to him, they’ll be paying even more without a tax increase!

If professionals (doctors, lawyers, etc.) incorporate, structuring as a c-Corporation, their tax rate is 35% (higher than if the owners kept their business as a sole proprietorship, simple partnership, LLC or S-Corporation)

The tax rate actually goes DOWN if a business makes more than $335,000 a year – and has profits of less than $15-million….the tax rates for this range is 34-35% (still higher than if the owners kept their businesses as sole proprietorship, simple partnership, LLC or S-Corporation).

Even those corporations earning $15-million to $18.3-million pay less taxes (38%) than those making just $100,000 to $335,000!  Make more than $18.3-million and your taxes drop even more – to 34% (which is still more than if you allow the income to flow through to personal income since you’ll then have double taxation – the tax on the corporate profit and then taxed again when you pay yourself a paycheck from the corporation).

Oh and let’s not forget the Accumulated Earnings Tax – more money to pay on top of the above rates if a corporation has accumulated taxable income in excess of $250,001 ($150,000 for personal service corporations).   Yup – do that and you’ll pay an additional 15% ….. to put it simply, if you have profits of $250,000, Uncle Sam gets 39% first in corporate tax, then another 15% for AET – combined, that’s a tax rate of 54% if a corporation has a profit of just $250,000.

Yo, Keith – when is 54% of your profits less than 33%***? 
***the tax rate a small business owner will pay if they have their income flow through to their personal income taxes via proprietorship, simple partnership, LLC or S-Corporation

Me thinks Olbermann needs to go back to school and learn math, don’t you?

It is the time for calm in the face of a storm that few fully understand. Let us, as advocates of freedom, be steadfast, rational, clear, and focused on the long term. Be of good cheer and never stop pointing to the truth about freedom. The answer is not the left nor the right nor the state. The way out of this mess is freedom. It is time we defer to it, and to the revolution in the status quo that freedom implies, and give up pretending as if any politician can finally stop it.

Llewellyn H. Rockwell, Jr.

Full article here

From the Heritage Foundation, Two Americas: One Rich, One Poor? Understanding Income Inequality in the United States

Class warfare has always been a mainstay of liberal politics. Politicians frequently depict the United States as a nation starkly divided between the rich and poor. For example, vice presidential candidate John Edwards decries “two Americas…one privileged, the other burdened…one America that does the work, another that reaps the reward. One America that pays the taxes, another America that gets the tax breaks.”

Obama is no exception – his rhetoric is rich with intent to foster continuation of the  class warfare (envy) in the United States to promote entitlement mentality and dependence on the government; aka socialism.

The “rich” are defined by Obama as those households earning $250,000 or more each year.

We’re told the “rich” don’t pay enough in taxes, they exploit others for their personal gain, and they benefit off the sweat of the lower income earners.

We hear a lot about how Obama will address the needs to “hard working Americans” and provide tax relief to “hard working Americans”; that “hard working Americans” deserve a dignified retirement, incentives to save more money, tax breaks and, the big one, redistribution of the wealth in the country – take from the “rich” to give to the “hard working Americans” who deserve more.

As if the “rich” doesn’t include ANY hard working Americans.

So, I’m going to say it – the rich not only work as hard, or harder for their wealth…but they also work smarter – they work the money they have.

That’s the real rub between those who have and those who don’t.

Simple fact of life:  it isn’t what you earn, it’s what you spend that matters at the end of the day.  If you spend your money on things that are not necessary you will be poor even if you have a high income.

What irks me lately is the government seems intent on destroying the very people who drive our economy – yes, I’m talking small business owners. 

I’m one of them. 

My husband and I own our business and employ 14 people, all whom have families, all whom we feel a great responsibility toward, pay well and provide top-notch benefits to.  Like many other small business employers, we’re being taxed to death!

Last year, I kid you not, even with our deductions, we still paid 50% of our income in taxes – to the federal government, the state, social security, medicare, AMT penalty; I’m not even including sales tax or property tax. 

Now Obama wants more?  Are you kidding me?

How much more can the government take?  How much more can they regulate us?  How long until they drive small business owners completely out of business?

The government seems to think it’s fair to take our hard earned money and re-distribute it to others less fortunate?  Good grief, I can do that by choosing my charities, I don’t need to government to do that for me!

Tax credits – checks of $500-$1000 – going out to people who PAY NO TAXES?  How the hell is that fair?

Another increase in the minimum wage coming this year – to $7.25 an hour, with Obama promoting an increase to $9.50 an hour by 2011….who the hell is going to pay for that 26% pay raise (from the $7.25 an hour) and the social security and medicare match employers have to make?  I don’t get a 26% raise unless I WORK HARDER AND DO MORE TO EARN MORE!

Oh and the one I just love (note sarcasm), the 50% of matching contribution from the government into savings accounts by “hard working Americans” for the first $1000 placed in their accounts through payroll deductions!  We’re “rich” so we wouldn’t qualify, of course.  But tell me – why the hell the government is getting into the business of matching contributions now, anyway?  They’re going to use the taxes they take from me to again, give it to someone else – money I could have used toward my retirement. But they’re not just content with taking my money – they’re only happy when they totally exclude me from even participating in these programs simply because my balance sheet deems me “rich”!

Small business will be crippled by the programs and plans being outlined by the new administration. When this happens, who will be the employers of the future?  Cause it sure as hell isn’t going to be motivated young people – by then, they’ll be fully entrenched in the entitlement mentality and totally dependent on government handouts.

Ranking Ways and Means member Dave Camp (R-MI) asks Thomas Barthold, head of the Joint Committee on Taxation, how many jobs  will be created by the nearly $1Trillion “stimulus” package: