Posted: Monday, February 16, 2009 12:00 am
Increasing taxes on business is same as raising our own taxes
In her Feb. 11 letter, Wendy Haber argues for raising business taxes so they pay their "fair share." This argument is entirely wrong! Businesses have to get money from their customers to pay expenses, including taxes. That is the price we pay when we buy things.
Raising business taxes increases the cost of the things we purchase. I have always found it strange that many people can't understand this. You don't gain anything by raising business taxes; you just pay the increased taxes with your purchases.
Assume that taxes make up one-fourth of business expenses (not a real number, just something I made up to illustrate a point). When a farmer sells tomatoes to a wholesaler, one-fourth of the price is the farmer's taxes.
When the wholesaler sells the tomatoes to a grocery store, one-fourth of the cost is the wholesaler's taxes and another one-sixteenth is the farmer's tax that the wholesaler passes on. When you buy the tomato, one-fourth of the cost is the grocer's tax, one-sixteenth is the wholesaler's tax and one-sixtyfourth is the farmer's tax, all passed along to you.
In all, one-third of the price is taxes. If businesses didn't pay taxes, the things you buy would cost only two-thirds as much as you now pay - like getting a 50 percent increase in your paycheck!
Of course, someone (you) has to pay taxes to support government, one way or the other. So part of what you save at the store would have to be taxed to replace lost business taxes.
Phillip Hays, Corvallis
Stimulus plan flies in the face of similar efforts through history
I'm sure that President Obama believes that it's not how big or small government is, it's whether government works. Unfortunately, his economic policies are shown to not work.
When Ronald Reagan inherited a more serious economic crisis, he took a four-pronged approach. First, he reduced tax rates to encourage savings and investment. Then he deregulated the oil industry, thus removing an unnecessary financial burden on Americans. Then he reined in government spending.
In 1981, Congress passed cuts in the tax rates and cut 5 percent of the federal budget, which would be around $150 billion today. Discretionary government spending declined by 16.8 percent from 1981 to 1983. Even by 1988, spending was still down by more than 14 percent from its 1981 level. He cut inflation in half, from more than 13 percent in 1980 to just above 3.2 percent in 1983.
Although many complain that Reagan spent too much on defense (and won the Cold War), when compared with the GDP, spending declined from 23.5 percent of GDP in 1981 to 21.2 percent in 1989.
What do Obama's and Reagan's economic policies have in common? Very little. And the greatest sin is Obama's plan to increase the size of government, which simply is moving in the wrong direction. Further, he still promises large increases in regulatory barriers, through global warming cap-and-trade legislation.
The economy will recover. However, because of "Obamanomics," it will take longer than necessary.
Jeff Limon, Corvallis
Look back at how Social Security really works, over many years
Lately, there were letters on this page about Social Security. On Feb. 9, John Brenan said we would be better off investing in private rather than public programs.
Mr. Brenan is mistaken about Social Security. He thinks it is insurance So did I. In 1956, I enclosed a letter with my return, resigning from Social Security, as it was not actuarial sound.
The IRS responded very promptly. They invited me to come talk with them. I gathered up my notes and went.
The IRS agent listened to my story. He then explained that Social Security was not insurance. It was a pay-as-you-go retirement benefit. The workers paid for the retirees, just as the workers would when I reached 65. This is how it had been since the 1940s.
In 1981, Ronald Reagan cut taxes more than half for the ultrarich. Now, he didn't have enough money to run the government.
The SSA was becoming worried about the Baby Boomer generation. They would begin retiring in 40 years or so. Ron appointed Patrick Moynihan and Alan Greenspan, and some others, for a solution.
Social Security taxes would be doubled. The Boomers would pay for the current retirees, and they would pay for their own retirement! The elites' tax cuts would stay in place. A Social Security Trust Fund would be established.
Reagan still needed money to run the government. Greenspan told him he could "borrow" from Social Security. No one would be the wiser.
Elvin Todd Allen, Corvallis
Give people the choice to 'opt out' of Social Security plan
In his Feb. 12 response to my letter, George Vee argues that one should judge the overall performance of a 45-year investment by how it performed over just 10 of those years. That is not logical. What about the other 35 years?
I started paying into Social Security in 1962 when a whopping $46 in tax money went into my account. Payments ended in 2007 with $12,028 more paid in, and I retired that year.
Had I been able to invest all those tax dollars in an instrument that mirrored the total return of the S&P 500 (Mr. Vee's basis for comparison) over all those years, I would have had $1,454,224 and could have earned about triple what Social Security pays me by putting it in certificates of deposit.
What if I were a year younger and hadn't retired until the end of the nightmare year of 2008? After losing 38.5percent in one year, I would still have $894,348 and could basically double my Social Security payment.
I understand the feelings of those who prefer perceived total and absolute safety nestled in the ever-comforting arms of sweet mother government, and would not wish to take that away from them. I do not, however, understand why they insist upon forcing that upon the rest of us.
Why not establish a system that would gradually allow those who wanted to opt out to do so? All our unborn descendants could choose either Social Security or a mandatory 401(k) type plan, and all would be content.
John Brenan, Corvallis