Another Mark of Brilliance!

"... Raising taxes at any time risks economic damage, but never more so than during recessions. Higher taxes shrink the return that investors and workers receive in exchange for their risk-taking, creativity, and productive efforts. So the inevitable consequence of higher taxes is less investment, entrepreneurship, and work.

During normal or booming economic times, growing demand from consumers -- and investors' eagerness to invest -- means that higher taxes are more easily endured. It's not that raising taxes even during boom times doesn't discourage some risk-taking and entrepreneurship; it does. But the general good health of the economy is often sufficient to swamp the ill consequences of higher taxes.

In bad economic times matters are very different. Businesses are losing customers and investors are sitting on the sidelines. Higher taxes, by cutting even further into businesses' falling profits, only fuel more economic pessimism. During recessions, there's no general economic vibrancy to balance out the profits lost to higher taxes. So raising taxes only amplifies entrepreneurs' and investors' pessimism.

Indeed, raising taxes during a recession likely does more than amplify producers' pessimism only for the duration of the downturn. By signaling to entrepreneurs and investors that the government is economically tone-deaf -- by revealing the government to be desperate to maintain its revenue stream even when many of the rest of us must struggle with reduced incomes -- raising taxes during a recession tells the world that the tax-addicted government is especially unfriendly to markets...

As the late Nobel economist Milton Friedman pointed out, 'No one spends someone else's money as carefully as he spends his own.'"

This sheer brilliance came from Donald Boudreaux in the Richmond Times Dispatch. I certainly can't say it better so I'll offer a brilliant wine pairing: a cool, crisp New Zealand Sauvignon Blanc, brilliant yellow straw color, perhaps with some lime green tints, and a refreshing taste of citrus, grapefruit and perhaps white flowers!

Want to Stimulate Job Growth?

THEN CUT CORPORATE TAXES! Who reading knows what the U.S. corporate tax rate is these days? Are you guessing 25%? maybe 30%? Wrong.

Next question: how high is our rate relative to other similar competitive and developed countries? Think it's comparable? Guess again.

Out of countries belonging to the OECD, the Organization for Economic Co-Operation and Development, the U.S. has the second highest corporate tax rate at 39.1% after Japan's 39.54%! Nearly 40% in taxes just to create jobs, goods and services!

Lots of talk these days about "stimulating the economy", but mostly action that is doing just the opposite. Keeping corporate taxes high, or disincentivizing job creation, for one. Interestingly, most OPEC countries, even the most socialist leaning, have been cutting their corporate tax rates. That, along with allowing ours to creep up, is how the U.S. ended up on the wrong side of the spectrum.

Further, there's lots of talk in our country right now about NEW taxes, and not so much about lowering taxes. Most often, the debate is about which sized "man" to tax -- the "big man", the "middle class man" or the "least advantaged man". Who's looking out for the very large companies that are paying the bulk of the taxes in the country (i.e., much more than individuals relatively)?!!

How can you continue to raise taxes on the very people creating jobs and ask them to create more? In the great words of Will Ferrell, "I feel like I'm taking crazy pills!"

Wine Pairing: Grab a Gruner (i.e., Gruner Veltliner) -- these crisp, citrus prominent Austrian white beauties are not only delicious, but support a country with a much lower corporate tax rate of 25%!

You Know it's Bad When the French...

are making fun of your tax policies! Today, I read an article in France-Amerique, "To promote tourism, the Americans want to... tax tourists".

The Travel Promotion Act of 2009, currently a Senate bill, would tax each U.S. visitor $10 and then use the funds to promote the U.S. as a choice tourist destination. To help them, since I'm a marketing professional, I've offered a complimentary sample advertising campaign below:

Scene imagery: Goofy, fat American in jeans and tennis shoes pictured at one of our finest cuisine destinations, a drive-thru.

Copy: "Hey all y'all foreigners, we really want your tourism dollars, so please come visit! Be sure to speak English 'cuz if you don't, we'll just talk louder. Also, try not to be shocked at how big we are -- we're not fat, we're just big boned.

You're going to have so much fun here. Oh yeah, one more thing -- we've designed a program to promote our country that, well... you're going to pay for. See you soon! "

This is like me invoicing my clients for my marketing and promotional costs. Very, very stupid. Shocking, in fact. What could possibly be more stupid than taxing the very tourists you're trying to attract?!! The only explanation that I can muster is a "miscommunication." Perhaps the conversation went something like this:

Senator X-D: "My constituents are suffering decreased business and civil revenue due to a decline in tourism. We should figure out a way to increase tourism... so I can get re-elected. Uh... did I say that last part out loud?"

Senators Y-D, Z-D, A-D and B-D: "Yeah, we just heard our favorite word, 'increase'! This is perfect: we can raise tax revenue without taxing our constituents! What could be wrong with that?"


I love how the article author writes (translated, of course), "The US Travel Association doesn't find it ironic that it's trying to finance a campaign with dollars from the very people it's trying to attract. Instead, it insists that other countries are doing it so they should, too." Did anyone actually determine if this worked in those countries before proposing it? Possibly consider offering any value-add to those coming here? Here's the scarier question: do they even care?

I smell yet another typical big government, big spending move to create yet another office employing people who aren't compensated based on performance. They just spend -- they don't have to create a budget and likely have no accountability for results.

Bottom line: I stand by my recommendation that all running for office (i.e., using our tax dollars) should have to have taken and earned an A in accounting, finance and economics before becoming eligible.

Wine pairing: French rosé, of course! It's hot and this is the perfect summer sipper. Pair it with some olives, Parmesan cheese and a pretty sunset.

Business Meal Tax Deduction Increase - Bill Introduced

There is potentially good news for small business owners and the restaurant and travel and tourism industries. Yesterday, Representative Neil Abercrombie (D-Hawaii) and Senator Daniel Inouye (D-Hawaii) introduced a bill to increase the business meal tax deduction to 80% from its current 50%.

Doing so will allow business owners to gain back more of this tax break which before 1993 was fully deductible. The bill is especially important for small businesses, who often use restaurants as mobile "offices" since many work out of their homes (some 52% including me). Furthermore, it will stimulate much needed economic activity in two sectors that have been hit hard by this tough section of the economic cycle.

Why should a LMF4HMW reader care? It is important to remember that small businesses, defined by the US Small Business Administration as having fewer than 500 workers, employ more than half of the private sector. These firms have generated 60-80% of the jobs created in the last decade. And they represent nearly 100% of the businesses in the U.S.!

Besides, people get tax credits for having kids (assuming they don't "make too much money). As long as we have this system (I'd vote for an across the board 10% flat tax where we do away with all deductions, thousands of forms and the majority of the expenses of running our current set up), we should be figuring out ways to help small business, not tax them out of business.

Your Biggest Asset and Foe When Dealing with Matters Money

Any guess as to what it is? Whether you have a high paying job? Trust fund? Good or bad childhood? Nope! It's your ATTITUDE.

I just read a truly shocking article about an ex-accountant (see picture) who stole millions of dollars from her employer winery in Canada. During the trial, she had the audacity to blame the winery for allowing her to do so given her gambling addiction and alcoholism. She even blamed the casino for allowing her to gamble!

Wow. Disgusting. Yet so prevalent in less malicious forms in our society given the move away from personal responsibility and toward entitlement. Her lawyer argued she should be excused given her issues. I argue she should be held fully accountable and given extra punishment for blaming everyone but herself.

So how does this relate to the point I'm proving? This woman chose to steal, lie and blame. Many other people choose to ask for help or simply stop being jerks. With matters money -- just like everything else in life, how you operate is largely a choice. You can choose to have a less emotional, more planned approached to the way you spend and deal with it. Or become a victim full of excuses who refuses to plan and then complains about things "happening" to you.

Instead of spending time worrying, complaining and stressing, I urge you to choose to confront your financial situation head-on in a business like matter. This is what I've been blogging about for nearly two years -- creating a plan, sticking to it, and working towards continuous improvement. While this does force you to take personal responsibility (likely my most treasured value) for your financial situation, it also frees you from the negative forces of "things happening". And the very good news is that if you face life like in this manner, you won't have problems quitting smoking, exercising, eating healthy and accomplishing the things you set out to do.

Each day we make plenty of choices. Make yours mindfully and then accept responsibility for your actions, financial and other.

Wine pairing: pick a bottle that's on sale made from a grape you've never tried before.

A Super and Simple Idea for Congress

STOP SPENDING BEYOND YOUR MEANS!!!!!!!!! (And then moping about it and blaming the rich.)

Why is it that so many businesses and individuals are able to self-regulate? Revenue and income goes down, spending decreases. Revenue and income increases, spending can increase.

I'm so unbelievably tired of all of the dire talk about "our economy in the toilet". Ever been to South Africa and seen a shanty town? Visited Mozambique, Ethiopia and Chad? Or hell, lived in Europe and paid over 50% in income taxes?

I'm still seeing people out and about -- fat (i.e., overfed) people, mostly, which is another post entirely but with a similar theme of moderation. I'm not saying it isn't "tough"out there, nor do I dispute the data regarding employment figures. My point is is a broader, longer-term societal thought.

Has anyone ever read a history book? Studied economic cycles? Bothered to think about the fact that the economy isn't a linear and positive trajectory?

I'm not arguing that things aren't tougher. My point is that the U.S. is still a damn fabulous country. I also have a few ideas that can very simply and cheaply save our country money:

1. Put a cap on medical malpractice lawsuits. (I'd rather send all ambulance-chasing "attorneys" to Mozambique or even Spain, but then we'd have to foot first-class tickets.) This is the elephant in the health care room. Physicians already have to spend about $200k NOT INCLUDING college to become licensed. It takes 10+ years from 18 to become a doctor. These folks didn't get in the business to be sketchy. No one ever said medicine was math. It doesn't always work out. This will decrease health care costs and prevent the USG from trying to make things "fair" (see thinking in idea #3 if you're skeptical).

2. Make health insurance like car insurance. Not dealt with or sold by employers or the government. Just something required and with private companies providing choices. If you want a higher deductible and lower premiums, great. If you smoke or choose to be obese, you pay more. If you choose not to pay for it and have a "lifestyle", then there are consequences. (Those truly in need can go with a temporary government style plan akin to Welfare or unemployment, with an expiration date, of course.)


3. Create a flat tax system of 10 or 20%. Period. Then be done with it. No more thousand page IRS docs. No more arguments about fairness and what is and isn't middle class. Or deduction after deduction after deduction. Why should people who rent be penalized? And why should people who have child after child be incentivized? The USG can't even adjust the AMT rates for inflation or cost of living index, so they shouldn't be trusted with defining "middle class". Everyone pays the same percent. Those with more income pay more. As fair as can be.

4. Make serving the USG an honor. Not a career. You serve a term. And you get back to doing what good Americans do -- contributing to society in something other than taking tax-payer money legislating for a "living". No black-tie affairs. No jets. No pomp and circumstance. US taxpayers should not be charged with paying for government parties. If they want to have a party, they can pay for it out of their own pockets. This is not a private company with profit and loss responsibility -- it's a "firm" that takes more money when it's losing.

5. Create incentive-based pay for government employees. Ever been to the Social Security office or post office. Enough said. Or hell, go out on a limb and PRIVATIZE everything.


Happy 4th of July! I urge you to be POSITIVE. Since sentiment also drives the market we can all do our part in taking off the party-pooper hats.

WINE PAIRING: South African Chenin Blanc.

The Dow is falling! The Dow is falling!

The obsession with the Dow Jones Index is ridiculous, much like Chicken Little's gloom and doom view about the sky and it's trajectory. The media loves to spout off reports "on the 10" regarding its every movement: "Up 2.. down 288...big gain of 100... big loss of 220..."

The wave of numbers is never ending. And it's quite common to get the movement without the total number. If the Dow Jones was 100 and it lost 50, this would be a major movement. But if it's at 10,000 and loses 50, not so interesting.

More importantly, the Dow Jones is a poorly constructed index. It is based on the trading

prices of the 30 included companies. 30. Thirty. Hardly representative of the US stock market! Five hundred companies. Furthermore, the companies trading at higher prices have a greater relative effect on its performance. Regardless of the number of shares outstanding.

A better index for measuring US stock performance is the S&P 500. It is comprised of the largest 500 equities and is based on market cap weights. This means companies are given weight based on how many shares are outstanding -- not the trading price.

The media's not too interested in delving into the S&P -- it is trading somewhere around 900 these days (versus the Dow in the 8,000 range) so the reported numbers are smaller and therefore much less interesting.