The "Outsource" Tax Rate

Readers of this blog know how little faith I have in economists. I have often considered them in a class with astrologers and alchemists. No one has ever tried to prove me wrong. With that in mind, here is an idea to solve the nation’s unemployment situation.

Once there are plenty of well paying jobs here with decent benefit packages, spending will resume and that spending will bring about more jobs, and the whole process will snowball, lifting us out of this “recession.” we are in. Simply stated, jobs are the answer. Everything else will then follow.

The creation of brand new jobs is a wonderful solution but it a slow and tedious process. It would be far easier to bring back the millions of jobs which have been outsourced to other parts of the world where labor and other costs are less than in the United States. Putting tariffs on imports would seem to be the logical solution, but that would throw a monkey wrench into our global economy and only result in retaliation from our overseas markets which supposedly spend the money here we send to them for their low-labor cost manufactured goods. Economists claim that was tried in the 30s and it did not work (Smoot-Hawley Tariff).

I propose we look at American corporations which outsource much of their manufacturing and even service functions to low-cost-labor and basically unregulated countries. Doing this contributes mightily to their bottom line, their profit, and makes their boards and stockholders happy. But it is really unpatriotic if not un-American because it keeps Americans out of work, taking away their jobs.

There has to be a way to determine what percentage of a corportation’s bottom line, its profit, is derived from outsourced operations. For example, if a corporation’s profits for the year were $100,000.000 and it were determined that 30% of that was the result of its outsourced operations, then $30,000,000 of their bottom line would be scrutinized to determine how much that portion of their profit would have been if the processes producing that amount had been conducted in the United States rather than overseas. Let’s say that profit number would have been reduced to $15,000,000.

Once these figures have been developed, the corporation would be taxed at the normal corporate tax rate for $70,000,000 of their profits developed in the United States and also be taxed at that rate for the $15,000,000 value of the profits developed from outsourced operations had they been performed in the United States. As for the remaining $15,000,000 of their bottom line, that would be taxed at a significantly higher tax rate which we will call the “outsource tax rate” and that would be a rate sufficiently, if not prohibitively, high enough to cause the corporation to bring jobs back to the United States, recognizing that taxes on outsourced profits will make outsourcing unprofitable to them.

This is a simple idea and therefore, probably something that economists would scoff at. I think it is worth a try.

JL

Inner Satisfaction

For those of you who do not live in Cascade Lakes, and I really don’t know who looks at this blog, a brief explanation of the following story (which that community's magazine declined to publish) is warranted. One of the three fountains at the community’s main entrance has frequently been out of commission over the years, despite frequent repairs and reconstruction of its plumbing. And now it’s time to read

Inner Satisfaction

Jack Lippman

Julien Bonhomme was one of the workmen employed in the construction of Cascade Lakes back in 2000. Actually, he worked for Bongiovanni Tile & Mosaic, the subcontractor which did the ornamental tile work decorating the fountains at the community’s Military Trail entrance. Julien was very angry. His employer had paid him every Friday during the first three of the four weeks he had been setting tiles on the fountains, but when payday came during that final week when the work on the last fountain, the one to the left of the entranceway, had been completed, Bongiovanni had disappeared. Apparently, once the developer had paid him, he had taken off, leaving unpaid bills and unpaid employees behind him.

Bonhomme and some of the other workers took their complaint to Buck, the construction foreman for the whole job. Buck felt badly about it, but explained that there was nothing he could do for them. The developer had already paid Bongiovanni, and if he had taken off without paying his employees, it was their problem, not his. Buck suggested they get a lawyer but since most of them were in the country illegally, going to court was the last thing they wanted to do.

That night, in the apartment he shared with a half dozen of his relatives, Julien explained what had happened. His uncle Pierre smiled at him.

“Why are you smiling, Uncle,” Julien asked.

“Because I think I can help you. You will never get the money from Bongiovanni, or this Buck fellow for that matter. I do think, though, that I can tell you what to do so that you will feel better about the whole thing. It’s the way we dealt with things like this back in Haiti. The important thing is that you get some kind of inner satisfaction, even if it isn’t money.”

And so it was that over the next few weeks, on the kitchen table in the apartment, Julien and Pierre built a clay model of the fountain which stood at the left side of the Cascade Lakes entrance. They put as much detail into it as they could. The family members in the place thought it looked remarkably like the actual fountain which some of them had seen while driving by on Military Trail, and offered words of encouragement to the pair.

“Now that we’ve built this model, Uncle, what are we going to do with it?” Julien asked.

“It’s hard to explain,” Uncle Pierre, suddenly very solemn, intoned. “I will recite some words in an ancient language which you will not understand. I learned these incantations from my father, words which have been passed down through generations of Haitians. They are very powerful and when you see me about to lapse into unconsciousness, and that is the effect saying them will have upon me, you must take this metal spike and this hammer, and drive it into the clay model. Trust me!”

With that Uncle Pierre handed a spike and a hammer to Julien, closed his eyes and started uttering an incomprehensible babble in a singsong manner. After a few minutes, Julien did what his uncle, whose body was now twitching uncontrollably, had told him to do, and the South Fountain at Cascade Lakes has never been the same since.

Silent Creation

With all that is going on in the world, in the Middle East and in our economy, let's pause for a bit of introspection, starting with a poem (once again we are scooping Cascade Lakes News & Views where this will eventually appear) by Sid Bolotin. Oh, yes .... like a voice in the wilderness, or a tree falling in a forest with no one there to hear it ... I repeat that your contributions as mentioned above are always welcome on this blog. (Note that we've fiddled with the format of the blog this week. Hope this is more legible and pleasing to our followers, all three of them.)
JL

The Inside of My Lids

Sid Bolotin

I close my eyes, and see

The dark gray of the inside of my lids

Then, released by the shutter

Of eyelids that block the external

Images begin their dance

As my mind unreels its film

Like a VCR on its own autopilot

Rewind, fast forward, pause

“If only” flashbacks

Happy images, peaceful ones

“What if” scenarios

Peek-a-boo into the future

Icons for meditative focus

As real as any movie on the silver screen

My inner orchestra’s sound track explodes

With audio provided by the chattering committee within

Show the film, quiet the clatter

Come back to my breath

Breathe into my heart

Back to the stillness, to no-thing-ness

To the inside of my lids

*** *** *** *** ***

Silent Creation

We’ve all heard the question which asks if there is any sound when a tree falls in a forest with no living creature nearby to hear it. Since sound is the result of vibrations felt on one’s eardrum, the answer seems to be “no” because there were no eardrums available to sense the vibrations. A totally deaf person, standing in the forest, might feel the vibrations, but would hear nothing.

Let’s go back to the beginning, when “chaos” was all there was, and if you are religious, you believe that out of this chaos, the universe and all that is within it was created. If you are not religious and believe that whatever happened to cause the universe to exist must have had a physical or chemical basis, that’s fine too.

The point is, however, that whatever happened occurred without any living creatures being there to hear the vibrations. Certainly the crashing and bursting of celestial bodies, the explosions, and once there was a planet, the rumbling of land masses as they tumbled into shape, colliding and rising and sinking into violent oceans all must have created tremendous vibrations. But there was no one there to hear them.

Today, I believe that scientists can look back and sense what these vibrations must have been by looking at their results. They can retrospectively calculate the force of the vibrations caused by what were literally earth-shattering events.

What you hear (the effect of vibrations upon your eardrums) is really not so important as the vibrations themselves and what caused them. A tree stood in the forest a minute ago and just crashed to the ground. That is what the vibrations caused by its fall represent. Whether an ear did or did not receive them as sound is not so important as the physical act of the tree falling. And so it was at the time of the universe’s silent creation. There may have been fury, but there was no sound.

JL

The Road to Serfdom

Do you believe that government is your enemy and that it tries to take away your freedom and money? In olden days, when feudalism was in style, people had to be protected from marauding bandits and other evils, so they agreed to let the local duke provide them with protection and in exchange, they would do his bidding and also give him some of their crops. Ultimately, they even gave him their land, but he was “kind” enough to let them still live on it. In effect, they had sacrificed their liberty, their freedom, for security.

Things haven’t changed. The bandits have been replaced by terrorists and unaffordable medical care. The government is willing to protect you from terrorists by providing airport security and SWAT teams and make sure you have adequate health care, but in exchange, you have to pay the government, via taxes, for these things, about which you have given up a lot of the decision-making function. You are sacrificing your liberty, your freedom, for security. Sound familiar?

Our government, then, can be seen by some as trying to bring back feudalism. Oddly enough, there was a book written in the forties by the eminent conservative Austrian economist, Frederich Hayek, entitled “The Road to Serfdom.” Some consider it a “libertarian manifesto.” He later won a Nobel prize for economics. “The Road to Serfdom” is still on my reading list but I suspect it points out that dependence on the government through collectivist means takes us back to what amounts to feudalism. Hayek is remembered for stating that “a conservative is a socialist who has been mugged by reality.”

In these days when many conservative spokespeople pour out oceans of meaningless drivel, it should be remembered that there are legitimate espousers of conservatism, like Hayek and his disciples. Surprisingly, even George Soros who most conservatives dislike, has shown respect for Hayek’s work by inviting a leading disciple of Hayek to participate in his new economic think tank.

My preliminary take on this (which I really should hold off on until I read the aforementioned book) is that if a government remains democratically elected and truly has the welfare of its people as its goal, the danger of it leading the country down the “Road to Serfdom” is minimal. This was not the case when Hayek wrote his book; at that time Hitler, Stalin, Mussolini and others were doing precisely that. I hope things are better today. More follows when I read the book.