Thursday, October 30, 2008

An Allegory About Our Tax System

I stumbled across this neat allegory that compares (in an oversimplified form, of course) the US income tax system to 10 guys drinking in a bar. While some call it right-wing propaganda, I think it is a fairly good representation of our income taxes.

Here it is:

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
"Since you are all such good customers", he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his "fair share?"
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"
"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

I'm not sure of the author (the comments from the link above say the author given is fictional) but I was impressed at the simplicity of the allegory while fairly accurately (in my opinion) reflecting the attitudes of a lot of people.

You may or may not agree with it, but is should make you think.

Wednesday, October 29, 2008

What Do We Expect To Get From This Election?

Change has been the big theme of this election. Both candidates are promising fundamental changes from the current administration. People are worried and frustrated and the prospect of change seems to be giving them some hope. However, I have to ask, what changes are we hoping for?

It seems to me that we got ourselves into this mess by spending more than we earn and creating a lifestyle that we can't afford. Wisdom says you can't borrow money forever and not expect your debt to come due, but that seems to be what the entire country is doing. Where did this credit crisis come from?

Selfishness and Greed.

Millions of people bought homes they couldn't afford. Now, when they can't pay for them, they blame "predatory lenders" and "greedy bankers". Sure, some were simply victims of circumstance. They lost jobs or had other things happen that rendered them unable to make payments that they could previously afford. That always happens but those are a small minority. Most saw an opportunity for easy money or a really big house and jumped on it without considering the consequences. Blame who you want but, at the end of the day, the fault lies with the millions of individuals who are now clamoring for the government to save them from their own shortsightedness.

So, back to change. What change are the voters hoping for? Are we hoping for those mortgage payments we can't afford to magically disappear? Are we hoping to stick it to those rich snobby people and arrogant corporations for ruining our fun? Are we hoping for somebody else to step in and solve all of our problems? Because if those are the things we're hoping for, we're going to be very disappointed.

Each candidate has ideas that may or may not help but, in the long run, it is up to us to change. We want a strong economy, but are we willing to sacrifice to get it? Are we willing to cut our spending so drastically that we can actually build our savings? Are we willing to be honest and fair in our business with others even if there's nothing in it for us (or worse we lose money from it)? Are we willing to show actual patriotism and learn about our constitution, study the issues, and vote for the candidates that will best serve the country? I know we're pretty busy with our lives but, if we're too busy to really find out what we're voting for, why are we voting?

So get out there and vote. Vote for the candidates you believe will do the best job. Just don't stop there. The best change is from the bottom up. Take care of yourself, your money, your family, and your country. It is the responsibility of every American to make this country great. It's time to take that responsibility seriously.

Tuesday, October 28, 2008

AZ Proposition 102 - Does it discriminate?

For those that have read my earlier post on marriage, it should be obvious that I support proposition 102. What's great is that I can support it unequivically. Why? Because it doesn't have anything else tacked on. It doesn't restrict benifits, it doesn't outlaw civil unions, it doesn't have any of the riders that killed the last attempt. It simply defines marriage to be what society has defined it as for thousands of years.

There may be concerns with some that defining marriage in the State Constitution is somehow an attack on alternative lifestyles. I can't speak for everyone, but for me, proposition 102 is a defensive move. Marriage has been relentlessly attacked for years. It has become progressively weaker as the laws have changed. Marriage now requires less commitment and less responsibility. It has become a more of a selfish than a selfless thing. However, deep down, people recognize marriage and families as the building blocks of society and yet it gets weaker and weaker. Now it seems that even the connection of marriage to families is under attack.

Marriage is between a man and a woman because that's what it takes to start a family. Proposition 102 is not attacking a lifestyle choice but defending the fundamental unit of society.

Vote YES on Proposition 102!

Tuesday, October 21, 2008

AZ Proposition 105 - Does it take away our vote?

Proposition 105 is very controversial.  On the face, it looks to take away the power of the voter initiative by forcing 50% + 1 to pass any initiative that has spending provisions.  We all know that just getting 50% voter turnout is pretty good (some elections have less than 11%) so isn't requiring 50% + 1 the same as taking away the voters' right to approve an initiative?

I've gone over it quite a few times in my head.  At first it was obviously bad.  After all, it virtually insures that no voter initiatives pass.  However, as I found out more about it, I found that it only applies to initiatives that raise taxes (like a cigarette tax, property tax, etc.).  OK, so it's not as bad as I thought but still very limiting for any initiative that costs money.  So I talked to my legislators about it.  The result was very interesting.

As everybody knows, we're in a bit of a bind on the budget.  However, billions of dollars of that budget can't be touched because it's voter initiative money.  So, no matter how useless, inefficient, or backward the program is, it can't be cut.  Everybody complains that they always cut education but that's one of the few areas where their hands aren't tied (or at least aren't as tied).  There's something to think about.

In addition, somehow we accept that Congress must have a two thirds marjority to raise taxes but the voters can do it with a 6% turn out (if only 11% turned out for an election, 6% of the voters could raise our taxes - it's kind of scary).  It's like a special interest dreamland!

So, in the end, I support it.  I feel strongly that anything raising taxes should have serious barriers.  That's why it takes a super-majority in the legislature.  Shouldn't we also have barriers to ourselves?  I heard an old saying once that said that a democracy can only last until the people realize they can vote themselves money.  Are we getting to that point?

Let's make it hard to create programs that our children will be required to support.  Let's be wise with our money and our power.  Let's support proposition 105.

NOTE:  More information can be found at ballotpedia.

Sunday, October 19, 2008

AZ Proposition 202 - Stop Illegal Hiring?

The "Stop Illegal Hiring" proposition (202) sounds great at first.  After all, it makes the penalties more severe for hiring illegals, it gives the money collected in fines to hospitals, and increases the penalties for identity theft.  Doesn't this sound like a great proposition that everybody should vote for?  It sure does and that's the problem.

As I understand it, proposition 202 actually makes the employer sanctions law virtually unenforcable.  It makes is harder to prove that a business knowingly hired an illegal which makes it easier for a business to get away with it.  The information I heard from my state representatives and senator is that the law is basically sponsored by low-wage employers that have been profiting from illegal labor and it's purpose is to sound like it's strengthening employer sanctions while in reality, it's hobbling our current law.

I encourage everybody to read this one very carefully before voting on it.

More information can be found on ballotpedia.

Thursday, October 16, 2008

Some Perspective on the Credit Crisis

I saw a blog today that really got me thinking about the credit crisis and how we're all caught up in worrying about our bank accounts, mortgages, etc.  Sure that stuff is worrisome but, most of us have a roof over our heads, food for our families, leisure time to relax, cars for transportation, AC and heating to keep us comfortable.  How many thousands of families don't have any of that?  How many struggle just to have enough to eat?  How many spend their nights at the mercy of the elements?

My point (and I believe the point of the blog), was that we get so concerned about ourselves that we forget others.  Is our house big enough, are our cars new enough, should I go to restaurant a or restaurant b?  We think we have it tough when we have to waste all that time taking one of our cars in to get an oil change.  We base our votes (we can vote! there's another privilege!) on what the candidate has promised to do for us personally.  I think we get so wrapped up in ourselves, that we make ourselves miserable.

So here's my challenge:  let's get outside of ourselves.  The blog I read encouraged helping others in poorer nations.  That is an excellent and worthy cause.  However, I'm going to ask something harder.  I challenge anybody who reads this to sacrifice their time and do something nice for somebody else every day for at least a week.  It doesn't have to be big.  Offer encouragement to someone who's down.  Get the door for someone with their hands full.  Even the little things can have quite an effect on both the receiver and the giver.

In this time of crisis, let's look outward to how we, personally, can help those in need.  I think you'll find that your problems become less and your happiness will increase as you focus on helping others.  Give it a try!

Tuesday, October 14, 2008

Who Pays for Healthcare?

I know what you're thinking, "We do!!!"  However, that's not exactly true.  You see, I recently did an analysis of the healthcare industry for a graduate course I'm taking and I was surprised at what it showed me.  As I gathered information, one of the things I asked was "why does quality of care seem to be going down while prices are going up?"  That's just the opposite of what a capitalist economy is supposed to produce.  What I found is interesting.

Everybody who has health insurance knows that costs are skyrocketing.  Not only that, doctors seem more and more interested in moving you through as opposed to really getting to know you.  Why is that?

As I studied how things work, I found out something very interesting.  We (individuals) are not the customers of healthcare (doctors, hospitals, labs, etc).  Sure we go in for treatment but who writes the check that actually pays for the services?  The insurance companies.  Healthcare providers, like all businesses, tend to focus on who is paying for their services.  In this case, it is insurance companies.  The more patients a provider can run through in a day, the more money is billed to insurance companies.  The incentive for a healthcare provider is to get the patient out of the exam room as quickly as possible.  We're not people any more, we're $150 reimbursements.  OK, that's a bit cynical but that's where our healthcare is.

But wait, it gets better.  See you might be thinking that, since we are paying for the insurance, that we should get better treatment.  Right?  Wrong.  Once again, the individual or family is not the primary customer of insurance companies.  Their primary customers are businesses.  According to 2006 census bureau statistics, only 9% of us have individual healthcare plans.  The rest of the market is made up of business and government (Medicare and Medicaid).  Once again we, the individuals, get the short end of the stick because insurance companies don't care about us, they're trying to sell to HR departments.  If you don't like what your company offers, too bad because you probably can't afford to get it yourself.  After all, the government has made premiums tax free if they're paid for by businesses but not for individuals.

Another feature of our healthcare system is that insurance companies are limited to a specific state (it's not Blue Cross Blue Shield, it's Blue Cross Blue Shield of Arizona).  Thanks to government intervention, there's not as much choice in insurance.  If I want to get individual insurance, I have 7 choices instead of hundreds.  Which of those options creates the kind of competetion that improves services and drives down prices?

These are just a few of the issues with our healthcare system.  If you'd like more information, there is an excellent sight sponsored by the Harvard Business School that has even more data on our healthcare system.  Enjoy!

Tuesday, October 07, 2008

McCain Obama Debate

So I just finished watching the second debate between McCain and Obama and I have to say that I'm impressed with McCain.  I'm not a big McCain fan.  While I'm a Republican from Arizona, I really haven't been that impressed with our senator.  He was my last choice in the primary (I liked Romney - who would do really well at dealing with our economy) and it was disappointing to see him win.  But he's getting better.

On the other hand, I've always liked Obama.  His calls for hope and change are infectious.  He's smart and charismatic.  He had my vote.  That is, until the specifics came out.  His policies are change in all of the wrong directions.

To shore up the economy, he would expand government and increase regulation.  His logic is that any business left to itself will crumble.  However, I have to point out that one of the most regulated economies in the world is that of the former Soviet Union.  When pitted against a far freer economy (the US economy) it could not compete and collapsed.  The cold war ended with an economic, not a military victory.  However, Obama's plan is model our economy more like the old Soviet economy with stricter goverment control and less freedom.  His stance would stifle innovation, make it harder to start a new business, reduce choice in the marketplace, and hobble our economy.  It sounds nice now but I just don't see it working in the long run.

McCain's plan for eliminating some of the tax and regulation burden that businesses are under allows them to innovate figure out their own ways out of this mess.  I've already been hearing about how smaller banks and filling in the lending gaps from the larger banks.  The real beauty of a capitalist economy is that it's self correcting.  It hurts because it lets businesses fail but it always finds a way to supply the demand.  The big goverment plan tries to make sure that nobody gets hurt but it also stifles creativity and, in the end, people usually get hurt anyway.

On foriegn policy McCain was excellent.  He came off as experienced and capable while Obama came off as hopeful and perhaps a bit naive.  I know Obama supporters will disagree with me on this but he said nothing of substance apart from saying he'd send troops into Pakistan to get bin Laden and that he was confident that he could talk Iran and North Korea out of their nuclear programs.  Somehow, I just don't see that happening.

However, there was nothing overwhelming on either side.  If you're an Obama supporter, you will think he won the debate.  If you support McCain, you'll think he won the debate.  If you're really concerned about the issues, you'll think we all won the debate as it stayed on the issues and usually on topic.

All in all, a good debate.