12/12/2012 4:15 PM ET|
Smarter ways to tap the rich
Solution No. 1: The big fix-up
With governments at both the federal and local level burdened, we need to find a creative way to finance and manage new infrastructure projects. Preferably, it should tap into the massive hoard of private capital (all that wealth the top 10% have accumulated) and use private ingenuity and the profit motive to deliver projects on time and under budget.
I'm talking about public-private partnerships, which the British are already using to fund new infrastructure. Such partnership projects now account for between 10% and 13% of all U.K. public infrastructure investments.
A recent report by Deloitte outlines the options and benefits. The basics are that, instead of issuing bonds or using savings, a transportation authority authorizes a private company to build and operate a road, school or water facility in exchange for revenue from tolls or usage fees. Standards of service are determined. Deals can be structured so that, after a certain time, asset ownership transfers to the government.
Risks, such as project cost and completion time, are transferred to private entities.
There are many benefits to doing it this way. New sources of capital become available. Project timetables can be moved up and social benefits accrued sooner. And the faster we fix the problems, the better: The World Economic Forum ranks America 23rd in the world for overall infrastructure quality, between Spain and Chile.
The U.K.'s National Audit Office reported in 2003 that 73% of construction projects that were not public-private partnerships were over budget and 70% were delivered late. In comparison, only 22% of PPP projects were over budget and 24% were late. As for quality of service, more than three-quarters of U.K. end users reported PPP projects were performing as expected or better than expected.
A few states here at home are dipping their toes in. The Virginia Pocahontas Parkway project avoided a 15-year construction delay by eliminating the need for public funding. (Search on Bing to learn more.) Private funding accelerated South Carolina's toll road system by 20 to 30 years.
It's worth remembering that no less than President Abraham Lincoln was a firm believer in the public-private partnership model. He used it to complete the first transcontinental railroad in the 1860s.
Solution No. 2: The wealth tax
Frequent readers know I've been hammering on about how terrible it would be to try to close the government's budget deficit by relying on higher taxes for the rich. Not only would it not solve the problem, it would actually make it worse by damaging CEO and small-business confidence, further reducing capital expenditures and investment, and limiting new hiring. (See "Why CEOs need our love, too.")
Already, the NFIB Small Business Optimism Index has fallen to a record low in November due to an "overwhelmingly negative response" among small-business owners to Obama's re-election.
But there is still a need to use the incredible wealth that has accumulated to the top to "reset" this morass and get us back on track. I'm talking about a one-time wealth tax, an idea that was recently proposed by the folks at the Boston Consulting Group (.pdf file).
To make it work and reduce the economy's debt-to-GDP ratio to a sustainable 180% level, BCG calculates that we would need to raise nearly $11 trillion. That translates into a 26% wealth tax. The money would be used to reduce both public and private indebtedness -- think Treasury bond repurchases, paying off mortgages and paying off student loans.
(I think we could make do with less, say a 10% wealth tax, by not focusing as intently on reducing corporate debt -- big business is just fine -- and keeping some government debt on the books, since Treasury yields are still low.)
Money would also be raised by levying higher capital-gains taxes on real estate and taxing corporate profits that aren't reinvested.
VIDEO ON MSN MONEY
Point 1 - You can't borrow your way out of debt. How stupid are you?
Point 2 - Stealing from the rich to give to the poor sounds like 'Robin Hood' but is really just Communism. Better dead than red.
A wealth tax?
There is a reason the seven deadly sins are called deadly - they lead to the death of the soul. In secular terms, it means that they degrade the humanity of the sinner and make them substandard creatures leading miserable lives. Those whose envy causes them to reject nearly every value that made America great because of their envy should not be ignored. They should be ridiculed and pilloried.
Let us start with Mirhaydari. Yeah, he has to write a column every day or so, and yeah, his words far outnumber his thoughts, but this is ridiculous. Is there no limit to the depths that MSNBC can sink?
Liberals, how is that massive tax increas on the rich working out for France? With revenues down 30%+ on the rich, did that tax work out? No, the rich voted with the FEET. They are leaving in droves and have the ability to adjust their income. Worse, the French unemployment rate went up as the rich layed off people to compensate.
If we are dumb enough to raise taxes, read Slam on the Economic brakes, why do we think things would turn out different?
I have to conclude, since democrats are trying to SLOW tthe economy with tax increases, that they are complete morons or are they just clueless?
Apparently the author hasn't heard that the rich are already fleeing this country by the thousands already even though it has been reported on MSDNC. When even rich liberals are leaving the sinking ship the last thing you need to do is tell them you are going to bleed them dry if they don't.
Also, if I were rich I wouldn't trust for one minute that the government wouldn't come back for more next year, and the year after that, etc. That is the track record of government.
A one time wealth tax might seem facially appealing until one realizes that there is no such thing as a one time tax. Period. Look at all the "temporary" tax increases that became permanent. It is naive in the extreme to believe that the the Federal Government, given a new source of revenue, won't simply spent more, then come back for more. The limit for "wealth tax" would become progressively lower, until the middle class is is deemed "wealthy" enough to pay the "wealth tax." Remember how Clinton ducked and dodged when the media tried to pin him down on what consitutued "high income." If I remember correctly, it turned out to be 35K.
A better source of additional revenue would be a VAT. At least then, when the politicians start digging deeper into everyone's pocket, they will have to deal with the howls and screams from everyone. And a VAT will hit the upper class harder ... they are the ones that spend the money.
If you really want to see tax reform, get rid of all withholdings and send everyone a bill every month for what they owe - for FICA, income tax, medicare tax, etc.... When people have to write out a check every month, they'll start caring more about how much they are taxed and what their taxes are spent on.
A single sentence lifted from this article says it all… “Government debt as a percentage of GDP has increased from around 30% in 1980 to near 100% now.”
Let’s see if I understand this percentage of GDP thing? – Are we to understand that back in 1980, in order to pay all operating expenses, Uncle Sam needed 30% of all the money earned by American Workers each year? - Wow, that’s bad enough; but today, they need 100% of every dollar earned by American Workers each year? - Am I reading this correctly? – If the annual cost to run our government equals our Gross Domestic Product, then anyone with a modicum of intelligence can see the only 3 solutions available to us…. They are as follows:
– A. Tax everyone at the rate of 100% – Everyone. Permit not a single person to keep a single dime of their own money, because Uncle Sam needs to confiscate 100% of the entire GDP as fuel for its massive engines.
- B. Make Government stop spending so much –Constitutional mandate stipulating that Annual Operational expenses of the US Government cannot exceed X% of GDP. (I suggest 20-25% - done!)
– C. Let there be a protracted Government shut down – a shut down managed like a well structured bankruptcy, designed to get our nation talking about the difference between necessary and unnecessary government services.
Enough partisan bickering about Dems vs Repubs! If the press were doing their job, they would frame the discussion around these 3 solutions only; because there is no other. Political sanity will not return to the United States until journalists push the National debate to hard questions about how much Government do we really need? – How much Control and Care do we really want? - What % of our lives do we want them involved? Do we want 30%, 60%, 100% ? These are the questions that need to be answered. It is a waste of time to quibble about this matter from any other angle. America is at the point where we must either give ourselves completely to the structure of Socialism – and begin PAYING our 100% socialist dues – OR, we need to exorcise ourselves from the Socialist demon altogether.
The only other sensible option would be State secessions.
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