Taxing Taxes!

Filled out my 1040 (Federal) and 540 (California) Tax forms and dropped them into the mailbox over the weekend. Fortunately or maybe unfortunately, my financial situation isn't that complicated so it didn't take too long to figure out. As I looked over the form and if I had to utilize some of the worksheets and read how to utilize some of the line items, it would have been a much more complicated affair.

The tax system is currently an instrument of social policy. Certain "behaviors" are encouraged by providing deductions (if you itemize) or special rates (captial gains). Both the right-wing and left-wing utilize the tax code for their own pet ideas.

Politically, I believe the tax system should raise revenue and minimally affect social policy. If I could "re-write" the tax code, here would be some of my priorities.

1) Keep the income tax code progressive (i.e. the people who earn more pay a higher percentage) which would make me left of center. Makes sense to me that somebody who makes $100,000 a year would pay more as a percentage than somebody making $35,000 a year. So I would say that those in the bottom fifth of the income scale should be exempt from taxes. The remaining four fifths should be taxed on a sliding scale.

2) Phase out taxes on interest, dividends and capital gains which would make me right of center. As a middle-class citizen, I work and pay income taxes on my earnings. I stick that money in a CD and the interest income generated is taxed! The same is true of a stock that pays dividends or a mutual fund that I later sell yielding capital gains. So I pay taxes on the money twice sort of! But since we don't tax on the gain then the loss CANNOT be deducted either!

One problem I see is that some people will receive their salary as stock and they turn around and sell it thus, they would incur no income taxes. I wonder how many people would want to do that in lieu of salary? Certainly, big shot CEOs often are compensated with stock on top of a base salary. Would ordinary white collar workers want this kind of compensation? Each month they would be given the equivalent of $3000-$4000 in stock. They could sell it right away to get cash or sell part of it for what they need and let the rest ride to go up or down.

Hmmm, maybe we still have to tax capital gains because of the whole sale evasion of taxes stock compensation in lieu of salary would afford. How about fix that stupid worksheet in the 1040 book? Make is simple stupid! How about say 50% of gains are taxable? Instead, you go through this kooky worksheet by dividing this with dividing that and subtract this..... argh.

3) Phase out all the deductions in exchange for lower income rates. Why should a family of four earning $50,000 renting be at a tax disadvantage with a family of four earning $50,000 who own a home? Home manufacturers will cry foul! But why should that industry be favored with a huge tax break like this??? Why don't we support the airlines by making airline tickets tax deductible? Why don't we support photocopy store by making photocopy costs tax deductible? And then there is the charity deduction: they would say, people won't donate if they can't deduct! Perhaps some people would hold back but I think most people give because they believe in the cause and the deduction is really a minor aspect of the decision to give. If anything, the deduction probably only effects when the charitable giving is made

In any case, I don't think the left or the right would like this! This is probably the libertarian instinct within me.

4) Also it is time to look at a national sales tax in exchange for lower income tax rates. I have been hearing for the last decade or so that some think tanks like this idea. I think it should be explored. Certainly, food should be exempt from this kind of tax. There may be other exemptions for essentials that would disproportionately impact the poor. Suppose advocating a sales tax makes me a liberal (looking for more ways to tax people!) but if it is introduced in conjunction with lowering income taxes and simplifying the code then they will say I'm a conservative.

My bottom line is that taxes are for revenue generation so simplicity of compliance and enforcement would be the best way to do it. What do you think?

On the nightstand

With all the WMD talk, economic downturns and day-to-day busyness, curling up with a good book is a nice break. So here are some I've been working through...

Harry Potter and the Sorceror's Stone is the first book in the famed series of books by J.K. Rowling. Very entertaining and fast paced. Taps into that ackward kid in most of us!

The Future and its Enemies by Virginia Postrel is about how societies make progress. Postrel shows how reactionaries and technocrats usually on opposite ends of the political spectrum actually share in common a love for "stasis." But progress is made when there is "dynamism." Great examples from various aspects of life. Not sure I buy the whole premise and am not sure how it would apply to certain issues we face in our society and in the world. Certainly, for technological development, it makes a lot of sense. But not sure how it fits regarding social ills here in the USA, Third world poverty abroad and moral issues.

Legacy of William Carey: A Model for the Transformation of a Culture is about the effect one man had on the nation of India. Sometime we wonder if one person can make a difference. Here is a prime example of how one man with faith made a difference.

Serowe: Village of the Rain-Wind is a book of history by Bessie Head about the famed city in Botswana. It is a rare out of print book and I am able to read it because I went to the LA Central Library and was able to find it in the stacks.

What would President Barlett do?

In the latest two episodes surrounding the inauguration of the fictional president of the NBC show West Wing, President Barlett (Martin Sheen) wrestles with sending troops to the fictional nation of Equitorial Kundu to stop the slaughter of innocent civilians by a dictatorship. Bartlett remarks to speech writer Bailey (Joshua Molina), "Why is a Kundunese life worth less to me than an American life?"

To which Bailey counters, "I don't know, Sir, but it is."

Toward the end of the two-part episode, Barlett decides to send troops into Kundu.

Now, back to the real world, on KABC Eyewitness news over the weekend they showed Martin Sheen and some other cast members of West Wing participating in the anti-war rallies in Los Angeles. Sheen had a brief interview where he came out against the war.

So why is an American life worth more than an Iraqi's life?

the Real World

This item from WSJ's Claudia Rosett referenced by Hugh Hewitt is very sobering. Here is an excerpt:
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From northern Iraq, in the U.S.- and British-protected no-fly zone, a friend sent me a message last weekend. I quote from it here at length because it is a bracing reply to the U.N. charades and the "peace" parades now filling the vacuum while the world waits for President Bush to act. This message comes from someone living on the front line, facing Saddam Hussein's army in the same region where Saddam years ago confirmed his zest for weapons of mass murder by gassing to death thousands of Kurds:

"Now, this UN business is really depressing me. Why can't they do the right thing? Many nations contributed to building this monstrous regime. Why not help to undo the damage inflicted on us? The "No Blood for Oil" signs are particularly galling. Loads of Iraqi blood has already been spilled. At least half a million in the Iraq-Iran war, a couple of hundred thousand are estimated to have died in the Gulf War, a couple of hundred thousand Kurds disappeared in the 1980s, I have no idea how many Shias and Marsh Arabs and other Arabs against the regime have been murdered. Thousands of prisoners have also disappeared or been executed. The list goes on. It is enough. Please send help. Everyone here wants this to be over. It is hard to imagine anything but celebrations if this monster is overthrown at long last."

Is it about the oil?

I tackled that idea a bit a few days earlier. Here is something much more extensive I saw on Virginia Postrel's site as she referred to something on another site..... http://www.rppi.org/isitabouttheoil.html

Life: Samaritan Woman at Ralphs?

Sometimes I go shopping for groceries late at night or early in the morning to avoid the crowded lines at my neighborhood Ralphs. One evening I was in line and in front of me was a twentysomething woman juggling a toddler, her groceries and her pocketbook. After the clerk finished scanning all her items, she handed over a number of food vouchers. Each one had to be scanned and it took a bit of time for all of it to happen.

Did she shop late at night because she didn't want people to see that she was a single mom on welfare who would tie up the clerk processing her food stamps? Did she shop late because she works all day and this was the only time she had to go get food for herself and her child?

As I watched this unfolding scene, I really didn't know what to say. All I could do was pray: God, does this woman know You and receive daily strength and wisdom through prayer? Does she have a family of faith to keep her going when the burdens of her life situation gets unbearable? Please bless her and help her.

Later on, I had to ask myself what is the role of the government and the church in this woman's life and others just like her? What kind of public policy would have helped prevent her from having a child too young and out of wedlock? Yes, teach abstainance but what about birth control? The liberals say pass out condoms and birth control patches and unlimited access to abortions. The conservatives say abstainance is all you need. How do we balance the two approaches? And then what do we do when abstainance and birth control fail? How much do we encourage adoption? And how much do we support the single mother who is low income?

What about the role of the church? Are we reaching out to young people and giving them a sense of the Divine so they won't seek to fill the void with premature sexual activity? And how welcoming are we in the church to the woman at the check out counter?

Sorry, no answers to these questions.

Friedman wants China to "get it"

It was a good weekend for some clear thinking amidst all the muddleheaded thinking among the protesters. See the Blair item below. And see Friedman's "Peking Duct Tape." Here is an clipping from the article:

The new world system is also bipolar, but instead of being divided between East and West, it is divided between the World of Order and the World of Disorder. The World of Order is built on four pillars: the U.S., E.U.-Russia, India and China, along with all the smaller powers around them. The World of Disorder comprises failed states (such as Liberia), rogue states (Iraq and North Korea), messy states — states that are too big to fail but too messy to work (Pakistan, Colombia, Indonesia, many Arab and African states) — and finally the terrorist and mafia networks that feed off the World of Disorder.
.......
So, you still think you don't have a dog in this fight? You still think you can be free riders on an Iraq war? You still think you can leave us to carry the burden of North Korea? Well, guess again. You need to get serious. It is quite legitimate for China to oppose war in Iraq or North Korea. But why isn't China's foreign minister going to Baghdad and Pyongyang, slamming his fist on tables and demanding that their leaders start complying with the U.N. to avoid war? I understand you don't want us to be impulsive, but why are you so passive?

One more 9/11, one bad Iraq war that ties America down alone in the Middle East and saps its strength, well, that may go over well with the cold warriors in the People's Liberation Army, but in the real world — in the world where your real threat is not American troops crossing your borders but American dollars fleeing from them — you will be out of business.

Now which part of that sentence don't you understand?   

Blair Get's It

Saw the following item on the weekend Daily Dish in andrewsullivan.com:
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AS:
WINSTON BLAIR: I would vote for him next time, regardless. Because of speeches as magnificent and as brave as this one:

Blair:
Yes, there are consequences of war. If we remove Saddam by force, people will die and some will be innocent. And we must live with the consequences of our actions, even the unintended ones.
But there are also consequences of "stop the war".
If I took that advice, and did not insist on disarmament, yes, there would be no war. But there would still be Saddam. Many of the people marching will say they hate Saddam. But the consequences of taking their advice is that he stays in charge of Iraq, ruling the Iraqi people. A country that in 1978, the year before he seized power, was richer than Malaysia or Portugal. A country where today, 135 out of every 1000 Iraqi children die before the age of five - 70% of these deaths are from diarrhoea and respiratory infections that are easily preventable. Where almost a third of children born in the centre and south of Iraq have chronic malnutrition.
Where 60% of the people depend on Food Aid.
Where half the population of rural areas have no safe water.
Where every year and now, as we speak, tens of thousands of political prisoners languish in appalling conditions in Saddam's jails and are routinely executed.
Where in the past 15 years over 150,000 Shia Moslems in Southern Iraq and Moslem Kurds in Northern Iraq have been butchered; with up to four million Iraqis in exile round the world, including 350,000 now in Britain.
This isn't a regime with Weapons of Mass Destruction that is otherwise benign. This is a regime that contravenes every single principle or value anyone of our politics believes in.
There will be no march for the victims of Saddam, no protests about the thousands of children that die needlessly every year under his rule, no righteous anger over the torture chambers which if he is left in power, will be left in being.
I rejoice that we live in a country where peaceful protest is a natural part of our democratic process.
But I ask the marchers to understand this.
I do not seek unpopularity as a badge of honour. But sometimes it is the price of leadership. And the cost of conviction.
But as you watch your TV pictures of the march, ponder this:
If there are 500,000 on that march, that is still less than the number of people whose deaths Saddam has been responsible for.
If there are one million, that is still less than the number of people who died in the wars he started.
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AS:
Something about Britain seems to bring my homeland the leaders they need when crisis beckons and nerves fail. Churchill - too late but just in time. Thatcher - way before her time. Blair - the Gladstone of the new century. As Glenn would say, Read The Whole Thing.
- 1:57:31 AM

Not as optimistic about the role of the UN as is Tom Friedman

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Friedman writes:

The tension that is now rising within the Western alliance, NATO and the U.N. over how to deal with Iraq is deeply disturbing. It raises fears that the postwar security system, which stabilized the world for 50 years, could come unglued if America intervenes alone in Iraq. At the birth of this security system, Secretary of State Dean Acheson wrote a memoir titled "Present at the Creation." Can we deal with Iraq and still ensure that Secretary of State Colin Powell's memoir is not titled "Present at the Destruction"?

Yes, we can — if we, the Russians, the Chinese and the French all take a deep breath, understand our common interests and pursue them with a little more common sense and a little less bluster.
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NATO was founded as an alliance to oppose the Soviet Union. The USSR is now gone and NATO is really an organization without a purpose. The war in Bosnia against the Serbians was the only time NATO went into combat and it was loaded with infighting about how to proceed. And this past week, when asked to act on Turkey's request for help, it was unable to act. Some structure should supercede NATO. As for the UN, they will have to fish or cut bait soon in regards to Iraq or face irrelavance.

Not as pessimistic about the role of the UN as is Andrew Sullivan.

=======

Sullivan write:

LEAVING THEM BEHIND: The lesson from this is a simple one: we have to abandon the U.N. as an instrument in world affairs. I'm not saying complete U.S. withdrawal, although I'm beginning to think that now makes a lot of sense. I mean temporary U.S. disengagement. The body is now a joke of immense proportions. If it cannot enforce a resolution it passed only a couple of months ago, it cannot enforce anything. If it cannot read the plain meaning of its own words, it is an absurdist theater piece, not a genuine international body. It isn't in danger of becoming the League of Nations. It now is the League of Nations. The difference is that this time, after 9/11, U.S. isolationism is not an option. So U.S. non-U.N. multilateralism is the only option for any future threats to world order. God knows we cannot rely on Europe to keep the peace. The Old Europeans will regret this deeply in the years to come. They have just told us in no uncertain terms to ignore them. We should. We will. And in the post-Saddam settlement, we must actively shut out the French and Germans from any slice of the economic action and tear up whatever contracts they had with Saddam. They have told us how highly they value the lives of American citizens. We can now tell them how highly we value their export markets. - 6:44:31 PM
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I'm figuring Powell knew going into today's UN Security Council session that most of the representatives would make statements supportive of more inspections. However, I think he might have been taken aback some by how strongly some of the statements were worded. It sounded on the radio that Powell was thinking on his feet countering their arguements vigorously. Right now, many of the countries can continue to do their best impersonation of an ostrich with its head in the sand. When the USA and UK push for a deadline, we shall see how the Security Council reacts. If they still don't move then Sullivan is right that we have to abandon the UN.

World: Iraq situation

The war is for political gain

Some say Bush is using the war talk to divert from the economic troubles here at home.

War is no guarantee of re-election. Ask LBJ. He knew he could not get re-elected in 1968 so he dropped out of the race. Ask Bush 41, he won the war and still lost the presidency in 1992.

This war will require ground forces to play a larger role than in 1991 because we will have to occupy and run Iraq. After a brief air campaign, ground troops will have to go in and if they encounter resistance, there will be many body bags coming home. The 24-hour cable news will be showing the flag draped coffins, the grieving widows and widowers and the orphaned children.

What if the war goes swiftly and the Iraqi army drops their guns, abandon their tanks and raise their arms and wave white flags but the US Army doesn’t find caches of chemical weapons, nerve gas canisters, stashes of anthrax or other deadly biological agents?

The American people will vote Bush out for waging a war for no reason.

If Bush wants to get re-elected in 2004, he should drop the war with Iraq and throw all his energy and political clout on turning the economy around. The polls tell him that Americans are concerned about the economy first and foremost. The only way the war will benefit Bush is if it is swift (probable), the WMDs get found (probable), post-war Iraq is rebuilt into a peaceful nation (doubtful before Nov. 2004) and the American people haven’t forgotten by election day (ask Bush41). Feeling lucky GW?

The war is for oil

Iraq has the second largest oil reserves in the world. Some say the USA just wants to control the oil supplies of the world.

This is the most repeated refrain of the anti-war crowd.

(1) The USA is far less dependent on Middle Eastern oil compared to Japan or Europe. Instead of spending $50-$100 billion (and that is the conservative estimate) on the war, why not throw that money to the auto-makers to help them build more fuel efficient cars so we don’t have to depend on Middle Eastern oil?

(2) Why not just buy Saddam Hussein’s oil? It will cost less to BUY it from them then to TAKE it from them. And if we do invade, Hussein will probably blow up the oil fields and it will cost us millions just to get the oil pumping again. Do the math! Factor in the costs of war, the cost of rebuilding a functional infrastructure in Iraq and after a few years, you finally you get 1 million barrels of oil flowing at $20 a barrel. Guess how much revenue you get? 20 million dollars/day times 365 days/year = $7.3 billion. And of out that money you got to pay the workers and help the Iraqis get their country back. It could be decades before the USA would "turn a profit" on the damm oil.

(3) If the USA just wants oil, why not invade the nation with the largest oil reserves in the world, Saudi Arabia? Or why go half way around the world, why not turn Venezuela into the 51st State of the Union?

(4) If the war is just about oil then why bother with the hassle of dealing with the UN? The world hates us anyway, why waste time working with the UN? Just go in there and start the bombing tomorrow?

On the merits

If you haven’t gotten where I’m going, I’ll say it outright: whether Bush is right or wrong, he is pursuing the war because he believes it is necessary. So let us debate the issue of Iraq on the merits and not on the above two non-issues.

In response to 9/11, Bush could have lobbed a few cruise missiles and bombed a few training camps and called it a day. Instead, he took the bolder and riskier step of taking down the Taliban.

He could have left Iraq alone and concentrated on other matters that could score him more political points. Instead, he believes Hussein poses a danger and has staked his presidency and his standing for history by pursuing an UNPOPULAR war.

Where do we go from here?

From listening to the UNMOVIC reports, it is probably unlikely that Hussein has nuclear bombs and probably won’t have them anytime soon. It is a pretty complicated technology to master. However, if we allow them to keep working on it, they will eventually get a nuclear capability.

They have a history of using chemicals in battle and competency to make biologicals. The US should provide as much intelligence as possible to UNMOVIC to "find" them and thus ratchet further the pressure on Hussein. Next, the US should set a deadline. Right now, French, Russia, China and others can say, let’s give the inspectors more time and be very hostile to the US in their public statements. But once a proposal is out on the floor with a date certain, they will have to think harder if they want to veto. And in back channel communications, the USA and UK should make it abundantly clear that if Iraq doesn’t come clean, then military action will be taken with (preferable) or without UN support.

What are they smoking over there?

What are the French and German's thinking? They want more inspectors
to play cat and mouse with Iraq. So 300 guys instead of 100 running around Iraq hoping to find stuff? And so let's say we do that. How long will they keep looking? Will they eventually be kicked out like in 1998?

Meanwhile, Turkey who have decided not to be an ostrich with its head in the sand has asked NATO for help should a war break out. Once again, the French leads the way with a veto.

Saddam Hussein must be sitting there laughing his head off thinking.... if I can just stall these clowns a little longer, they will all go away and all my precious WMDs will be safe again. The behavior of the French is totally ridiculous and NYT's Friedman blasts the French for their obstructionist behavior.

Columbia Investigation Continues

A segment of the left wing was found today. Data from the shuttle before the catastrophic break up indicated rising heat in the left wing. However, the cause remains unknown. Initially, considerable attention was focused on the launch where a piece of insulating foam coming off the external tank struck the left wing. NASA engineers examined that extensively and their analysis suggests that the foam piece was probably not large enough and not moving at high enough a velocity to do the kind of damage needed to endanger the shuttle. The theory gaining some press attention is perhaps some "space junk" hit the shuttle while it was in orbit.

As for the future of manned space flight, I hope NASA is able to win support for a shuttle replacement. The shuttle is a 1970s design. We have three left and there is no capacity to build more. NASA needs to develop a new ship for the purpose of transporting people to space with the latest technology. Private industry should be challenged to develop rockets to launch large payloads. The shuttle was designed to do both but it has become apparent that it was asking much too much of the technology of the era. It makes more sense to separate the functions.

Massive tax cuts don't make sense right now

Conceptually, tax cuts are always appealing to people. But the reality is that we are in a state of war and sacrifices need to be made. In WW2, the American people were asked to sacrifice. Rationing was the order of the day. People used their extra money to buy war bonds. And of course, millions went to war and gave the fullest measure of devotion possible.
We have been at war since September 11, 2001 and what kind of sacrifices have we made? Some inconviences at the airport and at public venues due to increased security? But is that really sacrifice? President Bush needs to use the bully pulpit and level with the American people and say, look, we are at war and it is costing us lives and treasure and will continue to cost more. But if we defeat terrorism in this generation, the benefit will be worth the price for our people and for the free peoples of the world. Freedom is not free. Nothing worth doing is without cost. Our soldiers are offering service with their mortal lives. We here at home must offer our willingness to forgo some comforts.

Columbia Lost During Landing Approach, Crew of Seven Feared Dead

This morning the space shuttle Columbia was approaching Florida for landing when it apparently broke apart. The last data was received while the Columbia was about 200,000 feet up. Debris have been reported in various counties in East Texas.

The crew was a cross section of America and the world. Col. Rick D. Husband served as commander. The pilot was Cmdr. William C. McCool. Payload specialists included: Lt. Col. Michael P. Anderson; Dr. Kalpana Chawla, an Indian-American aerospace engineer; and two physicians, Capt. David M. Brown and Cmdr. Laurel Clark. The final member of the crew was the first Israeli astronaut, Col. Ilan Ramon.

Speculation on what may have occurred is already underway. Undoubtedly, an investigation will be called for. After the Challenger explosion, investigations and redesign work led to a 2 1/2 year hiatus of flights. One often mentioned idea in early news coverage involved the launch phase where debris from the external tank struck the orbiter. Since this kind of debris damage is usually very minor and has occurred in other flights, it was deemed not likely to be serious. However, if the damage was greater than expected then the shuttle structural integrity could be compromised and thus vulnerable to the extreme heat and pressures of re-entry.

Like most of my generation, I've grown up following the space program since I was a child and though it seems routine, we know it isn't. I admire the people who willingly choose to do their missions even with the risks that it involves. Space travel and research will always be risky. People will ask if the benefits are worth the risks. The scientific spin-offs and technologies from the space program become the fabric of our daily lives. But I suppose one should not under-estimate the intangible benefit of helping us to dream, of inspiring courage and of giving us a vision of our world as single planet hurtling through the vast emptiness of space. Let's offer a prayer for comfort to their family and friends as they experience their grief and if possible, a prayer of thanksgiving for the courage and example of the lost crew.