Taxes

Of course, no one ever wants to pay them. We all spend our time trying to figure out ways around them whether it’s via Amazon.com or zipping across the state line to buy our groceries.

For most of us, we can save a bit, and we perceive no noticeable problems.

Some taxes we can’t get out of, though. Not without perhaps paying for the services of a good accountant, and that doesn’t make sense unless the amount we can save is more than the cost of said accountant.

At the Clarion Ledger website, Aaron Griffin complains about paying taxes, too. He’s classified as rich and worked really hard to amass his wealth and has problems with people who he perceives as trying to take it away from him.

One thing Griffith does that I see a lot in these discussions is that he lumps paying personal taxes with business taxes. This, I think, is why he feels overtaxed. He’s faced yearly with two sets of books, two sets of paperwork and two sets of accountants. It’s making him crazy!

He does question whether poor people are job creators, but this is a mostly hollow argument, I think. While it’s always been an actual person that made the hiring decision, it has always been a corporation that hired me. That’s right, the corporations are the ones who create jobs, not the rich people that run them (unless you are illegal, anyway).

Our corporate citizens really do a lot for the country. While I disagree with Mitt Romney and the Supreme Court old and new, I do believe if a person contributes, they should be rewarded.

With that in mind, I propose a simple solution: Any person or entity recognized as a person that creates in excess of 100 jobs receive a percentage reduction in their tax bill. This number is deliberately small so as to be within range of some small businesses. The scheme could be scaled up to work for larger companies, too.

Conversely, every carrot should also have a stick. Any corporation sitting on a war chest of more than $1 billion that does not increase their U.S.-based workforce shall see a percentage point increase in their tax rate. This can be scaled upwards, as well further punishing companies for not hiring when it’s exactly what our economy needs right now.

Rules for Education

Everyone needs to understand a few things:

First, education cannot be treated like a business. Kids all learn differently and teachers need the flexibility to work extra with kids that don’t understand. You cannot force a time-based curriculum onto them, nor should parents get bent when teachers tell them their kids need help.

Second, a good teacher is a gift from god. They should be rewarded and treasured. They should not be pawns on the chessboards of politics. They deserve to have their performance rewarded above that of their nonperforming peers. They should not be punished by having more work assigned to them. They should simply be left to educate.

Third, bad teachers need to go. A bad teacher is quite likely worse than no teacher because they can reinforce a student’s idea that he is just stupid, teach things incorrectly and generally turn kids away from learning. You do not protect them or force good teachers to share their rewards with them.

Fourth, spending more money when you don’t understand the problem is a waste. While every kid today should learn to use a computer, MS Office and a few other key programs, not every classroom needs a computer. Familiarity breeds contempt. You shouldn’t invest in an electronic whiteboard when a regular blackboard will do.

Fifth, well, that’s enough manifest writing for one morning…

Microfinance: Leading the Way into a Spiral of Poverty

In my review of Milford Bateman’s book, I noted his almost fanatical opposition to microfinance. With the recent high level of publicity surrounding Mohammad Yunus and the Grameen Bank, it’s a good time to reflect on this touchy issue.

My book review was written in October last year. In that time, I have seen headline after headline dealing with microfinance institutions (MFIs). I can’t think of one in hindsight that was positive. The biggest problem is this: MFIs are too often pushed to generate a profit.

Once the profit motive kicks in, how the organization operates invariably goes downhill. First, “market-based” interest rates are implemented. While institutions can get rates in the single digits, since these poor people are more of a risk, they often pay what most consider to be predatory interest rates. These rates are the first domino to fall in the Spiral of Poverty.

As Kiva notes on their website:

To break even on the $500 loan, the MFI would need to collect interest of $50 + 5 + $25 = $80, which represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest of $10 + 1 + $25 = $36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that when loan sizes get very small, transaction costs loom larger because these costs can’t be cut below certain minimums.”

What happens is that to meet the high interest rates, MFIs encourage the poor to take out loans to “top off.” These “top off” funds are used to pay off the interest in the loan. Of course, that leaves the poor person with another loan to pay off. It’s very good for the MFI, but not so good for the poor person in question.

Of course, if the poor person takes out a bigger loan, they can get a lower interest rate. Hurray! We can do to them what the housing bubble did in the USA. Remember all those people shouting that it was the poor people’s fault for taking out a loan they knew they couldn’t pay back? Be ready for that x two billion.

What about those non-profit MFIs? Well, Kiva is a big name. Let’s look at what they do: They take your money, loan it to a local MFI who then loans it to someone else. They charge that person interest. If that person pays back the loan, they give you your money back without interest. Riiiight.

Let’s back up for a second and reframe this. I loan you $100. You loan it to a guy named Fred and charge interest of say 30%. Fred repays you. You pocket $30 and repay my $100.

It’s basically naked short selling!

I’m not sure if people donating to Kiva realize they are actually enriching what is most likely a for-profit bank.

Ok, even if it works like something cooked up in the hellish bowels of Goldman Sachs, it still helps people, right?

Well, maybe. In Bangladesh, there was a program that helped women buy cellphones that they then charged people to use locally. It was great until every woman in the village was partaking and the market for the service collapsed. The thing is, the banks don’t care. They just want money.

MFIs are just as greedy as the rest of the banks. In a capitalist society, there isn’t really anything wrong with that. Until everyone realizes they are making their money off the poor, that is. At that point, morals and ethics are supposed to kick in. Too bad most of the time that never happens.

Poor Moms

A new study says women who lose their babies during pregnancy can suffer psychologically for years afterward.

It’s a perfect time for Georgia’s Bobby Franklin to introduce a bill in the state legislature to criminalize miscarriages! Good job, sir. You are a true humanitarian.

I suggest criminalizing having colds. I mean, if you took proper care of yourself, you’d never get sick, right?