What, you Can't Afford a Tiny, Wafer Thin 4% Tax Increase?

Welcome to the Front Porch. Hot enuf for ya'?

There's a Monty Python movie, "The Meaning of Life" where in one of the the vignettes a roundly obese "Mr. Creosote" sits in an expensive restaurant, opens the menu and says to the waiter, "I'll have the lot." In other words, he orders that he be served everything on the menu. What's more, when his order(s) arrive, he eats ALL of it. After Mr. Creosote has finished, the waiter comes over with a delicate tray, where on it sits a mint. The waiter offers it. At first Mr. Creosote refuses. alluding to being "full." The waiter persists. "Just one tiny, wafer-thin mint, sir?" Mr. Creosote acquiesces. He downs the mint. He proceeds to explode, in a comical, not macabre way, all over the restaurant. Somehow, the following discussion reminds of that scene.

"Just 4%?" JUST?

Politicians like to minimalize the impact of the tax de jeur. We've heard it: "it's just 4%"---which is the presumed increase if the Bush tax cut expires. A sales tax that goes from 5% to 6% is "just 1%." increase.

There's a group of us very Non-PC folks who understand just how misleading are these 'minimilizations'. You won't find these people in government, generally, and the Executive Branch in particular. They are called businesspeople. Instead government and it's politicians and bureaucrats are largely a part of a massive and growing group who have never run a business, never depended on functioning in one for their living, and who were 'educated' by academics of the same ilk. As far as making a real world business successful (profitable) is concerned, they blind have led the blind. With no real experience, these guys wouldn't stand a snowball's chance in Hades of competing with experienced competition in a real business. So our government, and consequently all of us, is in deep trouble. The problem is, the "blind" are steering the ship. Giving the orders. How's that working for us?

When I advanced from sales management to general management in the automotive retail field, I bumped right into a new, to me, concept. People operating businesses often use net profit as a per cent of sales as a yardstick for measuring the health of their operation. Twenty years ago, we were considered doing a good job if we kept, after bills were paid and payrolls met, 2% of our aggregate sales volume as net profit. 2%. 2 cents for every dollar we took in.

With a few exceptions, most mature businesses run pretty close to the same guidelines. What keeps us that close to the edge? Our competition. If we want sales at all, we have to price competitively. In the free market, established businesses cannot simply charge what they'd like, reap huge profits, because the customers will go elsewhere for the same product, or a workable substitute. This is why good businesspeople know they can't spend their way to profitability. Conversely, they can't save their way to profitability. It's a constant balance of both. When strong, aggressive sales of products and service are combined with rigorous expense-watching, the business fluorishes. Minus either, most businesses die a natural death, giving way to more efficient suppliers of goods and services.

Let's say, for the moment, that we buy the myth that we can't "fire" the government. America used to be the solution to that problem, not the cause. People ran to us. They wanted what we had: liberty, property, the opportunity to steer our own ships and select our own destinations. The difference is, now there's nowhere to go (correct me if I'm wrong---we're all ears!)

So what happens when small businesses, and your family, see a "tiny, wafer thin" tax increase of 4%? That would put small business OUT OF BUSINESS, and millions out of jobs, UNLESS...UNLESS they raise the price of their goods and services by a commensurate amount. And that means ALL OF US just saw the cost of everything we buy go up 4%.

So we pay their 4%, or they go under. But, what about our 4%? Well, in terms of buying power, that would reduce our ability to purchase by an overall 8%. But wait, there's more!! The original 4% tax is assessed against our gross income, not the 60% or so we are generally allowed to keep. So that tiny wafer-thin direct 4% tax is more like 6% of what we are used to keeping. Now add back the 4% we are paying to fund the continuation of our goods and services and we've just seen our gross relative spendable income sliced by 10%!! And wait---there's even more!! Ask yourself what percentage of your real income have you been saving or investing each month after your expenses? If you've managed to scrape 10% of your take home income together every month, the good news is: you won't have to change your mode of living. With the exception of course, that you won't have that nest egg you were accumulating.

If you're like most of us, you're not saving anywhere NEAR 10% of your income for a rainy day. Chances are much better that you're paying 20% interest on your credit cards. Where does this "tiny little 4% tax increase" put you now?

Is it time to stop ordering everything off the government menu, before that "wafer thin little mint" blows us all over the restaurant?

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