Developing a fairer tax environment is much less an economics problem than it is a political dilemma and, as many of you observed, it is unlikely that anything “tax” will be improved upon until there is some serious facial (and cultural) change in Washington.

Politicians focus on one issue at a time, and pretend to have problems dealing with inter-related programs. Tenured politicians have a vested interest in resisting any change that involves their spheres of influence. Both parties are embarrassingly mired in twentieth century class warfare that stifles all forms of productive debate.

Tax cuts don’t just benefit the rich. In fact, they provide the opportunity for everyone to attain greater wealth. Demand directs resources far better than punitive taxation. Money in consumer hands will fuel social and environmentally friendly change.

“You cannot eliminate revenue from one program without replacing it from another, equally complicated, one”, career politicians will say philosophically.

They have little to gain from simplifying the tax collection system — yet it is obvious that a whole new approach would solve most of the economic woes plaguing us today, domestic and international.
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So what would become of all the CPAs, tax attorneys, and offshore laundries— new jobs as consultants, auditors, and regulators perhaps?

Survey responses outlined constructive and manageable solutions to our multiple tax problems. If they could only be dealt with as a whole “New Deal” (catchy phrase), a fairer tax structure would be in reach.

Several basic concepts need to be accepted: (a) don’t tax the job creators, (b) tax consumption instead of income, and (c) regulate shareholder abuse in the form of obscene executive pay. Then, enforce compliance with the intent of a simplified tax code.

A smarter tax system would allow more people to become wealthy honestly; smarter regulation of thieves in high places would improve the image of big business (and big government) significantly.

There are 44,000 pages in the Internal Revenue Code (IRC) alone, 5.5 million words, incomprehensible at best. Obviously, there is a lot more to be said about each of the ideas that follow. Here are the top survey ideas; the first two were discussed in previous results articles as consumer spending enhancers and job creators, respectively.

One: Social Security. Replace it with a plain vanilla, individually, and flexibly funded fixed pension program. Every person has his or her own personal pension plan for both mandatory and limited voluntary contributions — limited to a maximum percent of income.

Two: Corporate Taxes. Eliminate income and Social Security taxes and all other nuisance fees and charges that increase corporate expenses and lead to higher prices— a “Free Trade Zone” only policy. Monitor employers to assure that their savings are translated into new job opportunities and/or lower prices.

Cap total compensation (all “perks” included) at mid seven figures. Allow one year-end bonus split among all employees and shareholders. Invade every boardroom with well-paid and expert compensation auditors.

Three: The Fair Tax. Adopt the plan that has been negligently ignored by congress for decades. It replaces the entire IRC with a Federal Sales Tax, and without Social Security, a number between 10% and 12% would probably work.

It’s easy to understand, eliminates the lobbyist gifts and bonuses that current IRC loopholes produce, taxes the underground economy, and gives back (with necessity only debit cards) to lowest tier wage earners. All businesses would be audited to assure collection compliance, and a cap would be set on the total take for all levels of government.

There would be no sales tax on food, healthcare, and educational expenses.

Four: The Flat Tax. Institute a 10% Federal income tax, with no exclusions, exceptions, deductions, credits etc. All income, regardless of source, is taxed at the same level, and the total from all levels of government capped at 15%.

A combined Flat Tax and Fair Tax environment would increase jobs and spending, while reducing tax fraud and credit abuse. Any number of approaches could be used to assist the lowest wage earners, and Social Security benefit payments would be tax-free forever.

Compensation creativity such as stock options, country club dues, and first class airfare, need to be dealt with to protect shareholders and employees from their leaders— new jobs for those displaced professionals.

Total annual employment compensation above $5,000,000 would be subject to a flat tax of 55%. This would apply only to employees of publicly traded companies and elected public officials. Entrepreneurs, celebrities, lottery winners, etc, must not be penalized for their creativity and good fortune.

It is likely that both new taxes will produce returnable surpluses quickly.

Five: Death & Gift Taxes. Give them death; they deserve it.

Six: Property Taxes. Reduce them each year for all persons receiving Social Security benefits. Retirees would pay no property taxes after ten years.

Seven: Tolls, Licenses, & Fees. Eliminate all collections and charges for government provided public transportation (roads, bridges, tunnels) and recreational facilities (parks, museums).

Eight: Value Added Tax (VAT). Several of the suggestions above should reduce the prices of American exports. But if our trading partners assess a VAT on those exports, lets negotiate elimination or return the favor.

Healthcare reform is next, with tons of ideas not being considered by Congress.

Steve Selengut
sanserve (at) aol.com

The mantra of the times is cost cutting. The axe of cost cutting invariably falls on the employees. It is either through wage reduction, reduced bonuses, reduction of other benefits, reduced work hours or in a worst case scenario in the form job losses.

In most countries unemployment rates are hitting close to double digits, the worst case scenario might soon become a reality for anybody including you. In such a situation, it is imperative that you should have a plan B ready.

Instead of waiting for a surprise and acting re actively, it is important for you do a realistic assessment of your current situation.

Each and every one of you must have an understanding of your employer’s financial situation and strategy, your own function/department current state and whether there is any danger of retrenchment at your level. Once you access the macro and micro level picture, you need to play your next steps accordingly.

You may not have a choice but to look out for alternate employment if you feel that you may be in the firing line. It may not be easy in the current situation. However the current economic situation gives you an excellent opportunity to do what you always wanted to do.

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A job loss or a potential job loss might be an excellent excuse for you to change your field and move into the field of your liking. An engineer may want to get into arts and a banker may want to get into farming. This might prove to be a once in a life time opportunity and catalyst for such a shift.

If you don’t foresee an immediate threat to your job, however at the same time don’t feel confident about your situation in the medium term, you need to adopt a different strategy. As long as the company you work with doesn’t look like winding up/closing down, the first option to be explored should be within your employer.

Being fair to yourself, you need to treat your employer as your customer and demonstrate value for the salary you are earning. If you feel the same is not the case in your current role, you should position yourself for an alternate role that is a better fit for your potential and will help bring more visible benefits to your employer.

Such an alternate role may be in the same or different function. Such a positioning and the subsequent change to your role may not happen overnight. However this paradigm shift in your outlook towards your employer will definitely help you in the medium to long run.

One important alternate option you need to consider is honing your professional skills. It is an excellent time to consider education in your field of liking, be it a management degree or a certification in any technical subject.

It should be something which will give you satisfaction and the edge required to move ahead. The thing you should keep in mind is to be careful on how much money you spend as fees. The last thing you want is getting stuck in a ROI loop.

Last and not the least, your best option for plan B depends on how much you have saved in your coffers for the bad times. If you have enough bank balance, what about an extended vacation for globe trotting?

It was like listening to members of two different species talk. If a fly (which lives for perhaps a few hours) and a tortoise (who can survive for a hundred years or more) had a conversation, it would probably sound like Buffett and that interviewer.

At one point, the interviewer asked Buffett to comment on how his companies would cope with the downturn. Buffett replied that things were certainly down at the moment but he expected them to be OK in three to five years. I could see that the mere mention of a time scale like three to five years had derailed the interviewer’s thought process. Coming as she did from a world where three to five hours or at most three to five days is the standard unit of time, the idea of an investor talking in years seemed to have thrown a spanner in her works.

Next, she pulled out the day’s newspaper and drew the old man’s attention to a news item that US unemployment was up to 700,000. She wanted to know what he thought of the news. Buffett said that he was sure that five years from now, the employment situation would be much better than it was today. Again, this epic timescale put an end to that line of questioning.
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However, this Methuselah of investing had reserved his best shot for the last. When the interviewer asked him about whether the economy was getting any better, Buffett upped the ante sharply. He said that the Dow Jones index had started the twentieth century at 66 points and ended it at 11,000 points. During these hundred years, there had been two world wars, a great depression, an oil shock and countless recessions. But in the end they had all worked out so he wasn’t really worried about the future.

There is simply no meeting point between an investor who is comfortable with such long time periods and the modern investing ‘process’. As you can see from the stock markets, there is no one around who actually takes the long view. Curiously, the normal investment-industry types frequently express scepticism about what Buffett stands for. Some time ago, I read a newspaper article which quoted some investment managers on Buffett. Many of them suggested that Buffett’s approach to investing was unrealistic—real investors need to be more ‘flexible’. They seemed to suggest that Buffett is a hermit living in a cave whose teachings are too impractical for the real world. Except that Buffett lives in the same real world and his real world investors have made returns of some 5,000 times.

Far from being impractical, Buffett’s success suggests—or even proves—that the only practical way of making money is to do a handful of straightforward things and keep doing them for decades.

Learn How to Plan Ahead

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It’s no secret that poor planning contributed to why so many people are currently in untenable financial situations. Don’t Panic. Figure out where you are at, where you want to be and put in place a realistic plan for getting there. The majority of businesses without plans in place before they start operations do not succeed. So if you are serious about creating a way to get ahead, or even just caught up, this step could not be more necessary. Unique circumstances will come up and cause you to stray from your plans temporarily, but structure is necessary in order to monitor your progress, and stay focused.

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Learn From Past Mistakes – Then Put it Into Practice

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Americans have an average of $10k in credit card debt. In order to identify how you came to be where you are at specifically, take a look at your spending for the last year (or even several years). Then locate what percentage of spending went to each type of expense. Chances are, the figures will be surprising and maybe upsetting at first when, for instance, you realize how much you spent going out to dinner or on entertainment. Figure out a realistic percentage that you would like to reduce your less-than-necessary expenses by, and then work this into your plan. The sense of urgency caused by the current recession can be an impetus to your learning about, and consequently fixing, poor money management practices.

Learn to Understand, Hate and Attack Debt

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Prioritize debt. Snowball. Pay off your highest interest rate first. Basic advice, right? The problem is that people have been regurgitating this theory for years, but most do not put it into practice. Paying off debt can be an arduous task, but it can also be quite rewarding. This step requires individuals to plan out their debt and then follow through with attacking it. A plan may seem difficult to stick to at first, but after several accounts are paid off, you’ll be surprised to see how quickly the remaining debt is repaid with more money being allocated to principal in subsequent months. One byproduct of this exercise should be a new understanding of debt – and you will probably learn to avoid credit cards like the plague.

Learning to Distinguish Want vs. Need

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After figuring out much money you’ve unnecessarily spent in the past, this should come naturally. I’m not suggesting that you should never go out to eat or splurge on anything ever, just that you implement a higher level of self control. For instance, the term “special occasion,” should have a greater meaning once you decide to get serious about your finances. When you condition yourself to realize that spending $100 on cocktails and dinner when you go out for your third cousin’s coworker’s birthday will mean that you are able to spend $100 less the next month on your aggressive debt repayment, you’re on the right path. In short, consider the opportunity cost of your spending.

Learn to Save – Even if You Start Small

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The oldest piece of financial advice relates to saving: put an emergency plan aside (6 – 9 months worth of expenses) should you lose your job. But, does it make sense to service a savings account with a 2-3 % yield, when remaining credit card debt rates of up to 29%? Yes, because it is not wise to forgo saving entirely in order to repay debt. Instead of spending less on debt repayment, save in the form of cutting out extra expenses. The problem for many people is that they live month to month and they don’t develop healthy saving habits until they are in their thirties or forties. Contributions to a savings plan should be recognized as the first of your necessary monthly expenses, so that money saved will never be thought of as money that can be spent. Even if your savings rate starts small, you can always increase in the future.

Learn to Monitor Your Expenses

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Scrutinize your current bills – cell phone, internet, credit cards, et cetera. I’d suggest to continually call your service providers to find out if there are better deals available, or if they can do something special for you. These days, customers have more power than ever; for instance, try suggesting that you will go elsewhere if vendors are not able to sweeten existing deals. Using leverage to get a better deal is a time-honored tenet of this more or less ‘free market’. Companies know that it is more cost-efficient to keep an existing client than it is to get new customers, and using this in your argument with customer service may be a way to get reduced pricing, or extra free services.

Learn to Stay on Course

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When I first started to cut debt aggressively about a year ago, I found myself able to dramatically reduce my monthly bills and pay down debt at a rate that I never could have imagined. The problem was once I paid about half of my debt down, I found myself at a plateau. It was only after realizing that I had replaced my old expenses with new ones did I start making ground again. My once super-frugal approach to eating out and playing golf only about twice a month became more lax, and this was putting a damper on my ability to repay debt at my preferred rate. It took an evaluation of my recent expenses to see how I had strayed from my plan and to figure out how to get back on it. This is extremely important to keep in mind: be careful not replace some unnecessary expenses with others.

Learn to Take Responsibility

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Personal finance is all about being responsible and taking initiative: no one will do these things for you, and learning to manage your finances is not something that you just wake up with one morning. It is every individual’s responsibility to monitor their bills and make sure they are not incurring any unnecessary fees with their banks or credit card companies, and also to monitor their credit score closely. And, if necessary, to repair their own credit. For those that own their own home, now is a great time to refinance and a good credit is imperative to improve your rates; for those looking to buy, knowing what your credit report says is only the first step in understanding what type of interest rate you will likely get. And, of course, the better your credit is, the better your interest rate will be.

Learn How to Get Organized

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To those who are not used to monitoring and managing their finances closely, this may sound like a lot of work. But once you get a system in place, it should only take about one hour per week to stay on top of everything. This will include: making sure that credit card due dates are not changing, that rates are not increasing, monitoring activity to your charge accounts, tracking the progress of your overall debt-to-income, and making sure you are always getting the best deals possible. These of course, are just a few of the examples.

Learn to Become Competitive and Creative

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One of the most important things to take from a recession is that nobody can just coast by anymore. For those seldom challenged in the workplace, it would make sense to improve your skill set, continue education, and network now. The medium- to long-term for many, still remains uncertain. For those that have fallen prey to our generation-high unemployment rates, it’s time to reevaluate your previous career and at least start considering other alternatives. In today’s changing and evolving marketplace, dynamic individuals are those which succeed.

Learn to Become a Deal Hunter

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While the housing market deflated, prices in most other industries have dropped in the last year as well. If you are serious about improving your personal financial wherewithal, try thinking about buying new as a way to replace old, not to satisfy want. Even better, think about buying slightly used as a way to replace the old. The ‘replacing’ aspect is key. If you need a newer vehicle, try finding a fleet rental and you will be blown away by the potential savings. Even in industries where consumers don’t traditionally haggle for prices, deals can be found with retailers looking to unload stock.

Learn to Diversify

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Where is your money going every month, and from where is it coming in? Cash? Currencies market? CDs? Commodities? Residual income? Profit-sharing? Trust fund? Is it possible for you to create a second income stream? In these uncertain times, individuals with contingencies and fall back plans usually fare the best. Think of the old saying, “don’t put all your eggs in one basket”. Always be on the lookout for producing additional income-generating opportunities. For some this might mean getting a part-time job, or taking on freelance work. My parting advice: be wary of get rich quick schemes on Late Night TV.

Contributed by BillShrink Guy

All we have to do now is sit back and watch the economy grow, am I correct?

One risk of the unprecedented government intervention is that it won’t do all that much to speed up the end of the recession. Another risk is that consumers, expecting a magic fix, could fail to prepare for tough times that still lie ahead. Obama himself said at his first press conference. “This is going to be a difficult year, If we get things right, then starting next year we can start seeing some significant improvement.”

Next year? I’m afraid not. A large number of economists agree that it will take that long, at least, before the biggest problems – mounting layoffs, the housing bust, the banking crisis, and plunging confidence – start to turn around. Whether the stimulus package is actually working, and when the economy might start to mend, here are a few things to watch.

Improvement In The Unemployment Rate. Of all the economic indicators, this is probably the single most important. But you might want to avert your eyes for awhile.

If the stimulus plan works it might come close to creating 3 to 4 million jobs which Obama has talked about.. And that – over several years, combined. But it’s almost certain that through this summer and into the fall, there will be a net job loss, not a gain. Most economists expect the unemployment rate, now 7.6 percent, to hit at least 9 percent by the end of this year. That represents up to 2 million more lost jobs.But the pink slips haven’t all gone out yet, so the layoffs haven’t shows up in the official numbers.
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The first sign of an improvement will be…corporate silence. Once that happens (or doesn’t), the unemployment rate will plateau. Then, companies might start hiring again, and a couple of months after that, the unemployment rate will start to fall. Three straight monthly declines would be a good sign that the economy is really on the rebound.. In all probability that probably won’t happen until 2010.

If you’re wondering what the point of the stimulus package is if it won’t do much to help workers in 2009, look to 2010. That’s where the plan will make a bigger difference. Moody’s Economy.com estimates that by the middle of 2010, the unemployment rate will start to drift back toward 8.5 percent. But without any stimulus plan, it would have hit 11 percent.

Stable Home Prices. The real-estate boom and bust is what triggered the economy in the first place, and the economy won’t start to recover until the housing bubble fully deflates. The good news is that housing prices have already been falling since more than two years, with a drop of 20 percent in prices nationwide, and we might be half way towards the bottom. Housing prices should stop falling nationwide by the second half of 2009. Overall, the forecasting firm predicts a 30 percent drop in home values from the peak values of 2006.

Once prices stabilize, buyers will stop worrying that they could be purchasing a costly asset that’s falling in value. As they buy, other kinds of consumer activity – like shopping for furniture and kitchen upgrades – will follow.

Rebound In Consumer Confidence. Since consumer confidence closely tracks the job market, the dismal numbers of the last few months probably won’t improve by much until late in 2009, or 2010. Homeowners have lost more than $3 trillion worth of value in their homes over the last three years, and investors have seen their stock portfolios shredded. So even people who feel secure in their jobs are dour.

A turnaround in the housing or stock markets would break the gloom and help some people feel better off. So would easier lending by banks, which would help solvent consumers buy a few more cars, appliances, and other goods. But consumer confidence won’t really start to improve until workers start to feel more secure about their jobs and income. Think 2010.

Less Volatile Stock Market. Every investor hopes that stocks will come roaring back in 2009 and regain some of the ground lost since the peak in 2007 – when the S&P 500 stock index was nearly 50 percent higher than it is today. A better indicator of economic health would be a steady recovery – without the manic swings that seem to come from every hint of undisclosed trouble at some big Bank.

Since the stock market is deeply dependent on psychology and other intangibles, this makes it harder to predict than most other parts of the economy. The market could bounce back by mid-summer. Or it could remain stagnant for years, like it did for most of the 1970s. The experts can’t be any surer than you or I.

One hopeful sign would be less market sensitivity to events in Washington. The biggest market mover these days is the federal government, since fortunes stand to be won or lost – mostly lost – depending on how deeply the government intervenes in the activities of mega banks, and how much federal spending will be available to stand in for plunging consumer spending. Since the government seems to be the only institution spending money so far in 2009, it could be awhile before Wall Street returns to form.

Positive Turn In Economic Growth. By all economic standards, the current downturn has already lasted longer than the typical post-World War II recession Yet there’s still a lot more pain to endure. A recent survey of economists by the Wall Street Journal found that the majority think the economy will continue to contract for the first half of 2009, with growth turning positive in the second half of the year.

It’s always possible that impatient consumers will get sick of holding back, and start running up their credit card balances once again (if the banks let them). The bank-rescue plan might spur more lending than expected, goosing businesses and consumers alike. Or the stimulus plan might spread goodwill and optimism throughout the land. If you get the urge to spend, that might be the strongest indicator of all.

1. Does it promise “low risk and high gain?”
“There is no such thing as a free lunch.” It’s a fundamental fact or basic of investing that the higher the potential return, the greater the risk and that you may never see that return. Do not fall for investments that promise spectacular profits or “guaranteed” returns.

2. If you don’t act now will it be too late?
Why will it be too late? Any legitimate investment will be there tomorrow, and next week, and next year. Never be pressured into investing in something because tomorrow might be too late. Even if it turns out that the stock doubles tomorrow, you should feel better knowing that you were cautious and responsible with your money.

3. Does the investment tip claim to predict the future?
“It will double in three months.” Oh, yeah? And where did your broker buy his or her crystal ball? Not only is this a ridiculous promise for a broker to make, it’s illegal. Go aheaed and report this infraction to his or her sales manager. And if the matter doesn’t get satisfactory attention from a supervisor, contact the Financial Industry Regulatory Agency (FINRA).

4. Do you know the background of the salesperson and his/her employer?
Any individual selling securities to the public must pass a background check, a series of examinations, and be registered with FINRA. Likewise, their employers must also be known to FINRA and the SEC. If you would like to check up on the background of your broker or brokerage firm, use FINRA’s BrokerCheck page. But remember, even if they don’t have any complaints against them, it doesn’t necessarily mean they can be trusted. You could be “Scamee No. 1.”

5. Does it “guarantee” anything?
It is impossible to guarantee the performance of any investment, but if your broker is doing so he could get tossed out of the industry.
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6. If you incur any losses has the salesperson offered to reimburse you for any losses you might incur?
One more no-no that your broker isn’t supposed to and can’t promise you. This one can get him or her booted, too.

7. Does your broker say that you are you one of the “lucky few who have been chosen” to invest in XYZ company?
While this may make you feel special, don’t fall for it. You probaly just happen to be one of the lucky few who answered the phone.

8. Does the salesperson claim that he or she has also personally invested in the company?
What difference does it make to you whether he or she made a bad investment? Do you trust the salesperson to call you if and when the investment goes sour? And will he or she get out first?

9. Is the salesperson unwilling to supply financial statements or a prospectus?
If a new company is just going public (an IPO, which stands for initial public offering), you must be given a prospectus. It is long and written in legalese and printed on very thin paper that you can barely read. Read it anyway. Especially the part called “Risks to Investors.” If the company in question has been around awhile, ask to see the financial statements for the past two years.

10. Does the salesperson claim that it is “a hot inside tip?”
This is particularly important to pay attention to — not because it might make you rich, but because it could land you in jail. It is illegal to pass on or act on material that is inside information. Anyone telling you otherwise is a liar.

These scams exploit the trust and friendship that exist in groups of people who have something in common. Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity scam. Victims often fail to notify authorities or pursue their legal remedies, and instead try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment.