Business Investment Deferral - A tax compromise idea

I watched a discussion on the "to extend or not extend" debate regarding the Bush tax cuts on "Meet the Press" this morning. If I understood it correctly, one of the major arguments is over the democratic position of 'let taxes go up for people over $250K' and the republican position of 'many or even most small businesses would be affected and thus dampen growth'.

What I propose is a new tax deferral I call the 'Business Investment Deferral', which would allow small businesses to defer a portion of their profits (over $250k) for future investment without being taxed. Sort of a section 175c capital expense in reverse. I would propose that this deferral must be spent within 2 years, or be taxed at the then current rate.

Example: Let's suppose I have profit from a sole proprietorship of $400k. This is my only income, and I need $250k to support my family lifestyle. This option would allow me to defer tax on $150k of the income for up to two years so that I can accumulate enough capital to grow the business. I take the $150k into the next year purchase some additional capital equipment and hire 2 new employees. The capital equipment is purchased for 75k as a section 175c investment and is paid for with the BID money. The net is 175c = $0 and the deferred amount is now 75k. My business income profit for the next year shrinks to $250k but I am still whole. Everyone is happy.

Something like this might work. I won't begin to argue that $250k is way to low a number to call someone rich, but that's a whole different argument. What it does is differentiate the difference in a small business with profits over $250k, and an individual or family with total taxable income over $250k.

A lot of damage can be done in a very short time

Remember the election of 1992? Bill Clinton, a relatively unknown Democratic Govenor, was elected president, and inheirited a Democratic Congress in both the house and senate.

And then what happened? In late 1993, the democratic triumferant passed a retroactive tax increase that caused me, and many other Americans great pain.

This is what happened to me. I had an opportunity to take an early retirement incentive, and use the incentive dollars to start my own consulting business. The retirement incentive was paid as a lump sum, using the then in effect withholding guidelines.

I took the money and invested in my new business. Then, along came the retroactive tax increase. This caused an unexpected and significant tax burden which severely damaged my new business.

I tell this story because we are in danger of having this same exact thing happen again. We are possibly going to elect a new democratic president with a possible filabuster-proof democratic congress. We are about to get reamed again. It won't be me this time, but the next generation.

America woke up in 1994 and resoundly defeated the democratic congressional majority, but in those short two years, the damage was done. Don't let this happen again!

Colin Powell endorses Obama. Now what?

Colin Powell gave an eloguent endorsement of Obama on NBC's Face the Nation this morning. I understand Powell's rationale, and it is pretty sound. Obama could be a 'New Frontier' kind of guy, in ways similar to JFK. There is no doubt that Obama has skills as demonstrated by his oratory. He is intelligent. Of that there is no doubt.

My concern remains 'Where is this man on the liberal scale?' His record puts him way left, further left than I have ever voted. His rhetoric moves him slightly right of his voting record, still left of my idealism.

I had wanted McCain to choose Joe Lieberman as his running mate. Now this is a true 'Maverick' position. Instead, he cowtowed to the conservative right and chose Sarah Palin. Palin is an interesting character, besieged by liberal media who want to declare her unqualified. The media crucify her for her lack of understanding of international affairs. How unfair! She is a state govenor. Her qualifications for being a govenor of a state is that she understand the state issues. She beat out a lot of people to be elected govener because she has spunk.

Sarah Palin has shown she can compete. Her qualifications are very similar to Bill Clinton's when he was elected president. True, Bill Clinton is an eloquent speaker, and true, Bill Clinton is a bright guy, but both Clinton and Palin had similar experiences before emerging on the national scene. And there is another important difference. Clinton was running for president, and Palin is running for vice-president.

McCain is clearly the more experienced leader of the bunch, and has consistently demonstrated his ability to work both sides of the aisle to get things done, collaborating with the liberal likes of Ted Kennedy and Russ Feingold to introduce legislation.

Powell's dismissal of Palin as unqualified is assuming that she is running for president. She is not. McCain is running for president, and the odds of Palin ascending to the presidency in McCain's first term are less than 20% from a health standpoint.

Consider this: a 20% probability Palin will be president in the next 4 years if McCain is elected vs. 100% probability that Obama will be president if he is elected.

I stand with John McCain, because I believe he will maintain some semblance of Federalist principles, while taking a far more moderate approach to governance. Sorry, General Powell, we just disagree. I still plan to vote for John McCain.

Politics and Energy - My Perspective

I have been a political maverick all my voting life. The first time I could vote was 1964, and I voted for Goldwater. In 1968, I voted for George Wallace, although it wasn't because I particularly liked Wallace, it was because I din't like Nixon and would never vote for as liberal a guy as Hubert Humphfrey. Since then, it has been mostly republican except that I voted for Ross Perot when he ran.

This year, I promised myself I would vote for the guy with the best energy policy, because it is my number one issue. Obama has the best energy policy, but I am shaking in my Texas boots because of his very liberal record and relative lack of experience.

I definitely was impressed by Obama's ranking energy as his number 1 priority, and equally unimpressed by McCain basically waffling on his priorities.

My issue is does Obama walk the walk as well as talk the talk? I am really nervous about that.

Energy Priorities of the candidates

With all of the obfuscation caused by the financial crisis, it's hard to figure out where the candidates are relative to energy priorities. If you look at the websites http://www.barackobama.com and http://www.johnmccain.com, you will discover that each has a well articulated energy policy.

Barack Obama would, on the surface, seem to be more agressive. John McCain's police is actually more believeable, having slightly more conservative but possible more realistic goals.

Here's the rub. With all of the recent economic calamities, where do each put their energy priorities? Reading their websites leaves me not totally clear on their priorities. Obama seems to put social issues first. McCain isn't clear at all.

Inquiring minds want to know where they stand on the energy independence/environmental issues exactly,

Drill Here, Drill Now! Pay Less?

I read a lot of opinions on the Drill Here, Drill Now, Pay Less forums today. There are a lot of people with very impassioned opinions supported by all manner of graphs, charts, references, quotes, projections, etc. They argue about how much oil there is, and how quickly we can get it out. They argue about whether it can make a difference or whether whatever oil we pump from new American sources will just get lost in the rounding.

Here's what I think.

We should drill here and drill now. Whatever we find will have two positive benefits. One, it will help delay the inevitable time when we cannot meet demand, and two, it will be some added insurance against supply interruptions as a result of future conflict. I don't see the pay less part being a significant factor because of the worldwide demand.

Whatever we do will help buy time to develop viable alternatives, but let's be clear about one thing: Drill Here, Drill Now, is in no way an alternative to developing renewable fuels. It is a delaying tactic to help us make the massive transition to a new kind of transportation infrastructure.

Drill Here, Drill Now is a necessary evil. It's a finger in the dike. What is most important is that no matter what we discover, there is no alternative to developing the renewable alternative sources.

Please leave the strategic Oil Reserve alone!

O'Bama, Pilosi, and others want to tap the strategic oil reserve just because the gas prices are to high. Do these people not understand the word 'strategic'?

The foreign oil supply to the United States is the first thing that would be interrupted by a war against any significant adversary. In that instance it could be the lifeblood of our military in a very short period of time.

The strategy reserve is to protect us against supply problems. We don't have supply problems, we have cost problems. The strategic reserve should not be tapped for cost reasons.