Small business 101

Writes one Lowell Simon of Seven Lakes, NC, in a letter published by The Pilot in its Dec. 10 editions, “Can someone please point me to a third-party source that says the GOP tax plan will help small businesses?”

Our gut reaction is to answer his question with one of our own. Can someone please identify a third-party source that says a GOP tax reform bill will hurt small businesses, or for that matter, corporations or individual taxpayers? One third-party who explained this concisely came quickly to mind. He had this to say about cutting federal taxes, in general:

An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget — just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions.

This third-party message was delivered in December 1962 by President John F. Kennedy. The Democrat Party JFK was affiliated with was so dramatically more centrist than today’s far-left Democrat Party, surely we now can accurately identify JFK as a third-party voice.

Mr. Simon might agree or disagree with this premise, but we’re fairly certain as to what he’d ask next. “What does this philosophical viewpoint have to do with tax reform helping small businesses entering 2018?” Answer: It has everything to do with an improved economic outlook for small business owners, employees and customers, which is what the pending tax reform bill being debated by Congressional Republicans will accomplish over time.

Small business owners are essentially self-employed individuals. Their income is not taxed as if they are an entity, such as a corporation. Their profit is their income and is taxed at individual rates, known as pass-through taxation, within their household federal tax return. Unlike an independent contractor (such as a lawyer or tax advisor), small business owners contemplate their after-tax income more broadly. If it’s a start-up small business, the owner often contemplates allocating some of his income back to the business. Perhaps a new piece of equipment is needed. Perhaps he wants to launch a radio ad campaign to raise awareness of the new business. Most small business owners do not think of a tax break as the government “lining their pockets”.

So, back to the question, how do the GOP tax reform bills (one passed by the House; the other passed by the Senate) help small businesses? Without getting into the weeds of when or if a small business owner qualifies for pass-through taxation (assume the mom-and-pop businesses and franchised stores you frequent in your community do), here is a third-party overview by the Director of Investment Planning for The Motley Fool, Dan Caplinger:

The Senate decided to give small businesses a tax break by offering their owners a deduction on a portion of the income that passes through to their individual tax returns. Under the final proposal, qualifying business owners will be able to deduct 23% of their pass-through income on their tax returns, subject to a limit of 50% of wage income in order to prevent potential abuse.

Rather than offering a deduction, the House suggested changing the tax rate that applied to the business income that pass-through businesses generated. A maximum tax rate of 25% would have applied to pass-through income, but limitations would have treated 70% of income as wages at the full ordinary tax rate unless a business could prove that a different percentage was appropriate. An even lower rate of 9% would apply to businesses earnings less than $75,000. Professional services companies, such as those operated by lawyers and accountants, would have been excluded from the preferential rate entirely.

It is obvious, to some, that either approach would be a welcome benefit to the small business owner, who heretofore might have seen his total household income (business income plus, as an example, a spouse’s income as a school teacher) taxed at 35%.

We mention that help being contemplated for small businesses is obvious to some because yet another third-party report on the subject, by the polling agency SurveyMonkey, finds that small business owners who identify as Democrats dispute the merits of the tax reform bills:

For those small-business owners who identify as Republicans or who lean toward the GOP, tax reform couldn’t come soon enough. A huge majority (85 percent) supports the passage of the tax reform. These data come from the newest CNBC/SurveyMonkey Small Business Survey, conducted Nov. 20–Dec. 4 among 2,043 small-business owners.

Democratic-siding small-business owners take a harder line. Eight in 10 (80 percent) oppose the tax reform proposals, and they do not mince words when asked about their thoughts. “Unfair” is the most frequently mentioned single-word response, but “rich” and “wealthy” come up frequently in longer responses, as in, “It’s not a reform, it’s a tax cut for the wealthy.”

The ideological polarization that defines 21st Century America apparently is so entrenched that even some small business owners would forgo tax relief in order to stop “big (evil) corporations” from seeing relief from burdensome taxation as well.

So misguided is this logic that we must harken back to the words of American economist Walter E. Williams, cited by this blog in October. Wrote Williams, explaining the crippling impact of our nation’s 38.91% tax on corporate earnings (proposed to be reduced to 20% by both pending bills):

If a tax is levied on a corporation, it will have one of four responses or some combination thereof. It will raise the price of its product, lower dividends, cut salaries, or lay off workers. In each case, a flesh-and-blood person bears the tax burden.

 

 

Taxing distortions

In a Twitter post, North Carolina Sen. Thom Tillis this week called out a Washington Post reporter’s visit to Burlington, NC, where he sought to demonstrate that pending Republican legislation to cut taxes and liberate businesses offers little relief to the little guy. The premise of the Post report is that the state’s tax cutting endeavors have done next to nothing to help small business so, by extension, federal tax relief is likely to have minimal impact going forward.

The Post obviously assigned the reporter to find a rural business owner who is, for whatever reason, an unhappy camper in a state where many businesses are thriving, and into which new businesses are relocating.

The extremes to which the Left is going to stop the unleashing of the full potential of the American economy is not limited to the corrupt mainstream media. It is seeping into our own community.

Apparently, it is the policy of our local liberal house organ, The Pilot newspaper, to allow a reader to submit a letter-to-the-editor that does little more than regurgitate extreme Left Wing talking points. There is scarcely a thread of truth in this missive by the misinformed Ms. MeNeish. She laments over “a few years of tiny (tax) cuts”. About half the U.S. population pays no federal or state taxes, thus can not be granted a “cut”. The highest producers (in the 39.6% bracket) are not likely to see a federal tax cut, even a tiny one, and some very high earners might find themselves in a new 45% bracket, pending the final terms of the bill. The author also claims tax reform will “make it harder for young people to go to college”. This obviously is drawn from warnings by people such as University of North Carolina President Maragaret Spellings who oppose the removal of tax deductions for private giving (to schools such as UNC). But why does she assume that, for example, a UNC alum who owns a successful business, would not give more to the school as his tax burden declines, even absent a deduction for his charitable activity? This seems to suggest that her alums care little about the institution but give only to add a deduction to their filings. Quite an insult. How, you ask, does the elimination of private giving deductions “make it harder for young people to go to college”? Because the Left accepts that tuitions must continue to skyrocket and, thus, youngsters will need academic scholarships more than ever. Left unsaid is that many of these scholarships go to students who are not U.S. citizens.

Ms. MeNeish also wrings her wrists about tax reform burdening “our children and grandchildren with more than $1 trillion in addtional federal debt.” This is based on models that are typically inaccurate and on the smear campaign now being waged by billionaire investor Tom Steyer, who writes this week in the Wall Street Journal that tax cuts for “the wealthy” will be “paid for with money taken out of the pockets of working Americans and their children.” This outlook defies the outcomes of the economic impact of the last sweeping reform, under President Reagan in 1986, which handed President Clinton a booming economy throughout the 1990s. Projected debt increases under the current government spending trajectory — apart from tax reform becoming reality — far exceed $1 trillion over the next decade (the Congressional Budget Office estimates $10 million). Easy to dismiss, apparently. But, worse, her misgivings also conveniently ignore the $9 trillion in federal debt added during the eight unchecked years of spending under President Obama. Are her children and grandchildren somehow unscathed by Obama’s reckless legacy?

Tale of ‘The Tape’

The markets referred to daily in the financial press are composed of Wall Street trading on regulated stock exchanges, less formal Over the Counter (NASDAQ) markets, organized commodity exchanges worldwide, and specialized trading in major financial centers across the globe.

Old timers often refer to price reporting as “the tape”, a reference to a 19th century telegraphic system that reported individual security transactions. By extension, one “fighting the tape” meant going against factual trends (i.e., the markets are poised to remain positive) because he presumes to be better informed. This also would be known as a contrarian.

In a vast industrial sector, price levels are indicative of anticipated corporate performance. Recent markets that have risen to record breaking levels have given huge thumbs up to GOP economics and the leadership of President Donald J. Trump.

High speed electronic data transfers have sent Edison’s ticker tape to museums. Modern trading desks are where authority to assume billions of dollars of risk is granted to alert young people who may not have reached their 30th birthdays.

Many believe the free market performance in a competitive marketplace driven by perfect competition is the most reliable indicator of future pricing of equities and commodities. Perfect competition is defined as the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent, and the market price of a commodity is beyond the control of any single individual buyer or seller. It is a classical economic theory.

The world’s trading in wheat, crude oil, strategic metals and international markets for a nation’s currency, provide spot pricing (today) or a fixed future price defined by delivery at distant point of time. A user of cotton, for example, will set his raw material cost by purchasing a given amount of the commodity at a fixed price for future delivery. Sellers of cotton, farmers for example, eliminate market risk by selling their anticipated production for future delivery.

There are many investors who enter the market as speculators and their risk is their own capital based on an individual analysis of market conditions. Publicly traded stocks anticipate corporate earnings and dividends and a rising equity price indicates belief in an enterprise’s growth over time. Collective wisdom, many economists believe, has a superior predictive capability.

So, today’s “tape” is saying that tax reductions, less regulation and decentralization of decision making is good for most Americans. Anticipated growth seems to be a more laudable goal than redistribution, espoused by the left.

Let’s turn to the anti-Trump political climate that emanates from believers in progressivism. They believe so strongly in government control they are unrealistic in their analysis of public data. They are fighting the tape.

The Trump assertive leadership, while something new to Washington, has found favor among Americans. Wall Street performance says so and all the tales of gloom and doom from the disciples of the FDR New Deal and the Johnson Great Society are clearly backward looking using faulty economic logic. Similarly flawed logic was expressed, ahead of Trump’s election, by Pulitzer Prize-winning New York Times columnist Paul Krugman, who predicted that a Trump victory would trigger an economic collapse from which the United States might never recover.

Current Democrat party leadership has adopted a policy they have called “The Resistance.” This is proving to be not very useful thinking to combat international threats stirring in North Korea and Iran to world peace and prosperity. It is a policy risk that is devoid of constructive thinking at a time when it may be clear to voters that policy changes are urgently needed.

The party of Sen. Chuck Schumer (D-NY), California Gov. Jerry Brown, and Rep. Nancy Pelosi (D-CA) is not the party of FDR, Kennedy, or even Barack Obama. It offers no ideas about production and preaches consumption with fairness predicated on a system that buries individual responsibility.

American success is due to creative individuals who shoulder responsibility, show up on time and take pride in a job well done. Collective performance leads to collective prosperity. Yet the Democrat Party continues fighting the tape.

– Walter B. Bull, Jr.
 

The 2018 challenge

It is no secret that North Carolina will be targeted by outside Democrat funding in next year’s mid-term elections. In their quest to retake a majority in the U.S. House and state General Assembly, Democrats need to shake up North Carolina. But there also is a not-so-well-kept secret that will confound this effort. Like many thriving states governed by Republican-controlled legislatures, North Carolina’s economic engine is roaring and it’s prospects for growth are soaring.

In 2011, when Republicans won their General Assembly majority, North Carolina’s unemployment rate exceeded 10 percent, House Speaker Tim Moore recalled during a recent address before the Moore County Republican Men’s Club in Pinehurst. Moore’s message certainly resonates with Republicans, who have seen that rate plunge to around four percent, but it’s difficult to comprehend how Democrats will be able to disparage this and other economic data points on the 2018 election stump. But disparage they will.

Listening to Moore’s summation of the state’s dynamic economy, we could not help feeling a tinge of melancholy as well. This same story of prosperity and growth was making headlines in 2016 but Republicans and, specifically, Governor Pat McCrory’s re-election campaign, managed to underplay it. This is mind boggling in retrospect.

Let’s not repeat this mistake during the 2018 campaign. If the campaign narrative is about the economy, N.C. Republicans should continue to be well represented in Raleigh and Washington. But messaging discipline and clarity can’t be taken for granted. The key points shared by Speaker Moore are these:

  • The state’s tax structure and regulatory environment are attracting new businesses and encouraging established businesses to expand.
  • 89,000 new jobs were added during a 12-month period ending September 2017.
  • North Carolina has seen a $4 billion swing from debt to savings in six years and has achieved a Triple-A bond rating from the three major agencies. Only 11 other states share this top rating.
  • The state’s unemployment insurance tax fund carries a surplus, which is part of $1.8 billion in “rainy day” reserves.

Strong economic data, while difficult for Democrats to refute, is frequently misrepresented by Democrat Governor Roy Cooper, and others, as resulting solely from the repeal of the so-called “bathroom bill” (HB2) after Cooper was sworn in last January. A complicit mainstream media is more than willing to let them get away with overlooking the fact North Carolina has been turning around since 2011 under Republican majorities in the state House and Senate. Consider this exchange between Cooper and CNBC after the network said Amazon should select multiple North Carolina markets as the home of Amazon’s planned HQ2 headquarters.

A CNBC reporter sat down with Gov. Roy Cooper on Monday to ask about (HB2 repeal). Cooper said moving beyond HB2 and his election a year ago demonstrates to the business, sports and entertainment sectors that North Carolina is a welcoming state.

“We’re sending a strong message we’ve taken a big step,” Cooper said. “That’s why these companies have come back on my assurances that North Carolina is moving in the right direction.”

My assurances? Absurd, of course. But look-ahead polling earlier this year suggests Democrats are eager to give Cooper and their 2018 candidates credit for, well, everything. Democrat enthusiasm is partially fueled by Donald Trump backlash.

In the May 18, 20-21, 2017 Civitas Institute Political Parties NC poll (N=600) — the most recent statewide poll — when asked, “If the election for North Carolina State Legislature were held today, would you be voting for the Republican candidate (32%), the Democratic candidate (47%), Neither one/Other/Independent (8%), or Don’t Know/Undecided/Need More Info (13%). These are the highest percentage for Democratic candidates (47%) for the State Legislature and the lowest percentage for the Republican candidates (32%) in the 34 polls conducted for Civitas since October 2010.

The stakes in 2018 are staggeringly high. That, too, is no secret.

 

Still a blood sport

In 44 B.C., when Marcus Junius Brutus plunged his dagger into Julius Caesar and the dying leader of the world’s major civilization muttered “Et tu, Brute?” politics was clearly identified as a blood sport. Public assassinations, quiet coup d’état take-overs, declared civil wars, street riots and many sinister activities to gain political power were and are characteristics of a blood sport with profound consequences.

While daggers, poison and various lethal devices are used in other nations to create political change, the 21st century has brought us a new weapon — modern communication networks. The weapons are words and the methods are profound. Today’s Brutus may be your nightly TV news anchor, a college professor, or a skillful writer presenting opinion via print media.

Yes, “the pen is mightier than the sword”, according to novelist and playwright Edward Bulwer-Lytton. These words were written in 1839 for his historical play, Cardinal Richelieu. With modern TV screens, plus streaming images and photos generated by the citizenry at large on laptops and mobile devices, the pen is joined by unrelenting audio and images created to mold people’s thinking.

Most public opinion regarding public policy can be segregated between the extremes of an ideological spectrum, either right (conservative) or left (liberal), and the middle has a tendency toward one or the other. Give and take cracker barrel discussion has been smothered by passion. Opponents today are unyielding with the certainty that there is no merit whatsoever to opposing viewpoints.

Wikipedia notes that the Media Research Center (MRC) is a politically conservative content analysis organization based in Reston, Virginia, and founded in 1987 by L. Brent Bozell III. Its stated mission is to “prove — through sound scientific research — that liberal bias in the media does exist and undermines traditional American values.”

Not so fast, retorts the left. In response its supporters have organized The Center for American Progress (CAP) in 2003 as a left-leaning think tank. CAP sponsored the organization of Media Matters for America in May 2004 to combat the conservative journalism sector. The force behind the information is David Brock and his group has been funded by notorious billionaire George Soros, a dedicated globalist.

Fabrication, distortion and outright lying make up much of the progressive message. Brock put a couple of notches on his belt with a takedown of notable personalities, beginning with New York radio icon Don Imus, who was off the air for months after insensitive comments about black female athletes from Rutgers University. Heavy hitters such as the late Roger Ailes, creator of Fox News Channel, and former FNC show host Bill O’Reilly, eventually run off the air by a New York Times report followed by advertiser boycotts, are among those who have endured the effects of the Brock smear machine. Media Matters frequently targets FNC host Sean Hannity, who has endured multiple advertiser boycotts.

Just like the gladiators in a Roman arena who are trying to kill each other for the entertainment value, today’s combatants have few rules and no ethics. Ask Bernie Sanders, a naïve socialist with gobs of popular support, if he ever had a realistic chance to win the recent Democrat party nomination. In today’s political world his answer will continue to be politician-speak double talk. But it was Bernie’s blood on the floor when all was said and done after the 2016 nomination season.

Political blood sport has a new chapter in the conflict as the laws of our nation are used against opponents by an investigator (“Special Council”) commissioned at the highest level of the Federal justice system. To the public, that individual has a stated objective of finding truth. The designee is granted extraordinary powers as well as unlimited funding and the media seems to delight in the process. Special Council Robert Mueller’s investigation into so-called Russian collusion was launched following a recommendation by the Department of Justice that followed months of speculation about Russian hacking of Democrat party data and possible foreign influence on the 2016 Presidential campaign.

Caught in the “investigation” can be many second- and third-level individuals, who can be charged with inconsequential process crimes that carry long prison terms. These folks are encouraged to “cooperate”, which means they will testify under oath about a higher up in return for a slap on the wrist by the Court. Blackmail, for sure. The nonspecific statute is a mighty tool in the prosecution toolbox.

The public quickly forgets pop culture star Martha Stewart’s and Bush 43-era White House official Scooter Libby’s jail time. The FBI can lie to an interviewee during a meeting, but the subject goes to jail for a false statement to the agent. And to prove a point the government can bankrupt an individual through defensive legal fees, ruin careers and with a shrug walk away when the process is finished.

Now that politics is defined even more so as a blood sport, predicting the future is uncertain. Reason and rationality are cast aside (thus, we see current Democrat members of the House presenting baseless articles of impeachment against President Donald Trump). Wisdom in the collective opinion of the people might be the only way to counter the destructive nature of political blood sport.

If not, well, Et Tu, Brute.

– Walter B. Bull Jr.

 

The Trump trap

As gridlock rages on in Washington, we are discovering that the shared commitment by Moore County Republicans to pursuing security, opportunity, liberty and victory is not always embraced by lawmakers. This only has become magnified in the age of Trump as Republicans in Congress seem paralyzed by the power they wield as the majority party.

It seems inexplicable that Obamacare has not been dismantled or that meaningful tax cutting is proving to be an excruciating legislative chore (even though Republicans were elected by voters who name these as priorities). As it turns out, there is an obvious explanation. It is proffered by North Carolinian and veteran political analyst John Davis, keeper of The John Davis Report.

Congressional leaders take heed: Every despicable, incompetent, crude, insulting, immature, reckless, irresponsible and insensitive thing that (President) Trump has ever said or done COMBINED, is not as bad in the minds of his supporters as a do-nothing federal government rigged for the privileged few.

President Trump will continue to make fools of U.S. Senate and House leaders who continue to protect the swamp, who put the moral high ground of the way things have always been done ahead of getting things done. Those who value civility over outrage.

The mainstream media, Democrats and even some centrist Republicans remain in a constant state of despair about Trump, his candor and his Tweets. He is not “presidential” enough. Precisely, notes Davis. If we want to see “the swamp” drained, you don’t do it with a Jeb Bush or a John Kasich.

“Donald Trump,” Davis writes, “is what you get when there is no presidential way to drain the swamp.”

He further cites the recent showdown between Tennessee Sen. Bob Corker, a Republican, and Trump. The President views Corker as just another entrenched swamp creature, even though Washington conventional wisdom would dictate that Trump avoid skirmishing with the chairman of the Senate’s Foreign Relations Committee.

Corker went after Trump in the aftermath of the Charlottesville (Va.) white supremacy march, joining a media chorus of feigned outrage directed at Trump because he did not adequately denounce the incident (though he did in no uncertain terms). Corker questioned Trump’s stability and competence, playing into the long held media narrative. Trump tweeted that he found Corker’s criticism odd in that Corker had begged for Trump’s endorsement before announcing he would not seek another Senate term. Observes Davis:

That’s it for Corker. He is now in the Trump trap. The latest Republican on a long list to fall prey to Trump’s ploy of needling his opponents into the tangled web of reactionary vindictiveness.

At their peril, DC swamp politicians continue to miscalculate the political consequences of demeaning Trump as an individual, or diminishing Trump’s presidency through inaction. Trump’s approval rating is below 40% but he remains a rock star in contrast to tepid Congressional approval numbers. Davis observes that they apparently fail to see what is coming in 2018, a tidal wave of dissatisfaction.

Unfortunately for establishment Republicans, the voter outrage that propelled unpresidential Donald Trump past their hand-picked candidates for president is now being redirected against US Senate and House Republican incumbents in next year’s GOP primaries. In today’s political environment, the establishment is the kiss of death.

 

 

 

 

States: Take the 10th

Individuals protect themselves from incrimination by “taking the 5th”, exercising rights granted in the Bill of Rights by the Fifth Amendment. It appears the time has come for states, including North Carolina, to protect their rights by “taking the 10th”.

The Tenth Amendment is a beautifully crafted sentence, if only because it is a case study in word economy. It reads, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”

While the subject of North Carolina’s voting district map, as legally drawn by a Republican majority, is mired in court rulings and shrouded in uncertainty ahead of the 2018 elections due to a U.S. Supreme Court ruling related to a similar legal challenge in Wisconsin, an informed citizen already knows where things are headed.

In this era of monuments to American patriots being taken down, of professional athletes declining to stand in respect for the flag, and core American Judeo-Christian values being dismissed as offensive, who can be surprised by a movement to deny states the right to conduct their own affairs in matters of drawing up voting district maps?

North State Journal political columnist Frank Hill provides useful historical perspective on the evolution of district gerrymandering from an accepted, if not messy, norm left up to individual states, to the current hand-wringing about racially motivated mapping that, suddenly, needs to be taken up by the courts and, ultimately, the U.S. Supreme Court. It is no coincidence that this arises at a time when Republicans have a stronghold on statehouses and Governors’ mansions.

A Wisconsin group that recently navigated a redistricting case to the Supreme Court (a ruling is expected next spring), bases its argument on the premise that redistricting had been “too extreme” and for partisan political purposes. This prompted Hill to ask a question: what is too extreme?

How about a congressional district that was drawn in North Carolina that was 91 percent Democrat by registration in 1984? That was the makeup of the Second Congressional District I ran in during the 1984 campaign as a Republican. Sadly, the same masses of lawyers and advocates who are today running to the Supreme Court to declare gerrymandering as “unconstitutional” in any way, shape or form were not as concerned about it in 1984.

It is no longer 1984, to be sure, as we find radical judges and courts more than willing to dispute what has always been a “specific constitutional duty given to state legislatures,” Hill writes.

Back in June, the Supreme Court upheld a lower court ruling on 28 North Carolina legislative districts. The lower court said these districts had been re-drawn to achieve illegal racial gerrymanders, diluting black votes, reported the Raleigh News & Observer. Which has led to the latest, even more disturbing, development in this story. In late October, a three-judge federal court panel announced it will appoint a Stanford University law professor to review nine legislative districts emerging out of a second re-districting effort by N.C. lawmakers in August.

Naturally, the far-left Southern Coalition for Social Justice applauded the decision to rob state legislators and their constituents of a constitutional right. Its executive director was quoted in news reports actually defending the idea that insertion of a voting rights scholar from California would “result in fair districts for all North Carolinians.”

Hill properly turns to an inconvenient fact to highlight the hypocrisy of Democrats condemning the evil partisan gerrymandering by the Republican majority. His point will be the basis for what should be vehement opposition to allowing a Stanford professor to influence North Carolina’s redistricting.

The North Carolina General Assembly has a long and proud history of drawing partisan gerrymandered districts at the federal and state level long before the Republicans took over control in 2010. All of it by Democrats since at least 1898.

Now that the Supreme Court has waded into debating the merits of gerrymandering, it seems inevitable that the body ultimately will be forced to do something it has expressly avoided for more than 200 years. It will have to decide if the Tenth Amendment still matters.