Welcome to the June Tourism issue of NorthBay biz magazine. Business continues to improve for the tourism industry locally and throughout the entire state of California. Forecasts are for revenues to reach or most probably exceed pre-9/11 levels this year. Hotel occupancy rates are climbing as both business and leisure travelers return to the North Bay and Wine Country en masse. As the crowds gather this summer, remember to keep smiling despite the added congestion—the billions of dollars these tourists spend is not only great for the local economy, but also translates into millions of tax dollars that help fund cash-strapped local services.
This issue has an appealing mix of local stories, special features and columns. From the anticipated stories on various facets of the tourism industry, to a profile of a highly successful jewelry designer, to a special quarterly commercial real estate report, there’s sure to be several items of special interest to each of our readers. Plus, inside you’ll find our columnists expounding on health, wealth, tech and wine, while some of the special features include wine and food pairings by local winery owners, a premium car review by a local business exec and, in Beyond the Boardroom, a Q&A with Safari West owners Peter and Nancy Lang. All this and more this month in the North Bay’s only locally owned, premier business publication, NorthBay biz.
It’s been 17 days. Seventeen days to return to a normal, reasonably calm state. To put the time frame in context, I probably should mention that today is May 2 and every year I’m afflicted with the same malady—let’s call it TDS (tax day syndrome). It’s hard to find anyone these days who doesn’t agree that the current federal tax system is a mess: highly inefficient, fraught with errors, inequities, abused by oversights and evasion and always anxious to create yet another loophole for special interest lobbyists. The complexity of the tax laws result in a compliance burden of 5.8 billion hours per year in America. That represents the equivalent of an annual full-time work force of more than 2,774,000 people. The joke is it’s so complex and open to different interpretations that the IRS doesn’t even understand the code—it gave out 8.5 million wrong answers to taxpayers seeking assistance and then made 5 million more “corrections” that also turned out to be incorrect. Simply put, the current federal tax code is a system broken—beyond repair—and needs to be replaced now with a system that’s both fair to citizens and better for the country.
If U.S. Rep. John Linder (R-Ga.) and the 54 co-sponsors of his bill in the House have their way, perhaps my annual, dreaded TDS affliction will become a thing of the past. Rep. Linder’s Fair Tax plan has three major provisions:
• Passage of legislation that repeals the income tax, the payroll tax, the estate tax, the gift tax, the alternative minimum tax, the self-employment tax, the Social Security/Medicare deduction and the corporate tax.
• Passage of legislation that installs a single-rate, national sales tax on all new goods and services at the point of final purchase for consumption, and that provides for a universal rebate in an amount equal to the sales tax on essential goods and services up to poverty level spending.
• Adoption of a constitutional amendment to repeal the 16th Amendment and to prohibit income taxes.
So what does this all mean? Here’s a quote from Americans For Fair Taxation that works well as a top-line summary of the proposal: “The Fair Tax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services and fully funds the federal government while fulfilling the promise of Social Security and Medicare.” After I first read that statement, I had to read it again just to make sure I understood it correctly. My next thought was, how could any working person be against this idea? If it can accomplish all it purports to, it’s brilliant in its simplicity. But, of course, there are many with too much invested in the status quo whose knee-jerk reaction will be negative. That aside for the moment, let’s look a little deeper at some of the benefits individuals and the nation would accrue were this new tax system adopted.
First of all, this new national sales tax is a tax on consumption, not income. It lets workers take home every dollar they earn. It provides for no federal tax to be paid up to the poverty level. That provision works like this. To ensure no one pays tax on necessities, the Fair Tax plan sends a monthly rebate to every registered household to cover the consumption tax spent on necessities. This is how this plan untaxes the poor, lowers the tax burden for most and makes the overall rate progressive based on lifestyle spending choices. Also, with a national sales tax, you’re only taxed once on any good or service. If you choose to purchase used goods—a car, home or appliance, for example, you pay no tax. Every time you decide what to buy and how much to spend, you’ll know how much you’re giving to the government with each purchase.
One of the best features of the plan is retail prices will no longer conceal hidden corporate taxes. Hidden corporate taxes and the cost of complying with them currently account for more than 20 percent of all retail prices. These hidden costs are passed on to consumers in the form of higher prices in everything they buy. If competition doesn’t allow prices to rise, companies lower labor costs, hurting those who can least afford it. And if prices are as high as competition allows and labor costs are as low as is practical, profits and dividends fall, hurting retirement savings and pension funds. A national sales tax ends corporate taxation, competition drives down prices, more Americans have jobs and pension fund performance improves. The current income tax exports our jobs, rather than our products. Want to stop the outsourcing of our jobs to foreign countries? This new Fair Tax helps accomplish that goal.
There’s much more to this proposed tax system overhaul, but unfortunately I’m out of space. We’ll revisit this topic in next month’s column in more detail. For now, I’ll leave you with this thought from Rep. Gil Gutknecht (R-Minn.): “There is an old adage that if you want more of something you should subsidize it. If you want less of something you should tax it. And what do we do in America? We tax income. We tax investment. We tax savings. We tax productivity. We tax all the things we want more of.”
Doesn’t make much sense, does it? That’s it for now. Enjoy this month’s magazine.
