Wednesday, December 29, 2010

Our Government Stuck it To Us Again


Our government likes to pull the wool over our eyes. We have what they call a "lame duck" Congress and they went ahead anyway to pass legislation that the incoming Congress would likely not agree with. Arrogance is the best word to describe those who are in charge of our government.

The country is divided into two groups. One group believes in Old English Law. They believe that everything came from the Crown and everything therefore is owned by the Crown except for that which the Crown decides to allow the subjects to keep. We derived much of our laws based on this concept.

The other group, as expected, believes in the exact opposite, mainly those things that are guaranteed to the citizens of the United States by the Constitution. For those of you who attended private school, let me lay out the two relevant provisions: Amendment IV and Amendment X.

Amendment IV (of the Bill of Rights) assured that we are all secured in our "persons, houses, papers, and effects, against unreasonable searches and seizures...." by the government.  Amendment X reserves all powers "not delegated to the United States by the Constitution... for the States and the people". In other words, the people have all powers and only those powers granted to the Federal Government by the Constitution can be exercised by the Federal Government.

Over the years, Congress slowly changed things by passing legislation granting them powers over the people which are not authorized by the Constitution. The EPA (Environmental Protection Agency) needs to give approval for everything anyone does and can make things so prohibitively expensive that projects cannot be economically viable. A good example is the Superferry. The ADA (Americans with Disabilities Act) can also be used by activists to shut down projects by making things so expensive that projects cannot turn a profit.

I could go on and on, but other than those who went to private school, most of you get the picture.

Before we examine the legislation extending the current tax rates, let's lay some facts on the table.

1. The top 1% of wage earners pay 41% of the income taxes.

2. The bottom 50% of wage earners pay 3% of the nation's income taxes and many don't pay anything at all.

3. The top 1% of wage earners make only 19% of the nation's income.

4. Many who pay no income tax actually get back money from the State and Federal Governments in what is called "refundable credits".

Let me further elaborate on #4 above. A single person with two young toddlers makes $20,000 in income. With various tax credits, low income rental credits, child care tax credits, etc., this person gets $4,500 from the State of Hawaii and another whopping $4,000 from the Federal Government. In addition, this person can qualify for Section 8 rental assistance, food stamps and other welfare programs costing thousands of additional dollars. This could be the equivalence of a $40,000 salary.

Let me state it another way. The tax credits are in addition to welfare benefits and is a direct payment to the recipient through their tax returns, bypassing the Social Services agencies. So the taxpayer pays for Social Services with higher taxes and for the direct tax credits through the person's tax returns. No wonder our governments are in a state of insolvency. We give a vote to those who not only pay no income tax, but get whopping refunds called "tax credits".

Thomas Jefferson once said, "Democracy will cease to exist when you take away from people who are willing to work and give to those who do not".

Now, let's look at the major provisions of the recently passed law that was signed by our President.

Dumb thing # 1. The tax rates were extended for only two years. It should've been made permanent. This is because most businesses plan for things in five and ten year projected increments. Two years will not motivate businesses and investors to expand if the rug is pulled from under them in two years.

Dumb thing #2. A credit was given to employees that is equal to 2% of their payroll. This is a reduction of the FICA (Social Security tax). Now, unless you went to private school, you would know that Social Security will soon be insolvent and there won't be money to pay future benefits. When they cut the "deposits" that were to fund Social Security, how will that increase the funds required to pay benefits? They have to make up for that shortage somewhere and I suspect it'll come from future tax increases, reduction in Social Security benefits or they will again print more money. Either way, our kupunas fall further behind.

Dumb thing # 3. The law also extended unemployment benefits for another 13 months. Stated another way, they are going to reward more people for not working. The cost of the benefits are passed on to the various states who in turn will pass that on to the various businesses in the form of unemployment taxes. Businesses are already faced with increased health care premiums for future employees and now they face even higher unemployment taxes. I don't see it as an incentive for businesses to hire more people. Better to buy goods produced by foreign workers and distribute those goods in the United States.

Dumb thing # 4. The Federal Estate tax was raised. Essentially, you get the first $5 million free in the form of a Unified Credit. But all assets over $5 million is taxed at 35%. This is a tax on your right to pass on assets (acquire with previously taxed dollars) to your heirs.

Let me assume that a business is worth $7 million. The owner suddenly dies. The IRS declares that the business is worth $10 million using the "capitalization of earnings method". The owner is not around to argue otherwise. Further, the value is based upon what the business was worth as a "going concern" with the owner still available to guide the company through profitability. The tax needs to be paid with cash within 9 months from the date of death.

The estate must sell assets in order to pay the IRS. The tax bill is $1.75 million. To raise that cash immediately, a forced sale of $3 million in assets is made. In all likelihood, the business would need to be liquidated and perhaps $5 million in assets needs to be sold at liquidation prices to acquire the $1.75 million in cash to pay the tax. Every employee is left without a job.

Note that I did not differentiate between Democrats and Republicans. Both Parties have members who believe that they're the elites of society and want a bigger government in order to use taxpayers' money to wield power. Essentially, it is the government against the people. I fear my government.

Friday, December 24, 2010

Looking forward to the New Year


I like to look back on my year every December to see where I can make changes to be a more productive human being for the coming year. I figure that at my age, I'd better make things count because I likely only have another 10 years where I can make contributions to our society and community. And that assumes that my good health holds up. After that, my body definitely will have deteriorated and I may be more of a liability than an asset to people and organizations. Even today, some question whether I'm of sound mind and body.

I have been in semi-retirement since 1989 so my income is somewhat limited, and thus, I am very careful on what causes I contribute to. I am still lucky enough to be able to give more than twice what the current Vice-President of the United States gives to charities. For that, I am grateful. The more the government takes from me, the less I will have left to give. The children are out of the house and my dog passed away in 2009 so I don't have people or animals to take care of. Thus, I've also been able to contribute more of my time, talent and ideas to selected causes. This blog will also be a year old in a few days.
Soldier protecting his country

Making the most of my time means that I may need to make choices based upon circumstances that come with aging. Having good bowel movements would be a concern every morning, I suppose. So would not laughing so hard that one's dentures fell out. All concerns that would await me in the future, I'm sure.

I have always made it a habit to help others in ways that are inexpensive by opening up my network of friends to each other. If someone is unemployed and another friend has a business that needs someone with his skills, I go out of my way to introduce them to each other. I do these things even in my daily activities.

For instance,  I make an effort buy goods from K-Mart/Sears when I can. Sears has a policy of making up the difference in salaries for employees who are in the reserves and are activated for our war effort so I want to show my appreciation to the corporation. I buy from the local supermarket rather than Costco or military exchanges because I want to make sure the local supermarket doesn't go bankrupt and pull out of my community. Anyone can do these things. And, it makes a difference in the community that you live in.

You may be wondering where I'm going with all this besides boasting about myself.

I've consistently argued that in order for our society to become whole again, we must contribute our time, talent and resources to make things better. The more government gets involved, the more expensive it gets and the job doesn't get done.

I may not have the talent or ability to do certain things. But, I know others who do. So I refer things to them and offer my expertise for projects they may be working on in exchange. Too often, people don't refer projects or business to friends because they fear that if something bad happens, it'll reflect upon them.

Well, the only way to have things run perfectly is if one does nothing. No matter what you do, you'll make mistakes. So will your friends. Pick yourself up and make things right. Then, you will have a collection of completed projects that you can be proud of. When a friend asks for help, do what you can. The friend asked you because he trusts you. Help could simply be an introduction to someone who can help solve your friend's problem.

This blog has chronicled my observations for almost a year now. I've tried to write at least an article a week. I've had to scrap a few features on people from time to time because I've been asked by the subjects to change a few things and I refused to compromise the integrity of the blog. If I allowed others to edit my observations, then it would no longer be my observations. It would be a P.R. piece for others.

I will continue to make observations, particularly those affecting our kupunas, but the articles may be reduced to twice or once a month. This leaves more time for my volunteering activities.

My entertainment schedule is taxing, not only because I do between 150 to 200 dates a year volunteering, but because my audiences are mostly people I entertain weekly. Thus, I need to have multiple shows and songs to present because they get bored, hearing the same songs and jokes every week. I need to concentrate on developing better shows and also do more performances with other musicians/dancers/singers.

This past year, I've cut back on providing music for funerals. In the past, I've volunteered my time and talents because I've believed that my music is part of the healing process for families and loved ones of the deceaseds. I still did 3 funerals this past year, but they had to call and request my services, which I gladly did so voluntarily.

Finally, I've cut back considerably on paid jobs. I will not do piano bars and will do private parties only if the gig intrigues me. And I can cull jobs by quoting higher fees. And, to support my fellow musicians, I will continue my policy of not performing for free on commercial projects. If the gig is a fundraiser for a legitimate cause, I will donate all or most of my fee back to the cause.

I wish everyone a very Merry Christmas.

Thursday, December 16, 2010



Christmas is one of the most marketed holiday in America. Mostly because of the tradition of giving gifts which has become a boom for the retail sector of the economy. Children grow up with the expectation of receiving gifts from birth, or, as soon as they are able to understand that they are to receive things at this time of the year.

Does that mean that those who don't receive gifts are not loved or are not good children so are being punished? We all know that the truth is that their parents lack the resources to participate in the gift-giving process. Some parents, in an attempt to save their children's self-esteem, use money meant for food, clothing, medicine and shelter to buy gifts. And they end up homeless, in failing health or, in bankruptcy court.

Our kupunas have a reverse situation. They grew up in a time that when they receive something from someone, they must give back an equal or greater amount. When going to a gathering, one must not go empty-handed. What happens when the kupuna doesn't have the resources to buy gifts or food to bring to a gathering as their contribution? I would guess that most would become reclusive and shut out family members from their lives. They would stay at home alone.

Some kupunas stop buying food and medicine so they can buy gifts for family members just so they don't have to be alone on Christmas. Many won't accept free Christmas dinners provided by charities because they grew up in a time when accepting something from someone means that they are obligated to pay back. Many don't have the resources to pay back. We try to convince them that they paid taxes so are entitled to some of the free things, but many aren't buying it. They know that their taxes are used to fund other things.

If we understand why they may be shutting everyone out, perhaps we can help them to "contribute" their fair share. For instance, if there's a family gathering where everyone is to bring a dish, one might buy the ingredients and go to the kupuna's house and ask for help in preparing that special dish that only he/she can make. Then you can go to the family gathering together with the prepared dish as your joint contribution.

When exchanging gifts, give the kupuna something he/she needs and wants but can't afford. Or, give a small box of $3 chocolates and insert a $100 bill in a card accompanying the gift. If the kupuna is spending $50 on gifts for you and your family, double that in your cash gift so the kupuna doesn't have to forego necessities like medicine or food.

This is a time of the year when many people go into deep depressions because they cannot afford to give gifts or go into debt by buying on credit. A true gift is something that helps to save the other person's self-esteem rather than to feed the giver's ego. Sometimes that can mean instituting a "no gift" rule among yourselves.

Have a Merry Christmas and a very Happy and safe New Year.

Thursday, December 9, 2010



This Christmas Season, I've noticed more people are giving to help others who are in dire need due to the economic conditions in Hawaii and in the country. It appears that more are also volunteering to help others less fortunate than themselves.

I'm not a religious person so I am not motivated to praise God or spend time in prayer or praise. Rather, I'm more moved to help those who are in need of food, shelter and clothing. And as I age, the promise of 72 virgins is more of a disincentive than otherwise. Mazlow's Hierchy of human needs states that basic biological needs have to be taken care of before anything else. And that's what people appear to be doing.

I am impressed with some programs like the Angel Tree, Toys for Tots, Foodbank and others servicing our communities without the need for government intervention. Many individual churches quietly feed and clothe those in need quietly, and without fanfare. That's when churches and their members are at their best.
Then, there are programs that service our elderly communities year-round. Meals-on-wheels by Lanakila come to mind. They send hot meals to our elderly every day, using volunteers as their main distribution source. Food is sent to various distribution points by volunteer drivers and are picked up by other volunteers who bring the meals to the elderly who are generally housebound. These volunteers are sometimes the only human contact these elderly people have. So the volunteers serve as eyes and ears so they can alert authorities if the elderly person needs special help and care.

Hospice volunteers also provide a much needed service in our communities. End-of-life care is a special category of services for those who expect to pass, and also provide a tremendous assistance to the families and loved ones in the process.

Our business communities also contribute towards community efforts by volunteering employees, expertise and resources to help. Offering Thanksgiving and Christmas meals to the homeless is one example of what various hotels and restaurants contribute to our communities. Many fast-food chains donate edible foods that have been kept warm for too long and not up to the standards for selling to customers. Supermarkets likewise donate edible food that cannot be sold, to various community causes.

the Institute for Human Services Inc. © 2010

Here is a registry for those who want to volunteer by helping the elderly and for those who need help.

America is unique because as free people, we are able to dig down and help one another without the need for government interference. We have much to be thankful for.

Wednesday, December 1, 2010

The Bankrupt Euro


Previously, we have opined about Hawaii's bankrupt Employee Retirement System and the equally bankrupt Healthcare System that Hawaii's civil service retirees are covered under. These are problems that have been created 45 years ago by the political philosophies we've adopted.

Europe is where Hawaii will be in 5 years or so. You see riots in Greece, Germany, France, and all the other countries with very liberal public pensions offered to the public sector employees. There is no money to pay the promised entitlements. They are also raising the cost of higher education. So people riot.

In the U.S., California, New York and all of the very liberal union-controlled states will be facing what Europe is now experiencing. It's no secret as to why these States have re-elected the very liberal politicians who got us into this mess. States cannot print money. The Federal government can. So these states expect the rest of the fiscally responsible states to bail them out. Based upon the recent election results where the Taxed Enough Already group taking over Congress, that's not likely to happen.

So the Fed tried another tactic. Cheapen the dollar by issuing $600 billion (printing) in debt so that companies in the U.S. can sell goods abroad. Har! The dollar got stronger. The Euro practically melted down and may crash in the next few months if something isn't done to stabilize the currency. Remember, a currency only has value if people trust the government issuing that currency. And right now, they trust the Euro less than they do the American dollar.

I received some very vile and angry emails when I opined that since Hawaii won't face their pension problems in a responsible way, taxes will go up. To shelter yourself, you must choose not to be a Hawaii taxpayer. People called me selfish, traitor and many things I cannot print. I invited those people to voluntarily pay more taxes to show how much they care for the people of Hawaii. We must choose to control our individual destinies. Giving the government control over your life is foolish.

I'll give two illustrations of my point. When the government passed laws about fuel standards and required gas to have a 15% ethanol mix, prices went up. Creating ethanol uses more fuel to plant, grow, harvest and convert the corn into fuel. Further, the corn is taken out of consumption so the cost of corn as well as beef and pork goes up because it costs more to feed these animals. The ones who gain are the government employees who are added to the payroll to oversee the program.

The second thing the government does is they lie to the citizens. When they declare that all federal pay will be frozen for two years, it doesn't mean that Federal employees won't get pay raises. It is the pay scale that is frozen. Employees will still be able to move up in pay by moving up in the GS pay system.

For those who don't understand how serious this problem is, consider that if the Hawaii ERS has $6.2 billion in unfunded pension liability, then the taxpayer must not only deposit the yearly normal cost of ongoing pension funding, but somehow amortize this $6.2 billion. If an acceptable amortization schedule is 10 years, then the taxpayer must cough up $620 million each year for 10 years just to retire this shortage. Let me repeat that. $620 million additional taxes that the State of Hawaii must collect each year to retire that liability. Add the $10 billion of unfunded healthcare liability and we're talking an additional $1 billion a year to that $620 million.

This is a huge problem. And it was never debated during the past election cycle. Not to find fault, but to find solutions. It's also noteworthy that the unions in California are pressuring their elected officials to continue paying the entitlements that they're legally entitled to. Like the people of Hawaii, they want benefits but don't want to pay for them.

Our kupunas end up as the big losers. Most will not move to another state so they have to continue to pay Hawaii taxes. The government will be pressured to increase social services, financial aid and it appears that our elected officials will readily comply. Private investments will leave Hawaii and businesses will be called upon to pay more in taxes. When unemployment insurance costs go from $65 to $1,000, companies would be less inclined to hire more people. When health insurance costs go from $900 a month to $1,300 a month per employee, companies not only will curtail hiring, but may lay off employees.

Theoretically, this means there will be more people who have free time to volunteer. Hopefully it'll be in the area of assisting our kupunas. Thus far, this has not happened. Volunteering presents the volunteer with opportunities to show others his/her work ethics, discipline, talent and abilities. This could convert into fulltime employment.