Monday, January 11, 2010

Someone Who Isn't You

We tax all the others and pass the revenue on to you

It makes some people feel good when taxes are imposed or raised on corporations.  People like the prez think taxes aren't about revenue, they're about fairness.  We addressed that quirky notion last year.  These are the same people who support Oregon's Props. 66 and 67 on tomorrow's ballot.  Their idea of raising revenue is "We'll just take it from someone who isn't us."

Corporations don't pay taxes.  Corporate taxes are added to the cost of goods sold and figured into prices.  That means buyers pay those taxes, not the corporations themselves.  Buyers = you.

If that's too hard to understand, let me illustrate it another way.  The WSJ reports that the Obama administration is contemplating new bank fees.  This is, of course, the same administration that recently excoriated the banking industry for the high fees it was charging customers.  Do they have no sense of irony or shame?

The prez wants to use the money to help repay some $170 bil that has been lost in TARP bailouts, money that they already know isn't going to be repaid.  This is no more than a trial balloon for increased fees but it's one to keep an eye on.  The underlying message is that someone who isn't us is going to pay for the government's bailouts.  That'll make it all OK, won't it?

The TARP bailout, in case you have already forgotten, was an outgoing Bush administration/incoming Obama administration program to purchase or insure non-performing real estate loans.  We bought bad loans in order to bail out the previous purchasers of those loans.  If you think about it for even a moment you'll know that was probably a bad idea.

The idea was so bad, in fact, that we (you, me and the rest of America) have already lost $170 bil or so from just that one bad idea.  That's more than $14 bil in losses a month.  To put that in another perspective, it's 8-1/2 times California's projected deficit.  We bailed out the RE loans and we're gonna bail out CA pretty soon and CA looks like the more attractive choice!  We shouldn't bail out anyone (except me, of course) but do you doubt that's the way things are headed?  But I digress.

You should be asking some questions about the proposed bank fees.  "How much is it going to cost bank customers?" is one good question.  The answer is, the entire fee plus admin costs plus a mark-up.  You'll pay it in higher bank fees of your own (disregarding prior remonstrations about those high fees), lower interest earned and higher borrowing costs.  Did you think the bank was going to pay it out of bonus money or retained earnings?  Not likely.

The banking industry is healthier today than it was a year ago and that may be partly due to TARP.  I have trouble imagining lending institutions not doing well if they get free money to lend and are absolved of their bad debt.  Check out the latest stories about bank bonuses before you disagree.

The banks that are left today, including the ones that have paid back their TARP bailout money, are going to get stuck for the money that other banks aren't going to repay.  Does that make sense to you?  Should you get stuck with the part of your neighbor's mortgage that he didn't repay?  If you did, he could correctly say "Someone who isn't me is going to pay my bills."  Same thing.

You're going to hear a lot of ideas about how our TARP bailouts should/must be repaid, mostly from the people who shouldn't have made TARP investments in the first place.  They are scrambling to find neo-kulaks to demonize, marginalize and rob.  Rich guys are such easy targets, too.  If we make rich and evil and criminal synonymous then it feels more like our duty to fleece them to help ourselves.  It's a lot easier on our consciences, too.

Do you recall (this goes all the way back to yesterday) our prediction that CA would imposing more arbitrary revenue-generating measures that wouldn't be called taxes... but are?  How could I have omitted predicting that this would happen on the federal level too?

Someone who isn't you isn't going to oppose these methods of paying for bad decisions.  Someone who isn't you isn't going to demand that your governments stop their reckless spending.  Nope, sorry, it's going to be up to you to do it... and someone who isn't you is going to fight you every step of the way.

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If you owe the bank $100, that's your problem.  If you them $100 million, that's the bank's problem.
J. Paul Getty

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