America’s Blurry Vision

America is at a crossroads.  We sit here on the edge of a fiscal cliff fighting to determine if tax hikes or entitlement reform is going to lead the day.  As we fight to raise our debt ceiling critical questions are not being answered and seem to be ignored time and time again.  How did we get here?  Why did we get here?  And how do we avoid getting here again?

When we rescued two of the three American car companies we did so by removing huge debt and the liabilities of their underfunded pension liabilities.  Did we address why they were all failing to begin with?  Were VW, BMW, and Mercedes in Germany rescued?  Did Japan step in to support Toyota, Honda, Nissan, Subaru or Mitsubishi.   There are concrete reasons why two thirds of the American auto industry was failing.  The truth is that America’s other smaller industries are just as affected but don’t have the glitter and prestige of the auto industry.  Many have already disappeared.

Unfortunately, the hidden statistic that never reaches the lips of leaders in Washington is that the United States of America has had 38 years of consecutive trade deficits.  Our current account deficit is 10 times worse than the worst country in Europe.  The EU as a whole carries a $32 billion trade gap with the world which sounds large until you realize that the United States of America has a trade deficit of $600 billion annually.  So the question needs to be asked, how is it that a continent stocked full of high cost socialist governments, scarce natural resources, expensive energy prices, speaking 23 languages, and with a 200 year history of intra-continental war, can out-produce and out-ship the United States of America.   Aren’t we the most innovative entrepreneurial land on earth?  Are we not the land of Facebook, Google, Microsoft, and Under Armour?

If you ask many of today’s leaders they will tell you that the new order of the day is an economy based on services, or they may tell you that manufacturing has left and will never come back.  Some will say the cost of manufacturing in this country is just simply too high.  Has anyone told LEGO’s, made in Portugal, or Playmobile, made in Germany that costs are too high?  With 300 million people in this country why was it considered impossible to find a few hundred willing to work for reasonable wages so we could outfit our Olympic athletes in clothes made in the USA?

It is time for a reset.  As a country we need to reflect upon the structure of how we operate and then begin to make the necessary structural changes – regardless of the blow-back from those seeking to benefit from the status quo.  There are many things that need changing as America’s issues are not the result of just one or two burdening policies, but many small issues that together can seem overwhelming. The Chinese call this death by 1000 cuts and we can’t allow this paralysis to threaten the future of our country.

Complicated tax rebates, loans, grants, and special incentive programs while well intentioned, are actually a burden to business, especially small businesses that don’t have the resources to handle them.  A business that is losing money cannot use a tax deduction when it is already losing money.  What business in America needs are not specialized manufacturing technology centers and special start-up technology programs, what a thriving economy needs is simplification.

An entrepreneur to be successful must focus.  They cannot be distracted with complicated tax codes, layers upon layers of insurance protections, human resource processes, burdensome licensing and environmental regulations, and complicated legal contracts. When an organization reduces operational processes it increases efficiencies which in turn creates the necessary focus on providing a better product or service.

Starting a business with core knowledge is not as difficult as some may think.  However, growing a business to any substantial size is exponentially harder.  Once a business grows to $40 million or 100 people it becomes subject to a bevy of interstate and intrastate rules and regulations that don’t affect smaller businesses.  Most companies are completely unprepared both financially and operationally to handle the overwhelming onslaught of regulatory obligations that come when a company achieves these new milestones.  It is my opinion that this is one reason you rarely see new small manufacturers opening production plants in the US.  The labor regulations, the environment regulations, and necessary permits are just the beginning.

If none of these regulations stunt the growth of a new manufacturer, the product and worker liability burden will surely take a huge bite out of any potential profits.  For in America, where companies are not reimbursed for successfully defending themselves in court, the cost of unwarranted litigation is a serious threat.  With over 1.2 million licensed legal professionals in America, frivolous litigation is rampant.

We need to be able to stop pandering to the entrenched interests and start creating visibility to the obstacles of business then remove them one at a time.  This is not as difficult as it sounds.  What is difficult is finding those with the courage to get this done.

Jay Steinmetz

CEO

Barcoding Inc.

Member of the Maryland Small Business Commission

 

 

Attitudes Towards Industry

China is too busy building things to worry about legal issues, the US is too worried about legal issues to build anything.  Hence the largest transfer of wealth in the history of the world.

Tax Simplification for Businesses

There are numerous policy proposals that would contribute to a more simplified and efficient tax regime in the United States. While individual states and jurisdictions cherish their individual taxing authority, universal policies can be championed on a national level that would reduce the burden on taxpayers and more importantly the businesses that are the engines of the democracy.

 

a)      Sales Tax

• There are 9,998 sales tax jurisdictions in US (over 5,000 in just 5 states: TX, MO, IA, AL, OK)
• In 2011, there were more than 1,000 tax law and/or rate changes in these jurisdictions causing additional compliance and regulatory burden
• There is a tremendous burden on businesses to track sales of goods and services, remit taxes appropriately, and face onerous penalties for inadvertent failure to comply; and differing tax bases and definitions further increasing complexity.

 

Adopting a uniform national sales tax partnership (I.e., one rate, one return administered by the federal government with most of revenues sent back to states to pay for schools, roads, etc.) between the federal government and the states is a win-win for all taxpayers by reducing complexity for businesses, increasing business compliance, increasing understanding and predictability for consumers, and equitable sharing of tax dollars across the nation. In addition, the costs of administration can be handled by a central authority (which should be more efficient) rather than burdening states with the costs of administering these taxes separately. If legislative negotiations are required, each state could provide a clearinghouse for these transactions under a uniform set of regulations.

Sales Tax Changes

There are almost 10,000 sales tax jurisdictions in the US (over 5,000 in just 5 states: TX, MO, IA, AL, OK);
– In 2011, there were over 1,000 tax law and/or rate changes in these jurisdictions causing additional compliance and regulatory burden.
– There is a tremendous burden on businesses to track sales of goods and services, remit taxes appropriately, and face onerous penalties for inadvertent failure to comply and differing tax bases and definitions further increase complexity.

Adopting a uniform national sales tax partnership (I.e., one rate, one return administered by the federal government with most of revenues sent back to the states to support state projects) between the federal government and the states is a win-win for all taxpayers by reducing complexity for businesses, increasing business compliance, increasing understanding and predictability for consumers, and equitable sharing of tax dollars across the nation.

Improving Sales Tax Collection While Reducing Drug Dealing (Just an idea)

We are faced with critical federal budget issues both on a federal level and on a state level.  America needs to be smarter with how we manage and control the governmental resources at our disposal.  The federal government can assist the states with increased revenue by providing better tools to track American currency.  Since 1929 the US dollar has been traceable by serial number.  However, the technology of today can now providing better ways to utilize and process this information.  The federal government needs to modify printed money in a way that converts the serial number to a machine readable bar-code with human readable information also included.

What is the purpose of adding a bar-code to money?  Once this is done the states can transition to new more efficient tools to collect and manage tax revenue.  For instance a state could create a process that discounts sales tax for items scanned at the  “point of purchase”.  To use Maryland as an example we could adjust the sales taxes down from  6% to 5.75%.  The scanned serial numbers are transmitted through a standard XML interface to a central site that aggregates transactions by EIN, date/time, location (Geo-locate).  There is a huge amount of the local economy that simply doesn’t pay the sales taxes to the government because they don’t report the sales tax or the full transaction as a whole.  For companies that don’t scan at the point of purchase the government would increase the sales tax to 16%.  This would not happen all at once but over a period of time.  This means that they either scan it upon purchase or offer their products at a price that puts them at a disadvantage to their customers who have to pay extra at the register.  Eventually this extra tax will manifest in people attempting to avoid paying the tax all together which will expose the retailer to provable tax fraud or force the retailer to use a system that more accurately prevents the opportunity for fraud.  The additional benefits to this will include tracking dirty money and exposing counterfeit money quickly.  For example, imagine if you arrested a young kid for concealing drugs, the police could track the actual money used in the transaction and flag that money when it re-appears during a future monetary exchange.  If a bill appears in Baltimore and Tucson at approximately the same time it would evident that at least one of the notes is fraudulent.  Notifications can be sent out immediately to retailers who bear the liability of accepting bogus dollars.  Creating visibility to how and where our currency is being used will allow us to better confirm that everyone is contributing to the costs of our society.

Keeping the lights on

While I cannot say I have any expertise in this space, I feel that the powers that influence the direction of American energy independence are too powerful.  Policy should be defined and only modestly changed.  Significant changes in policy from administration to administration create too much uncertainty and therefore a decrease the volume of investment.  75% of the ridiculously large US trade deficit is energy so this is a PRIORITY.

The US Energy Department should be supporting all energy sources with an emphasis on renewable and safer nuclear alternatives such as Thorium.  (This Thorium a home run for the US as we have secure domestic supplies in abundance)

With regards to solar power, the US Government should purchase a few key solar patents under a third party source, license them out to specific US and select foreign companies.  Once this is done they should then mandate any subsidies be given to companies that follow the patented technology or process.  This is just a creative idea to spur domestic production and sale. (take it for what it is worth)

Trade is the real issue

When you have thousands of companies whose job it is to educate on the complexities of the layers of laws protecting workers, it costs the business time and money.  Eventually you get to a point where you cannot effectively compete internationally with other countries in producing ‘widgets’.  Soon company after company that produces ‘widgets’ shuts down and the local population can’t even find a pair of khakis or a towel made in the host country.   The end result is heightened unemployment, large trade deficits, and ballooning budget deficits.  We can give everyone healthcare, protect everyone’s rights, and ignore either of two options:

Option I:  We figure out a way to tax products coming into the country for the lack of environmental, legal and social protections that we have here in the US.  At the same time find a way to remove the burden on the domestic supplier when exporting goods.

Option II:  Reduce our own protections to equalize the difference between us and the other guys.

Do we have any more options?  Anyone care to suggest an alternative?

American must establish a preferential voting systems

Preferential voting systems are majority election systems where candidates must receive an absolute majority, 50% plus 1 of the total formal votes cast to be elected.

The term “preferential voting” means voters can select preferences for candidates, ie. who they want as their 1st choice, 2nd choice and so on.  It is not necessary people have second or third choice but the option makes it easier for people to feel comfortable voting for a third party candidate without wasting ones vote.

Action Plan

To reverse 37 years of trade deficits we need fundamental change in our policies to include:

• Uniform commonality of how to implement tax policies between states setting up a common “best practices” protocol and call out any state that fails to support these protocols
• Support an national sales tax or VAT tax
• Reduction of restrictions, certifications and controls on business to allow them compete with less burden
• Removal of annual property tax on business assets excluding the actual physical building.  Most people don’t realize companies have to pay taxes on the assets in the building annually
• Restrict the number of federal college loans for degrees that are not in demand
• Offer subsidies on degrees that promote the jobs in high demand
• Provide green cards for foreigners with advanced degrees that take jobs in the US for a specified number of years
• Open green cards for people wishing to immigrate, willing to pay for the vetting process, and able to pay a little bit more for the rights to be part of our system
• Modify the legal system to promote loser pays
• Validate all government identification systems are UID/GS1 compliant or replace ones that are not
• Require that all government contractors own or operate a business that is 51% commercial/manufacturing
• Re-think unemployment insurance – Don’t take money from companies with a strong payroll to give it to the government to fund unemployed.  Sponsor the opportunity for companies to hire people instead of just giving it to the government.  Just keep the money in the company as long as net income of any individual within that company doesn’t exceed $250k and average salary for the company in aggregate doesn’t exceed $75k.
• Tie bonuses in food stamps aka SNAP to a lack of unexcused absences by the kids of the people who are getting the SNAP funds
• Pass TERM LIMITS by creating visibility to each person involved in making a decision to see it pass.  Walk the bill through the required sub-committees. Make each candidate swear a pledge to uphold these term limits.
• If the government is paying for your healthcare and you are not contributing you should not have significant legal recourse

The formula needs to change

America can only reverse manufacturing declines and subsequent 35 year contiguous trade deficits by fundamental changes in how we operate our government and the laws that burden business.  Things will continue to only get worse with a series of band aids applied by polarized leadership influenced by ever increasing special interest money.  To reverse the trend we need public financing, term limits and the desire of our executive leadership to not defer to congress to make the difficult choices.