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IN FOCUS: Is a flat tax the best way to get America booming again?
STEVE FORBES: David, I am not going to disappoint you. Yes, the nightmare on Main Street is about to end. Rick Perry is going to propose a flat tax, generous exemptions, rip out this 10 million word monstrosity that is going to do several things. It is going to lower the price of good things like risk taking, success and productive work. It is going to get rid of a lot of corruption is Washington. Half of the lobbying revolves around the tax code and it is going to give more time to the American people. Last year we spent 6.5 billion hours filling out tax forms, the equivalent of 3 million full time jobs. Liberation is at hand!
KYM MCNICHOLAS: Not really, I mean we all agree that we need a less complicated tax code, we really all agree about that but it is regressive. It helps the rich and hurts the poor. The Tax Policy Center has said it will raise taxes for 84 percent of Americans and cut taxes for millionaires and billionaires. So helping the rich and hurting the poor, we can't afford it.
RICH KARLGAARD: Yea, you can add a little progressivity into it that way, but come on Kym either you are progressive, flat or regressive. You can't be flat and regressive at the same time. Flat is flat and you know the moral foundation for flat goes all the way back to the book of Leviticus in the Bible which talks about a double tyth, 20 percent. You know 20 percent is a pretty good number. Nobel economists at Stanford and Hoover Institution come up with numbers something like 20 percent. Steve is consistently talking about 17 or 18 percent. Hong Kong has 15. So that 15-20 percent range, you get the most revenue with the least amount of damage to prosperity and that is the magic place you want to be.
VICTORIA BARRET: Leave it to Rich Karlgaard to come up with that one. Look I love the idea of a flat tax; our tax code is enormously complex. We file taxes; we don't even know what we are filing honestly. But I am concerned that a flat tax coming on the scene now poses two problems. One, it lets politicians dodge the issues of entitlements. I want to see them say what is going to happen to social security, which is facing a $46 billion deficit. What are we going to do with Medicare that will actually bring the cost down without gimmicks? Speaking of gimmicks, you know Steve I am also concerned a flat tax can also be full of gimmicks. I mean you could see lots of handouts in those lobbyists you referred to will fight hard to stay employed.
MIKE OZANIAN: Well first of all with the flat tax you think Liberals love it in the sense that actually after the marginal rates were lowered in the 80's, the top ten percent of earners paid a higher percentage of overall taxes to the U.S. treasury. I mean you are not going to have corporations setting up phony offshore trusts to hide revenue. It is going to simplify things. Look, Tim Geithner can't even figure out what his income taxes should be, the Treasury Secretary. I mean how can you expect the average American to do so? No a flat tax is much simpler and will generate more revenue.
ELIZABETH MACDONALD: Yea that is interesting. Well, you know I testified about tax reform and I testified before congress about IRS reform and mentioning the flat tax, yea I think that the rich could pay more under it because it would stop them from doing tax evasion with a higher rate. But let's face it, Russia has got it. Astonia has got it. Lithuania has got it. We are stuck with the IRS tax code that makes War and Peace read like a church pamphlet. The problem is that congress has drilled so many loopholes back into it, and mentioning Russia and Astonia you need a one party system to enact it because with all the special interest they are going to turn it and twist it again.
Is giving visas in return for home-buying the best fix for the housing market and economy?
MIKE OZANIAN: It is a terrible deal David. We shouldn't be letting people into this country based on what kind of home they can afford to buy. We should be letting them in based on what kind of people they are. A lot of people that come into this country and help our economy are low wage earners or people that are just starting out. They are the people that help innovation in this country. Not necessarily because they can afford to put $500 thousand down for a house.
ELIZABETH MACDONALD: No it is a good idea. And by the way, I like how we were for companies repatriating foreign profits but we are not for foreigners coming in and bringing money in to buy houses to help the housing market. Look, Canadians and Europeans have helped the housing market and really distressed states by buying second homes, spending tourist money there. It would not mean that they would get a permanent work visa to live here, they would still have to apply for that and you could do it. You could get China also to invest money here in houses. 1.5 million Chinese said recently in a study, 60 percent of them said you know we may want to get our money out of China and invest it elsewhere in foreign markets, so why not in our houses?
VICTORIA BARRET: I couldn't agree more! I think this is so wacky that yet again we want to artificially stimulate housing prices. Have we earned anything in the last five years? Again, to echo what Mike said, I mean we want to attract people to come to this country and work really hard and build companies that create more jobs, not just buy houses. I mean it does not make any sense.
RICH KARLGAARD: Gosh I don't know why you see this as either or Vick. I mean I want both talent and capital. I like this idea, give somebody a visa if they come and spend $500 thousand on U.S. housing. I also like the idea that if you get a technical degree at a U.S. university and you are foreign born, you get a green card the same day. We should be a magnet for talent and capital. If we are a magnet for talent and capital, which we have historically been, we will boom again and start growing at 4 percent a year.
DENNIS KNEALE: It really wouldn't be a drop in the bucket. First of all it is in really poor taste. Whatever happened to your tired, huddled masses yearning to breathe free? Second of all, foreign buyers were only 5 percent of property purchases last year anyway. $80 billion, so what? And as long as we are now going to say that visas are up for sale guys, why don't we just start selling visas to the highest bidders? Let in only the rich. Then we will expand the tax base of the richest one percent so we can pay all the benefits to occupy Wall Street.
STEVE FORBES: Hey David it is a gimmick but hey, why not make $250,000, emboss the diploma with the green card if you graduate from a high class university here in terms of high tech. Do all of that. But really in terms of helping housing though, a big thing would be David, and my hobby horse is why not let people whose houses are underwater refinance at these low rates. Fannie and Freddie won't let them do it. There are positive things we can do for housing here at home. Foreigners, icing on the cake but let's deal with the cake itself.
Should we scrap the post office now, before the union puts taxpayers on the hook for billions more?
DENNIS KNEALE: David it already may be too late. Look at some numbers here. The Post Office has lost $20 billion in the last four years. Those loses are getting bigger, $3 billion in the last quarter. It stopped paying $800 million a year to its own retirement fund for employees and it owes $5.5 billion to that retirement fund. With a few months we are going to get stuck and this is a service that specializes, its business is down 20 percent, in delivering the junk mail from companies that we throw out at really cheap rates instead of commercial rates. Raise your rates on companies, spit if off. FedEx and UPS will bid to buy it and chop it up.
VICTORIA BARRET: Look you can't just junk the post office. There is incredible value in what the post office does. Ti is an immense distribution system. That is worth a lot. You can't just junk it. I like sending Christmas cards Dennis. You get one every year. There is real value here. The union contracts are a problem, you need to rip them up, that is true but you can't just junk the post office.
STEVE FORBES: You are not going to stamp out the post office, but what we should do is privatize the post office so that is does compete. Remove the monopoly on first class mail and let it be like any other company. One thing to prevent, David, is what happened with the SNLs when they tried to bail them out 30 years ago. They allowed them to go to other businesses and as a result, taxpayers were stuck with a $200 billion loss. Post Office, don't let them do that unless they are a private company.
KYM MCNICHOLAS: No, I don't think that is the answer, I think the answer is in Congress. The Inspector General issued a report in July that said Congress has overcharged the United States Postal Service to the tune of $75 billion for retirement benefits. Why not make them pay it back? It will solve the whole problem.
MIKE OZANIAN: The Post Office desperately needs to be privatized, but David you made a big mistake leading off the segment. You used brains and auto bailouts in the same sentence I believe. This guy [Ron Bloom] is just coming in to save union jobs. General Motors is the bottom of the heap in the auto industry when it comes to revenue and operating income per employee and he is offering nothing to streamline the Post Office.
INFORMER: Stocks to help you fight inflation
KYM MCNICHOLAS: McDonald's (MCD)
VICTORIA BARRET: Amazon (AMZN)
DENNIS KNEALE: UGI (UGI)