- While Americans can't help but be fixated by America's
"Revolutionary" military operation called "Shock and Awe,"
designed to render great physical and psychological damage to the enemy
by raining down a huge number of devastating cruise missiles in a short
period of time, most are not aware that Americans are about to receive
their own economic "Shock and Awe." Many forget that while Rome
burned, Nero was busy deflecting attention away from the real center of
action.
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- The front page of Saturday's Washington Post featured
a huge picture showing the burning of Baghdad with all but five percent
of the front page devoted to the war in Iraq. However, at the bottom was
the "bunker buster" which will shatter our own field of dreams
here in America.
-
- The Post reported that "a few hours before the Senate
action, the House--meeting well past midnight on its version of the budget--voted
215 to 212 to approve Bush's full $726B tax cut request." Furthermore
with the House and Senate controlled by the GOP, it is expected that by
Wednesday, a final version of Bush's "growth and stimulus" bill
will be ready.
-
- Unfortunately, our government has not really made clear
what this tax law is all about. I consider this proposal to be the most
heinous change as it will destroy the ability of the middle class to sustain
their economic power while enhancing the upper classes.
-
- If enacted, this legislation which will deliver the final
blow to the ability of "Joe and Jane Average" to get ahead. It
should be pointed out that its title is a misnomer. This plan will not
stimulate the economy but will cause much larger deficits, which will be
borne by Americans as a result of the war, which is being waged. According
to many key economists, the proposed legislation will change the ENTIRE
TAX CODE OF AMERICA from a tax on income to a tax on consumption. At this
point in history, we are the only developed country not to have this form
of taxation which means Bush is globalizing our tax laws. In other words,
he is harmonizing our tax laws and system to conform to what the major
European industrial countries have. In my opinion, this basically will
set the platform for a global IRS.
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- Under this Value Added Tax-VAT, every time a purchase
is made, there will be up to a possible 27% tax on it. This tax will replace
the tax on income, making only consumption taxable while all forms of income
are tax-free. For those who have enough savings to live off of their income,
this is a windfall, but for those who have only debt with little or no
savings, this will create a financial burden equal to the Israelites having
to make bricks without straw.
-
- At the heart of this plan is the elimination of tax on
corporate dividends. Again, if you obtain your living from stock dividends,
this will be like going to heaven. No tax on INCOME--only a tax on what
you buy. Let's look at three different sets of individuals.
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- First we have Old Money Harry. He has never had to have
a real job because he gets his living from the family trust. All of the
family assets--the fabulous house, the cars, the summer homes, the yacht,
the Mercedes and Rolls are held by the family trust, along with title to
three large commercial pieces of real estate. Harry made several killings
buying and selling real estate because the gains were tax-free since they
were inside the family trust. The only downside is that the income from
the trust is taxed. However, under the proposal to reduce tax brackets
from 38% to 21%, it won't hurt as much. Harry will have 17% more to spend.
Only what you buy--will be taxed, however, if you have it in a trust--NO
TAX. Old Money Harry will achieve growth unsurpassed under the proposed
tax stimulus plan, just like the Kennedy's the Rockefellers, the Mellon's
and anyone else with this arrangement.
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- Next are John and Jane Middleclass. Both have reasonably
good jobs with attractive incomes. They both have advanced degrees and
live in the "executive home" to match their rising social status.
They lease a Lexus and Jaguar and think nothing of packing up and going
to Vale or to the Bahamas at a moments notice. They have re-financed the
house several times to add a new wing, exceptional landscaping and a pool.
While they know they are basically spending everything they are bringing
in, they rationalize by thinking about the rising equity in their home
and how much they will be able to cash out when they retire. Unfortunately
their 401k's got zapped during the NASDAQ crash.
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- Donnie and Susie Squeeze are twenty-five years old. Donnie
served in the military and works as a mechanic for the local Honda dealer.
They have three small children and Susie works part-time at the local grocery
store. They are saving for a down payment on a home and hope to send their
kids to college if they can afford it. Right now they are just barely making
ends meet.
-
- In order explain the proposed tax stimulus program; let
us take a look at who will come out like a bandit. Old Money Harry will
be able to double his assets because he has the right tools: a pile of
money and a trust. He will basically pay very little tax considering his
income and assets. The stock dividends will be tax free, all sources of
income, including trust income, will be tax free and what he consumes,
because of the trust will be tax free.
-
- Joe and Jane Middleclass will experience some drop in
tax on income. However, once the proposed stealth tax is in full force,
they may not have any tax break from the mortgage interest expense because
it had to be sacrificed in order to pay for the other parts of the tax
package. Since they have no savings, they won't have any benefit from the
tax-free sources of income. But because they like to spend, they will pay
21-27% every time they make a purchase. If the economy tanks and one of
them gets laid off, they will have to sell the house. If the economy is
not doing well, who will buy their house and at what price?
-
- Donnie and Susie Squeeze are about to be squished. Their
tax bracket will have to rise in order to help pay for the new tax law,
but since they have very little savings they really won't feel the benefit
of tax free dividends and investment income. Furthermore, when they can
afford the house, there will be no mortgage interest expense to deduct.
However, since they are still accumulating, every time they buy a car,
a dishwasher, etc, they will pay a hefty consumption tax. Unfortunately,
the thought of buying a house might be out of the picture since it too
will have a 21-27% tax. Lastly, because the U.S. is waging war at the same
time it has huge federal deficits and reducing taxes, the burden of the
economic "stimulus" will fall on them and their children, thus
rendering them equal to the slaves of Pharaoh.
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- Lastly, it is time to examine what George Bush stands
for because he will erase the middle class that has separated the type
of system America put in place from the rest of the world. Bottom line,
for the first time in our history, the United States will revert back to
the kind of system the colonists fled to get away from--a feudalistic system
of financial oppression where the rich were permanently rich and the poor
were permanently poor.
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- Joan Veon
- Veon Financial Services, Inc.
- 301/371-0540
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