Murray Tucker, Ph.D.: Cut taxes


— An open letter to Sen. Ken Salazar:

The campaign season is about over. It is now time for Congress to get serious about the economy. Consumer spending has dropped to its lowest level since 1980. It is the engine of growth.

In May, I wrote to your office opposed to the way the "economic stimulus" was effected. The effectiveness of that allocation is now known - about 20 percent - mainly because it went to people like me (it still sits in my money market account).

I proposed then and I propose again that the employment tax on workers be cut for the first $20,000 of income with a back end that recoups the revenue on high-end earners who would have received the benefit on the front end. The net result should be revenue neutral but also put money into hands of people who will spend it.

Murray Tucker, Ph.D.

Steamboat Springs


JLM 8 years, 5 months ago

What this effectively does is to inartfully transfer the tax liability of workers to higher earning workers, in effect, making the tax liability "progressive" which is simply cocktail party chatter for soaking the productive elements of society. This is something which Barack Obama would like very much.

The fact that it is "revenue neutral" is irrelevant.

There is however an important fundamental economic difference --- high earning workers are more likely to "spend" the discretionary funds available to them on retail goods and services as they have already paid for their basic needs of shelter, clothing and food. This discretionary spending will ripple and expand through the economy.

Lower earning workers are likely to spend the money on things which will have a lesser "ripple" effect (including the basics) thereby blunting the impact --- perhaps even going backwards. Renting a more expensive apartment does not have any real impact on the economy.

What we really need to do is to lower everybody's taxes and thereby create jobs, jobs and more jobs. It takes money to create jobs and tax increases on those whose hands are on the job creation mechanism reduces the capital available to create and sustain jobs.

We are looking at some very goofy and untested theories while we know that tax decreases spur the economy.


Murray Tucker 8 years, 5 months ago

JLM. PLease be honest. What did you spend your $600s on?


JLM 8 years, 5 months ago

Murray ---

Damn good question and honestly I don't even know if I received it? It is so inconsequential as to be less than meaningless and your are the first person to have inquired.

But honestly, I am in the process today of working up a "right sizing" progam for a small public company in anticipation of BO being elected. Thus far, I have determined to layoff at least 12 persons by year end, to reduce compensation by an average of 15% across the board, to cancel the wellness program and other benefit plans, to defer all new unit openings for at least a year, to defer all new units currently under development, to cancel all capital expenditures for at least a year and to operate solely for cash flow --- no new investments of any kind until further notice.

I raised a substantial amount of capital about a year ago in anticipation of continued growth and new jobs; and, have negotiated a new line of credit. It will all sit in the bank until I know what the BO impact will be on business. In my business career I have created literally thousands of jobs and now I will sit on the sidelines for at least a year.

The cost of this growth --- all of which was planned and expected --- has been a $6.5MM net loss carry forward which I will mine and exhaust before I pay another cent in taxes.

I will take no capital gains and I will finance my personal adventures by borrowing against real estate equity. I will organize my personal affairs to generate the minimum possible tax liability. I will defer the maximum amount of ordinary income into deferred comp plans until further notice.

Every public and private company CEO with whom I speak is undertaking a similar program.

Bring on BO. I will vacation in Mexico for a couple of years. LOL


Murray Tucker 8 years, 5 months ago

JLM: Are you blaming someone you refer to as "BO" for the current mess? Please explain. The real culprit lies in excesses of greed, not with ANY ONE elected official. I'm just a dumb retired economist who saw the handwriting on the wall in 2006 and got out of a second home that I can now buy back for less than I paid for it in the first place. You have a business plan, pull in, avoid taxes, etc. These are all business decisions on your part. Incidentally, as your personal finance advisor, you should wait to mine any capital loss until the new tax law is passed as it will increase from 15% to 20% the value of the loss.

But thanks for making my original point-that the "stimulus package" was poorly targeted. As for my plan, yes it will have a progressive tinge to it. Anyone earning less than $103,000 a year will get a 6.1% wage increase on $20,000 that will diminish to nothing by the time earnings reach $250,000. Now, how important is $1200 a year to a person earning $20,000? Will he put it in a money market? How important is $1200 to a person earning $103,000? How important is $1200 to a person earning $250,000.

You've told me that you don't even know if you got your stimulus money ($600) and probably don't even care. You've answered my question. Believe it or not, you agree with me.


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