Nearly 80 years ago, Oliver Hardy moaned to Stan Laurel, “Well, here’s another fine mess you’ve gotten me into.” Well guess what, we could be saying the same thing to those who are trying to fix the economic mess that they’re partially responsible for getting us into this fine mess we’re in. It took one super-smart person from Harvard and one genius from Yale to come up with all that creative financing that has virtually destroyed our financial markets. Now we have 545 largely confused and misdirected elected officials trying to fix the problem. Why try and recreate the wheel when the easiest way to stimulate the economy would be to cut the tax rate by one-third immediately? A tax rate cut could go into effect now and be retroactive to January 1, 2009. Federal tax withholding on workers’ paychecks would drop. This would immediately put more money into the economy and stimulate every taxpayer to go forth and spend. Businesses would have to hire more employees to take care of the demand. Inventories would diminish immediately and warehouses and manufacturers would be happily forced back to full production. This would not be such a bad thing for retailers, trucking companies and media sellers; we might even generate enough sales tax revenue to help many states out of their financial deficits. Manufacturers might have to come up with new ideas to help fill the demand from all the new consumers with extra money to spend. Maybe a lot of American technology could come out of this new idea that if you work harder and smarter you can have more money to buy more and more. What if the tax rate for wage earners under $50,000 would only be taxed at five percent? Under such a plan, there would be almost no incentive not to file a tax return. If a delinquent tax amnesty period was combined with this new tax rate (at two-thirds of what Americans are now and taxed at only five percent for the first $50,000) an enormous amount of previously untaxed income, under-reported income and creatively deferred income from previous years, would be reported. This would bring in billions of new tax revenues into the government’s coffers. Imagine if the Capital Gains Tax were reduced to 10 percent. There would be no need for real estate 1031 tax-deferred exchanges or other tax-free havens for large taxpayers. It would be cheaper to pay taxes than to hire lawyers, consultants and tax specialists to help defer the taxes into the next lifetime (or possibly never). This would be a tremendous windfall for the IRS. For decades, most large, profitable transactions have been made with no tax benefits to the State or Federal governments. With this modification, the government can tax the billions of dollars being made through tax- deferred exchanges, most of which are now tax free. The only losers I can see in this scenario are all those hard-working people in Washington D.C. who are trying to help us out. They will lose out on their share of the billions and billions of dollars in “pork” that will be created from all the bailout programs coming to us in the next months. The way I see it, the new musical playlist in Washington will be more of the same old tune. The rich will continue getting richer while the bottom 50 percent of the population who truly need help will end up with the same thing they have been getting for generations. It’s time to wake up our elected and appointed officials to make changes that will benefit all, not just special interests. In their 1929 film, Unaccustomed as we Are, Ollie lectures Stan on the virtues of common sense, just before walking into a gas-filled kitchen with a lit match: “You know, there’s a right and wrong way to do everything.” Our lawmakers could learn something from Laurel and Hardy, since they seem intent on doing things the wrong way and are about to walk into an economic kitchen with a flaming match. Rickey M. Gelb is managing general partner of Gelb Enterprises, a real estate development and property management company.
