Obama's Reform on Taxes

Second to Japan, the United States has the second highest corporate tax rate in the world at 35%. Many critics argue that such a high tariff encourages companies to move their businesses overseas, which creates fewer jobs for Americans. On Wednesday February 22, 2012, President Obama released his plan for changing certain aspects to the tax system, which include lowering the corporate rate to 28%, lowering the manufacturing tax rate to an even lower 25%, closing a loophole that lets hedge fund managers and private equity executives pay taxes at lower rates than most working people, and imposing a minimum tax on companies with foreign earnings.

So, is this a good thing for America?

By having a lower corporate tax rate it will assist American businesses to compete with foreign corporations and urge expansion projects amongst companies, which will be preceded by development and job opportunities. However, to every positive aspect there are always negative ones.

For one, the White House is favoring manufactures (by giving them a 25% rate) over service-oriented companies—and who’s to say which one deserves more of a break? Isn’t it true that due to a rapid trend in globalization and technology that our world is becoming more interconnected and that manufacturing jobs in the US are being replaced with cheaper jobs overseas? Shouldn’t the United States move to a more information-technology economy and try to be the leader in such an economy?

This being said, manufactures benefit the middle working class because if manufactures get more of a break, they will be able to expand, and if they augment then they will purchase more and require more workers. In conjunction, manufactures are said to be the key aspects in the economy that spark innovation.

President Obama did not end all tax loopholes, so corporations will still be able to use their attorneys to get away with paying little to no taxes.  But, is it really feasible that the President try to induce total tax reform during an election year and with a split house in the Congress? No. So, for the meantime the American people should be glad that hedge fund and equity executives will be paying more taxes than they normally do. However, if Obama is elected to a second term, I think that he should advocate for ending loopholes for oil companies and for corporations.

Along with this, the President also advocated for a raise in costs for US companies operating overseas—meant to deter businesses from going to other countries and to keep them in America. Although this makes manufactures want to keep business in the US, it shrinks American jobs on world markets—essential for learning and progressing from others.

All and all, I would applaud Obama for lowering the corporate and manufacturing tax bracket, eliminating an important loophole, and raising taxes for those companies overseas, but I think that there is still more work to be done to the tax system. 

Working Together for the Middle Class

Most Americans can agree that the middle class is one of the most important factions in our political and economic society—probably the largest. It is the middle class that represents the United States democracy and stability, the American Dream, and the goal of providing a better life for one’s children.

In today’s economic turmoil, the United States has suffered from a shrinking middle class due to high unemployment and benefits and tax breaks that concern and assist the wealthy, corporations, and investment banks. However, the government officials in Washington are realizing that the middle class is necessary to preserve, and they are passing an important piece of legislation that will help ensure economic security for those Americans.

On Monday February 13, 2012, Republicans in Congress cooperated with the Democrats and passed an extension on the Payroll Tax Cut Bill and an extension on unemployment benefits. The Payroll Tax Cut decreases the payroll tax from 6.2% to 4.2% for the middle class. On average, this is about $40 dollars per week per, and is intended to help stimulate consumer spending and provide growth in the economy.

So, why all of a sudden did Republicans and Democrats work together to help the middle class? One reason could be is that this is an election year, and any party that gives a tax break to the middle class would be reaching out to a large voting bloc. Additionally, the GOP has been consistently associated with being the party of “no,” so maybe they decided to change it up and cooperate to do what is best for the middle class. Or could it be that President Obama’s ratings have been steadily rising and both sides—Democrat and Republican—are riding on his coattails?

No matter what the reason is, Congress collaborated to assist the middle class and the economy. Kudos to that! 

Stabilizing the Housing Market

Did you know that one in five Americans owe more on their home than what their home is actually worth? In 2007, tragedy struck the United States; due to lack of regulation, the housing bubble burst, leading to defaults on risky subprime loans, which induced the collapse of the investment banks in 2008. Here in 2012, Americans all over the country are still being hurt by the economic disaster that hit five years ago.

However, politicians today are attempting to hold the investment banks accountable and assist the millions of Americans who desperately need it.

Over the past few months, state regulators and officials have been talking about settlements of allegations on investment banks’ improper foreclosures of American homes based on faulty paperwork and deception of foreclosure practices through the reliance on the Mortgage Electronic Regulation System.

New York Attorney General Eric Schneiderman is one of the leading prosecutors who is suing Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and Ally Financial. This 26 billion dollar settlement will help over two million current and former homeowners who were harmed by the burst of the housing bubble in 2007.

Now, you may think to yourself 26 billion dollars? Taxpayers are paying for yet another bailout? Nope, that is the common misconception among citizens when they hear of this housing relief effort (which is the largest relief for homeowners whose homes have been foreclosed and whose debt exceeds their home value in history).

Instead, the investment banks will pay for the 26 billion dollar deal! This effort would finally hold banks accountable for their risky and corrupt actions that caused the crisis in 2007 and ultimately the recession.

So what are the benefits? Well, many economists and politicians believe that it will stabilize the housing market, aid consumers, and lay the groundwork for just practices in the future. Additionally, homeowners in trouble will receive aid and others will have their mortgage debt reduced.

On the other hand, many economists believe that this deal is not necessary and that the market will fix itself. Additionally, several wonder why banks should pay for aid and reductions for mortgages when the root of the issue was irresponsible spending and borrowing from the banks.

Personally, I think that this is a superb idea. The taxpayers are not paying, but rather the banks are—holding them responsible! Isn’t it about time that the United States hold these five banks liable for their corrupt practices? 

Working Together to Stop Insider Trading

Several Americans feel that most government officials are corrupt and abuse their powers and privileges. Almost all United States citizens can argue that partisan politics get in the way of creating real change within our government. Well, for a refreshing change in Washington, Republicans and Democrats are working together on a bipartisan bill! Yes, you heard it correctly; the right and left are finally collaborating to stop insider trading, which will ultimately ensure that officials are not taking advantage of their political influence for unjust capital gains.

The Republican-proposed bill to stop insider trading is fittingly called the STOCK (Stop Trading on Congressional Knowledge) Act, and on Monday January 30, 2012 the US Senate Committee voted on it, and the full vote is closely approaching.

Basically, this bill would prevent Congressional officials (members of Congress, their spouse, and their staff) from using nonpublic information (knowledge that they have acquired behind closed doors) for personal benefit. It would require all members of Congress to file and disclose all of their financial transactions of stocks, bonds, commodities, and securities within 30 days on their online website.

Republicans and Democrats alike are pushing for the act to go even further—to apply the act to the Executive branch as well!  Our government was founded on checks and balances, and not only will this bill “check” the Senate and the House of Representatives, it should apply to the President and Vice President too in order to keep the powers of the branches balanced.

One Democrat, Sherrod Brown, wants it to be completely illegal for members of Congress to hold stocks. I personally think that this is too extreme, as government officials should have the right to hold stocks like the rest of America, however, they should not be allowed to use insider information.

In President Obama’s State of the Union Address, he claimed he would sign a bill that bans insider trading, hopefully, STOCK will be passed by both the House and Senate and signed by the President himself.

If a law, STOCK would help restore America’s faith in their government, add legitimacy to the “rules of the game”, rejuvenate the belief that politicians are on the same level playing field when it comes to Wall Street, and would instill the pertinent message the politics is the business of public service—not profit.

All of this is well and good, but even if passed, how do the people know that Congress is not getting unfair tips and knowledge about the market? I propose that a committee be formed to enforce the law (when it comes into action which will most likely occur) and investigate in such matters. After all, this is a government of the people, by the people, and for the people and we should not let the pursuit of happiness and profit of some corrupt politicians tarnish the legitimacy of American politics.