Significant changes needed to help the little guy

The U.S. has suffered a recession about every four years since the American Revolution. They used to be called “panics,” because they were. A recession is less scary.

Every panic had the same root – someone(s) with money/power manipulated a market for their advantage. They made money. The rest of us lost. House and gasoline prices are just two recent examples of this. I would like our Legislature to work on insulating us from these pyramid schemes.

Housing inflation needs to be controlled. Any product is worth only what someone pays for it. Assessed values for loans and taxes are speculative and inflationary. For tax purposes, the purchase price should remain the assessed value until resale or refinance at a higher price. Loans should be adjusted for recession realities.

A borrower who lost his job should have a year or more with no payments or penalties on his house, car or credit cards. Bad luck or market manipulation should not cause someone to lose everything they worked for.

When I was behind, I called every month to try to work something out. Every month I was charged late fees, plus $60 for a drive-by inspection to ensure that I still occupied the house. I am still paying these fees off.

I spent months, hours on the phone, hours collecting and transmitting forms and info the bank wanted. “You qualify for HARP” Two months later, “No, but we can do this.” Again two months later, “No, but...”

Finally, in frustration, I wearily asked if I had to go to a local branch and perform an unspeakable act before they would help – 59 seconds later a manager came on with a plan to get me back on track. No one should have to go through this.

Real tax reform needs to accommodate this business secret: Businesses do not pay taxes.

The price you pay reflects taxes as a cost, then marked up to cover the tax. Increasing taxes increases inflation until people won’t pay. It’s another pyramid scheme that collapses into panic.

Let’s concentrate instead on closing the sales tax loophole. We can’t tax Internet sales, but we can place tariffs on imports, say $100/pound, with the option of paying a value tax equivalent to sales tax. Remember, we don’t have an income tax.

Outsourcing manufacturing or customer service to other countries affects local jobs and limits tax collection. These people are not paying L&I or any other payroll tax. Any retail price savings is offset by higher taxes to fund programs. If outsourced jobs were equivalently taxed, the rates could be lower to minimize some of the inflationary markup, and would bring some of these jobs back.

Credit card fees are strangling small business. I have paid as much as 5 percent to process a purchase. Your reward card is paid by the merchant. As with taxes, this is figured into the cost, then marked up.

Everything you buy is 5 percent to 20 percent more expensive to cover the cost of credit card processing. Your $4 latte can cost $1.30 to run the debit card.

Small businesses should be exempt from these fees. You are charged immediately when you use your card, but it takes up to five days for the merchant to see the money. Money should hit the merchant’s account when yours is debited. Authorization “holds” should be eliminated. These tie up your account and cause extra fees.

The argument against these types of reforms is that the banks will pull out of the market. I say OK. Someone will pick up the money they leave on the table.

Laws to prevent financial irregularities have not helped us. Let’s minimize panics with laws protecting people in such a way that financial losses are paid by the institutions that cause them, not John Q. Public.

Money will still be made, but without the boom/bust cycles we are now slave to.

Originally printed in The Olympian on January 21, 2013.