Bentzen’s Blog

HR 1 – The New Stimulus Plan
by Brian Bentzen

$825 billion is a lot of money.  It’s a lot of your money.  And it is up for grabs.  A lot of the money would go towards tax breaks, but the rest will lead to increased spending and larger government.  This money could be put to great use, but should it be used at all?  

I’ve been reading a bit about this bill, and even went so far as to download the full 647 pages.  The bill itself is broken down into all of the various categories of spending that are involved.  There are sections about energy, transportation, medicare, medical records, military, education, tax breaks, etc.  The end result is much greater government spending, but much of the spending is via existing government fixures that will come to depend on the new income stream (over the next two years).  When the money runs out, we’ll already be in the more debt than ever before as a function of GDP.  We’ll be deeper in debt than at the end of World War 2 and worse off than when Reagan dealt with the deficit in the 1980s.  

The New York Times posted a blog article today that chronicles the thoughts of six leading economists.  I agree with Stuart Butler’s opinion.  In order to grow, we need to reduce the size of government, reduce costs and cut taxes.  Our corporate taxes are the highest in the world.  When we overtax our businesses, we put them at a competetive disadvantage compared to foreign businesses by forcing them to raise prices to pay their taxes.  Ultimately, you pay their taxes every day at the cash register.

If we must spend money we don’t have, we should spend it on programs that will pay back dividends.  Education, agriculture, progressive energy and transportation infrastructure should be the backbone of the stimulus.  These types of projects can be implemented by the private sector through guaranteed low interest loans offered to business owners or new startup companies.  The answer is not more government jobs, but the government offering the opportunity for free market Americans to create jobs for themselves and others.

After this bill goes through, the government will be left with almost $1 trillion in debt.  The Fed has the power, really, to create money out of thin air.  This creation of US dollars is intended to cause inflation, which has been close to flat in the past year.  With the new money, the Fed is now planning to buy treasury bonds.  This will put the newly printed money directly into government coffers.  For the short term, this may work well as a means of funding our record debt, but it may lead to inflation down the road that could come back to harm us in the end.

What do you think about the record government spending?  Who do you think the record stimulus should go to?  Get in touch with your congressman and let them know before we wind up with larger government and greater debt.

Time for a Fair Tax
by Brian Bentzen 

The Fair Tax is a proposed change in tax law that would completely eliminate the federal income tax, replacing it with a progressive national sales tax. I think this is the single most important economic bill of our time.  It promises to alter the distribution of tax away from the poor, who in many cases pay a disproportionate tax due to FICA and payroll tax withholdings.  It promises to keep American corporations in America and direct foreign investments to the US by rewarding US companies for staying on US soil.  It reduces government spending on tax collection and saves you time and stress since you would never need to file another federal tax form.  It works with the state sales tax system already present in the vast majority of states.  And in the end, it encourages financial strategies that will help Americans help themselves.

Why is change a good thing?

Our current tax system is archaic, over 60,000 pages long and requires a specialized industry to help prepare taxes. Additionally, 83% of large corporations (who pay a large percentage of the taxes) have overseas subsidiaries located in tax havens, allowing them to avoid a portion of the tax they arguably owe the government.  The American people waste an incredible sum of money ($11 billion in 2007) just to pay their tax collectors.  The sum spent on tax preparation at H&R Block in 2007 was $2.686 billion according to H&R Block’s 2007 Annual Report, and they have about a 50% market share according to a quick google search.   This means that our current “good thing” is costing the American people on the order of $16 Billion a year.  Our current taxes are not as progressive as you have been led to believe.  Although generally speaking, high income earners pay much more than low income earners, the FICA and payroll taxes add up 15.3%.  These taxes are in addition to income taxes.  If you are making minimum wage you still pay these taxes, but income tax on the money you earn, increasing your tax rate from what you may believe to be low or even 0%.  Consider the unemployed, independently wealthy individual who earns only capital gains and dividend income.  This person pays 15%, less than his housekeeper, chauffer, nanny, gardener, etc.  

How would Fair Tax affect me?

I don’t think anyone knows the exact answer to this question.  Prices should remain fairly stable, even with the added sales tax, because the tax that corporations are paying now will just be payed at the cash register by you.  This is not, however, a change from current practice.  You are already paying the corporate tax every day at the cash register.  The overall effect should be a decrease in the amount of tax every individual pays over the course of their lifetime.  The reason for this is predicted economic growth and decreasing tax fraud by forcing everyone to pay tax, including tourists, criminals and illegal aliens.  

Unburden the Poor

You would not be completely free of paperwork.  You would still need to submit a Family Consumption Allowance (FCA) form.  This form is the key difference between a flat tax and the fair tax.  The FCA would refund the tax up to the poverty level for all families.  Families living under the poverty level would thus pay no taxes, while the richest people would pay closer the full tax rate.  Those who did not submit the form would pay the full tax rate without a refund.  

The Family Consumption Allowance is $10,400 per adult and $3,600 per child.  The annual rebate is $2,392 per adult and $828 per child.  This rebate would be applied monthly, with a direct payment to your bank account.  For the poor, this is effectively a 100% tax rebate.  For those who spend millions, this refund is just a drop in the bucket.  

An Investment in American Business

The Fair Tax removes the tax burden from corporations, who normally pass that burden on the consumer.  The US charges the world’s highest corporate tax.  Businesses move overseas for one reason, higher profit margins.  Reducing corporate taxes would reward companies who stay on American soil, and encourage overseas investors to come to America to start their businesses.  American products would become more competetively priced compared to imports due to tax advantage.

Encourage Savings

Gone are the days of IRAs and 401k’s.  These institutions exist only as a way to delay taxation.  The Fair Tax eliminates this taxation altogether, and encourages people to save now and buy later.  Additionally, this law will decrease the incentive to overspend on credit, by taxing the overspending at the time of purchase.  If you make $50,000 a year, you will take home $50,000 and you can do whatever you want with it.  If you spend all or most of it, like most people will, you’ll pay tax on all or most of it.  If you only spend up to the poverty level, you’ll pay essentially no tax.

Effective Tax Rate

The Fair Tax is a 30% exclusive tax or a 23% inclusive tax.  This means that if you currently make $100,000 you pay a 23% inclusive tax and take home $77,000.  Under the Fair Tax, you take home $100,000 and pay the same $23,000 tax (30%) at the cash register.  The tax you pay is the same under both systems, but under this system, your thrift, savings and financial planning is rewarded.

More Information

FairTax.org is an encyclopedic volume all about the Fair Tax proposal.  Wikipedia provides an excellent summary as well.  There will be more to come on this subject.  I’ll answer any questions and try to convince you this is the best option for America.

Goals for 2009
by Brian Bentzen

Happy New Year! It’s January 2nd and time to get back to business. The first rule of order for a new year is to decide upon or review your goals.  I don’t like calling them resolutions.  Resolutions are made to be broken. I’d prefer to set a goal so I can aim for a destination.  How I get there will be the fun part and doesn’t need to wait for December 31 for me to think about.

There are many ways to organize your goals. You could use post-its, write a note, make a diary entry, make a post on your blog, or just take a few minutes to think about what you want to accomplish. You can break your goals down into categories if you want to and into time frames. The key point is that you should try to be organized in your thinking so you can come up with some goals that are attainable, some that are not attainable, and some that might be attainable down the road.  I’ll divide my goals into professional, personal, and financial since I think these are all encompassing categories.  Then I’ll further divide the goals into short term (2009 goals), goals for the next 5 years, and long term goals (beyond 5 years)

After you define your goals, you’ll have to come up with a plan about how you would like to go about achieving them.  For psychological reasons I think its easier to start with the short term goals and check them off as you go.  

Next year I can review my goals and update them.  Many of them will probably stay the same, and many more will come up throughout the year.

Short Term Goals (2009 Goals)

Professional:  

Improve inservice exam scores:  

Every year of residency we take the inservice exam.  This exam approximates the real anesthesiology boards and you receive a score in your mailbox along with a list of suggested study topics.  This year I plan to organize my studying at least partially by keyword.  I’ll do small writeups on the keywords and post them on my other website, Anesthesia Explained, which is not yet up and running.  The rest of my studying will be by reading relevant chapters and topics, and wherever else I find gaps in my knowledge.

Complete a publishable case study:

We have to complete two writing assignments during residency, so I’d like to get one out of the way sometime in the next 12 months.  I already have 3 or 4 good cases to choose from.  The write-up and background research for these four cases are already started.

Increase web traffic:

The only way I know of to increase web traffic is by increasing content and providing information that is relevant to my readers.  I’d like to increase my posting to at least once a week, but will plan to keep my topics spread out over a number of subjects that I consider useful or interesting.  If some types of posts are more useful to you, just shoot me an email or comment about what you want to hear about.

Personal:

Two outdoor vacations:

The past few years I’ve gone on one to two skiing or backpacking trips a year.  I’d like to do some hunting, backpacking, skiing, cross-country skiing, fishing type trips.  One will be coming up in February or April and the other later on in the year.  I haven’t picked out a destination yet.  I’ll have to sit down with Melissa to figure out where we will go, and exactly when.

Continue working on marine reef aquarium:

This is my big little hobby.  I have a few tanks plumbed together.  The 90 gallon reef is in the living room.  Below it is a40 gallon sump that is plumbed to a 65 gallon refugium, and that tank is plumbed to a 40 gallon tank I plan to use to grow out small corals.  All told it adds up to about 180 gallons of salt water in my living room.  The other 55 gallons are taken up by rocks and sand.  I only have four little fish and three shrimp, but there are a lot of coral.  Maintaining the tank is a bit of work every week, but I plan to continue and would like to grow out enough coral so I can sell some and support my hobby.

Get back into shape:

I think I’m officially out of shape.  I have a habit of not working out much during the winter.  We’ve been cleaning out the garage and in a couple of weeks we’ll have some weights.  I’ve started doing squats on the exercise ball for ski season but need to do more cardio if I want to be able to enjoy a trip out west.  I’d like to get back a lot of the strength I’ve lost over the past year and would like to be able to run 5k in 21 minutes like I used to.  I could bench 225 pounds a year ago, but I’ll have to start at 135 pounds in a few weeks.

Home:  

The house needs some repairs.  The vent for the laundry goes through the ceiling in a very awkward manner.  This fall the vent hose sprung a leak, the drier plugged up with lint and the moisture damaged the kitchen ceiling.  To fix it, we’ll have to cut some holes in the living room and kitchen ceiling and put up new drywall.  I’d like to tile the kitchen, bathroom and entry.  Some rooms need a little bit of paint for color or touch up.  The back patio could use some more plants.  There are always a lot of little things to do around the house.  

Financial:

Save $1000 a month:

This really means I need to reign in my spending.  In July I’ll get a little bit of a raise, and my mortgage is going down by $100 due to a change in my local taxes, so I hope this is a reasonable goal.  I also have some debt to pay off, but its all in deferment until I have a better paying job.  

Medium Term Goals (2014 Goals)

Professional:

Complete residency, pass boards and oral boards, partnered in private Anesthesiology practice:

This goal is all about consistency, continuing to work hard and preparing towards my exams.  I’m not sure where I’ll be practicing after June 2011 when I am done with residency.  Part of me would like to go west and look for wide open spaces, but the other part of me wants to stay close to home.  So far, I’ve always stayed close to home for school and work.  

Personal:

Marriage, children:  

This isn’t entirely in my hands and will happen when the time is right.

Home:

If I stay in the Harrisburg, PA area I’ll plan to continue living in my current townhouse until I can get my higher interest school loans payed off.  I don’t want a big house, but I’d like to have some land.  I’d like to be at least a few miles away from the highway so I don’t have to hear it at night.  And I’d like to be able to look up and see as many stars as I can at my parent’s house outside Gettysburg.  This might mean a bit more of a commute, but I think its well worth it.

Fitness:

I’ll be 33 years old.  I don’t know exactly what kind of shape I’ll be in, but I want to be in better shape than I am now.

Health:

The is no way to tell what 5 years will bring in terms of health, but we eat pretty well most of the time and I’m active pretty much all the time.  I suppose I just have to keep my fingers crossed on this one and do what I can in terms of diet and exercise.

Financial:

Out of debt:

I may keep some of my debt around since I was one of the lucky ones who was able to lock in some school loans at an extremely low percent, but I have some horrible loans at 7-8% that need to go away fast after I can afford to pay them down.

Investing success:

I have always wanted to get into real estate.  If I stick to my $1000 a month goal, I’ll be able to afford a rental property relatively soon.  If things go well, I won’t stop at one and might start building.  

Long Term Goals (2041 Goals – Age 60)

This is too far away for me to anticipate.  I don’t like even thinking about this yet.  I don’t know what to expect, but I have a vague sense of where I could be, and where I don’t want to be.  

Professional:

Nearing retirement:

At this point, I have no idea what to expect.  We may see incredible advances in drugs, medical knowledge, genetic applications, etc.  

Personal:

Marriage and Children:  Hope to be still married and an empty nester at this point.  Maybe a grandpa.  This seems funny to think about since I’m not a father yet.

Health:  I hope to still be here!

Financial:

Ready for retirement:  If we stay around Harrisburg professionally, maybe we’ll retire somewhere out west.

It may be too young to have retirement goals at this point, but at least I am started to plan for it now.  At that point in your life, I think health, family and leisure are most important.

Your goals

What goals do you have?  How do you like to organize them?  Where are your priorities for the next year?