CPA Blog

CPA & Accounting Topics for Business

Democracy in America

The recent passage of The Middle Class Tax Relief and Job Creation Act of 2012 by Congress that was signed Wednesday of this week by President Obama reminded me of Alexis de Tocqueville's observations on our democracy.....

"The American Republic will endure, until politicians realize they can bribe the people with their own money."-Alexis de Tocqueville

Who is Alexis de Tocqueville?
Alexis de Tocqueville was a French politician and social scientist who toured the United States in 1831 observing our political system, religious practices and the workings of our economy. He published his views in a book titled
Democracy in America.... writings I studied while in college.

 

And What is The Middle Class Tax Relief Act?
The Middle Class Tax Relief Act continued the reduction of the employees portion of the social security tax from 6.2% to 4.2% through the end of this year. It also extends unemployment and it adds funding to medicare.

The most costly portion of this bill is the reduction in social security tax. Under the act, an American earning about $50,000 a year, for example, will continue to receive about $19.23 more per week in the paychecks. If you earn $100,000 per year you will continue to receive $38.46 per week more than if the reduction had never been enacted.

This bill according to the Congressional Budget Office will increase the deficit by $101 billion this election year. Net revenue increases in future years decrease the deficit resulting from this to $92 billion by 2022.

What does de Tocqueville have to do with The Middle Class Tax Relief Act?
So was this a wise move by Congress and the President to get a slow economy growing faster, thus helping you, the small business owner grow your business and get more people back to work? Or was this about political gain for both parties and the future payment of this deficit will fall on you, the successful small business owner in the future? Time will tell and the answer will probably be very hard on you, my dearest friends.

So what should you, the small business owner do?
Hold your congressman accountable for what you think should be done. Vote.... and prepare for tax increases. Make sure you are signed up with tax planning services because you will be asked to pay this deficit back and you don't want to have to pay one dime more than required by law. If you are currently not getting our tax planning services, get proactive about your taxes... now!!
So I will conclude this letter with one last sobering observation made by Mr. de Tocqueville.....

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years."-Alexis de Tocqueville

largesse:lar-gess; noun
1. the generous bestowal of gifts, favours, or money.

Tax the Other Guy, Too!
1099-K... Another Reason to Keep Accurate Records