Ahoy there, maties! Belay those taxes!

Making the leap from total irrelevance to barely relevant last week was the man who is described by columnist Jonah Goldberg as “The Human Toothache” – Sen. John Kerry.

It seems that the erstwhile Presidential candidate recently bought a luxury yacht valued at $7 million, built in New Zealand.

Now, I don’t really care how Kerry spends his money, he married it legally. If he wants to stimulate the economy of New Zealand, that’s his business. The problem, it seems, is that Kerry, in order to avoid the exorbitant excise and mooring taxes of his home state of Massachusetts, decided to moor his yacht in the much more yacht-friendly state of Rhode Island. In so doing, Kerry avoids approximately $437,500 in sales tax and an additional $70,000/year in excise taxes. As one of the ruling elite who constantly remind us that the wealthy need to “pay their fair share” of taxes, Kerry painted himself into a corner of having to choose between fiscal stupidity and rank hypocrisy. In true liberal elite fashion, he chose hypocrisy. Would that Senator Kerry was as responsible with the American taxpayer’s money as with his own.

What does this episode teach us, except for the obvious fact that the ruling elites feel that they don’t have to live by the same rules that they impose on the rest of us? The primary, elementary, lesson we can take from this is that taxes are a disincentive.

Like water, business flows downhill from those areas of higher expense to areas of lower expense. In this case, in order to squeeze the maximum dollar out of a taxpayer, the state of Massachusetts lost all revenue from this activity to the state of Rhode Island, which has a much more favorable tax rate.

This should be a “duh!” concept. Taxes are an expense and every businessman knows that if you can turn out the same product for less expense, you increase your profit. Yet, as obvious as this concept is, our state and federal governments continue to insist that, in this recession, the way to raise revenue is to increase taxes on the very businesses and job creators that are keeping the economy afloat. When I had the opportunity to question a candidate vying to be governor of Michigan who favors keeping Michigan’s odious business tax in place why I should locate a new business in Michigan when right across the border in Indiana, there are much more favorable tax rates, he said that he doesn’t like the business tax, but it must be kept in place in order to maintain tax revenue. Of course, the problem with this thinking is that, even though Michigan collects much more in the way of taxes than does Indiana on each individual business, it is very difficult to collect taxes on a non-existent business.

Likewise, existing businesses must make a decision on whether the cost of moving their business to a state with more favorable tax rates is more prohibitive than staying in state and paying the confiscatory tax rates. In our modern global economy, what is true for our states is also true for nations. The United States has one of the highest business tax rates in the world. Why, then, do we wonder why our companies are fleeing to those countries with more favorable business environments?

What is true for businesses is also true for individuals. Whether we realize it or not, tax rates have a major influence on our population. The most obvious way this occurs is when workers move to follow a moving business. As I told this gubernatorial candidate, a large reason Michigan is in a fiscal crisis even deeper than that of most of the remainder of the US is not because our tax rates aren’t high enough. It is because we are hemorrhaging jobs and, therefore, dramatically contracting our tax base.

In addition to this, taxes are factored into the cost of living in any particular region. State and local taxes, sales taxes, property taxes, etc. are all obvious factors in the cost of living. Those same taxes on businesses and services that are passed on to the consumer in the price of the object are less opaque, but no less real. Taxes are no less of an expense on a business than payroll and inventory and the business owner needs to recoup those expenses to make a profit. When business falls off, the owner of the business needs to cut expenses in order to stay afloat. Since taxes are a fixed expense, the business owner must cut expenses elsewhere. In a business that is running close to the margin of efficiency, anyway, the only way to do this often involves cutting personnel or cutting employee benefits.

It is incontrovertible that taxes harm businesses. This is why people such as the Obama administration’s Chair of Economic Advisors, Christina Romer and Federal Reserve Chairman, Ben Bernanke, have both recently stated that raising taxes during a recession will prolong or deepen a recession. Yet, Obama and the Congressional Democrats are determined to do just that by allowing the Bush tax cuts to expire on Dec. 31, 2010.

As of now, the Democrats say that the increases will only affect the “rich”, even though many of those affected will be small businesses that file taxes as individuals. So, in this era of almost 10% unemployment, the Democrats are proposing taxes be raised on the very people and businesses that are employers.

It is also easy for the Democrats to say, “Trust us. We’ll only let the taxes expire on the wealthy. The rest of you have nothing to worry about.” Yet, no bill has, as yet, been offered in Congress to extend the tax cuts for the lower income brackets. Why is that? When the Congress has an approval rating of 11% and Obama’s approval rating is less than 50%, wouldn’t it make sense to introduce a bill that is bound to be very popular before the mid-term elections? Do you really trust Congress when they tell you that they’ll pass a bill extending the tax cuts after the mid-term elections? Because politicians never lie, right?

Speaking of politicians never lying, Kerry, one week after this incident became public has vowed to “ . . . pay all the taxes I legally owe.” Yeah, we’ll see. Personally, I would rather have seen him keep the boat in Rhode Island and tell Massachusetts to jump in the ocean with their taxes. Maybe that would have given the Bay State an incentive to lower their taxes and keep business in state.

Hey, there’s an idea!