Not interested in US history? Consider Britain’s recent tax experience.

I saw an interesting article this morning as I perused my email and drank my morning tea. Given my choice of beverage, it is appropriate that the item that caught my eye was out of the British press, namely from The Telegraph, dated Thursday, 11/29/12. Written by Robert Winnett, it comments on tax rates imposed on millionaires and the effects of recent changes in those rates.

The arguments made eerily resemble our own in the United States. It also appears that they mirror our own lawmakers’ tendency to cling to ideologies, despite concrete data and evidence to the contrary.

Our politicians in Washington D.C., currently wrestling with the so-called fiscal cliff (which they’ve known about for ages and simply ignored it until they couldn’t any more), would be well served by reading this article and considering it carefully, before they repeat Britain’s mistakes. For their benefit, I offer it here, with thanks to Mr. Winnett. Emphasis and parenthetical comments in the article are mine.

Two-thirds of millionaires left Britain to avoid 50p tax rate

Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p (That’s 50% for my US readers.) top rate of tax, figures have disclosed.

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs. This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election.

The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government.

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.

George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April. Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000. However, the number of million-pound earners is still far below the level recorded even at the height of the recession and financial crisis.

Last night, Harriet Baldwin, the Conservative MP who uncovered the latest figures, said: “Labour’s ideological tax hike led to a tax cull of millionaires. Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.

“Labour now needs to admit that their policies resulted in millionaires paying less tax and come clean about whether they would reintroduce this failed policy if they were in power.” Mr Osborne argued earlier this year that the 50p rate was deterring entrepreneurs from coming to Britain.

The Chancellor wanted to scrap the top rate altogether for those earning more than £150,000 a year and return to the previous system of a basic and top rate of tax. This was blocked by the Liberal Democrats without a new mansion tax being introduced.

Labour will hold a parliamentary debate today to criticise the decision to reduce the top rate, which Ed Miliband, the Labour leader, has described as a “tax cut for millionaires”. (Does this sound familiar?)

Senior Coalition figures are locked in negotiations (as our US leaders should be!) over next Wednesday’s Autumn Statement which will set out government tax policies for next year.

The Tories wish to freeze out-of-work benefits. The handouts usually rise in line with inflation, which has meant that the unemployed are likely to receive a higher rise than most workers can expect.

It is understood that the Lib Dems will only allow the benefits freeze if taxes on the rich are increased. The Lib Dems have long cherished an increase in taxes for multi-million pound properties. David Cameron has ruled out changes to council tax.

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Considering a tax increase? Read your history first!

Yes, I am doing it again, dipping a toe, or maybe an entire foot, into perilous political waters. I can’t help it. The ongoing debate leaves me screaming with frustration. So I will try once again, with the help of Stephen Moore, a brilliant economist and author who also sits on the editorial board of the Wall Street Journal.

I have read at least one of Mr. Moore’s books and have enjoyed his business information and commentary many times on Fox News. Today, he has done it again, with an article in the Wall Street Journal. It is entitled “Why Lower Tax Rates Are Good for Everyone.” In the article (which I heartily recommend to my Gentle Readers), he gives a badly needed overview of tax history in the United States, going back to the 1920′s. It systematically dismantles the arguments made by the President and his fellow party members that we must take a “balanced” approach to raising revenue and that “millionaires and billionaires” should pay “their fair share”.

I have to take issue with the terminology. First, a translation. “Balanced approach” means to raise taxes. “Millionaires and billionaires” somehow morphs into anyone making more than $250,000 per year. (Are they arithmetic-challenged?) Finally, the top 1% of taxpayers are already paying the lion’s share of the taxes, so please define “fair share”. I have noted that when asked, and specifically requested to offer a number, that those on the left never answer the question.

The argument never changes. Too many in our government cling to their talking points. And they continue to annoy me with their ignorance and blatant dishonesty.

So, here is my humble suggestion. The election is over. No need for talking points. Instead, we need open, honest and serious discussion on the financial mess we face from both sides of the aisle. And please, study your history and begin the discussion based on the facts!

Posted in Rants & Raves, Taxes | 2 Comments

Customer Service – Yes, we have no bagels

Greetings, Gentle Readers! It’s good to be back, after a bit of a blogging hiatus. I am drawn back today by the subject of customer service. I have a story to share, this one drawn from actual and very recent life. My husband, partner in life and work, had an experience just yesterday that simply must be shared, with commentary.

We both have a particular love of bagels. However, finding a good one around here is NOT easy. In fact, it has proven damn near impossible. At least it was until we discovered one small bagel place on one of our many islands. (This particular island, and the name of the bagel company, will remain nameless, to protect the guilty as well as this writer. Regardless, I truly hope they read this someday, recognize themselves, and benefit.)

We have been regular customers of this little bagel shop for a decade. We don’t get there very often, because going requires crossing the water, so when we can go, we generally buy lots of bagels, usually about four dozen. They freeze well and we can enjoy them for weeks, rather than just a day. We call in advance to order them, to ensure getting plenty of our favorites. Then, our first act upon reaching this island is to stop and pick up our bagels. The bags of fresh bagels, many laden with garlic (nectar of the gods), perfume the car for our entire trip. We salivate and savor the bagel delights to come.

Yesterday, my husband had occasion to travel over the water. He tried to call ahead and order the usual four dozen. He could not get through on Saturday, and they are closed Sunday and Monday. So, he called early yesterday morning. The woman who took his order seemed hesitant, and not very polite, but she did take the order.

Upon arriving at the shop, he was confronted by the man who is most likely the owner of the shop, who refused to honor the order and sell the bagels to my husband! In front of a crowded shop, without apology or much courtesy! The order would leave him too short of product to conduct business that day, so we could not have any bagels!

Now, let’s consider this. A long term customer, ordering lots of bagels, is being rudely told he could not have any. Granted, it had not been possible to order in advance, which would have allowed the bagel maker to make a larger quantity. This is completely understandable. I strongly submit, however, that this could have been handled much better, with far better results for all concerned, especially the business owner.

How about this? “I am very sorry, sir, but without advance notice, I simply can’t sell that many bagels, because I would not have enough product for the day. Let me do this for you. How about 1 dozen bagels today, of your favorite flavors, and a discount coupon for your next visit? Your business is important to me and I do appreciate it. I want you to come back.”

Instead, with his rudeness, he has lost a dedicated customer who has recommended him countless times to other bagel lovers in the area, and who is likely to comment very negatively in future. He has generated some bad press. He has shown a crowded shop of customers that he is not a very good businessman, unprepared for a rush in business (which should have been anticipated on a summer day), and without a sense of what constitutes good customer service, not to mention good manners.

My husband, to his credit, did not make a scene, although he probably wanted to. He simply left the shop, without any bagels and was later forced to explain to his very disappointed, bagel-loving and hungry wife.

Normally, our advice to a business owner would cost real money. We are, after all, in the business of selling our consulting services. In this case, I offer this business owner some free business advice:

    Start measuring your business, the number of bagels you sell and the number you make. I happen to know that it’s not unusual for this guy to misjudge and run out of bagels. He simply closes his shop when this happens. I’ve seen this first hand. In business, there is a very important rule: That which can be measured can be managed. Start measuring. Note the ups and downs and analyze the situations, the timing, and the events that may be affecting sales. With this information, you can do a better job of being prepared when you determine how many bagels to make on a given day, so you don’t run out.

    Find a way to use the extra product when you make too many bagels. Donate to charity. This is good press, as well as a nice thing to do. Make bagel chips and sell them. Get creative and do something.

    Develop a better method of taking phone orders. Be courteous with your voicemail message. Leave clear instructions on placing a phone order. Then, follow up with the customers by phone to confirm receipt of the order.

    Train your staff! If it’s too late to accept a large phone order, say so when the customer calls!

    Learn some manners, then teach them to your employees. Remember, a customer is not an interruption of your day or a problem to deal with. A customer is the reason you are in business!

    Consider hiring a good consultant who can give you some guidance. You’ve got the basis of a wonderful business there, even in this miserable economy. Don’t waste it!

I guess I must be happy with plain old toast for the foreseeable future. Sigh.

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Customer Service – what does your voicemail say about your company?

Greetings, Faithful Readers! I have been away for a while, but I am glad to be back and sharing my business musings with all of you. That’s the good news. The bad? Well, a recent experience in phone frustration has demanded comment.

We’ve all been there. We make a call to a company to get in touch with someone, address an issue, or do some business. In these days of economy and business belt tightening, it is the rare company that still has a receptionist either in person or on the phone. So, our calls are greeted by machine. And sometimes, (cue the spooky music), we are launched into “The Outer Limits”, the endless phone tree maze!

Check this one out. Like many of you, I have an elderly mother who needs a great deal of assistance with the tasks of living. I happen to handle all of her personal business, including paying the bills. She has moved recently, so address changes are an ongoing challenge. She is a retired state employee with a pension. (I will leave the state nameless.) I called the appropriate state office of retirement services to initiate the address change.

(Spooky music time! Theme music from Psycho? No! Jaws!)

I enter the phone tree. I am invited to enter Mother’s account number or social security number, neither of which I have at hand. I press “0″, attempting to bypass the tree and talk to an actual person. I am again invited to enter the aforementioned numbers. And again. I try entering anything, to move on and talk to a human. My entry is deemed unacceptable. I give up, hang up, and go find one of those numbers in Mother’s files.

Properly equipped with appropriate data, I call again. I proudly and carefully enter the necessary long number. The system helpfully reads it back to be and requests confirmation. It has doubled a couple of the digits! I retype, watching my entry VERY carefully. It does it again, missing another digit. How can this be? I know I entered it correctly. Third time’s the charm and, miracle of miracles, I progress.

They ask for tons more information, I forget exactly how much, but I get it all entered (multiple times in some cases – it keeps doubling digits) and the system finally rings through to a person. Five rings, now eight. I lose count. I am transferred to a recorded message and am informed that the person I am trying to contact has not yet set up the voice mail box and to press “0″ for assistance. I do so, praying for a living human voice. Instead, I am routed all the way to the beginning of the #@$%^#&^* phone tree!

This is unbelievable! It’s bad enough for me, but consider for a moment the audience for whom this monstrosity is intended. Remember? This is the state’s Office of Retirement Services. It is likely to be contacted by people just like my mother, 84 years old, physically disabled, hard of hearing, and in the early stages of dementia. She would have been forced to give up the minute she couldn’t actually contact a live person. Her pension is her lifeline. What reaction from her would you expect? Tears and panic? Probably.

Let’s consider this from a business perspective. This abysmal phone tree is the first contact this organization’s customers have when they have important business to transact. If this were a for-profit business, rather than a state monopoly, would you want to do business with this organization?

Neither would I.

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Taxing the Rich – it has an unanticipated cost

I have written on the subject of taxing the rich before. Basically, I think it’s a bad idea, for lots of excellent, well-documented reasons most politicians and voters choose to ignore.

This morning, over breakfast, my husband brought a recent article in the Wall Street Journal to my attention. Entitled “The Price of Taxing the Rich”, it offers another perspective on the subject, pointing to a real danger in the rush to address current budget shortfalls by taxing them even more.

The basic premise of the article is this: An over reliance on income tax and capital gains tax collected from the rich is dangerous because this income is so volatile. The rich are hit far worse in a downturn and governments relying too heavily on them for revenue bear the brunt.

The result: Without addressing the overspending that comes out of boom times, states take it in the shorts and wind up with huge deficits. The article uses California as a case in point. As the subtitle reads, “The top 1% of earners fill the coffers of states like California and New York during a boom – and leave them starved for revenue in a bust.” An eye-opening chart included with the article indicates that 43.9% of California’s revenue comes from income taxes. And 45% of their income tax receipts come from the top 1% of income earners. Wow!

Bottom line? Well, Washington D.C. is tending to go the way of California. And that’s not good!

I sometimes feel like a voice crying in the wilderness on tax issues, especially given that I live in deep blue Washington State. However, I encourage my readers to check out this article, and as many others as they can on this difficult subject. As voters, we simply MUST become better informed before we cast those all important votes for the people who will be setting our tax laws. And this applies at ALL levels of government.

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The Word Cop returns – “No problem”

As The Word Cop, I can’t resist commenting on the current vernacular, those expressions that creep into our speech and become established with use. There are many that overstay their welcome, in my humble opinion. Today’s post is a case in point.

I had the pleasure of hearing an excellent speech the other day. I was attending a luncheon given by Seattle’s Women Business Owners. (Full disclosure – I am a long term member and just finished a three year stint on the board. It’s a great organization, worth checking out. End of shameless plug.) The speaker of the day was Brad Worthley. His topic and his expertise – customer service. Toward the end of his comments, he hit one of my current speech bugaboos. That is responding to “thanks” with “no problem”.

No problem? How did problems get into this? Whatever happened to that old standby? Remember? “You are welcome.” What’s wrong with that?

Brad suggested expunging the expression “no problem” from your own speech as well as the speech of all employees in your organization. Why? To improve customer service. I loved Brad’s suggested reply to receiving an expression of thanks. Not “no problem”. Not even “you’re welcome”.

When someone thanks you for your service, try saying, “It was my pleasure.”

Now, how would your customers react to that? I, for one, would react very well. I look forward to your comments.

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Income Tax Initiative 1098 – A pending disaster for Washington State!

I am going to risk offending my readers by dipping a toe into politics one more time. I would not do so if I were not so terribly worried about the issue at hand. I am deeply concerned, not as a political partisan, but as a Washington businesswoman. So I ask my readers to take off their own partisan political hats, consider my thoughts from a business perspective, and cut me a little slack.

Unless you have been hiding under a rock in Washington State, you are aware of the fact that there is an initiative on the ballot that will create our first state income tax. Bankrolled by Bill Gates, Sr. and the Service Employees International Union (SEIU), it imposes stiff new income taxes on income above $200,000, or $400,000 for married couples. There’s a lot more to it than that, however. As always, the devil is in the details. There are also many other consequences of going this route. Consider these:

- We are one of only 9 states without an income tax. This is more than a benefit to each of us as residents. It also draws businesses here and keeps them here. Compare the job growth numbers of these nine states (18.2 %) to those states with the highest income taxes (8.4%). Are you looking for a job right now? Do we want to go this route and risk jobs in our state? I don’t think so.

- Think you will be spared the tax because you don’t earn $200K? Think again. There is a provision in the bill that would allow the legislature to extend the tax to everyone after two years. And this by a simple majority! Think our big-spending legislature would have any problem with this?

- Our state constitution specifically forbids an income tax. This initiative calls it an “excise” tax. Who do they think they are fooling? This is an end run around our constitution!

I could go on, but why? My biggest concern is this: At a time of severe economic crisis, with so many people feeling the pinch, it is way too easy to say, “Let’s soak the rich! They can afford it.” Then, people will vote for this idiocy and we will be stuck with it. Unfortunately, this will lead to unintended consequences that will hurt everyone. Don’t kid yourself that it will be otherwise!

There was an excellent opinion piece in the Wall Street Journal a couple of weeks ago. Entitled “The Gates of Confiscation”, it gives the most succinct analysis of the initiative and its likely results that I have seen. I urge my readers to find it and give it a thorough, thoughtful read.

If this convinces you to stand against this initiative, please pass the word! Stop this runaway train before it crashes!

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Taxes – Think twice before taxing the rich!

Yesterday, I heard unhappy news. Nordic Tugs, a highly respected Burlington boat building company, announced it is closing its Burlington manufacturing plant. Their outstanding boats are clearly a luxury purchase, and one that is not selling in these difficult, uncertain economic times. This is billed as a temporary closure “forced by the ongoing effects of the Great Recession”, according to their press release. They are not closing the business entirely and are hoping to resume building in the future.

I’ve had the pleasure of being onboard a Nordic Tug, so this news made me sad on more than one level. Most importantly for this blog post, it is an example worth considering in the context of our economy and what is being proposed to help it. I speak of tax increases, particularly the drive to raise taxes for the “wealthy”.

There are two specific tax increases to consider here. First, there is the upcoming expiration of the Bush tax cuts, which will result in a huge, across the board tax increase as of January 1, 2011. (No, the Bush tax cuts were decidedly NOT just for the richest 1%. That is a political lie that has been repeated so often, and not challenged enough, that many believe it as truth. It is not.) There is talk of a delay, but there is also much talk of delaying all but the taxes that fall on the “wealthy”. Second, there is an initiative on the Washington State ballot, proposed by Bill Gates Sr., that would initiate an income tax, again on the so-called “wealthy”. This one bothers me on two levels. The first, that it is a blatant end run around our state constitution which expressly prohibits an income tax, I will set aside for the moment. The second problem it shares with the national debate on the Bush tax cuts, namely allowing them to expire for the “wealthy”.

Why use that word in quotes? Because when you are talking about taxes, “wealthy” is a concept that depends on who defines it at the moment. It is also a fluid term that absolutely will change in time. To support that statement, one has only to read up on the history of the Federal Income Tax.

I am really tired of the class warfare rhetoric! This is America where everyone is supposed to have the opportunity to become really successful and wealthy by virtue of creativity, entrepreneurship and old-fashioned hard work. Why must we continually punish that success with ever higher taxes? Punish a behavior and you will get less of it. Reward it, and you will get more. We are currently rewarding non-work and punishing success. This is a really bad idea!!!

These two proposals, Federal and State, both set the bar for “wealthy” around the $250,000 per year mark, if I remember correctly. At that level, you hit two key constituencies that will get you more results just like the closing of Nordic Tug. Let me explain.

First, you will punish small business owners, a large proportion of who pay taxes at individual rates rather than corporate, since they are subchapter S corporations. Tax them more and you slowly kill the goose that has laid the golden American entrepreneurship egg throughout our history, that job creating machine that has fueled our amazing economic success.

Second, taxing the people with disposable income, i.e. those evil rich people, and they can’t buy things. That kills the market for products like Nordic Tugs. Now, before our natural envy of people with money kicks in, remember that their consumption is the fuel in the engine of that job creating machine.

A lot of people lost their jobs when Nordic Tug closed its plant, dedicated and highly skilled workers who took personal pride in creating a quality product. Contemplate that for a while before jumping to the conclusion that taxing the rich is a good idea.

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The Word Cop – “Incentivize” my day

Some words make their way into the English language that absolutely should not. One of these is the unfortunate product of a crime, namely verbicide. The perpetrators took the noun “incentive” and twisted it into an awkward verb – “incentivize.” I have heard this abomination one time too many in recent days, so I decided to delve into my dictionaries. Naturally, as The Word Cop, I have lots of them.

I started with the largest, thickest dictionary on my shelf – Webster’s New Universal Unabridged Dictionary. That’s “unabridged”, i.e. left alone, not shortened, nothing left out. Sounded like the right source to me.

What did I find? I found the venerable, and correct, noun “incentive”. No reference to “incentivize”, or even “incent”, which is a shortened version that at least sounds better, if just as incorrect.

I moved on to The American Heritage Dictionary of the English Language. This was the dictionary my mother gave me in the 1960′s. It made a big splash at the time because it included all the naughty words, the swear words, and the four-letter words. Mother, being an English teacher, got a kick out of handing out dictionaries to both of her kids and all of her nieces and nephews on Christmas Day. (To the dismay of her siblings and siblings-in-law, she also informed each child that they could look up swear words in that dictionary. To her delight – no dismay here – , they all dove right in.)

Any dictionary that includes four-letter words ought to include newer English creations, Americanisms and/or slang, right? Wrong. No “incentivize” and no “incent”. (It does include many other interesting words, however. I can still remember the day, shortly after the Christmas of the Dictionaries, when Mother called to me from the kitchen, “Margaret, look up chicken shit.” You can imagine the rest and, yes, it is there.)

I turned next to the World Wide Web. How did we ever exist without this resource? Here, I was more successful. They list newly created words, bastardized expressions, and illegitimate results of crimes such as verbicide. defined it as a verb meaning “to give incentives to”. They added that it originated in 1965-70 and was an “Americanism”. (Is that good or bad? Maybe it depends on which side of the pond you are on.) They also quoted the World English Dictionary (their source being Collins English Dictionary), which defined it much the same, but spelled it “incentivise”.

Then I found Jackpot! They obligingly search multiple dictionaries and present the searcher with a handy list of links. I worked my way down the list. Most indicated that the word originated in the business world, that source of so many examples of bad English, and that it was created in the 1960′s or 1970′s, then shortened in the 80′s or 90′s to “incent”.

Beginning to get bored with the repetitious list, I worked my way down to the Urban Dictionary, This one made my day, to quote Dirty Harry. They listed a couple of helpful definitions, along with examples of usage. Let me share at least one. You can surf over for more. First, their definition:

“A corporate-jargon non-word meaning “motivate,” coined in 1968. Some 10 years later, it was shortened to the equally annoying verb “incent.” Unfortunately, both are recognized by both Merriam-Webster and the OED. The only respectable form of the word is the noun “incentive”.

And now, the example:

“I would like to motivate him to never say “incentivize” again by telling him I will rip his windpipe out of his throat the next time I hear him say it.”

I roared with laughter! My husband entered my office for explanations and to share the laugh. My thanks to the Urban Dictionary! I will be surfing over there again, let me assure you. Of course, The Word Cop would never threaten such violence!

“Go ahead. Make my day.”

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Managing people – delivering a difficult message

Management is an under-appreciated skill. Yet nothing will make a workplace more unpleasant, even downright miserable, than poor management. Sadly, it is something I see far too much.

Part art as well as science, the ability to work well with subordinates isn’t something that should be taken for granted. Business owners, if you want a productive workplace, with loyal employees who deliver great work and stay with the company, pay attention to your first line managers. Make sure they get the guidance and training they need.

One of the more difficult tasks any supervisor or first line manager faces is delivering bad news to an employee. That news can range from “you didn’t do that right” to “you’re fired” and still be challenging. I got over the hump as new manager by reminding myself that, if I didn’t tell the employee he/she was doing something wrong and give them a chance to fix it, I was doing them a grave disservice.

Why do managers hesitate to say anything? The most basic reason is fear of confrontation. I believe this is the reason most times. I like to believe that people are basically good at heart and wouldn’t stoop to ignoring an employee in order to make him/her miserable enough to leave. Not only is this rather sadistic, it is counterproductive to the company. Poorly performing employees can do a lot of damage, both in their own jobs and by creating a miserable work environment for others.

My message to managers: Have the courage and the compassion to be direct with your employees. Don’t sidestep issues. They will fester and grow like cancers. If you need help delivering the bad news, get some. Talk to a business coach, a fellow manager, your own manager, an HR specialist. Think through your delivery carefully and rehearse it. The first time you have to do this will be the worst. It will get better with time.

Ultimately, your employees will appreciate your honesty and your guidance.

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