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Of Taxes: Federal, State, Local And All

I suspect that even pedestrian news watchers have heard of the fiscal cliff by now.  I hold out very little hope, however, that even a basic understanding of what that means is had.  Which, I suppose, is par for the course.

However, here on the hallowed pages of TarHeel Red, it means that the federal government has some decisions to make.  We could, for example, go off the cliff.  Some think that not such a bad idea.  Me, for example.  I think that taking the hard steps required to cut spending, even defense spending, are long past due.  Sadly, I’m joined in this analysis by Hoard Dean.  I’m suspicious of the twist of fate that cause him to agree with me; I’m afraid to discover which of us has made the mistake in calculus.

However, there are other courses to take.  We could make permanent the Bush era tax cuts.  For everybody.  For some.  We could take this opportunity to cut spending even more, maybe even in a REAL way that real Americans understand.  For example, the local specialty beer shop around the corner sells individual bottles of goodness for $2 American.  I like to stop in and buy a six-pack every  other week.  My spend is $24 a month.

But let’s say that I budget an increase, I want to not only buy those 2 six-packs a month, but I wanna add the full liter of specialty beer.  I up my spend from 24 bucks to $31.  But then….then, well, Obama wins the election and my financial adviser says that I should cut back, so I say, “Okay.”  And instead of buying 12 beers a month I buy 14; an extra $4.

My man goes crazy, he’s out of his head crazy.  He demands to know how I agreed to cut the amount of money I spend on beer and THEN expanded it.  I tell him simple, “I had budgeted a $31 expenditure.  I reduced it to $28.  I cut out nearly 10%!”

Serious.  Politicians, all of ’em, dem and repub, look us in the eye and say this with a straight face.

Anyway.  The cliff.

Obama wants to raise the rate of taxation on the rich.  And when he says that, he means the rate of federal income tax.  He frames the question in terms of the federal income tax rate.  So, I usually speak about the federal income tax rate.  And this is what I say:

According to the CBO, in aggregate, the poorest 60% of us don’t pay a federal income tax.  Worse, the top quintile, the wealthiest 20%, pay more than 94% of federal incomes taxes according to the most recent numbers in 2009.

When Obama claims that the rich don’t pay their fair share, he’s not making sense.  The rich are paying dramatically more than their fair share.  However, I have folks that disagree with me.  And those that do point to this graph:

This graph, built by Citizens for Tax Justice, shows that as a % of income, we all typically pay about the same share of taxes.  For a time I couldn’t square the data.  The report from the CBO didn’t seem to jive with the data coming from CTJ.

Then I realized my mistake.  We’re talking about two different units.  The CBO data that I was using was reporting share of tax revenue.  The CTJ is using share of income.  When I used the “back of an envelope” – I had too, the CTJ data is in 2011 numbers and the CBO data is in 2009.  Further, I used the average of the quintiles and not the total population so my numbers may be off.  However, if the details can be run, I’d be interested in seeing that.  This is what I came up with:

Now we’re talking apples and apples.  I broke out the quintiles in that weird way that folks do; listing the first 4 and then breaking down the last by the “nest 10”, “the next 5”, “the next 4” and “the top 1.”  What this means is that if you gather than top quintile in one group you would see that they pay 93.93% of all taxes.  And this is on an earning of 50.0% of all income.

Holy moly.

The top 20% of Americans earn 50% of the income and yet pay 94% of the taxes.

Occupy Raleigh: Gone Galt

Earlier this month I posted on the frustration of certain members of Occupy Raleigh.  It seemed that the “1%” of the movement was beginning to get fed up with the “99%.”

To those of you who continue to complain, and whine, and bitch, and moan about the camp – just fucking stop. We are all tired of hearing it. If you have a problem at the camp, come fix it. I can not fix everything myself. Jes can not fix everything herself. Thomas can not fix everything by himself. Nor can Charles, Susie, or any of the other people who do put an effort in.

In some ways this Occupy movement is a useful lesson to those involved.  It’s perhaps their first involvement in running an organization.  In generating consensus, in knowing when consensus is a paralyzing goal.  For the first time in life these folks might be managing people.  However, for some of the citizens of this society, enough simply became enough.

They “Gone Galt.”

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Wages, Middle Class And Stagnation

I’ve been aware, politically aware, since about 2006 or 2007.  That’s when an interesting tidbit caught my attention:

The 2008 Presidential election would be the first in a long time where neither a sitting President or Vice President would be running.

The race would be wide open.  I began to  pay attention, and I was hooked.  And since then I have heard a steady dull roar about the fading middle class.  I’ve heard that the richest among us have been getting richer while the rest of us have experienced wages that remain flat.

The world would have us believe that for most of us, wages have experienced stagnation.

Is it true?

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Who Should Work In America

From pretty early on I knew that I was going to college.  I also knew that I would be going to get a degree that would help me get a job.  By the time I was a sophomore in high school I was having conversations with the guidance counselor about degrees and programs.  There were two key metrics in the decision-making process:

  1. How much did various occupations pay.
  2. What was a day in the life.

After graduating high school I loaded up my car and was off to MIT.  For those of you who just choked on your Sweet Red Muscadine Wine, the MIT I went to was the Minnesota Institute of Technology; not the other one 😉

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99% And The Top 1%

All of us are trying to figure out this #OWS stuff and  how it impacts us.  The opinions ranges from one of skepticism and disgust to respect and admiration.  Clearly the movement is having an impact.

My personal reaction to the movement is one of disdain.  It’s my understanding that these folks are upset that 1% of the people control more than 1% of the wealth.  That the remaining 99% of the population is somehow getting screwed.  To be sure, there is some version of protest that speaks to the very elite rich manipulating the “system” to their advantage in a way that endangers our economic fabric, but I firmly believe these people to be few and far between.

What we are seeing is a bunch of folks upset that there are rich people.  Or rather, who have more money than they have.  But is that the real picture?

Let’s take a look at the top 1%:

I sit in an interesting chair in the financial services industry. Our clients largely fall into the top 1%, have a net worth of $5,000,000 or above, and if working make over $300,000 per year. My observations on the sources of their wealth and concerns come from my professional and social activities within this group.

…a family enters the top 1% or so today with somewhere around $300k to $400k in pre-tax annual income and over $1.2M in net worth.

Okay, so that’s a lot of money.  A TON of money.  I can remember a time when earning that kind of money was stupid.  In fact, earning that kinda money for me is STILL stupid.

But let’s go further:

The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well….

The net worth for those in the lower half of the top 1% is usually achieved after decades of education, hard work, saving and investing as a professional or small business person.

Decades.  Hard work. Saving.  Investing.

Decades.  That is, these folks didn’t “come into” this money, they earned it.  EARNED it.  By working, risking and sacrificing.  THAT is the lower half of the 1%.  Which means that we are now talking about the top half of the 1%.

The whole read is fascinating.  But I’ll leave you with what the author leaves us with:

I could go on and on, but the bottom line is this: A highly complex set of laws and exemptions from laws and taxes has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%.

I think this is true.  I am willing to believe that the top 0.01% of Americans have much if not all of the power and influence in this country.  Which, by the way, turns out to be about 32,243 people.  And we’re not really talking about people, we’re talking about families.  So it could be half that.

If the cost of 99.99% of us living like relative kings is having 16,000 of us live lives that we can only dream of?  Well, hell, I’m willing to pay that.

Don’t ever forget.  Ever.  That we have a life that would have been the envy of the richest people of the world just 50 years ago.  Imagine what the world’s wealthiest would have paid for what we now see as everyday convenience.

Maybe Capitalism Isn't ALL Good

But then again, it sure sounds good.

Hat Tip: Kids Prefer Cheese


This is beyond “sounds good”; it’s hilarious.

1000 Today

This started in early January 2009.  It’s taken me 10 months to hit 1000 views; most of ’em are my mom.

Here’s to the next thousand.

North Carolina Allows Illegal Aliens into Community Colleges

Recently the North Carolina Board of Community Colleges voted to allow illegal aliens to enroll in our community colleges.  I strongly agree with this stance.  Independent of your legal status in this country, the more educated our communities are, the better off our communities will be.  Research has shown that as the education level of a group goes up, the impact to the community in which they lives is more and more positive.

Further, I don’t understand why we would choose this one product to draw the line in the sand.  For example, we don’t prevent illegal aliens from buying groceries.  Or gasoline.  Or clothes.  Why would we exclude those folks from the one thing that may actually result in them trying to become legal?  I mean, if a person who is here illegally takes the time, the effort and the cost to go to school, almost certainly that person is going to want to reap the rewards of that education.  That is going to mean obtaining a job with pay commensurate to the education level.  And that, in turn, is going to result in them wanting to obtain legal status.  And THAT is what we want.  We want people who come here, want to study and sacrifice and then go to work in our communities.  And anything that we can do to make that easier, we should be doing.

Good for the North Carolina Board of Community Colleges.

Where Brad and Britt Are Wrong

I’ve been listening to the Brad and Britt show for some years now.  I know what I am getting when I turn ’em on.  I’m getting a couple of guys who think they’re center or neutral, think they’re not talking over folks and think they’re right.  What I get though, are some left leaning talk over guys who think they’re right.  Mostly you can only blame ’em for being leftists.  Everyone thinks they’re right and really, it’s a talk show on the radio; they are supposed to be a little bit “jabby”.  So, I know what I’m getting when I turn ’em on.

This morning though, I just went crazy.  They are talking about health care reform and the proposed system and how it’s being compared to auto insurance etc etc.  And so it starts.

Brad begins by trying to pull the analogy by saying that if you only consider folks who do drive cars, then the auto insurance parallel is accurate; we do mandate that all drivers carry car insurance.  In this he’s right.  But he fails to mention that there are three important distinctions:

  1. If the cost of owning a car becomes to great [payments, insurance and upkeep] you can opt out and the insurance stops.
  2. Really, we are only mandating that you carry insurance to cover THE OTHER GUY.  If you own the car, it is your choice to cover any damage to your actual car itself.  In short, you are allowed the choice to “self insure”.
  3. No one is saying that the car insurance folks would be forced to cover “pre-existing conditions.”

I mean really, enough with this car insurance parallel.  Serious, can you imagine how expensive car insurance would be if insurance companies were forced to cover pre-existing conditions on a car?  That they would, for example, be forced to fix a car AFTER it had been in an accident?  Silly.  SImply silly.

But there was more.  The Brad and Britt show had a guest on who claimed that as a 52-year-old man he could get very nice insurance individually that was not outrageously priced.  Let’s check.  When I do this, I like to go here: eHealthInsurance

I am looking for plans in Greensboro for a single 52-year-old man who does not smoke.

Ah, here’s one.  $5000 deductible, Office visits are free after the deductible.  0% coinsurance.  149 a month.  Oh yeah, and you can have an HSA.

Another:  $5000 deductible, $15 office visits and 0% coinsurance.  $229 a month.

One more:  $1250 deductible, office visits are not covered and the coinsurance is 20%.  $253 a month.

Net/net, I don’t know why people think that coverage isn’t affordable.  It is.  It may not be free.  It may not cover every single thing in the whole medical world.  But the whole argument for this reform bill is that “if you get sick or hurt you should not go bankrupt.”  Here ya go.  Buy this policy and you won’t.

Last, Brad and Britt spoke about the fact that people miss allocate their money.  In other words, they aren’t spending wisely.  This resonates with me; I don’t think people budget well.  We spoke about this in a post just a few days ago:  Health Care Lottery.

In short, of people who make less than 10k a year, 46% of them play the lottery.  And they play about $600 a year.  Which, by the way, is the cost of a health insurance plan for a 25-year-old man.

I know what I get when I tune in Brad and Britt.  Today was just too much of it.

Goodyear: Bad Policy

The United Steelworkers Union won one the other day. In the deal, the Union was able to win a number of concession from Goodyear:

  1. Minimum staffing levels
  2. Prevention of shifting production to any facility not represented by the Steelworkers Union
  3. $600 million in updates to the plants to keep them modern
  4. Wage and benefit increases
  5. Continuation of cost of living increases.
  6. A plant in Tennessee that was closed will have it’s employees to receive a buy out

So lemme get this straight.  Companies across the country, world in fact, are trying to cut back to minimize the impact of the global recession [which has most certainly ended by the way].  We are seeing staff reductions, we are seeing wage freezes and even in some cases wage roll backs.  All of this in order to keep companies from having to close.  But Goodyear?  What are they doing?  Why, of course, they are promising that they will keep a minimum number of workers on the job; not a maximum.  They are promising that they won’t move work to any plant not in America represented by the SWA.  Yeah, did ya notice that?  The Union didn’t say that they couldn’t move the jobs out of city or out-of-state or country, they simply said that the couldn’t move them where the union didn’t have representation.  So, if Goodyear wanted, they couldn’t move the plant to a Right to Work State and avoid a represented racket work force.  Nice.

Further, the Union was able to provide raises on top of cost of living increases to its membership.  All the while forcing Goodyear to spend $600 million in the plants so that they would be anchored to this ship wreck for the next several years.  Awesome.  Simply awesome.

Meanwhile,the only mention of why  these plants are in need of protection comes when the article mentions:

The Tennessee factory has been severely hurt by the economic downturn and an influx of cheap tires from China

Let’s ignore the fact that all of the tire buying American’s enjoy the “cheap tires from China.”  We like to have things provided to us at a price that is less expensive than we could otherwise find in the market.  So, while the American tire makers may see a decline in their sales, or at least in their profits, the rest of America see more money in their pockets.  This could be anyone from the single mother trying to make it to work to the florist that has to rely on tires to deliver her flowers on time.  All of this means added productivity.

Allocation of scare resources with multiple uses.

What we have now is an artificial allocation.  Or, people spending money on things that they wouldn’t otherwise spend that money on.  Which is almost always not optimal.  And somehow the press and the world rejoices at the fact that some Union jobs are saved at the expense of jobs elsewhere in the economy.  Jobs that have long ago ceased to be meaningful means of employment here in the US.  Here, you see, we are known for innovation and for services.  We need to free resources from the manual labor of tire making in order to free those minds to invent new kinds of tires.  Or news kinds of rubber.  Or any other of a long list of things yet to be invented but now prevented from being discovered.  All because of a racket.

But how, may you ask, can Goodyear continue to survive in this system where it is forced to pay fees and services to a work force that isn’t worth those fees and services?  Because, Mr. Obama has allowed Goodyear to charge an extra 35% for its tires adding directly to that companies bottom line.