Wednesday, April 7, 2010
Changes
I'm in the process of possibly changing the host of this on again/off again blog. Google's Blogger is forcing a change in the way this blog has been published since it's inception and the process is becoming arduous. I'm currently not sure if I'll remain with Blogger, or make a move to Wordpress.
I've already set up a blog at Wordpress with the same moniker as this one, florida ramblings, in the event I decide to proceed with the move. In the mean while, time is rapidly chasing the deadline Blogger has set for the move.
Despite several weeks of minimal pursuit, and several days of frantic pursuit, I've made precious little progress towards transferring to a custom domain hosted at this domain.
So, I've temporarily set up the blog to host on blogspot at flaramblings.blogspot.com where this page will automatically redirect in a few seconds.
If it doesn't redirect quickly enough for you, click on the afore mentioned link to go there directly.
"We are all in the same boat on a stormy sea andwe owe each other a terrible loyalty." - G. K. Chesterson
Wednesday, February 24, 2010
Wealth, taxation and wealth envy in the US
The following is a response to my friend Will, who struggles with what he apparently perceives as inequality in income and taxation in the US. This came out of a wall post he made on my facebook page:
Remember when we were talking about the highest tax bracket. It appears they pay less than 17 percent taxes on their income. Most of it was from capital gains which is a maximum 15 percent tax.
Personally I'd like to see progressive capital gains after data like this. 400 people in the united states make up 30 percent... of the total wealth in the US, but only pay 17 percent taxes, and since the poorer pay more like 20-30 percent taxes when you take into account social security, medicare and other capped taxes too. So how much medicare social security and such before it's capped?
Ya know, it's possible they didn't teach statistical analysis in high school, or that you can look at one small area and miss the whole picture. So, first, the data quoted is for 2007, it fails to take into account current stats. The current data isn't yet available except as estimates. The IRS typically runs 2 years behind in getting this data out; I've followed it for several years. So let’s just dive deeper into the numbers.
When you look at all the IRS statistics for the 2007 tax year in question, you may want to notice that the top 1% of income earners paid 40.42% ($450,926B) of all income taxes. The top 50% paid 97.11% (%1,083,243B) of all income taxes. This means that the bottom 50%, those with an annual AGI of $32,897 or less paid cumulatively 2.89% ($32,261B) of all income taxes. That kinda blows that old liberal mantra that the wealthy don't pay taxes, doesn't it.
According to IRS statistics, in 2007 the average tax rate for the top 50% of income earners was 14.03%, for the top 1% of income earners it was 22.45%. Now that is just income tax, not total payroll taxes lest you start getting your panties in a wad.
One thing that isn't clear in the data is how much negative tax payments, i.e. earned income tax credit, and other "entitlement" payments such as food stamps, welfare, etc were received by those in that bottom 50%, effectively a wealth transfer from the top 50% to the bottom 50%. There was $371.9 Billion in means tested entitlements which includes Medicaid, food stamps, family support assistance (AFDC), supplemental security income (SSI), child nutrition programs, refundable portions of earned income tax credits (EITC and HITC) and child tax credit, welfare contingency fund, child care entitlement to States, temporary assistance to needy families, foster care and adoption assistance, State children’s health insurance and veterans pensions. You can be pretty certain that all those "payments" went to the bottom 50%. (The Budget For Fiscal Year 2007)
There was $581.2 Billion in Social Security payments which would include payments to those above and below the 50% threshold so for simplicity, let's just say the bottom 50% got half, or $290.6 billion of Social Security payments.
After combining both categories together, we can extrapolate that there was a wealth transfer of about $662.5 billion to the bottom 50% who cumulatively paid in 2007 $32.261 billion in income taxes.
Now you said that "the poorer pay more like 20-30 percent taxes when you take into account social security, medicare and other capped taxes too." Actually, the Medicare tax rate is 1.45% and the Social Security part is 6.2%. By my rudimentary math skills that comes to 7.65%. If you assume that the bottom 50% paid an average of 2.89% in income taxes (IRS figures), that totals 10.54%, a far cry from your 20-30%, and that's before those pesky negative tax payments that brought the real rate for much of this group to zero, or less.
Now, I'll grant you that when it comes to payroll taxes, i.e. social security (I use that term advisedly) and Medicare, the lower income percentiles pay a greater portion of their income than the higher percentiles. That is a function of the tax code and Congress, not the income earners. But one thing that isn't clear in the Tax Analysis statement is whether their analysis takes into account only those payroll taxes paid by the income earner, or if they also include those paid by the employer, which effectively double the tax payroll tax paid.
I'll also have to say at this time that I would support a change in the law that would means test both social security and Medicare, provided that those who didn't receive the benefit were not required to make the contribution (sic).
The other thing that must be considered is the source of some of the analysis. Professors Emmanuel Saez and Thomas Piketty are economists at the University of California at Berkeley, an institution well known for it decidedly liberal bias.
Nevertheless, I was somewhat surprised to see the opening hypothesis of their 1998 study "Income Inequality In The United States" (pdf) make the statement, "...steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks (the Great Depression and WWII).
They go on to predict that "...the decline of progressive taxation observed since the early 1980s in the United States could very well spur a revival of high wealth concentration and top capital incomes during the next few decades."
The apparent despair of Messes. Saez and Piketty isn't limited to the "income elite." They also bemoan the increasing wealth disparity of the working class in "The Evolution of Top Incomes in the United States"(pdf).
"The labor market has been creating much more inequality over the last thirty years, with the very top earners capturing a large fraction of macroeconomic productivity gains...We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional reforms should be developed to counter it."
So it would seem that the authors would have issue with even working class individuals who aspire to escape the bounds of their entry level hourly incomes and seek higher incomes and personal wealth. That apparently doesn't fit into their paradigm of the Marxist dogma, "From each according to their ability, to each according to their need."
Now, the bottom line is, are you a victim of wealth envy. Of course "victim" is a misnomer. The term victim implies there wasn't a choice in the matter, but, wealth envy is a choice.
So is it your choice that that higher income earners should be penalized for their success? If so, where will you make the cutoff? Or will there be a cutoff? You just decide that everyone makes X amount, say $20K, a year.
The Soviet Union and other communist/socialist based economies used this methodology. Only those in power and position, or in the favor of those in power, were able to enjoy the wealth of the nation. The rest of the bourgeoisie lived a subsistence existence, waiting in bread lines, stores had minimum amounts of inventory, families living squeezed together in tiny apartments waiting on a list for years for the opportunity for a larger apartment, or a separate one for adult children.
And what happens when you take away the incentive for entrepreneurship, for individuals taking risk to chase their dreams and goals? What happens is, dreams die. Goals go unrealized, and with them jobs, income for those who would have been employed, innovation and economic growth.
You see, this is not a zero sum game where you can penalize an achiever on the one hand and not see a change in behavior or income or success on the other. There is a penalty. It may not be at 20% or 30% or 40% or even 50%, but at some point, the achiever says, why should I continue to work so hard if I'm not going to be compensated for it.
Think of it in your own life. If you were going to have the opportunity to double or triple or quadruple your income if you contributed another 30% of your time would you do it? Would you want the opportunity even if you decided not to? How about giving another 30% of your time if you could only increase your income by 10%? I dare say you'd laugh at them, if not in their face, behind their backs.
So what makes you think penalizing the entrepreneur for his time and effort and intellect would have no effect on what he is willing to do?
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: income, IRS, progressive, taxes, wealth envy
Wednesday, February 17, 2010
Distention in the Ranks?
"..Germany’s harsh experience with runaway inflation after World War I should be remembered.
"When named president of the Kansas City Fed in 1991, (Thomas) Hoenig said his 85-year old neighbor gave him a 500,000 German mark note. The neighbor told him that, in 1921, the note would have bought a house. In 1923, it wouldn’t even buy a loaf of bread. The neighbor said, “I want you to have this note as a reminder. Your duty is to protect the value of the currency."
"That note is framed and hanging in my office," Thomas Hoenig CEO the the Kansas City Federal Reserve Bank as quoted by the Wall Street Journal.
Hoenig was the lone dissenter in the Jan 26-37 FOMC report that called for maintaining the Feds policy of artificially low interest rates for an undetermined period. Hoenig and many others believe this can lead to runaway inflation, destroying our currency, and our economy.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: economy, Federal Reserve, FOMC, Germany, inflation, Thomas Hoenig
Wednesday, December 23, 2009
The Reid Plan, or a Better Way?
I had barely posted my previous submission and headed out the door for my 5 mile run/walk when the thought occurred to me, “I had failed to fully analyze and develop my thoughts regarding the cost of Reid’s plan.”
So, in an effort to correct that failure, I offer this update.
In my original post I discussed the addition of $518 billion in taxes associated with the Reid bill. I my rush, I didn’t consider that that $518 billion is over 10 years, not per year as stated. With that, the cost of “insurance” averaged per family of the “uninsured” is reduced to about $5,412 per year. On its face that’s a reduction, for those “families,” in the cost of their “health care insurance” at least as it relates to the American taxpayer when compared to the “average” cost of private insurance.
Score one for Reid.
But the Reid plan is not going to cost merely the $518 billion in new taxes. Democrats talk about a $1 Trillion cost over 10 years. Reid claims to pay for about half the cost of his plan through “found savings” in Medicare and other areas of health care.
That $1 Trillion expense, amortized over the “30 million uninsured” results in a cost per family of $10,477 per year, back above the cost of private insurance by 66%. So Reid’s plan will cost far more than it would to simply have the taxpayer foot the bill for private insurance for the targeted group.
But there’s one more step. While Reid’s plan calls for taxes starting in 2010, the “benefits don’t actually begin until 3 years later in 2014. So the cost of the Reid plan is actually amortized over 7 years, not 10 years. That means the cost of insuring the “uninsured” rises to $14,952 for each of our hypothetical families in the so called “30 million uninsured.” That’s an overrun of $8,624 per year, or 136%, above the average cost of private health insurance.
(Disclaimer, I do not advocate forcing taxpayers buy insurance for 30 million people, many who don’t have insurance by choice. I merely make the statement for the sake of the argument.)
No one who has observed Washington politics for any length of time believes the costing of Congressional legislation. There has never been a bill come out of Congress that cost what the legislation originally stated and never has it cost less. But let's give them the benefit of the doubt and say their cost projections are spot on.
Here’s where it get’s interesting. If, for the sake of argument, the taxpayer footed the private insurance bill for the 30 million “uninsured” to the tune of $60.46 billion, and Reid achieved his claim of $500 billion is savings from Medicare, et al, there would be no need for heaping $518 billion in new taxes on the American people.
In addition to letting Americans keep that $518 billion in their pockets to invest and spend in this economy, with the savings realized from his plan, Reid could cut taxes by $439 billion. That would be a huge shot in the arm for the economy and would serve to fuel economic growth and investment, creating jobs and reviving growth in all areas, including the struggling housing market.
On the other hand, if Reid followed true to his nature and didn’t trust the taxpayers with their own money, he could use the surplus to pay down the national debt. Now the following assumes that Congress will grab its collective self by the “neck” and make hard decisions, do away with waste, pork, gratuitous entitlements and unconstitutional programs that are better run by local and state governments. I know, that’s a huge assumption but let’s enjoy the fantasy for a moment.
For the sake of argument, let’s say they do it. They balance the federal budget, then take the $439 billion saved after buying private insurance for the “uninsured” and begin paying down the national debt, you know, that $12 Trillion behemoth that hangs over the head of every American like a guillotine and threatens our national security.
If they could bring themselves to do it, that is, pay down debt instead of creating more, after 13 years it would be cut nearly in half. By the time my young nephews and nieces were getting close to retirement 28 years from now the national debt would be history and they could enjoy a retirement free of the worry of a government that would tax away their savings and compete for the investment and interest earnings they should be receiving on their hard earned money.
As a further benefit, my family, along with the progeny of all Americans would be able to live in a world where their country and by extension themselves, could not be held hostage by the political aspirations of a foreign nation, i.e. China, Japan, OPEC, that is bent on threatening to collapse the US economy by demanding immediate repayment of debt held, or simply refuse to buy more.
That alternative reality, paying down the national debt, the US becoming a creditor rather than a debtor nation, would allow them to enjoy a prosperous and peaceful retirement in their “golden years.”
In either case, the “savings” that Reid claims to find would filter through to the rest of the health care system, resulting in decreased costs which in turn would mean insurance companies, with decreased exposure could lower the cost of health care premiums. That in turn would decrease the cost to taxpayer for both their own insurance plans and those of the formerly “uninsured.”
Taking those newly found dollars, individual Americans would begin investing them in the economy through direct investment or through spending for goods and service. That in turn would add even more fuel to the engine of economic growth.
So I stand by my original conclusion, there is a better way to accomplish providing health care insurance for Harry Reid’s target group. Again, I don’t agree with his premise, but using his premise and tools, there is a better way that would strengthen and grow the economy. Not become an anchor around our necks and drag us into a deep, dark abyss.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: economy, Harry Reid, health care, insurance, interest rates, uninsured
Tuesday, December 22, 2009
Health Care For Less?
So, the Harry Reid health insurance bill going through the Senate will increase taxes by $518 billion initially. I refer to it as the “Harry Reid” bill because it has no resemblance to the bills that came out of the Senate committees and was concocted under the cover of darkness over this past weekend.
Anyway, it will increase taxes by a reported $518 billion for the purpose of insuring the “30 million uninsured.” That comes to $17,266 per individual to insure all of these allegedly uninsured. Or, with the average family consisting of 3.14 persons according to the US Census Bureau, $54,217 per family.
So, I wondered, how does that compare to the average health insurance premium in the United States. Just how much do these “unaffordable” health insurance premiums the Democrats have so vilified as “too expensive” for the average family actually cost?
According to an article on About.com:
In a report (Individual Health Insurance 2009: A Comprehensive Survey of Premiums,Availability, and Benefits) made public in October 2009, America's Health Insurance Plans (a trade group representing health insurance companies) presented some interesting information that gives a sense of what health insurance policies cost when purchased by an individual.Across the country, the annual premium was $2,985 for a single person and $6,328 for a family. The annual premium was very different from state to state. For example, the premium for a family health plan in New York was $13,296, while a similar plan in Iowa was $5609. The annual premiums for health plans were also very different depending if the annual deductible was high or low. For example, family plans with no deductible had an average premium of $12686 each year, while plans with an annual deductible of $10,000 had an average premium of $5380 each year.
So while the premiums obviously vary widely according to the options a family selects, the average family health insurance premium costs $6,328 per year. Those “outrageous” private health insurance premiums actually cost $47,889 per year less than the “affordable” health insurance plan that Harry Reid has concocted when prorated over his target audience of an allegedly 30 million uninsured.
It seems that the Democrat plan to “lower the cost” of health care is actually going to cost eight and one half times more than what those nasty private insurance companies charge. Perhaps the citizens need to be investigating the excesses and illegal practices of Congress. It appears that the health insurance industry is actually doing a good job holding down the cost of health insurance.
If Reid had thought to simply buy insurance from the private companies for the alleged “uninsured” it would have only cost the taxpayers $60.46 billion. So it makes you wonder, what is this really all about? Is it about insuring the “uninsured” or is it about giving more power to Washington and socializing our national economy? The data would suggest it certainly isn’t about “cutting the cost of health care” as these bozos in Washington continually repeat.
Anybody ready for a tea party?
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: Democrats, Harry Reid, health care, insurance, taxes, tea party
Sunday, December 20, 2009
Like A Thief in the Night
The Senate, led by Harry Reid, is planning a preliminary vote on Reid's "health care" legislation at 0100, that's 1AM on Monday morning, December 21.
A vote in the middle of the night is very indicative of the nefarious nature of those trying to push this bill through. If it was good for the nation and had the support of the American people this vote would take place in the light of day, in full view on C-Span and in time to make the next day newspaper headlines.
That the Democrat leadership is sneaking around in the middle of the night like cockroaches speaks volumes.
Among other things, to get this bill this far Reid and his cronies has had to tighten rules against funding abortion, rules that will no doubt be stripped in conference. He also, apparently in a nod to his Hollywood supporters, stripped a tax on cosmetic surgery while throwing the youth who supported Obama under the bus by adding a 10% tax on tanning bed services.
This bill will add an additional $1 Trillion to the federal budget and while it is supposedly budget neutral, that is because the collection of new taxes will begin immediately, in some cases retroactively, while "benefits" won't start until 2014.
So while on paper the bill is "neutral" for the first 10 years, no one, at least on the Democrat side, is talking about what happens after that. Anyone with a 5th grade education can see that after 10 years, this bill will produce at minimum 30% annual deficits. That's before the inevitable excess costs inherit to every spending bill that has come out of Congress begins producing massive deficits.
If this bill passes, our government will have set in place the tool of its fiscal destruction and the collapse of the American economy. It may not be 5 or 10 or even 15 years away, but with this kind of reckless spending, no individual, business or, yes, even government can even hope to keep its financial head above water.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: Democrats, financial crisis, health care, legislation, taxes
Wednesday, December 16, 2009
A Different Christmas Poem (UNCLASSIFIED)
by Michael Marks
The embers glowed softly, and in their dim light,
I gazed round the room and I cherished the sight.
My wife was asleep, her head on my chest,
My daughter beside me, angelic in rest.
Outside the snow fell, a blanket of white,
Transforming the yard to a winter delight.
The sparkling lights in the tree I believe,
Completed the magic that was Christmas Eve.
My eyelids were heavy, my breathing was deep,
Secure and surrounded by love I would sleep.
In perfect contentment, or so it would seem,
So I slumbered, perhaps I started to dream.
The sound wasn't loud, and it wasn't too near,
But I opened my eyes when it tickled my ear.
Perhaps just a cough, I didn't quite know,
Then the sure sound of footsteps outside in the snow.
My soul gave a tremble, I struggled to hear,
And I crept to the door just to see who was near.
Standing out in the cold and the dark of the night,
A lone figure stood, his face weary and tight.
A soldier, I puzzled, some twenty years old,
Perhaps a Marine, huddled here in the cold.
Alone in the dark, he looked up and smiled,
Standing watch over me, and my wife and my child.
"What are you doing?" I asked without fear,
"Come in this moment, it's freezing out here!
Put down your pack, brush the snow from your sleeve,
You should be at home on a cold Christmas Eve!"
For barely a moment I saw his eyes shift,
Away from the cold and the snow blown in drifts,
To the window that danced with a warm fire's light
Then he sighed and he said "Its really all right,
I'm out here by choice. I'm here every night."
"It's my duty to stand at the front of the line,
That separates you from the darkest of times.
No one had to ask or beg or implore me,
I'm proud to stand here like my fathers before me.
My Gramps died at ' Pearl on a day in December,"
Then he sighed, "That's a Christmas 'Gram always remembers."
"My dad stood his watch in the jungles of ' Nam ',
And now it is my turn and so, here I am.
I've not seen my own son in more than a while,
But my wife sends me pictures, he's sure got her smile."
Then he bent and he carefully pulled from his bag,
The red, white, and blue... an American flag.
"I can live through the cold and the being alone,
Away from my family, my house and my home.
I can stand at my post through the rain and the sleet,
I can sleep in a foxhole with little to eat.
I can carry the weight of killing another,
Or lay down my life with my sister and brother..
Who stand at the front against any and all,
To ensure for all time that this flag will not fall."
"So go back inside," he said, "harbor no fright,
Your family is waiting and I'll be all right."
"But isn't there something I can do, at the least,
"Give you money," I asked, "or prepare you a feast?
It seems all too little for all that you've done,
For being away from your wife and your son."
Then his eye welled a tear that held no regret,
"Just tell us you love us, and never forget.
To fight for our rights back at home while we're gone,
To stand your own watch, no matter how long.
For when we come home, either standing or dead,
To know you remember we fought and we bled.
Is payment enough, and with that we will trust,
That we mattered to you as you mattered to us."
See Snopes for more on the origin of this poem.
At this Christmas season, take time to remember those men and women who stand guard protecting our freedom. Those on the battlefield overseas and standing a vigilant watch everywhere, giving up time with their families to ensure our safety and freedom deserve our gratitude and appreciation.
Merry Christmas!!
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Wednesday, December 09, 2009
Call and Write Your Senators About Harry Reid's Health Care Plan
Letters to my Senators regarding Harry Reid's "health care plan."
Dear Senator Nelson,
I implore you to respect the wishes of your constituency and vote against the pending health care legislation before the Senate. While the intentions of some may be good, the end result will be long term massive costs, increases in taxes and health care costs, and loss of services as budget restrictions force rationing of services.
The American people are far better at determining their own personal health care needs than 100 Senators and 435 Congresspersons who have little regard for the well being of their constituency.
To foist these overbearing measures on the 80% in order to supposedly provide for the 20%, a dubious justification at best, is not only wrongheaded, but indicative of the need for term limits to return elected officials to the states they hail from and limit political inbreeding in Washington.
We do not need the kind of health care reform Washington politicians are proposing, we need new representative who are more interested in statesmanship and the will of the people. Not a group of lemmings who blindly follow the party leadership.
Vote no on the Harry Reid led charge to decimate our health care system.
Dear Senator LeMieux,
Thank you for remaining steadfast in opposing the wrong headed and dangerous health care legislation pending before the Senate.
If our economy has even a possibility of recovery, this legislation will at best delay it, at worst, plummet us into a miserable decline.
The damage this legislation will inflict on the delivery of health care, on the health of individuals, and the economic health of families has been sorely underestimated.
Medicare currently costs many multiples of the originally stated cost. Senate Democrats have had to, in similar fashion to the University of East Anglia Climate "researcher", fudge the numbers and creatively skew them to show a "balanced" bill.
The truth is the ever increasing costs will result in massive deficits and/or unbearable taxation of American families that will be required after the stated 10 year “balanced” projections.
Thank you again for your stalwart opposition to this attempt to destroy our health care system, our economy and our nation.
I you haven't written and called your Senators, do so now, the time is short and the future of our nation and our economic well being is at stake.
Senate Directory: Look up your Senator and email him or her via the web mail application on their Senate website. Also check their Senate website for phone numbers or use the directory at TheOrator.com to call them. TheOrator weblinks to email your representatives may be broken. Try it before using the multistep process on the US Senate website.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
Labels: Bill Nelson, George LeMeiux, Harry Reid, health care, politics, Senate, voting