Mitt Romney may not have intended it, but he is providing another good reason to be rich: the low tax rate. First, there was the $10,000 bet in the Republican debate on Dec. 10. It must be great to be able to wager that much money as nonchalantly as most people bet a six-pack of beer.
Then on Jan. 17, Romney said that his $374,327 in speaking fees over one year is “not that much.” Earth to Romney, these fees alone put you in the top 1 percent of income, and more than likely 98 percent of the population would be thrilled to make that much money.
Romney might be able to afford $10,000 bets because of his low tax rate. Romney reluctantly released his tax returns on Tuesday. He paid about $3 million in taxes on income of about $21.7 million, for an effective rate of 13.9 percent in 2010. The difference between that rate and the top rate of 35 percent would allow Romney to lose 456 wagers.
Unlike Romney, investment guru Warren Buffett willingly revealed his income and tax rate back in August. Buffet wrote in “Stop Coddling the Super-Rich,” he made about $40 million and paid 17.4 percent in taxes. His employees paid taxes at rates from 33 percent to 41 percent on salaries around $60,000. Romney’s and Buffett’s compensation was more than 360 times what these employees made, yet their tax rate was about half.
Buffett has been advocating many years for a fairer tax system. In October 2007, he offered the following challenge:
I’ll bet a million dollars against any member of the Forbes 400 who challenges me that the average [tax rate] for the Forbes 400 will be less than the average [tax rate] of their receptionists. So, … I’ll give ‘em an 800 number. They can call me. And the million will go to whichever charity the winner designates.
He remains unchallenged.
A few months ago, President Barack Obama advocated getting rid of this unfair tax quirk law and applying the Buffett Rule — “that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.”
The current regressive tax system, Buffett’s proposal and Obama’s advocacy generate a more fundamental question. Why does source of income matter when determining tax rates?
The Federal Insurance Contributions Act (Social Security and Medicare) taxes are examples of a higher tax burden imposed on one source of income: wages. Can anybody explain why it is fair to charge most wage earners an extra 5.65 percent on their incomes? Why not put the extra burden on capital gains or dividend income? Just to be totally arbitrary, why not put the burden on people whose surnames begin with the letters A through F?
It’s not even a matter of coddling the super-rich, although that is happening. It is a simple matter of fairness. Someone who makes $60,000 should not be paying a larger percentage of their income in taxes than someone who makes $20 million or $40 million.
It is time to change the tax code and set rates strictly on amount of income. Income source should be irrelevant. Otherwise, exceptions could always be added that force lower paid wage earners to pay higher rates.
A system based on amount of income would have several advantages. Such a system would simplify the tax code. Different tax rates for different sources of income would not be required. A proposal to add a tax exception to correct an inequity caused by a previous tax exception would be unnecessary.
Social Security and Medicare funding could be maintained by allocating a percentage of tax revenue to these programs, thus ending the highly regressive FICA taxes on individuals and making payroll processing easier. This same method could be used to eliminate FICA taxes on businesses.
In addition, the government would need to remove business tax loopholes and tax breaks so that all profitable companies actually pay income taxes. Perhaps the most egregious example is General Electric Co. In 2010, GE made $14.2 billion in profit, yet paid no federal income taxes.
For too long, wage earners have been subjected to unfair, regressive taxes on their wages while some millionaires and billionaires have been favored with much lower tax rates than their wage-earning counterparts. It is time to level the tax paying playing field by having tax rates determined only by the amount of income. Such a system would establish a tax system that is more equitable and progressive.
Employees who made $60,000 could buy about 1,800 six-packs if their tax rate was 13.9 percent instead of 35 percent. Unfortunately, at their current high tax rate, they can’t afford to drown their sorrows.
On Tuesday (Jan. 24), The Daily Show skewered Mitt Romney on his low tax rate of about 14 percent. Romney made $42.6 million over two years.
Romney says about his low tax rate, “I pay all the taxes that are legally required and not a dollar more. I don’t think you want someone as the candidate for president who pays more taxes than he owes.”
As Jon Stewart says, “No, but you might want one who think that’s wrong,” which captures the essence of the problem.
In a future posting, I will comment on how to modify the tax code so that millionaires would never have a tax rate less than somebody who makes around $50,000.
Sen. Roy Blunt (R-Mo.) underwent outpatient surgery on Thursday. He had a stent placed in a coronary artery.
As a conservative Republican, Blunt has railed against the Affordable Care Act, or “Obamacare,” as the conservative critics like to call it. These same critics have yet to propose any other viable solutions that will make health care more affordable or prevent the 45,000 deaths per year due to lack of health care.
Blunt said he is “a strong believer in the life-saving importance of early detection, and I encourage everyone to be proactive about their preventive screenings.”
How likely is it that people will get a preventive screening if they do not have heath insurance? Even if they can scrape up the money for a screening, they almost assuredly would not be able to afford any necessary medical treatment, such as having a stent inserted.
Senator Blunt, if you are truly “a strong believer in the life-saving importance of early detection,” either stop complaining about Obamacare or propose a health care system that provides affordable health care for everybody.
In the meantime, as you recover, just be thankful that you have great health insurance largely financed by taxpayers, a benefit that you refuse to extend to other citizens of this country.
People are not the only ones who can make resolutions to make themselves better. Nations can do the same. The following resolutions would make our nation better and improve the economy.
Resolution 1: Adopt a single-payer system for health care.
A single-payer system would cover everybody, reduce the nation’s health care costs by more than 40 percent, and prevent medical bankruptcies. Currently, more than 45 million people are uninsured in this country, and 45,000 people die due to lack of health care. By 2019, the Affordable Care Act would reduce the uninsured to 23 million allowing about 23 million deaths from lack of health care, a better, but still imperfect solution. It is time to end the lethal effects of a health care system that relies on private insurance.
Resolution 2: Modify the tax code so that all millionaires pay a higher tax rate than thousandaires, and close loopholes so that profitable companies actually pay taxes.
As Warren Buffet has stated, last year he paid 17.4 percent in taxes on about $40 million while his employees paid anywhere from paid an average of 36 percent on incomes around $60,000. In 2010, General Electric made $14.2 billion in profits, but paid no federal income taxes.
Resolution 3: Our infrastructure will be rebuilt, and taxes will be raised to pay for it.
Our infrastructure’s overall grade of “D” by American Society of Civil Engineers’ 2009 Report Card is unacceptable. The ASCE estimates it will take about $2.2 trillion over five years for the improvements.
Resolution 4: Enact policies that will maintain and create jobs.
We can start with the resolution to rebuild our infrastructure, and provide local and state governments with the necessary funding to keep the number of public employees, especially teachers, fire fighters, and police at pre-2008 levels.
Resolution 5: Make our educational system the best in the world.
According to 2009 study, the United States ranked 14th in reading, 25th in math and 17th in science out of 34 countries. Between budget cuts and the No Child Left Behind Act, the focus has been on making sure that every student meets a basic level of achievement. Our education system will not become superior if we just concentrate on the underachievers. Making education fun and exciting should be a priority so students can naturally excel. We can and must do better, and a good place to start would be by hiring back teachers laid off due to budget cuts.
Resolution 6: Any candidate who does not accept science will be disqualified.
I cannot take any candidate seriously who does not recognize evolution as a valid scientific theory. I find it troubling and discouraging that half of the current Republican presidential candidates do not recognize evolution as a valid scientific theory. Ron Paul, Rick Perry, and Rich Santorum have this view. At least Newt Gingrich and Mitt Romney have expressed limited support for evolution. Jon Huntsman to his credit has expressed strong support for evolution.
When it comes to climate change, all the previously mention candidates disagree with the scientific evidence supporting climate change despite the fact that about 97 percent of climate change specialists think that human activity significantly contributes to climate change.
How can we improve our dismal science education ranking when major political figures deny scientific evidence?
Adopting these resolutions would make our nation stronger and provide a solid foundation for future growth.
The end of the Iraq War brings a welcome close to a domestic and foreign policy disaster. Some politicians have criticized the president saying that we should not withdraw, and that our interests in the Middle East could be harmed. Sen. John McCain (R-Ariz.) and Sen. Sen. Lindsey Graham (R-S.C.) along with presidential candidates Mitt Romney and Newt Gingrich have advanced some variation of this argument. McCain and Graham voted for the war without voting to fund it.
These politicians display their blatant hypocrisy when they argue to continue the war without explaining how they will pay for it. After months of complaining about the national debt and excessive government spending, McCain, Graham, Romney and Gingrich owe us that much.
The cost of the Iraq war is staggering, more than 4,470 American soldiers dead and more than 30,180 wounded. More than 100,000 documented civilian deaths and 2.8 million displaced Iraqis. The direct cost of the war is $806 billion, and the total economic cost will be between $3 trillion and $5 trillion. (Just think how many jobs would have been created and how great are roads, bridges and schools would be if that money had been spent on infrastructure.)
In addition, the damage to moral authority of the United States is staggering. The Bush Administration created a false association between Saddam Hussein and the 9/11 terrorists attacks. We lied about the weapons of mass destruction. We allowed the use of torture, which has been outlawed in this country since the Revolutionary War. We have ignored international treaties that demand the investigation and prosecution of suspected war criminals. Since former President George W. Bush admitted personally approving waterboarding, an investigation is not only warranted, but also necessary to help regain our international reputation.
The Iraq War did meet the foreign policy goals of one country. Unfortunately, the country is Iran. Our wasteful foray into Iraq accomplished many of Iran’s foreign policy goals at virtually no cost for that country.
From almost any view, the Iraq War has been a disaster for this country. The danger is not ending the war—it is continuing it.
McCain, Graham, Romney and Gingrich, are you listening?
Filed under: 2012 Presidential Campaign, Economy, Jobs, Taxes
All the Republican presidential candidates claim that excessive regulation and high taxes are stifling economic growth. Cut taxes and regulations, and the economy will expand. “It’s a compelling picture, but the data simply do not support it,’ said CNN’s Global Public Square host Fareed Zakaria this past Sunday.
If the Republican presidential candidates were presenting rational plans about how to grow the economy, the country could have an honest debate about policy prescriptions. Unfortunately, the evidence overwhelmingly contradicts their prescriptions.
In two rankings on economic competiveness – one by the World Bank, and the other by the World Economic Forum – the United States ranked fourth and fifth respectively said Zakaria, “And these rankings have not slipped much over the last decade.”
Zakaria expands and explains where the economy has problems [emphasis added]:
The organization of economic cooperation and development, the OECD, released a study last week measuring tax revenues as a percentage of GDP. Of the 30 countries studied, the United States came in 28th. Taxes are low in historical terms, as well, the lowest since the early 1950s.
So where has there been change? Where have we slipped?
The answer is pretty clear. Only five years ago, American infrastructure used to be ranked in the top 10 by the World Economic Forum. Now, we’re 24th. U.S. air infrastructure has gone from 12th in the world to 31st, roads from eighth to 20th.
The drop in human capital is even greater than the drop in physical capital. The United States used to have the world’s largest percentage of college graduates. Now, we’re number 14, according to the most recent OECD data. And American students routinely rank toward the bottom of the developed world in international tests.
The situation in science education is even more drastic. The number of engineering degrees conferred annually decreased more than 11 percent between 1989 and 2000.
In other words, the big shift in the United States over the past two decades has not been a rise in regulations and taxation but rather a decline in investment, in physical and human capital. … [And] investment is the crucial locomotive of long-term growth.
On this program, Michael Spence, the Nobel Prize-winning economist, pointed out that the United States got out of the Great Depression because of the spending associated with World War II, but also because during the war it dramatically reduced its consumption and expanded investments. People spent less, they saved more, and they bought war bonds.
That surge in investment by people and government produced a generation of growth after the war. If we want the next generation of growth, we need a similarly serious strategy of investment.
The claim that tax cuts will create jobs is especially egregious. Taxes were higher under President Bill Clinton than under President George W. Bush. During the Clinton years, 22.7 million jobs were created, while under Bush, only 1.1 million jobs were created. What the Bush years prove is that tax cuts by themselves do not produce jobs.
So what will produce economic growth? As previously stated, investment in physical and human capital produces growth. Policies should concentrate on infrastructure and education to rebuild capital. The debt and deficit are not a concern in the short term.
We can start by rebuilding our infrastructure. The American Society of Civil Engineers gave our infrastructure a grade of D, and estimates it will take $2.2 trillion dollars over five years to rebuild infrastructure. This would create needed jobs.
Next we can improve our educational system. Some good first steps would be to lower class sizes by rehiring laid off teachers and hiring more teachers. Target class size should be 15 – 20 for most classes.
In addition, a college education should be free, provided a student is qualified and accepted by an accredited school. This would prevent students from being saddled with expensive student loans, and would be a great way to improve human capital.
The extra cost could be covered by a one percent financial transaction tax, which could raise up to $700 billion. Half could be used for infrastructure, and the other half could be used for education.
For the economy to grow, we must implement economic policies that are based on reality. Until the Republican presidential candidates propose policies that might actually work, they deserve neither support nor the presidency.
Obama sounded reinvigorated in his speech on Tuesday. He clearly specified the issues facing the country and what needs to be done. Now he needs to tell us how to accomplish these goals.
Obama outlined the problems facing most people in the country. He said what made our country great, “If you gave it your all, you’d take enough home to raise your family, send your kids to school, have your health care covered, and put a little away for retirement,” and this is what made our country great.
However, “Fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.”
Obama then explains why Republican policies won’t work, and what needs to be done to fix the economy.
Trickle-down economics, the Republican policy of “cut more regulation” and “cut more taxes – especially for the wealthy,” doesn’t work and has never worked, Obama said. It didn’t work the decade before the Great Depression. It did not lead to the “incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.”
Obama says that the “most expensive tax cuts for the wealthy in history” in 2001 and 2003 had the “slowest job growth in half a century.”
The data backs Obama. During President Bill Clinton’s time in office, almost 22.7 million jobs were created, while the under President George W. Bush about 1.08 millions jobs were created. (Note that the figure often quoted for jobs created during the Bush presidency is 3 million. Updated statistics revised that figure downward.)
Obama then says that years of weak regulation and lax oversight led to: “Insurance companies that jacked up people’s premiums with impunity, and denied care to the patients who were sick. Mortgage lenders that tricked families into buying homes they couldn’t afford. A financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy.”
He then cites statistics that “the average income of the top one percent has gone up by more than 250 percent, to $1.2 million per year,” and that the “typical CEO who used to earn about 30 times more than his or her workers now earns 110 times more.” This inequality “distorts our democracy” and gives an “outsized voice” to lobbyists who can afford unlimited campaign contributions.
Obama then talks about how the inequality makes it harder to advance to the middle class, how we should be rebuilding our infrastructure, hiring teachers instead laying off teachers to improve education, and fix our tax code so that millionaires do not have a lower tax rate than somebody who makes $50,000.
He then commends how the Big Three Auto companies agreed to give bonuses not just to executives, but to all employees, and how the owner one company said that during tough times when workers give up benefits and pay, so should the owners.
Obama gave a passionate speech that clearly and eloquently stated the problems facing our country, especially the problems cause by inequality. Implicit in the speech is that we need to resolve the problems caused by inequality. He needs to explain how he would solve these problems.
As Obama said: “This isn’t about class warfare. This is about the nation’s welfare. It’s about making choices that benefit not just the people who’ve done fantastically well over the last few decades, but that benefits the middle class, and those fighting to get to the middle class, and the economy as a whole.”
I passionately agree.
The scandal continues at the Big Bank Preschool as the fallout continues over the toy hogging scandal.
Apparently, in the largest class, two children were hogging 40 percent of the toys and breaking many of the toys as they played with them. The headmaster at the school, Ken Lewis, assured parents that everything was fine while he secretly supplied toys from other classrooms to hide the breakage.
Other children were looking for toys and had nothing to do. When three-year-old Timmy was picked up by his mom one day, he said, “I was bored,” as he wiped several tears from his eyes.
Costs kept going up and the parents could not understand why their “toy” assessment kept increasing with fewer toys to go around. More and more kids were crying when they were picked up because they had nothing to do.
Parents and teachers became outraged when other classes were canceled to reduce costs. Parent Alan Citizen said, “The innocent suffered, but not the perpetrators. The guilty still have jobs and received bonuses. The guilty should be locked up and the keys thrown away. The guilty should pay.”
Three-year-old Lizzie’s class was canceled. When she found out, she climbed into her mother’s lap, started crying and said, “The toy hoggers did not even get a timeout.”
Filed under: 2012 Presidential Campaign, Drug War
In yesterday’s posting I took a whimsical, yet serious view of why Newt Gingrich’s comment that Americans receiving “any kind of federal aid” should be drug tested is an abysmal idea. While Gingrich meant drug testing for poor people because he specified “[u]nemployment compensation, [and] food stamps,” he left himself open to other interpretations when he added “you name it.”
I pointed out that “any kind of federal aid” covers a wide range programs including TARP and the use of public airwaves for radio and television.
There are several reasons why drug testing is a pee-poor idea.
First, the law is unfair. If food stamp recipients are going to be drug tested for aid, then so should TARP recipients. The requirement must be applied to poverty-welfare and corporate-welfare recipients.
Second, if drug use is so evil, then it should apply to elected officials. Congress and the president should be required to submit to drug tests, and if the results are positive, then those officials must resign from office.
Third, drug testing is expensive for dubious benefits. Florida recently implemented a policy that required testing welfare recipients for drugs. Two percent of the recipients tested positive for drugs as compared to a national drug use rate of almost nine percent. There is doubt whether the program saves money, and may actually cost the state money. About a month ago, a federal judge blocked Florida’s law because it may violate the Constitution’s Fourth Amendment ban on unreasonable searches and seizures.
Finally, the war on drugs is failure. The Global Commission on Drug Policy states:
“Political leaders and public figures should have the courage to articulate publicly what many of them acknowledge privately: that the evidence overwhelmingly demonstrates that repressive strategies will not solve the drug problem, and that the war on drugs has not, and cannot, be won.”
So, Gingrich is advocating a policy that would be practically useless, a policy that is likely to cost money, a policy that is likely unconstitutional and a policy that supports a failed drug war.
Advocating a policy that supports a failed drug war makes no sense.
Filed under: 2012 Presidential Campaign, Drug War
Yesterday, presidential candidate Newt Gingrich proposed that Americans receiving “any kind of federal aid” should be drug tested. “Unemployment compensation, food stamps, you name it.” His goal is to get serious about stopping drug use.
I doubt that Gingrich appreciates how enjoyable his proposal could be. Note that Gingrich said, “any kind of federal aid.” I can’t wait to make all those banking and investment executives who accepted TARP money pee in a cup. In fact, it might be necessary to make all employees of such firms as Bank of America and Goldman Sachs take drug tests.
Let’s not stop there. All television and radio show employees would need testing. The use of public airways is a type of federal aid. I am excited that Sean Hannity, Bill O’Reilly and Ann Coutler would have to pee in a cup. Requiring anti-drug crusader Rush Limbaugh to take drug tests leaves me positively giddy.
It gets even better. Anybody who has ever used a road, airplane, or train could be required to take drug tests because infrastructure is a “kind of federal aid.” Every person in the United States could be required to drug test. I can’t wait to make that six-month-old baby pee in a cup.
And since Gingrich won’t raise taxes, think of all the programs that will need slashing to pay for the drug testing. To save money, unemployment compensation and food stamps could be cut to reduce the need for testing, a perfect plan.
Making a useless war on drugs even more expensive while not paying for it is the next logical step for the Republican policy paradigm. I just hope I have time to start my chain of drug testing laboratories before Gingrich’s proposal becomes law.