Serious Blog Alert! Our Government's Purse is Full Enough!

Our government does not tax too little, it spends too much.

In response to a “call congress” campaign to voice objection to a debt limit increase without a balanced budget amendment, real significant cuts in spending, and no tax increases, I received several standard “tax the evil rich” responses. In one response, a friend of mine stated that per capita GDP has increased throughout the economic meltdown. While it is true that GDP increased in 2007 and 2008, all be it at a very slow pace, GDP actually dropped in 2009 according to the Bureau of Economic Analysis. That being said, this “tax the rich” philosophy beg the questions how much is enough, and who is it that you consider rich? Leaving aside the fact that if you confiscated the ENTIRE wealth of the fifty richest people in the US (many of whom are democrats by the way i.e. Gates, Buffett, Ellison, Bloomberg, Page, Brin, Soros, Perelman, etc.), you get about 650 billion dollars (figures from Forbes Magazine). That is not even enough to make up half the deficit in this year's budget.

The current top rate for wage earners is 35% which cuts in at $379,150.00 of taxable income. My dear friend states that this is the lowest rates have been since shortly after the great depression. The fact is, however, that in 1992, the top rate was 31%. Be that as it may, let's explore this idea of taxing the rich some more. In 1992, the top 20% of wage earners paid 65% of the income tax. In 2001, when the top rate was 39.5% the top 10% of wage earners paid 64% of the income tax, and in 2008 when the top rate was 35%, the top 10% of wage earners paid 70% of the tax. The threshold for this 10% is an adjusted gross income of $113,799.00 per year. That is not what I would call excessively rich. The interesting thing about this is that the bottom 50% pays 3% of the tax, meaning that the other 40% of taxpayers with adjusted gross income between $33,048.00 and $113,798.00 pay 27% of the total income tax collected by the IRS. The percentage of tax paid by the bottom 50% has been steadily DECREASING since 2001. Federal Revenues have fluctuated from 2.0 trillion to 2.56 trillion from 2005 through 2010, peaking at 2.56 trillion in 2007, and dropping to 2.16 trillion in 2010. Spending, however, has steadily increased from 2.4 trillion/year in 2005 to 3.8 trillion/year estimated in 2011. The question we REALLY need to be asking, is where has that extra TRILLION dollars per year since 2008 gone? In 2009, 2010, and projected for 2011, we have spent an EXTRA trillion dollars more per year that we did in all the years gone before. Even under George Bush, who spent money like a drunken sailor, mostly on war toys, we weren't spending at anywhere close to the rate we are now. Were children starving in 2008? Were old people going without food, clothing and housing in 2008? I don't remember that. I don't remember autistic children starving in the street in 2008, do you?

So where did the money go? 28 billion dollars of it went to GE for high speed rail no one will ride. 0.5 billion for cash for clunkers, 10.6 billion for first time home buyers, 9.2 billion for child tax credits (one reason the bottom 50% pay a smaller share of the tax), 186 billion for grants to states to fund pensions, Medicaid and unemployment, 82 billion to the Department of Education and National Science Foundation (shrimp on treadmills program), 25 Billion to the Department of Energy and the Environmental Protection Agency, the list goes on and on. Of the 2.4 million jobs the administration has claimed to have “saved or created” each job cost $278,000.00 in stimulus money to create or save. That is a fairly expensive way to create and save jobs, which brings me to corporate taxation.

The current corporate tax rate is 35%. When a corporation is creating a budget for coming years, one thing it must take into account is its tax liability. Along with the costs of labor, raw materials, fixed operating costs and the like, they also estimate their tax liability. When a corporation decides how much to charge for its product or service, it must take its tax liability into account. If taxes go up, the price of the good or service goes up accordingly. That means the only thing increasing corporate tax rates, or capital gains rates for that matter, does is pass that tax on to the consumer. When tax rates are unreasonably high in comparison to rates in another state or another country, it provides an incentive for a corporation to move to another state or country. Please take note of the mass exodus of companies from New York, Michigan and California and the gain in Texas. We currently have the second highest corporate tax rate in the world, which explains why GE, our President's favorite corporation, moved much of its operations offshore, and paid NO corporate tax in 2010.

With all that said, it becomes clear that we do not tax too little, we spend too much. The only result we will get from raising top tax rates, is that we will shift an even higher burden on to those carrying 70% of the weight now, and diminish economic activity, pushing corporations overseas, and putting increasing strain on an overwhelmingly thin job market. With 9.1% unemployment, and REAL unemployment (including those who have given up looking) over 15%, the last thing that makes sense from an economic point of view is increase the burden on those who are carrying the bulk of the weight now. Anyone who has a sound background in market economics will say the same thing.

Finally, President Obama attacked private jet owners, saying they should lose the tax break that his administration gave them early in his term. This “break” allows a company to depreciate the cost of an airplane, or improvements to an airplane, over a period of five years instead of seven. For those of you without a background in accounting, depreciation is expensing a purchase over a period of time. If a company leases a car, for example, the monthly lease payment is an expense, and is subtracted from the company's income before tax is calculated on that income. If the company purchased the car instead of leasing it, the price of the car, minus it's expected value after seven years, has to be divided by the number of years (seven in this case) and 1/7th of that value is expensed from each year's income before tax is calculated. The only thing changing the length of depreciation for an airplane does is make the company either less likely to buy or refurbish an airplane, or extend the period of time in between such purchases. The reason the depreciation period was shortened in the first place, was to save airplane manufacturing jobs by encouraging companies to trade their planes in faster. Now we want to slow down the turnover of airplanes and put those jobs in jeopardy?

There is no clearer example of this kind of thinking as when George Herbert Walker Bush went along with the luxury tax in 1990. The reasoning was the same. It went like this; “When people are hurting, and need jobs, why shouldn't the rich pay a little more. They are buying yachts and other luxury items, like diamond rings, and we ought to put an extra tax on those items.” Against his better judgment Bush 41 went along with congress on that one. The actual effect though, as one might guess, is that “rich” people quit buying yachts, or bought them offshore. The net effect was that revenues went down, and 200,000 people who worked in the boat building industry lost their jobs. Ultimately it cost Bush the 1992 election.

If you still think “tax the rich” is a good idea, I would encourage you to read anything by Allan Meltzer, Professor of Economics at CMU, Milton Friedman, Nobel Prize winner in Economic Science and Professor of Economics at the University of Chicago, or Ayn Rand for that matter. Rather than take money from the folks in this country who work hard, create business, and create employment for the rest of us just so we can give it to other folks to see what happens when a shrimp gets some exercise, we ought to stop the excessive spending. We should fix our long term problem of unfunded liabilities for Medicaid, Medicare, and Social Security in a way that protects our seniors, and insures our safety net exists long into the future. That way we can let business get back to work doing what they do best, which is grow our economy!

Obama Announces Big Changes to AMP up the Future

(MOJ) Pittsburgh PA, June 24th – During his visit to Carnegie Mellon University today, President Barak Obama announced a new Executive Order.* After calling for a "renaissance in American manufacturing that would replace shuttered steel mills with plants producing robotics, nanotechnology and other high-tech advances.” The President said "We have not run out of stuff to make, we've just got to reinvigorate our manufacturing sector so that it leads the world the way it always has, from paper and steel and cars to new products we haven't even dreamed up yet.”

He said, "That's how we're going to strengthen existing industries, that's how we're going spark new ones." Adding, "That's how we're going to create jobs, grow the middle class and secure our economic leadership."

In announcing his new order He noted “We have a congress that refuses to raise the debt limit. They believe that we must cut spending at a time when we have these initiatives that will give jobs to American workers. Congress is blocking our new initiatives and walking out of important meetings.'

“Therefore, I am issuing an executive order today which will extend my authority to be supreme, relegating Congress to an advisory position only.  My new title will be Progress Czar.  We face an emergency in this country, and we must put our people back to work in ways that support our environment, green energy and innovation.  That is what the American people want, and that is what the American people need.  The authority for this order comes from Commerce clause of the Constitution, in order to promote the general welfare, and because congress throws up roadblocks at every turn and on so many issues, all laws from now on will be issued by my office.  There will be no need for a Presidential election in November 2012, because I know the American people want me to continue to lead them and the country forward.”

“John Bryson, as the new Commerce Czar, will be in charge of the overall jobs initiative for our nation.  He will be working with businesses, suggesting how many jobs they will create, and what the wage scale will be.  We realize some parts of the country are doing better than others.  We have identified areas, shown on this map in blue, where jobs need to be created.  The areas shown in red are doing fine, and will need to contribute their fair share to our economy.'

“Our Energy Czar, Seven Chu, working in conjunction with EPA Czar, Lisa Jackson, will be working with the polluters, oil companies, gas companies, coal producers and old technology power plants to bring them into the future.  There will necessarily be some big changes in this area and my Czars will be working with the current managements of these companies to bring them in line with my vision for our future.'

“It is natural for me to be making this announcement at CMU.  The folks here at CMU, working at the forefront of technology, have developed a new, high efficiency stationary energy-producing bicyclogen.  With my wonderful wife Michelle I have initiated a program which will not only supply our nation with green energy, but tackle two other pressing issues at the same time. As you know, job growth has been slightly less than we expected, we have faced headwinds and bumps in the road. The recovery, while strong, hasn't produced the green energy jobs as quickly as we had hoped.  This new initiative solves that problem. At the same time, and as you know, Michelle has been tirelessly working to make our population healthier. She has worked with Walmart, McDonalds, and many other companies to make better choices for the nation's nutrition.  Now she will also be able to help folks tackle their obesity problems in another way, while reducing the number of unemployed and lowering health care costs.  We will be creating thousands and thousands of high paying government jobs for 'green energy creators'.  Michelle will be the new “healthy energy job Czar”. In that position she will be identifying many thousands of over weight, unemployed folks. We will be putting them to work, at high paying, energy producing jobs, riding thousands and thousands of these new bicyclogens, losing weight and generating energy at the same time!'

As I develop new initiatives to move our country forward and Win the Future, I will be assigning Czars to manage every aspect of everyday American life.  It's what the American people want, it's what the American people need, it's what will keep our country moving forward down the path to a winning future.  Thank You!'
*(Satire)