Converting Pounds to Dollars February 11, 2004January 21, 2017 But first . . . THREE NOTED CONSERVATIVES WEIGH IN PAT BUCHANAN From his column yesterday: [H]ow we were persuaded to go to war raises grave questions about the character and competence of those who led us into it . . . [T]he White House stampeded Congress and the country into war, a war we now know was utterly unnecessary. We were misled. ANDREW SULLIVAN From his appraisal in Monday’s The New Republic On-Line: I’m not one of those who believes that a good president has to have the debating skills of a Tony Blair or the rhetorical facility of Bill Clinton. I cannot help liking the president as a person. I still believe he did a great and important thing in liberating Iraq (although we have much, much more to do). But, if this is the level of coherence, grasp of reality, and honesty that is really at work in his understanding of domestic fiscal policy, then we are in even worse trouble than we thought. We have a captain on the fiscal Titanic who thinks he’s in the Caribbean. BILL O’REILLY From Reuters, Monday: Popular conservative television news anchor Bill O’Reilly, usually an outspoken Bush loyalist, said Tuesday he was now skeptical about the Bush administration and apologized to viewers for supporting prewar claims that Iraq had weapons of mass destruction. ‘I was wrong. I am not pleased about it at all and I think all Americans should be concerned about this,’ O’Reilly said in an interview with ABC’s ‘Good Morning America.’ And now . . . CONVERTING POUNDS TO DOLLARS Andy (who works for a big Swiss investment bank, so maybe this is a trick question?): ‘I have a question for your ever-helpful and resourceful readers. How could one transfer approximately $100,000 in British Pounds (in London) into a US dollar denominated bank account (in NY) at the least expensive rate? (both the spread and any charges)? I can’t find any way to do it that doesn’t cost an arm and a leg. Lloyds bank, for example, offer me a $1.76 exchange rate when the actual spot rate of the $ / GBP is close to $1.86! I figured your readers in their brilliance might have a suggestion for how people do this. Surely, most people aren’t willing to give up 5% of their money just to transfer it into another currency?’ CONVERTING MIKE, THE TOUGH COOKIE Larry Taylor: ‘So Mike, quoted yesterday, believes in ‘means testing’ for reproduction. I’ll bet he also thinks that you should own property to have the right to vote.’ ☞ Let’s not give him any ideas. Tomorrow: Steve Martin on Bonds; a Priceline Tip; Betting on Bush – and More
Your Further Thoughts About Taxes Doug's Receptionist February 10, 2004January 21, 2017 Steve: ‘I was doing my taxes today and got to the part about deduction for use of a motor vehicle in a business. If you purchase a vehicle that weighs less than 6000 pounds (like a Prius or any other car or normal pickup or van) you get to deduct up to $10,710. If you purchase a vehicle that weighs 6000 pounds or more (like a Hummer or Suburban or Abrams tank) you get to deduct up to $100,000. Somehow, seeing it when you’re doing your taxes makes it seem worse than reading about it in the Times.’ ☞ It’s almost as if the Administration cared more about the oil industry than energy conservation. Robert Doucette: ‘Why is the question of tax cuts put into terms about how things ‘should’ be. My problem with the tax cuts is that I don’t see how they can accomplish the goals set out for them. Tax cuts to lower- and middle-income groups are spent, right? People buy things. Retailers make money and hire people. Inventory drops and manufacturers hire people. All good things. ‘Tax cuts to rich people are a little more murky. It probably won’t affect their spending, but they may increase their investments. But the connection between US employment rates and their money in a Cayman account is hard for me to understand. Sure, some of these ‘rich’ people may start new businesses, but aren’t they more likely to postpone hiring until people start buying stuff (see previous paragraph)? So, what does an administration want to accomplish with tax cuts? If you want to pump up the economy, tax cuts to the top 5% (which might include me) won’t help.’ ☞ It’s almost as if the Administration cared more about the rich people than ‘most’ people. Doug Jones: ‘The discussion Friday about the hardworking persons in the thankless and necessary jobs we all take for granted reminded me of something. About 10 years ago, our Public Works Department of our local government had a meeting for all staff. The Director mentioned that the most important person in the organization was the receptionist, the public’s first link with Public Works. He raved about how important she was. Some wise guy in the back row (if my memory is correct, I was the wise guy) promptly asked him why, if she was the most important in the organization, the Director was getting paid five times as much as she was. (Remember, this is government. That ratio is much higher in the private sector, or so I’ve heard.) He was quite angered by my question. (Of course, 10 years later I’m still there and he’s not.) The glaring disparity in our wages in this country is something that we shouldn’t be proud of. PS – I forgot to mention that the receptionist wasn’t at the meeting because she had to remain at the front desk to answer phones.’ Mike: ‘Once again your column misses the point. You speak about a woman who gets up at 6 feeds the kids takes a bus works as a domestic makes $65 etc, etc, etc and then says society owes her something. It is her bad decisions that got her in to this mess, just like the janitors who brought the kids to picket at the office buildings for more money a few years ago here in LA. Why in G-d’s name do people earning only a janitors or a domestics income think its okay to bring children into this world? I had low paying jobs before but I didn’t father children until I could afford to and it’s not the employers responsibility to pay for kids that the irresponsible employees make. If the woman you described didn’t have children maybe she would have still went to work at 6 and then went to school after work became a nurse and enjoyed a middle class income BEFORE bringing kids into the world. To raise the taxes of the Davids of the world to support her bad decisions is not right. I have the right to go shopping but not with your money.’ ☞ Wow, Mike. You are one tough cookie. You are basically saying that low-income people should not have children (though you want the work done that low-income people do) . . . and that if they are irresponsible enough to have children, and those children should be malnourished or poorly cared for, it’s their own damn fault – they should have chosen more responsible parents. Or, well, maybe it’s not the kids’ fault, but it’s certainly no concern of yours. This stuff about ‘no man is an island,’ or ‘blessed are the meek,’ or ‘there but for the grace of God’ is just so much crap. Dan: ‘Your column Friday really hits the heart of the differences between Republicans and Democrats. Democrats stress the benefit to the community and want to use government to that end. Republicans focus on the individual and how he may benefit himself. Unfortunately, the Republicans don’t care too much that many people lack the advantages necessary to achieve what we all want (a secure home, healthcare, etc.). Every four years, the Republicans seek allies (right-to-lifers, etc.) for their coalition to allow the ‘haves’ to keep the biggest possible piece of the pie. That’s their issue. Unfortunately, it’s really all about money; the rest is all window dressing.’
Meet The Press February 9, 2004January 21, 2017 Here’s how I wish Tim Russert had led off the domestic section of his interview with President Bush yesterday: ROLL TAPE . . . [Footage from the Second Presidential Debate] Texas Governor G.W. Bush: ‘ . . . no, Al, my proposed tax cuts DON’T go mainly to the top 1% or 2%. By far the vast majority of my proposed tax cut goes to people at the bottom end of the economic ladder . . .’ Tim Russert: ‘Mr. President, what proportion of the taxes people are saving from your cuts does go to people at the bottom end of the economic ladder?’ President Bush: ‘Well, Tim, I certainly never meant to imply that much of the actual MONEY would go to those people. But by far the vast majority of the PEOPLE are not in the top 2% or 3%, so most of the people getting cuts are not in that group.’ Tim Russert: ‘But most of the money goes to people in the top 2% or 3%?’ President Bush: ‘No, Tim. It starts there, but then it trickles down. By far the vast majority of the benefit goes to people at the bottom, because the vast majority of the people ARE at the bottom. That’s just simple math, Tim. The Democrats can promise all they want to, but most people will always be in the bottom 90%.’ Tim Russert: ‘But Mr. President, when you say that ‘by far the vast majority’ of what will ultimately be a multi-trillion-dollar tax cut goes to people ‘at the bottom end of the economic ladder’ . . . but it actually mostly goes to people at the very top . . . isn’t that a multi-trillion dollar lie?’ President Bush glowers. Russert waits silently for an answer. President Bush: ‘Certainly not, Tim. Millions of families had their income tax bill reduced all the way to zero. It was THEIR MONEY, Tim. We think people can spend THEIR MONEY better than government can.’ Russert ROLLS TAPE of then Governor Bush saying, no, he CAN cut taxes dramatically and not risk having to dip into the Social Security trust fund or run a deficit. Tim Russert: ‘But you have dipped deep into the trust fund and have added $1.3 trillion to the National Debt – about $10,000 more for each American household – with loads more projected. What happened?’ President Bush: ‘We were within 45 minutes of chemical or biological attack from Iraq, Tim, THAT’S what happened. Wars are expensive. That’s how you finance them: tax cuts for the rich. Just ask my former Secretary of the Treasury, Paul O’Neill. I know there are those who say we could have waited a few months while we did more inspections and got more of the rest of the world to share the cost. But we had intelligence from the British that Saddam Hussein was buying yellow cake from AFRICA. And don’t forget, Tim, Saddam Hussein was a madman. He gassed his own people.’ Tim Russert: ‘But didn’t he do that while your father was President, and while Rumsfeld and Cheney and Wolfowitz were in his Administration? And didn’t they all just look the other way and double his trade credits the following year? If we waited this long, why not a few more months of inspections and planning and diplomacy? Was the timing of the war geared to the mid-term elections, dictated more by Karl Rove than by true necessity?’ And so on. Instead, no tape was rolled; the toughest questions were not asked. The interview – normally live, and on Russert’s home turf – was taped in the Oval Office. Even so, here’s how Peggy Noonan, a strong Bush supporter, characterized it: The President seemed tired, unsure and often bumbling. His answers were repetitive, and when he tried to clarify them he tended to make them worse. He did not seem prepared. He seemed in some way disconnected from the event. When he was thrown the semisoftball question on his National Guard experience – he’s been thrown this question for 10 years now – he spoke in a way that seemed detached. ‘It’s politics.’ Well yes, we know that. Tell us more. . . . Tomorrow: Your Further Thoughts on Taxes
“What Do You MEAN, ‘I Don’t Pay Taxes?!'” February 6, 2004January 21, 2017 Dan Schaeffer: ‘Tom says ‘your median American $38,000 wage earner does not pay ANY federal income tax.’ That doesn’t sound right to me, but you didn’t call him on it, so maybe you can explain?’ ☞ My explanation is that Tom was wrong. It was my oversight not to point that out. David Bruce: ‘Little people do pay taxes. I made $28,334 in 2002. I paid $2,051 in federal income tax, $515 in state income tax, and $494 in local income tax.’ Tax-Paying David: ‘I just filed my income tax with a total income of $42,000. Even with itemized deductions of $12,000 (mortgage interest, property tax, charity, and unreimbursed work expenses), I owed $3,645 in tax.’ Disgusted David (who is being sarcastic): ‘Just because there are some people who are willing to get up early in the morning, work hard, and sell their hard-earned, marketable job skills in the marketplace in return for a decent income, doesn’t entitle them to walk away with such a large share of the pie. And just because those with initiative and drive and ambition pay 80% of all taxes, doesn’t mean we shouldn’t keep the pressure on to tax them even more. Let’s tax the rich, keep the class warfare going strong, and pretty soon, America’s industrious will be wiped from the face of the earth.’ ☞ What a wonderfully Republican attitude. (Not that all Republicans feel this way; but a lot do.) Does David think that the woman who gets up at 6, gets the kids off to school, walks to the bus stop, waits for the bus in the cold, takes the bus for an hour, gets on her knees to scrub bathroom floors and polish the silver, makes her $65, walks back to the bus stop, waits for the bus, takes another hour to get home and make dinner for the kids . . . is lazy? Unenterprising>? Subhuman? Under-taxed? Coddled by the long-suffering, over-taxed rich? Does David realize that he has totally distorted the discussion? No one was talking about raising taxes on the rich beyond the good balance we had with Clinton/Gore. The question Democrats pose is: should we really be borrowing hundreds of billions of dollars to drastically cut taxes on the rich? Does David think Warren Buffett fails to understand the merits or workings of capitalism when he rails against abolishing the estate tax? Or when he wonders why his secretary is in a higher tax bracket than he is? Does David think the American economy was unsuccessful from 1945 to 1961, when the top federal income tax bracket was (an admittedly wrong-headed) 90%? Or that entrepreneurs didn’t bother to get out of bed 1962 to 1982, when the top bracket was (a nearly as wrong-headed) 70%? Does he think the economy performed better under Reagan/Bush than it did under Clinton/Gore (who raised the top bracket from 31% back up to 39.6%)? Listen to yourself, David! Are you one of those compassionate conservatives who think Scrooge was exploited by Bob Cratchett? Pulitzer-prize-winning author David Cay Johnston’s compelling new bestseller, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else, notes that ‘Those in the top 1 percent saw their [after-tax] average income, adjusted for inflation to 1999 dollars, more than double from $234,700 in 1977 to $515,600 in 1999. Meanwhile, the 55 million Americans in the poorest fifth of the population lived in households whose average income fell from $10,000 in 1977 to $8,800 in 1999.’ And all this before President Bush rode to the rescue with breathtaking tax cuts for the top 1%, and cuts to social programs for those less fortunate. (For a partial list of upcoming program cuts, see yesterday.) Jeff Martin: ‘To branch off from the discussion of personal income taxes: according to an article by Bob Herbert yesterday, Halliburton paid $15 million in IRS taxes for 2002 by utilizing off-shore “subsidiaries” in tax-havens such as Vanuatu and Tobago.’ ☞ Maybe Vanuatu is the site of the Vice President’s ‘undisclosed location.’ Jacob Roberts: ‘It is useful to look at the CBO’s assessment of the total effective tax rate (taking into account income, excise, and payroll taxes while reducing the taxes paid by benefits received). Here is the most recent data I could find after a quick search. This is pre-Bush tax cuts.’ Bob Daniels: ‘Apropos your 1/29/04 column and John Brownie’s point that the 1% highest incomes pay 34% of the income tax: here are a few more statistics mined from the latest IRS data release. In 2001, one taxpayer in 700 — 195,000 out of 130 million — reported income over $1 million. These folks received almost 10% of all the income in the US that year, and they paid almost 20% of the total income tax ($174 billion out of $887 billion.)’ [By definition, that’s what makes our “progressive income tax” progressive. If those who earned 10% of the income paid 10% of the tax, it would be proportional, not progressive. But the thinking is that the family living on $26,000 has little left over for taxes, whereas the same family earning $1 million or $2 million has more room to maneuver. – A.T.] ‘The higher the income, the more it reflects the return to capital, not labor. Over half of all capital gains reported in the US in year 2001 were on the tax returns of income millionaires. For the 6,836 folks at the pinnacle with incomes over $10,000,000, only one-quarter represents salary, while over half was in the form of lightly-taxed long-term capital gains. The super-rich don’t miss a trick, either. P. 30 of the IRS report shows that 12 taxpayers with incomes over $10,000,000 collected an average of $4,250 each in unemployment compensation. I wonder – how do they spell chutzpah?’ ☞ Have a great weekend. I hope, for your sake, you are one of the overtaxed, whining, long-suffering Republican rich and not one of those getting a cushy free ride working as, say, a lazy hotel maid or the unenterprising guy who picked my strawberries.
“What Do You MEAN, ‘I Don’t Pay Taxes?!'” February 5, 2004January 21, 2017 But first . . . Just weeks after touting an expansion of job training programs in his State of the Union address, President Bush has cut $300 million from vocational education programs in his 2005 budget. Released Monday, that budget calls for spending trillions of your dollars in fiscal 2005, so it’s worth a minute or two to check it out. Columnist Matt Miller has read it, and I think it would be fair to say he is not fully on board with the President’s choices. BUSH’S RECKLESS, DECEPTIVE, IMMORAL BUDGET By Matt Miller ———————————————————– In a perverse sense, you’ve got to hand it to President Bush: When he sets out to bamboozle us with his budget, the man thinks big. Consider the facts. Bush’s new budget calls for a record federal deficit of $521 billion, meaning he will borrow nearly one in four of the dollars he wants to spend. He is borrowing this money from children of all incomes in order to achieve his chief priority: extending roughly $300 billion a year in tax cuts mostly to America’s highest earners. But this understates the scam. The record Bush deficits don’t include the ongoing costs of Iraq and Afghanistan, which Bush plans to submit after the 2004 election. Nor do they include the cost of limiting the growing bite of the alternative minimum tax, which officials privately say they’ll address in any second term, at a cost of tens of billions more each year. (These facts help explain why Bush’s paper pledge to cut the deficit in half over five years is a hoax.) Bush’s budget also doesn’t look beyond the next five years, when 76 million baby boomers start to retire in force. This lets Bush sidestep questions about the insanity of large, permanent tax cuts just as $25 trillion in unfunded promises in Social Security and Medicare start coming due. Apparently that’s the next guy’s problem. You’d think these omissions and deceptions would be enough to shock any fair-minded citizen who believes in fiscal prudence. But an elaborate additional charade compounds the fiscal felony. Call it “The Illusion of Runaway Spending.” Bush would have us believe that his record deficits are a function of congressional spending run amok. Put aside the weird spectacle of a Republican president trying to pin the blame on some generically reckless “Congress,” as if today’s GOP majorities didn’t march in lockstep to the White House’s tune. The broader truth is that spending today is lower than under previous presidents when you look at the relevant big-picture measures. From 1980 to 2003, as the Center for Budget and Policy Priorities points out, federal spending averaged 21.3 percent of GDP. (It averaged 22 percent under Presidents Reagan and Bush I and 20 percent under President Clinton.) George W. Bush’s plan calls for federal spending of 20 percent of GDP in 2004. It may come as news to the president and his bean counters, but 20 is less than 21 or 22. No, Bush’s record deficits have unambiguously been caused by historic drops in the level of federal revenue even as spending levels remain below those of the last 25 years. From 1980 to 2003, revenue averaged 18.5 percent of GDP. In 2004 it will be 15.8 percent of GDP. This is the lowest level since 1950 – before Social Security had been phased in for most seniors, and before Medicare and Medicaid were enacted. The runaway spending myth doesn’t stop there. The president says that the “discretionary” part of the domestic budget – the portion that is appropriated annually by Congress, as opposed to “entitlements” like Social Security and Medicare – is out of control and must be restrained. But this claim is grossly misleading because this “discretionary” measure includes increases for homeland security that have bipartisan support. As a new analysis by my colleagues at the Center for American Progress shows, spending on non-security domestic programs – the relevant measure – has remained essentially flat as a share of GDP since 1995. The GOP is betting that fights over the size of government will play out the same whether taxes are at 16 percent of GDP or 19 percent. Their theory: You can always brand liberals “tax hikers” and carry the day. In the “he said, she said” world of modern media coverage, they may be right. But the difference in where the debate starts – taxes at 16 percent, or taxes at 19 percent of GDP – comes to about $300 billion a year in federal activities that most Americans want, which is why neither party cuts them. And that’s before we do anything about such domestic needs as the 44 million uninsured or properly funding the boomers’ retirement. The stakes of exposing Bush’s budget scams are thus enormous. Luckily, since just a few simple relationships can be used to teach citizens the big picture (“20 is less than 22,” for example, and “16 is less than 19”), even a mathematically challenged press doesn’t have to be a party to the con. ********** Matthew Miller, senior fellow at the Center for American Progress, is the author of The Two Percent Solution: Fixing America’s Problems in Ways Liberals and Conservatives Can Love. His website: mattmilleronline.com. While we’re on this topic (thanks, Matt), here are some of the 65 programs the President proposes trimming a bit (SOURCE: White House Office of Management and Budget): * Comprehensive School Reform grants for low-income schools. 2004: $234 million; 2005: 0. * Eisenhower Math and Science Education Programs. 2004: $20 million; 2005: 0. * Even Start family literacy. 2004: $247 million; 2005: 0. * Education Department Parental Information and Resource Centers. 2004: $42 million; 2005: 0. * Community Development Block Grants. 2004: $334 million; 2005: 0. * School Alcohol Abuse Reduction. 2004: $30 million; 2005: 0. * Arts in Education grants. 2004: $35 million; 2005: 0. * HOPE VI public housing revitalization. 2004: $149 million; 2005: 0. * Local Law Enforcement Grants. 2004: $1.58 billion; 2005: 0. * Juvenile crime prevention block grants. 2004: $59 million; 2005: 0. * Migrant and Seasonal Farmworker Training. 2004: $77 million; 2005: 0. * Smaller Learning Communities to divide large high schools into smaller ones. 2004: $174 million; 2005: 0. * Health Professional Training Grants. 2004: $409 million; 2005: $126 million. * Rural Health Aid. 2004: $147 million; 2005: $56 million. * Homeland Security first responders. 2004: $4.37 billion; 2005: $3.56 billion. * Juvenile Justice Delinquency Prevention Program. 2004: $78 million; 2005: $44 million. * Advanced Technology Program, which supports high-risk technology development with the private sector. 2004: $171 million; 2005: 0. Listen: you can’t do everything, especially when you’ve cut taxes so dramatically for the rich. And look at this! Again I’ve run out of time. Tomorrow, I promise: ‘What Do You MEAN, ‘I Don’t Pay Taxes?!”
What SHOULD the Top 1% Be Taxed? February 4, 2004February 24, 2017 This all stems from January 29, wherein I tried to explain my sarcasm in a previous column . . . I was trying to show how callous and wrong-headed the Republicans are for tilting things even further in favor of the best off. It is appalling. It drives me to sarcasm. Sarcasm can backfire. My apologies! ( For the record: most American workers make nothing like $100,000 a year – $38,000 is closer to the median, if memory serves – let alone the $250 million I referred to in the same sentence.) . . . and wherein, also, I offered this exchange: John Brownie: ‘Last week, John Stossel (ABC-20/20) stated that IRS data shows that the top 1% of income earners (over $300,000 a year) pay 34% of the Federal tax and that the top 5% (over $125,000 a year) pay 53%. What do you think they should pay?’ ☞ Good question. Maybe what they were paying under Clinton? That seemed to work pretty well. From which I got a good bit of feedback. For example: Tom: ‘Not to derail your rhetoric with the cold hard facts, but your ‘median’ American $38,000 wage earner does not pay ANY federal income tax. But that same wage earner, if s/he had children, would receive a refund via the Additional Child Tax credit. Perhaps you need to select a better example of the rich not paying their ‘fair share.’ But your failure to directly address the final question is why so many of us simply disregard your position as typical liberal class warfare. If you truly believe our steeply progressive tax system is not steep enough (where the median does not have any federal tax liability but may well receive a refund anyway) why not simply lay your cards face up on the table so we can decide whether your position is to our liking? But rather than specifics, you resort to some line about how the percentage paid by the top was just about right under Clinton. Direct answer, Andrew: in your world, what percentages of total income tax paid should come from the top 1%, top 5% and top 50%. Should the bottom 50% owe any federal income tax at all? Should you have the mettle to print my message and address it directly, only print it in its entirety. Thanks again for the CICI tip.’ ☞ Where to begin. First, I wasn’t being flip, suggesting that the Clinton tax brackets seemed about right. Empirically, they seemed high enough to balance the budget, yet low enough to allow the best-off to see their after-tax income rise smartly. If the Clinton/Gore tax regime was placed a drag on capital formation, or inhibited investment, or stunted job growth, you could have fooled me. People were throwing capital at new ventures. We added 22 million jobs. So if you want to try to base policy partly on simple real-world experience, we know that things worked pretty well under Clinton/Gore’s tax regime. Under Reagan/Bush, we added $3 trillion to the National Debt, in part because the top tax bracket was dropped from 70% (way, way too high) to 28% (too low, as it turned out). Second, I never argued that those earning $38,000 are over-taxed, although I am guessing that a lot of them think they do pay taxes. Third, I do believe in a progressive income tax – and I don’t believe it’s quite as ‘steeply progressive,’ to use his phrase, as Tom thinks it is. Really rich people get most of their income from capital gains, now taxed at 15% (down from 20%), dividends, now also taxed at 15% (down from 39.6%), and tax-free interest, now taxed at 0%, as it always was. (If you impute a tax to it based on the slightly lower interest that tax-free bonds pay relative to, say, Treasuries, it still may come out to only 15% or 20%.) So take Dick Cheney. On $560,000 of his 2002 income he paid zero tax, because it came from tax-free bonds. How steeply progressive, really, are rates of 15% and 20%? In the year 2000, four hundred Americans reported income to the IRS of $86 million or more. They were, one might expect, at the peak of the steeply progressive income tax pyramid. Yet on average, they paid not 90% or 70% or 50% or 39% or 35% of their income in federal tax . . . they paid 22.3%. To their rescue rode George W. Bush, cutting the capital gains tax by 25% and the tax on dividends by 62% (and proposing to cut the estate tax by 100%). Had today’s Bush tax cuts been in effect in 2000, the aforementioned 400 zillionaires would have seen their federal income tax burden fall from 22.3%, on average, to 17.5%. To me, a 22.3% effective tax rate on income of $100 million or $200 million – let alone a 17.5% rate – is not steeply progressive. Consider that a self-employed lawn maintenance man earning $38,000 a year pays, for starters, 15.3% of his income in FICA. So even if he paid zero income tax – and he might well not – how steep is the climb from 15.3% to 17.5%? There’s more to say about all this, but let me hand the microphone back to some of you to say it: D.H.: ‘John Brownie asks how much tax the top 1% and 5% should pay. He points out that these two groups pay 34% and 53% respectively. But he didn’t show what percentage of wealth in America these two groups hold (from reports documented on The Office for Social Justice website): The top 1% paid 34% of all federal income taxes and 25% of ALL PERSONAL FEDERAL TAXES (when the payroll tax is factored in) BUT HOLDS 38% OF ALL WEALTH IN THIS COUNTRY. The top 5% paid 53% of all federal income taxes and 38% of ALL PERSONAL FEDERAL TAXES (when the payroll tax is factored in) BUT HOLDS 59% OF ALL WEALTH IN THIS COUNTRY. ‘A couple of other things John Brownie forgot to mention are that these numbers are from tax year 2001 (income in 2000), so Bush’s tax cut had barely begun to phase in at this point. (And he completely ignored the impact of the payroll tax on the average American. Almost 80% of all Americans pay more in payroll taxes than they do in income taxes.)’ Tim Nieman: ‘Let’s put 100 people in a room. One of them makes $10 million a year and the other 99 make $100,000 each. Let’s make it a flat tax of 10%. The rich guy pays $1 million; the rest combined pay $990,000. So John Stossel would lament the fact that the ‘top 1% of income earners pays more than the other 99% combined.’ Sadly, this kind of statistical manipulation works – the viewers think there’s a gross unfairness that may not exist at all! Ridiculous!’ So what percentages of the total federal tax burden should the top 1%, top 5% and bottom 50% pay? Well, start with the fact that the gap between the rich and everyone else has been steadily widening. That might suggest that we should modestly steepen the progressivity of the tax code, at least partially to compensate. Instead, by cutting the capital gains rate by 25% and the dividend rate by 62% and proposing to cut the estate tax rate by 100%, we are making our tax system less progressive, actively moving to widen the inequality gap. The census bureau tells us that in 2001, the top 5% earned 22.4% of total US income. So if the tax rate were proportional and not progressive, the answer to Tom’s question would be: 22.4%. The top 5% should be paying 22.4% in total federal tax because they are earning 22.4% of the income. But, because those in the top 5% pay so much less than 22.4% of the total payroll tax (the self employed plumber with $87,900 in income pays $13,448; the retiree with $5 million in investment income pays nothing) – the top 5% should be paying a significantly larger share of the income tax just to bring their total federal tax burden back to proportionality. But a lot of us believe in a progressive income tax. The guy making $5 million, we believe, should pay a higher percentage of his income in federal tax than the guy making $35,000. Thus, we believe, the top 5% earning 22.4% of all the income should pay more than 22.4% of the total federal tax burden. If DH’s numbers (above) are correct, the top 5% were paying 38% before Bush made the cuts. So I’ll say it again. While there is no precise magic number, I think the percentages we had under Clinton/Gore were about right. Everyone did pretty well. And we worked ourselves out of the giant Reagan/Bush budget deficits that we have now so quickly worked ourselves back into (yesterday‘s column). To see just how blood-boilingly unfair all this is, read David Cay Johnston’s new best-seller Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else. Or start with an excerpt. Then remind yourself that the main focus of the Bush administration has been to tilt the playing field dramatically further in favor of the very best off.
What SHOULD the Top 1% Be Taxed? February 3, 2004January 21, 2017 But first . . . Did you see Paul Krugman last week? ‘George Bush promised to bring honor and integrity back to the White House,’ Krugman begins. ‘Instead, he got rid of accountability.’ And did you see Tom Friedman Sunday? ‘The Bush team’s real vulnerability,’ he writes, ‘is its B.M.D. – Budgets of Mass Destruction, which have recklessly imperiled the nation’s future, with crazy tax-cutting and out-of-control spending. The latest report from the Congressional Budget Office says the deficit is expected to total some $2.4 trillion over the next decade – almost $1 trillion more than the prediction of just five months ago.’ What is $1 trillion? Here’s how Democratic Mississippi Congressman Gene Taylor put it on the floor of the House this past summer: ‘If you went all the way from the Revolutionary War to 1979 . . . the Revolutionary War, the War of 1812, the Mexican-American War, the Civil War, the Spanish-American War, World War I, World War II, Korea and Vietnam, built the interstate highway system, built the Golden Gate Bridge, the intracoastal waterway . . . we borrowed less than $1 trillion.’ And now we’ve added an extra trillion to the 10-year deficit projection in just five months. But that’s just a projection. Taylor was reacting to what a Republican Congress and White House had actually borrowed. ‘In 25 months,’ he told his Republican colleagues, ‘you guys have borrowed $1 trillion.‘ The full text of his speech can be found here. Congressman Taylor is actually more of a deficit hawk than I am. (I’m not one who thinks a balanced-budget amendment is a good idea, or that it’s unwise to run a large deficit – if it’s the right kind of deficit – in a recession.) And to be fair, the not-quite-$1 trillion we had borrowed from 1776 to 1979 would have been higher if expressed in 2004 dollars. But still, it’s stunning to think that in the twelve Reagan/Bush years that followed 1979 we added another $3 trillion to the debt . . . and now we seem well on our way to adding $2 or $3 trillion more. And is it to invest in our children? Our infrastructure? Our future? No, it’s largely to cut taxes – dramatically – for those who least need the help. Like my friend who gets $3.6 million a year in dividends from a stock he inherited. A very nice guy . . . I begrudge him not a penny of it . . . but why did we cut his tax bill by more than half, from a 39.6% rate to a 15% rate, saving him – and costing the Treasury – $800,000 a year? So this brings us right back to the advertised question! What Should the Top 1% Be Taxed? And look at that! I’ve run out of time. But one final note: A few trillion in debt may not seem like much when the Treasury can borrow at 1% or 2% or 4% (depending on the maturity). But what kind of burden on the taxpayers will this be when all the trillions we have borrowed by then require interest payments of 6% or 8%? Those huge interest payments could amount to a quarter or a third of our entire federal budget, cutting deeply into the funds available to pay your parents’ Social Security, provide their Medicare, fund veterans’ benefits, pay a voluntary army, inspect the meat we eat, help kids pay for college, assist devastated families after natural disasters . . . everything. Tomorrow: What SHOULD The Top 1% Be Taxed? (Thursday or Friday: your reaction to Jared Swecker’s comment on the Bush 9/11 video.)
Is This a Great Country Or What? February 2, 2004January 21, 2017 CICI Suggested December 23 at 35 cents, we sold a third of it a month later for 65 cents. It closed Friday at 98 cents. I would sell another third – up 157% in six weeks – and hold the last third to see what happens. (Our two other year-end suggestions, ILA and CMM, are up a little; but if you can afford the risk – and if you can’t, you never should have bought them in the first place – I’d plan to hold them quite a lot longer.) REVERSE TIVO God I love the Super Bowl. I can get into any restaurant or movie without a wait. And now, with TiVo, I can see all the commercials. It’s TiVo in reverse: hyper-speeding through the content and watching the commercials. Is this a great country or what? RALPH I include this link not so much in hopes you will help persuade Ralph not to run again – Ralph will do what Ralph will do – but because it so vividly shows how the Democrats can win in 2004. (If he does run, I believe the good people who voted for him last time, thinking it couldn’t hurt, will now vote ‘early and often’ for the Democrat – any Democrat – in 2004.) Add back just a third of the Nader voters . . . let alone some of the conservatives and libertarians who have become disillusioned (here’s just one example, from USA Today: ‘Conservative Sportsmen Turn Against Bush’) . . . and – whew! – we move the country back to a more centrist, sensible, progressive track. Not a moment too soon. Tomorrow: What SHOULD The Top 1% Be Taxed?