What Is Mitt Romney Hiding?

August 7, 2012

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Mitt Romney, former governor of Massachusetts,...

Mitt Romney

Harry Reid is saying that Mitt Romney didn’t pay taxes in past years.  Romney has released his 2010 tax return and will release the 2011 return when it is ready – but that’s a far cry from the 12 years of tax returns that his father released when George Romney ran for president.

Republican leaders are calling Reid a liar, and the result of the entire exchange is that there’s as much focus on Mitt Romney’s taxes as there is on how to solve the current unemployment problems.

That begs the question:

What is Mitt Romney hiding?

There are several possibilities.  Some are far more likely than others.

  • Romney is not hiding anything – The returns from the last ten years may be near carbon copies of 2010, and Romney may be refusing to release the earlier returns on principle alone.  In my opinion, this would be a bad decision, as the failure to release earlier returns gives the definite appearance that he is hiding something.
  • Romney is committing tax fraud – It’s also possible that Romney is committing outright fraud, either by failing to report income or by taking illegal deductions.  However, unless Romney and his legal tax are complete morons, this seems a pretty remote possibility.
  • Romney was born in Kenya – Romney may be paying millions in taxes to the Kenyan treasury
  • Romney paid $0 tax in some years – This is actually quite possible.  I’m sure that Mitt’s stock portfolio has taken a hit in several recent years.  It’s quite possible that he sold stock to lock in capital losses that would offset other income. 
  • Romney had very high income – On the flip side, if Romney had a bad feeling about the market, he may have sold stock to lock in gains.  Are there years where Romney had $20, $50, or $100 million in income?  It’s definitely possible.  it’s even possible that he locked in huge gains as the market was plummeting.

Something to keep in mind is that a capital gain is often the result of many years or accumulation.  For the sake of argument, let’s say that Romney had a $100 million capital gain in 2008. The stocks in his portfolio may have appreciated over a span of 20 or 30 years, and a rate of a few million per years.  Sure, that’s a lot of money, but it’s not as if Romney opened an eTrade account one day and reaped a $100 profit the next.  The huge gain may have been recognized in 2008, but it was building up gradually over the years.

Likewise, if Romney locked in some capital gains in an effort to drop his income to $0, these losses may also have been building up for years or decades.

If you care about how much money politicians make, you really should be focusing on the average income over a long span of time, rather than cherry picking a handful of years.  If someone earns $50 million for each of five consecutive years, this is a higher total income that a person who has $0 in income the first four years and $150 million in the fifth year – even though the $150 million catches they eye.

Honestly, as long as Romney fairly reported income and deductions and paid the proper amount in taxes, I really don’t care how much he paid in taxes.  His effective rate is fairly low due to the fact that most of his earnings are capital gains.  That’s not Romney’s fault – that’s simply the way the tax code is written.



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How Many People Don’t Pay Taxes?

June 12, 2012

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47% of Americans pay no income tax, according to many sources. Is this really true?  Let’s take a look.

First of all, I’m going to present IRS data, so I’m limited to the information from tax returns. According to the 2010 US census the population of the United States was around 308.75 million people. The number of exemptions claimed on 2009 tax returns (the most current data available from the IRS) was 283.8 million. In other words, 25 million people – about 8% of the population – don’t appear anywhere on tax returns.

Who are these 25 million people? [survata]They could be people dodging taxes. They could be people who have paid their share of taxes in their lifetime (retired) or will pay their fair share at a later stage in their life (students). These may even be people who paid some amount of income tax during the year but aren’t filing for a refund (yes, this does happen).

Let’s work with the numbers we have from the IRS. Of the 140 million tax returns filed for the 2009 tax year, just over 58% paid taxes. So this means 42% of the people in this group didn’t pay taxes, right?


It means that 42% of the returns didn’t have any tax liability. What’s the difference?

Let’s walk through this example:

  • Sam makes $3000 from his summer job and has no tax liability.
  • Danielle and Thomas have three children: Mark, Lindsey, and William. They have tax liability of $150,000.

Looking at this example, what percent of people aren’t paying taxes? Is it fair to say 50? 50% of the tax returns (1 out of 2) have tax liability. Is it 33% (1 of the 3 adults aren’t paying taxes?). Is it 17% (1 of the 6 Americans aren’t paying taxes?) The people who are simply looking at the number of tax returns with taxes paid are going to say 50%. Is that right or wrong? I’ll let you decide.

If you choose 33% or 17%, let’s dig a bit deeper. Take a look on my article regarding how many people make more than $250,000. You’ll notice an correlation between number of exemptions (essentially household size) and income. The lowest income levels have the lowest number of exemptions (1.01), with this increasing until it plateaus around 3 in the $500,000 – $1,000,000 range.

There’s also a correlation between income level and likelihood of owing income tax. Less than 3% of tax returns with under $5000 in adjusted gross income owed any taxes, building to 77%+ in the $40,000 – $50,000 range and near 99% by the time we reach the $100,000+ range.

What’s my point? Let’s look at an extreme example. A million tax returns in the sub-$5000 range represent 1,010,000 Americans (1.01 exemptions per return). A million tax returns in the $500,000 – $1,000,000 range represent 3,050,000 people (3.05 exemption per return). Let’s take a sample of a million returns from each of these groups. Let’s further say that all one million returns in the $500,000 – $1,000,000 group have taxes owed and 160,000 returns in the sub $5000 group have taxes owed. That means that 1,160,000 / 2,000,000 – or 58% – of the returns have tax liability. However, these returns represent 3,211,600 or the 4,150,000 people – in excess of 77%. The basic mathematical concept here is weighted average.

An extreme example, yes. However, it does illustrate a valid point. The 42% of tax returns with no liability is going to represent less than 42% of the 283.75 million people covered by these returns.

Just want the data? Here it is!

Source: http://www.irs.gov/pub/irs-soi/09in11si.xls (compare column 6 to column 1)

AGI Filers Pay tax
All returns 140,494,127 58.27%
No adjusted gross income 2,511,925 N/A
$1 – $5,000 10,447,635 2.93%
$5,000 – $10,000 12,220,335 15.54%
$10,000 – $15,000 12,444,512 23.17%
$15,000 – $20,000 11,400,228 42.69%
$20,000 – $25,000 10,033,887 46.21%
$25,000 – $30,000 8,662,392 53.15%
$30,000 – $40,000 14,371,647 66.71%
$40,000 – $50,000 10,796,412 77.62%
$50,000 – $75,000 18,694,893 87.99%
$75,000 – $100,000 11,463,725 95.81%
$100,000 – $200,000 13,522,048 98.88%
$200,000 – $500,000 3,195,039 99.38%
$500,000 – $1,000,000 492,568 99.18%
$1,000,000 – $1,500,000 108,096 99.05%
$1,500,000 – $2,000,000 44,273 99.06%
$2,000,000 – $5,000,000 61,918 99.09%
$5,000,000 – $10,000,000 14,322 99.06%
$10,000,000 or more 8,274 98.86%


The IRS Has Funding Issues

February 17, 2012

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I have already finished and filed my taxes for the year…which is an achievement for me. 2011 was different than past years. I had 1099’s this year from my writing, had started my writing gig, we moved….it was a busy year. I was learning what I could and couldn’t deduct (business cards and office supplies are deductible; a “family size” bag of circus peanuts not so much), what I did right and what I did wrong last year. But I got it done, the tax software checked for errors and it sent it on its way.

And then H&R Block sent me an email from the IRS (panic!!). The headline read “Refund funding issues” (what?). Yes, apparently the IRS has “funding issues” and it would take over a month to get my return sent back to me.

Really, IRS. Really. I wonder, if I ever have to pay in the future, if the IRS would just accept my delay in payment to them, if I sent them an email and said I was having “Payment Funding Issues”. Somehow I don’t think their response would be so nice.

Pro Tip for the IRS: people who get refunds generally file pretty early, while the people who owe money usually file much later. You might want to plan for this cash flow discrepancy in your budget. I’m guessing this happens fairly frequently … like, say, every single year?

Oh, well. I guess I can at least track the status of my refund on the “Where’s my refund” site the IRS runs. What? That site’s having problems? Does the IRS have a “funding issue” with its IT department, too?

So I’ll just wait for my refund. With another baby on the way, we’ve already decided we’re going to use it as a down payment on a new (to us) vehicle. My 1993 Dodge Caravan just isn’t cutting it anymore. While I love my “broke-ass soccer mom van”, I would like a vehicle with a muffler…and a speedometer that works all of the time, not just when it wants to. I’m not picky.

Tax related articles from our other writers:

Starting a small business in 2012? The details can get a little tricky, especially if you’re forming a separate legal entity. Check out Kosmo’s guide to starting a small business so that you can get off on the right foot.

Sell a lot of items on eBay? You’ll want to be aware of the new 1099-K form. Johnny Goodman takes a break from sports writing to discuss the 1099-K and how it can even affect collectors.

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Why Doesn’t Mitt Romney Pay More in Income Taxes?

January 25, 2012

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English: Governor Mitt Romney of MA

Image via Wikipedia

Mitt Romney has released income tax information, any many people are shocked that he paid an effective rate of just 13.9% in 2010.  His opponent, Newt Gingrich, pays an effective rate of 30%!  Is Romney doing something illegal?

The reason for Romney’s rate

The reason why Romney pays a far lower rate than Gingrich isn’t due to some strange loophole that Romney pays his lawyers to exploit.  It’s simply due to the fact that capital gains are treated differently than ordinary income.  While tax rates on ordinary income (wages, interest, etc) range from 5% to 35%, capital gains are taxed at 15% (although taxpayers in the 5% and 10% brackets pay their ordinary rate on capital gains).

This means that if I have a $1000 capital gain and Mitt Romney has a $1000 capital gain, we will both pay taxes of $150 on that income.

Mitt’s income is nearly all derived from investments.  He doesn’t have a wage-earning job.  While he does make a few bucks from book royalties, it pales in comparison to his investment earnings.  Throw in some deductible charitable contributions, and Romney is able to chisel the 15% rate down to 13.9% without much work.

Why are capital gains taxed at a lower rate?

The basic idea behind a lower rate for capital gains is that this will encourage people to invest in capital assets (ownership of companies) instead of keeping their money in a mattress or a passbook savings account.  There’s more risk in doing this, of course, so one way to balance the risk/reward is to allow profits to be taxed at a lower rate.

Is the capital gains rate too low?

In my opinion, yes.  It seems absurd that a $500 capital gain and a $5 million capital gain would be taxed at the same rate, when $500 or ordinary income and $5 million of ordinary income would be taxed at different rates.

Do I think that capital gains should be taxed at the same rate as ordinary income?  No.  I do believe that there’s is value in encouraging investors to put their money into equities.  It clearly is a riskier proposition, and I’m OK with a lower capital gains rate being a reward for taking that risk.

My suggestion would be to make the capital gains rate 2/3 of the rate for ordinary income.  Under this plan, the capital gains rate would be 7% for those in the 10% tax bracket and would top out at 23.45% for those in the 35% tax bracket.  Mitt Romney would still pay a lower effective rate that Newt Gingrich or Alex Rodriguez, but would pay far more than he does today.

What’s an effective rate?

As a last bit of explanation, let’s look at the difference between a marginal rate and effective rate.  You might be in the 25% tax bracket.  This doesn’t mean that you pay a 25% tax rate on all your earnings.  Tax rates on ordinary income are marginal.  If you are single and make $50,000 (this would be in the 25% bracket), you would pay 10% on the first $8500 of taxable income , 15% for the amount between $8500 and $34500, and 25% on the amount that exceeds $33950.  That would be a total tax of $8625 on $50,000 of taxable income – or 17.25%.

The second point is that there is a big difference between your gross earnings and taxable income.  You’ll reduce gross income by the exemptions for yourself, spouse, and children, and well as a variety of deductions (mortgage interest, property taxes, charitable contributions, etc), and credits (earned income credit, child tax credit, etc).

effective rate is often calculated against gross income (AGI), his effective rate drops to $12.5%.

A married couple with two dependent children who have an AGI of $50,000 and take only the standard deduction and personal exemptions (no itemized deductions or credits) will pay $2690 in federal taxes … an effective rate of 5.4%.  This is achieved by excluding a total of $26400 via the $11,600 standard deduction for married filing jointly and $14,800 in personal exemptions (four exemptions @ $3700 each), dropping the couple’s taxable income down to $23,600.


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What Percentage Of Taxes Are Paid By The Rich?

August 17, 2011

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Photo credit: 401k

There is no debate that the rich pay a disproportionate amount of income taxes in the United States. Whether this is fair or not is a political discussion that I won’t address in this article. I’m more concerned about the reliability of statistics that are floating around.

You’ve probably heard that the top 20% of earners pay 80% the taxes and that the rich pay half the taxes. Are these comments true?  What percentage of taxes do the rich pay?

To answer this question, let’s to go the authority on tax statistics – the Internal Revenue Service. The data used in this article comes straight from the IRS web site.

Before we get started, I’d like to make a few points:

  • These statistics are based on returns, rather than people. The lower levels of income tend to have fewer people represented by a return (single people are over-represented in these levels). This means that you can’t say that 8274 EARNERS had an AGI of more than $10 million or more. This could be a dual income household where each spouse earns $5 million.
  • Data is from tax year 2009. The is the most recent data available at the time this article was written.
  • I’m not exactly sure what to make of the returns with no AGI. I have included this data for the sake of completeness, but this group likely includes a hodgepodge of exception statuses and the stats for this group might not make much sense. Caveat emptor!

Let’s take a look at the first table. This lists the percentage of returns for each income level, as well as the group’s percentage of the nation’s aggregate AGI ($7.6 trillion) and individual income taxes paid ($865 billion). Dollar amounts are in thousands. What data can we glean?

  • The top 20.57% of returns – those with AGI of $75,000 or more – earn 62.37% of the nation’s AGI and pay 83.96% of the taxes. So the much quoted stat about the top 20% paying 80% of taxes is true (assuming it means 20% of returns).
  • What about the rich paying half the taxes? This depends on your definition of “rich”, but returns with more than $200,000 in AGI represent 2.79% of all returns, earn 25.76% of AGI, and pay 50.14% of taxes.
  • Returns claiming AGI of more than one million dollars represented 0.17% of all returns, but paid 20.49% of all taxes.

Here’s the data:

  # of returns % AGI
% Taxes paid
All returns 140,494,127   7,626,430,723   865,948,695  
No AGI 2,511,925 1.79% -198,958,452 -2.61% 85,376 0.01%
$1 –
10,447,635 7.44% 27,218,608 0.36% 40,278 0.00%
$5,000 –
12,220,335 8.70% 92,407,278 1.21% 379,851 0.04%
$10,000 –
12,444,512 8.86% 155,465,805 2.04% 848,075 0.10%
$15,000 –
11,400,228 8.11% 199,017,560 2.61% 2,516,274 0.29%
$20,000 –
10,033,887 7.14% 225,167,737 2.95% 4,669,410 0.54%
$25,000 –
8,662,392 6.17% 237,994,230 3.12% 6,827,564 0.79%
$30,000 –
14,371,647 10.23% 499,879,773 6.55% 20,151,883 2.33%
$40,000 –
10,796,412 7.68% 483,088,798 6.33% 25,404,305 2.93%
$50,000 –
18,694,893 13.31% 1,149,068,817 15.07% 77,962,073 9.00%
$75,000 –
11,463,725 8.16% 990,337,913 12.99% 80,492,622 9.30%
$100,000 –
13,522,048 9.62% 1,801,446,897 23.62% 212,290,589 24.52%
$200,000 –
3,195,039 2.27% 905,347,402 11.87% 176,322,148 20.36%
$500,000 –
492,568 0.35% 332,037,478 4.35% 80,458,186 9.29%
– $1,500,000
108,096 0.08% 130,149,237 1.71% 32,755,871 3.78%
– $2,000,000
44,273 0.03% 76,148,200 1.00% 19,393,235 2.24%
– $5,000,000
61,918 0.04% 182,986,391 2.40% 46,943,630 5.42%
– $10,000,000
14,322 0.01% 97,493,167 1.28% 24,617,005 2.84%
or more
8,274 0.01% 240,133,885 3.15% 53,790,324 6.21%


OK, but what rate does everyone pay? In the next table, I’ve simply divided the taxes paid by the AGI to determine the effective tax rate.

A couple of observations:

  • Returns with an AGI of $10 million or more have an effective rate significantly lower than several other income levels. Why? Capital gains. Note that this income level doesn’t have an upper bound, and the more extreme outliers are generally going to be the result of capital gains. It’s much more difficult to earn $1 billion in wages than $1 billion in capital gains (I’m speaking in relative terms; both are extremely difficult to do).
  • There’s a noticeable jump between the 100-200K group and the 200-500K group. Not only are there some rate increases in these levels, but you will also see the effect of phase-outs of certain itemized deductions.

Here’s the data:

  # of returns % AGI
Tax paid
All returns 140,494,127   7,626,430,723 865,948,695 11.35%
No AGI 2,511,925 1.79% -198,958,452 85,376 -0.04%
$1 – $5,000 10,447,635 7.44% 27,218,608 40,278 0.15%
$5,000 – $10,000 12,220,335 8.70% 92,407,278 379,851 0.41%
$10,000 – $15,000 12,444,512 8.86% 155,465,805 848,075 0.55%
$15,000 – $20,000 11,400,228 8.11% 199,017,560 2,516,274 1.26%
$20,000 – $25,000 10,033,887 7.14% 225,167,737 4,669,410 2.07%
$25,000 – $30,000 8,662,392 6.17% 237,994,230 6,827,564 2.87%
$30,000 – $40,000 14,371,647 10.23% 499,879,773 20,151,883 4.03%
$40,000 – $50,000 10,796,412 7.68% 483,088,798 25,404,305 5.26%
$50,000 – $75,000 18,694,893 13.31% 1,149,068,817 77,962,073 6.78%
$75,000 – $100,000 11,463,725 8.16% 990,337,913 80,492,622 8.13%
$100,000 – $200,000 13,522,048 9.62% 1,801,446,897 212,290,589 11.78%
$200,000 – $500,000 3,195,039 2.27% 905,347,402 176,322,148 19.48%
$500,000 – $1,000,000 492,568 0.35% 332,037,478 80,458,186 24.23%
$1,000,000 – $1,500,000 108,096 0.08% 130,149,237 32,755,871 25.17%
$1,500,000 – $2,000,000 44,273 0.03% 76,148,200 19,393,235 25.47%
$2,000,000 – $5,000,000 61,918 0.04% 182,986,391 46,943,630 25.65%
$5,000,000 – $10,000,000 14,322 0.01% 97,493,167 24,617,005 25.25%
$10,000,000 or more 8,274 0.01% 240,133,885 53,790,324 22.40%


As a whole, the aggregate effective tax rate is 11.35%. For each $100 of AGI, the government will collect $11.35 in taxes. The 100-200K group is basically right at this level, but the other income levels drift far away from this baseline. What percent of the “expected” taxes are paid at each income level (based on the expectation of $11.35 in taxes paid on each $100 of AGI).

I’ll let you peruse this data without any observations, other than pointing out that 100% would be equal to the expected 11.35% effective rate.

% AGI % tax % baseline
No AGI -2.61% 0.01% -0.38%
$1 – $5,000 0.36% 0.00% 1.30%
$5,000 – $10,000 1.21% 0.04% 3.62%
$10,000 – $15,000 2.04% 0.10% 4.80%
$15,000 – $20,000 2.61% 0.29% 11.14%
$20,000 – $25,000 2.95% 0.54% 18.26%
$25,000 – $30,000 3.12% 0.79% 25.27%
$30,000 – $40,000 6.55% 2.33% 35.50%
$40,000 – $50,000 6.33% 2.93% 46.31%
$50,000 – $75,000 15.07% 9.00% 59.75%
$75,000 – $100,000 12.99% 9.30% 71.58%
$100,000 – $200,000 23.62% 24.52% 103.79%
$200,000 – $500,000 11.87% 20.36% 171.52%
$500,000 – $1,000,000 4.35% 9.29% 213.41%
$1,000,000 – $1,500,000 1.71% 3.78% 221.65%
$1,500,000 – $2,000,000 1.00% 2.24% 224.30%
$2,000,000 – $5,000,000 2.40% 5.42% 225.94%
$5,000,000 – $10,000,000 1.28% 2.84% 222.38%
$10,000,000 or more 3.15% 6.21% 197.28%

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Loopholes From Those ‘Holes In Washington

April 14, 2011

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We’ve all heard the age-old axiom that “Actions speak louder than words,” right?  What would you think of the following actions based on that?  In a country where corporations are already paying the lowest amount (by percentage) of taxes in that nation’s history, a group politicians is trying to lower the corporate income tax.  In that same country where lower and middle class incomes have been virtually stagnant the past 10 years and the top .5% of people own over 40% of the wealth that same group of politicians is trying to reduce taxes for the wealthiest and reduce medical benefits for the poorest.  What do those actions tell you?

Yes, that country is the United States and that group of politicians is the Republicans.  They’re trying to do those things while saying they understand what the common person is going through.  In a recent discussion with a very conservative friend he told me people need to stop complaining and “just buckle down and work harder.”  I’m no stranger to hard work, I worked at a Burger King in high school to help get money for college.  I worked 20+ hours a week in college for the same reason as well, while attending classes full-time.  While lucky enough to be working in an IT department on Wall Street I would do 60-70 hours a week and think nothing of it, mostly so I could pay off my student loans early.  I’m sure there are plenty of lazy people out there and I have no sympathy for them, but there are also plenty of hard-working people who are out of work because some banks decided to use some not so scrupulous methods back in the run-up to 2008’s crash and recession.  We all know what happened after that … the banks got bailed out and the average joe didn’t.  Now the banks are back to making their usual record profits and many people are still struggling … and a certain group of politicians once again wants to tell us that “Trickle-Down” will work.  We give breaks to the rich, and they’re supposed to pass some of that on.

It has been proven time and time again that “Trickle Down Economics” (or as the modern conservatives call it “Supply Side Economics”) doesn’t work – The CBO has stated when you have to give away money, money given to lower and middle class people has an almost 3-fold effect on economic returns because these people tend to spend money on necessities.  Money given to corporations or the wealthiest (generally through tax breaks/loopholes/reductions) tends to stay with just a few people and thus has little return.  If there is hard math on why it doesn’t work, why would any politician champion refusing to repeal ill-advised Bush tax cuts to the wealthy while at the same time proposing cuts to services for the poor?  With the income gap getting wider every year since the 80’s wouldn’t this just do the same thing?

One of the things that should happen is a revision to the tax code, cut the loopholes, garbage, tax shelters, etc.  When companies like GE are not paying any taxes at all despite billions in profit, millions in tax credits, and who knows how much in no-bid contracts, how can you argue against a revision?  That’s right, GE spent millions of dollars on lobbying for laws and loopholes so they wouldn’t have to pay any US taxes despite making 5.1 billion dollars in the US.  If corporations are now people, thanks to Citizens United, why can’t I do the same?  Oh, that’s right, because politicians are no longer politicians in this country, they’re simply wage slaves to the highest bidder.

Tax codes change every 25-30 years (1926, 1954, 1985), the reason is because in these occasional years there are complete overhauls, getting rid of the loopholes, tax breaks, ways for rich people to pay less money and the government to make it up by sucking more money out of the middle and lower class.  They need to be fixed on these occasional years because as soon as it’s finished, the corporate lobbyists move in and start to throw money at politicians to re-add loopholes and tax breaks.  Maybe the 2012 tax code revision needs to include a law that prohibits politicians from becoming lobbyists for a minimum of 5 years after leaving any political office?


Life On Other Planets, Bush-era Tax Cuts, Gays In The Military, Wikileaks

December 9, 2010

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This will be my final article for 2010, and I’ve been pretty darn moderate my last few articles so rather than focusing on one specific issue here I’m going to give my opinions on a bunch of different issues that are making news the past few weeks.  I apologize in advance if I get a little too stream-of-consciousness.

Within the past few days it has been announced both that astronomers found an extra-solar system planet that has water vapor and a lifeform that uses arsenic instead of phosphorus for basic life processes.  This opens up the possibility of there being life in a lot more places out there (including outside of Earth) than we thought previously.  I already know the one question on every Republican’s mind:  Are these lifeforms willing to put a hold on everything just to keep an unnessessary tax cut for the richest of the rich?  (and if so let’s spin that to our advantage)

Ok, about that whole tax issue …

I’m going to break into a little comparison here.  Ok, a big comparison.  Pretend that you work for a big company that has a board of directors that chooses the CEO.  For some strange reason a new CEO gets chosen every 4 years and can only be CEO for a total of 8 years.  Anyway, your CEO announces that he’s giving an across-the-board temporary raise to everyone in the company, and he has it done in contract form so everyone knows it’s temporary.  He’s not entirely sure the company can afford it, but what the heck, it’ll raise company morale, right?  Besides that, it’s temporary and he’s set it to expire while on the next CEO’s watch, so even if it is a problem it will be somebody else’s problem.  Some years later there’s a whole lot of water-cooler gossip because those temporary raises are set to expire.  It’s a new CEO now and he’d like to continue the raise for everyone but the absolute top earners in the company, and those top earners have salaries absolutely dwarf yours (we’re talking quite a few magnitudes of order) scream to the point of holding up any plans to continue that raise and it all falls through.  Do you think it’s dishonest to call that temporary raise expiring, with all the circumstances, a pay cut? 

Welcome to the United States of Goldman Sachs.  I just don’t get how extreme right-wingers can act like Bush’s brand of capitalism is fair when everyone but the top 1% starts at a massive disadvantage.  It is a proven fact that one of the worst ways to improve the economy and create jobs is to cut taxes, and one of the best ways is to keep those without jobs on unemployment.  Why?  Virtually 100% of unemployment money is spent (the jobless don’t save, they barely survive) while the super-rich continually invest/save outside of America.

[Editor’s note: for a primer on income distribution in the US, check out this article – How many people make more than $250,000].

Every Republican and even a few Democrats have swallowed the cool-aid, though, and are calling what’s gong on here a tax raise.  Heck, what the taxes are going back up to aren’t even at Reagan tax levels and people were doing just fine, then.  Finally, why is no one pointing out that this is yet another mess Bush created and will have no hand in solving?  I sure didn’t see Republicans screaming about the debt or deficit when he was starting wars and not using correct accounting methods for their costs, and 1 of those wars was started based on information Dick Cheney knew was false.  I bet South Korea is wishing we invaded the real nuclear threat rogue state right about now.

Speaking of the military, I wonder where John McCain will move his goalposts to next.  2006 he said he’d be fine with repealing Don’t Ask Don’t Tell if the military was ok with it.  In 2008 he said he’d need a thorough study from the Pentagon saying it wouldn’t cause major impact and he’d be ok with it.  Now that the thorough study is out McCain is insulting the head of the Joint Chiefs of Staff and our Commander in Chief by saying they don’t really lead military men so this study is invalid.  I bet if by some miracle he had won the presidential election in 2008 he’d say he led troops as Commander in Chief.  Homophobia, like John McCain, is really old.  He froths at the mouth defending positions that not even 50% of Americans want, and then flip-flips on DADT when over 75% of Americans would be OK with gays serving openly.

About Wikileaks …  I’m still not quite sure what to think about Jullian Assange.  It is unclear to me if he is breaking the law or not, or even morally wrong or not.  On the one hand, I understand that government secrets are sometimes a necessary evil but on the other hand I feel like someone has to watch the watchman.  The US Justice Department is going all-out to try and charge him with something, anything – that feels like to me he might just be innocent.  We’re talking about a US espionage service that was able to infect Iranian nuclear processing centrifuges with a virus – and don’t think for a minute that the US didn’t have a hand in it, even if it was just helping Israel do the dirty deed.  If they really had some dirt on Assange, don’t you think they would have him being waterboarded at Quantico right now?

[Editor’s note: check our Squeaky’s article, What should we do about Wikileaks, for more commentary on Wikileaks and Julian Assange.]

Finally, I’d like to give a big middle finger to political correctness and say Merry Chrismas, Happy Hanukkah, and a joyful whatever else you celebrate.  Most of what we celebrate these days has Pagan roots anyway, and it’s all capitalistic.  I wish the world would stop being so greedy and just learn to love their fellow man.

Should We Raise Taxes On The Rich?

September 16, 2010

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[Editor’s note: although the sentiments of this article remain the same today, please note that the article is from September 2010 and refers to events in that time frame.]

Benjamin Franklin once said, “Certainty? In this world nothing is certain but death and taxes.” As the Bush tax cuts are set to expire and the mid term elections only 2 months away, Congress is scrambling on what to do about the tax cuts.

If the democrats choose to back President Obama’s plan to soak the rich in taxes it would be political suicide. Let’s think about this. Right now we already tax the rich heavily. And who hires people, the rich? Who owns businesses? The rich. Why would taxing them benefit anyone? If they have less coming in, they’re less likely to hire people. With unemployment at record highs, why risk that? Again, if you have less coming in (or more going to the government) you might not only not hire people, but cut positions. And that would cause our unemployment rate to go even higher.

In this current economic climate, how does taxing more, which would cause fewer jobs to be available (or loss of even more jobs) even make sense? Trust me. I’m not rich. I’m not pleading this case for my own pocketbook. It just doesn’t make economic sense to tax the rich at this time. Everyone is already taxed too much. The government takes too much of what is ours. Benjamin Franklin was right.

If the tax breaks are allowed to expire and the rich are taxed more by our government, I hope people let their voices known on election night. Chris Christie said, “Higher taxes is the road to ruin. We must and we will shrink our government, and that means making some tough choices, tightening our belts.” In the current economy everyone has been forced to tighten their belts … why not the government?

Sick and Tired

March 1, 2010

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What I am sick and tired of is the budget and tax debates that we have to go through every year. It doesn’t matter whether we are talking city, state or national politics. Whenever there is not enough money in the budget to cover every program, the only proposed cuts are in essential services (i.e. police, fire, military). The only solution is raising tax rates, not cutting other services or programs. What else is in the budget? Are all of the other line items in the city charter or in the state or federal constitution?

As an example, my state established a special levy tax to cover a shortfall in the roads budget. Okay, a specific tax for a specific purpose. This year, our governor wants to divert some of the money brought in by this special levy to pay for the state patrol. This was an interesting bait and switch. What in the over all budget is more important than funding the state patrol? I have actually requested a copy of the proposed budget, and I was informed that it would not be available until it was passed into law. A bit late I think!

I am not a member of the Tea Party, so I am not asking for tax cuts. I am not a libertarian, so I am not asking for the elimination of taxes either. There are legitimate reasons to have taxes and to raise those taxes. I am fiscally conservative. Just like in my own finances, if the money is not there, do not spend it. If I cannot afford something, I can not go to my boss and tell him I need a higher salary. Actually, I can, but I do not have the authority to force him to give it to me. If on the other hand, I offer to perform some additional service or make additional product, he will probably compensate me for that additional effort. So it should be with taxes.

We have basic taxes to fund necessary government functions. Any other activities that are desired by the community should come with a funding source so that the boss (tax payers) can decide if that activity is worth funding. Whether that is new taxes or some fee schedule would have to be decided at the time of implementation of the program. This is not an evaluation of the value of any specific program. There are things that have to be funded, but many of the activities that are in different public budgets are designed to “encourage” or “develop”. Although these programs may be good to have for the community, they are by definition non-essential. If the people want the program, they will accept a tax hike or fee. If that funding is insufficient, then the true costs will be exposed and the value of the program can be reviewed.

I really don’t have a problem with attaching each program, even the basic stuff, to specific taxes. If 2% is good enough to cover the fire department of a community of 1,000 people, the efficiencies of scale should make it good enough for a community of 100,000. This example is of course completely arbitrary, I have no idea what an actual tax rate against what commodity (land, property, income, sales) is necessary to fund a fire department. This may result in the reduction of activities supporting local parks or loss of the subsidy for sheep in South Dakota for wool army uniforms (not used since WWI), but it will make tax and budget discussions less divisive. All I am really asking for is transparency and an elimination of the scare tactics used to get tax hikes

Tax Tips for 2010

February 7, 2010

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[Editor’s note: this really should be obvious … but to avoid getting sued, I’ll point out that these are not serious.]

Get Wesley Snipes on the phone and ask what his tax guy recommends.  Rich guys always have the best tax advisors.

It’s called “voluntary compliance” for a reason.  Because it’s voluntary.

Certainly, Fido qualifies as a dependent.

Yes, the above ground pool qualifies as a business expense.

Sign your tax return “Mickey Mouse”.  You’re completely safe from allegations of fraud, since your name isn’t on the return.

April 15th is more of a suggestion.  End of the year-ish should be just fine.

Yep, you can include that $58,752 in charitable contributions without any sort of documentation.

The fact that he picks up garbage for a living doesn’t mean that Bob isn’t perfectly qualified to prepare the tax return for your S corporation.

If your son acts like a 12 year old, he still qualfies as a dependent – even if he’s 30 in chronological years.

Yes, it is perfectly acceptable to pay your tax bill with currency from the Republic of Meopolis.  Money is money.

Include 6,874 pages of documentation with your 1040EZ.  Confusion is your friend.

Include fake copies of your W-2’s and 1099’s which understate your income.  The IRS has no way of independently verifying this information.

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