Our Income Taxes Are Not Progressive

Progressive?

The claim we have progressive income taxation has been accepted with no thought given to whether it is true.

It isn’t. Although the wealthy are paying a larger share of total income taxes than ever, they are also wealthier than ever, and Liberals are constantly whining about the growing wealth gap. Far from being progressive, income taxes discourage savings and the accumulation of wealth, and place obstacles in the path to closing the wealth gap. It’s easy to maintain wealth, hard to accumulate it.

To begin, what makes an income tax progressive? The probable answer is that the higher the income, the higher the tax rate. The intent of progressive taxation is to have the wealthy carry the tax load, because: “They should pay their fair share. They need to give back. They receive the greatest benefits. Yada, yada & Etc.”

Because of the “progressive” nature of our income tax system, the wealthy make a lot of tax lawyers and accountants wealthy too by paying them to devise ways to beat high taxes. Even government has leaped into the tax avoidance business, by promoting schemes like tax-free municipal bonds.

Since the top 5% in terms of adjusted gross income pay 60% of income taxes (the top 5% share of the total has increased steadily, up from 37% in 1980 when the top tax brackets were at 70%), and the bottom 50% pay only 3% of the total (less than half of the 7% they paid in 1980).

You can see by the trend, the wealthy need all the help they can buy to avoid fulfilling the Democrat’s dream of wealthy Republicans eventually paying all the income tax. As it is, almost half of our “taxpayers” no longer pay any taxes to the IRS.

Thanks to the Internet, you can also easily find entire nations that provide tax avoidance services, offering off-shore banking in British Virgin Islands, Belize, Dominica, Seychelles, Panama and Gibraltar, and in other less favored states.

As is usual, the unwealthy need not apply.

Can an income tax be regressive? Look no farther than FICA (Social Security) and Medicare payroll taxes for the answer, a resounding “Yes!” The FICA and Medicare rates are the same for all, and FICA is paid equally on the first dollar earned up to the 137,700th dollar, after which the marginal rate is zero. Therefore, the total FICA tax rate for someone earning $275,400 falls to 3.1 percent, exactly half the 6.2 percent rate for anyone earning $137,700 or less.

You do realize your "employer contribution" comes out of your wages too, don't you? It's a sneaky way politicians try to make you think you're only paying 6.2 percent into Social Security. If you were self-employed, you would know you pay 12.4 percent into Social Security, and 2.9 percent into Medicare.

The total FICA tax rate continues to fall once taxable wages pass $137,700  For example, for someone earning $413,100, the tax rate is only 2.07 percent. At $550,800, it falls to 1.55 percent, or approximately the 1.45 percent Medicare tax. Get the picture?

FICA is also regressive because it discourages savings and wealth accumulation. The 12.4 percent of income paid into Social Security earns at about a 2 percent rate, less than the rate of inflation. After a lifetime paying into FICA, mortality tables show that a black male born before 2000 will die just about the time he would collect his first check at about 66 years of age. He will probably be unmarried when he dies, so his Social Security benefits will cease with his last breath. The return on his working lifetime investment is worse than 0.00%, which would be the return if someone was paid what he put in. No, his return on investment is a negative 100 percent (-100%).

Opponents of privatized Social Security accounts don’t spend much time on this feature of the present system, or on the fact it went cash income negative in 2010 and goes bankrupt in 2035.

As added frosting on the wealthy’s tax avoidance cake, a person making a million dollars a year from investments only pays FICA at the 0.00% rate. If, following the example of Ross Perot, the million dollars was all income from tax-free municipal bonds, his federal income tax rate is also 0.00%. Therefore, the wealthy can legally pay FICA and income taxes at the same rate as the drug dealer, who pays none of either unless he is caught, arrested, and convicted, and then only if the government can then find where he stashed his loot (see British Virgin Islands, Belize, Dominica, Seychelles, Panama and Gibraltar), and then find someway to collect from it.

Lots of luck collecting, G-Men.

Not only FICA is regressive, but our “progressive” income tax system is too. It also discourages savings and wealth accumulation, by taking a portion of the income before it can be invested, and then taxing interest and profits which, during inflationary periods (i.e. most of the time), means the IRS is reducing your capital base.

Taxing both interest earned on investments and capital gains are particularly regressive and oppressive forms of taxation. In the first instance, interest usually doesn’t keep up with the rate of inflation, so taxing interest earned just adds to capital shrinkage.

On the other hand, capital investments usually increase with inflation, and often at a faster rate. However, that still means that most of the value of the asset is original cost plus inflation. If the value only goes up by the amount of inflation, and the asset is then sold, the investor has not made a profit, he has just gotten back the value of his original investment.

“Not so,” says the IRS. "You have made a profit, i.e. selling price – original cost = profit, and on that profit you will pay capital gains tax." In other words, your investment not only did not beat inflation, but after paying tax on the “capital gain,” you lost money. Such a deal! Courtesy of your IRS.

I am waiting for a Liberal to explain to me why a system of taxation that discourages savings and investment is considered “progressive.”

The most illogical and regressive part of income taxation is the double taxation of corporate profits. Corporations are taxed at a very high rate (basically 21%, formerly 35%, with possible add-ons) when profits are earned, and then those profits are taxed to individuals when distributed as dividends.

Liberals have justified this double taxation by once again clothing it in the mantel of “fairness,” declaring that corporations must pay their fair share. Either through deceit or ignorance, the Liberals don’t admit that corporations don’t actually pay any income, property, or any other form of taxes; we who buy their products pay their taxes.

That’s right, when you’re calling for corporations to take on more of the tax load, what you are really demanding is government to tax us more. To a corporation, corporate taxes are just another cost of business to be passed on to their customers along with the costs of labor, materials, and overhead.

When the government collects corporate taxes, it reduces the capital the corporation can use for investment. Therefore, instead of funding growth internally through increased retained earnings, the corporation has to replace the funds lost to corporate income taxes by borrowing.

I’ve heard many Liberals dispute this, but without demonstrating to me how corporations could pay their taxes unless they receive money from their customers when they sell them their products. Some have told me that corporations sell a lot to other corporations, and to government, as if that proved a human being was not the ultimate link in the tax paying chain.

For the accounting illiterate among you, I would like to explain that corporations who buy anything from anyone include those costs as material or overhead charges, and recover them through charges such as depreciation, amortization, professional services expenses (such as tax lawyers and accountants), & etc. The only time they “eat” the taxes instead of passing them on is when they are operating at a loss. However, at that point taxpayers subsidize their loss because tax law provides for corporations to carry losses back against prior period taxes paid, and then forward against subsequent year profits.

The bottom line is there is nothing progressive about “progressive” income taxation. It is an artifact created from class envy and taxpayer ignorance by legislators to fool taxpayers. While the taxpayers are gloating and celebrating how politicians have “socked it to” the wealthy and to the evil corporations, the politicians are gloating about how easy it is to fool ignorant and envious citizens and get their votes.

Meanwhile, instead of benefiting from the stronger and healthier economy that sensible taxation would promote, the taxpayer congratulates the politicians for distributing tax misery equitably.

Income taxation problems such as discouraging investment, wealth accumulation and savings, slowing economic growth, and placing American business at a competitive disadvantage in the world marketplace, would be solved by a national sales tax along the lines of the Fair Tax proposal.

Just as regressive income taxation has been called “progressive,” the progressive Fair Tax proposal has been labeled regressive.

Newspeak lives.

Please click on the label below to see all my articles on this topic.

Tax Day Lament

Day after day in years past I have struggled against waves of remorse to sit before my computer and painstakingly compose Alice and my income tax returns. My sole objective every year is to arrive at all ways this side of outlaw to reduce our tax “contribution”. However, I realize that our efforts to minimize our contribution might seem selfish to many: “Where’s your spirit of sharing?”

Oddly though, before I plumb the depths of guilty feelings too deeply, I rationalize that it’s only me and trusty TurboTax against a well-paid IRS army; in years past Democrats like John and Teresa Kerry, John Edwards, and Bill and Hillary Clinton, who were generous to a fault with public funds, were known to sic armies of tax lawyers and accountants onto the IRS to make sure that they too contributed as little as possible. Then, if still burdened by feelings of selfishness, I take solace knowing we donated more to charity in a year than Joe and Jill Biden did in a decade.

At this point waves of smug, self-satisfaction wash over me, until I realize that I live in a community where generosity takes many forms, and is a way of life. Whereas the taxes we pay leave our community to be frittered away, in our communities the Lions, Rotarians, Soroptimists, Gualala Arts volunteers, school boosters, restaurateurs, and donations by generous businesses and individuals do what the bureaucrats won’t and can’t: find our real needs and fill them.

For over twenty years it’s been my privilege to work with many other Lions and Rotarians to round up donations for our fundraiser raffles and auctions, so I am constantly made aware of the generosity of neighbors and business owners.

We render unto Cesar, but our hearts give voluntarily and happily to friends. 

Social Security Privatization Made Easy

Privatization of Social Security is still a hot topic in the Combs house. I started drawing Social Security at my normal full entitlement age, in my case 65 years and 10 months (I was born in 1942). However, Alice waited  until she was 68 before starting.

Both of us knew that Social Security wouldn’t pay me much, even though I earned above or near the maximum for FICA contributions for almost all of a working life now approaching fifty years.

Over the years Alice and I have heard Democrats putting down Social Security privatization, saying that it wouldn’t pay as much and was too risky. As a test, I thought it would be a good idea to use real income and contribution amounts to get an accurate estimate of how a person would have fared if Social Security had always been privatized. Fortunately for my project, Alice had “Your Social Security Statement” in one of her voluminous files (she never throws anything away) and I copied her Social Security income by year onto an Excel spreadsheet, beginning with the $40 she earned in 1959.

The next part, calculating how much Alice contributed to Social Security each year, took a little research. Happily, such research in the Age of Google is the essence of simplicity, and I immediately found a Social Security page on JustFacts.com that provided a table of Social Security tax rates:

Year Social Security Tax Rate
1950 3%
1960 6%
1970 8.4%
1980 10.2%1990 12.4%
2000 12.4%

By multiplying Alice’s Social Security earnings each year by the tax rate for that year I calculated how much Alice contributed each year. Since Alice earned more than the Social Security ceiling since 1977, I projected her income and contributions through the end of 2008 and found she had contributed a total of $220,254.56 from 1958 through 2008.

The next part was simple, but a bit tricky since it required me to select a table of values for stock market investments covering at least a half century. I selected a table of the Compound Annual Growth Rate (CAGR) of the S&P 500 for two reasons. The CAGR gives about a one percent lower rate of return than using simple averages, but avoids the valid criticism that a simple average method mechanically distorts the effects of year-to-year fluctuations. The other reason I chose it was that an index of the S&P 500 reflects a simple, inexpensive mutual fund investment option that has been available for a long time.

I used the date range calculator for each of the fifty years 1958 through 2007 (I valued 2008 FICA contributions at face value). It was laborious work, but now you don’t have to do it, because I’ve done it for you.

(For example, a dollar invested in the S&P 500 in 1958 is worth $32.57 today. Multiply your FICA contribution in 1958 by $32.57, and you would have its value now.)

Year Compound Annual Growth Rate
1958 $32.57
1959 $24.78
1960 $23.22
1961 $24.19
1962 $20.18
1963 $22.88
1964 $19.28
1965 $17.06
1966 $15.65
1967 $17.98
1968 $14.97
1969 $14.05
1970 $15.87
1971 $15.85
1972 $14.37
1973 $12.43
1974 $15.00
1975 $21.29
1976 $16.23
1977 $13.63
1978 $15.37
1979 $15.42
1980 $13.71
1981 $10.90
1982 $12.12
1983 $10.53
1984 $8.98
1985 $8.85
1986 $7.01
1987 $6.07
1988 $5.92
1989 $5.27
1990 $4.14
1991 $4.43
1992 $3.51
1993 $3.36
1994 $3.14
1995 $3.18
1996 $2.37
1997 $1.97
1998 $1.51
1999 $1.19
2000 $1.00
2001 $1.11
2002 $1.27
2003 $1.66
2004 $1.31
2005 $1.21
2006 $1.17
2007 $1.04
2008 $1.00

Now all you have to do is post this to your Excel spreadsheet, and multiply your contribution each year by the CAGR value for that year. When you’re finished, just sum the total and you will find how much your contributions would be worth through 2008 if they had been invested in an S&P 500 index fund. (This fund would be much larger if you assume that dividends are reinvested.)

Alice would have had a fund worth $765,722.90. If she drew on it now, at the rate of the $2,000 per month Social Security would pay if she started now, it would last her 32 years, or until she was 98 years old, even if she never re-invested a penny. That’s a good thing, since Alice, then at age 66, had a life expectancy of another 18 years to the age of 84. If she only made it to 84, by drawing out $2,000 a month she would still have about $333,000 left to pass on in her estate.

(Unfortunately, in our current government-run system, as soon as you die, your Social Security disappears unless you have the unlikely situation of a spouse who does not qualify in their own right, or unmarried minor children.)

Alice, being a very successful businesswoman, would of course re-invest her privatized Social Security funds, and would probably just leave it in an S&P 500 index fund.

The average rate of return for all holding periods beginning in 1926 (the year the S&P 500 was actually founded) is 11.0%. The average rate of return for all holding periods beginning in January 1945 is 11.6%, and since January 1980, the average rate of return for all full-year increment holding periods is 13.9%.

Let’s keep it simple and say that the market can only do 10.0% per year, so in each month of 2009 Alice leaves the principal alone and only takes out as income the average monthly increase of $6,380 ($76,560 per year), which is about 3.2 times larger than she would have been paid under Social Security.

Don’t forget, Alice can keep drawing on her funds at this rate for years and still have over $765,000 untouched to pass on tax-free one day to her heirs (assuming that politicians don’t get greedy, as they usually do, and levy an exorbitant Death Tax on these previously taxed funds).

So why don’t we have privatized Social Security? To answer this question, ask another question. Why aren’t there any funds in the Social Security Trust Fund?

There aren’t any funds in the Social Security Trust Fund because Democrat politicians realized that historical Social Security surpluses could be diverted to finance current spending through the simple device of replacing the Trust Fund surplus dollars with special Treasury Bonds (or government IOUs).

In essence the government said, “I’ll borrow from myself, spend the money, and when Social Security goes into deficit spending in 2010, I’ll increase payroll taxes plus borrow from the General Fund – excuse me, sell back the IOUs, causing the General Fund to borrow and increase taxes to make up the deficit - while pretending the whole time that Social Security is solvent until 2035. By then I’ll be long retired, and some other poor suckers will have to try to clean up the mess.”

Our government has always trusted that we are primarily too stupid, and secondarily too greedy, to privatize Social Security. Too stupid to realize Social Security is a horrible investment for workers, but a great cash cow for politicians to tap for funds to spend to buy our votes. Then we have to be too greedy to stop them from buying our votes and to phase in privatization to pass down a better system to our descendants.

As a final point, and one deserving of a post all its own, if we all had been paying into a privatized account, an S&P 500 index fund (the S&P 500 contains 70% of our stock market capitalization), instead of a government deep in debt, we would have an economy awash in capital. All of our contributions invested in our economy instead of frittered away by politicians would be powering economic growth, and high levels of research, development, and innovation.

As an incidental consequence, the high level of economic activity would also be generating high tax revenues, especially at reduced tax rates.

We would have universal health care through personal Medical Savings Accounts, not a bankrupt Medicare system and Medic-Aid that has been cut so much that doctors are refusing Medic-Aid patients.

We have seen the future, and it works, but only if we can take back control of it from the politicians.

Liberals Use Statistics to Lie About California Taxes

In fact, California ranks 18th among the states in percentage of personal income paid to state government, and its presumably beleaguered wealthiest 1 percent, according to Citizens for Tax Justice, pays just 7.4 percent of their income to the state, while the poorest Californians pay 10.2 percent.

So prattles Harold Meyerson, in a May 29, 2009 article in the San Francisco Chronicle, How the Golden State got tarnished.

To take the second part of Meyerson’s statement first, the Citizens for Tax Justice table he referenced was updated, and he overlooked the update. Instead of 10.2 % for the poor, and 7.4% for the rich, the table shows an effective tax rate for the poorest 20% of 11.1%, and 7.8% for the wealthiest 1%.

Meyerson conveniently overlooks some details in the study which aid him in distorting its results. The study says the wealthiest 1% only pay 7.8%, that is arrived at by deducting a "federal reduction offset" of 2.4% from the 10.2% the rich actually pay, which apparently adjusts the tax rate of the rich for the federal taxes saved by paying state taxes and itemizing deductions.

The poor only pay 0.1% percent of their "income" for income tax, but about 7% for sales and excise taxes. What the study doesn't even hint at is that the poorest 20% receive untaxed transfer payments (food stamps, rent subsidies, aid to dependent children, WIC, etc., plus their own "federal reduction offset," the Earned Income Tax Credit) that usually more than double their "income," but which are not reflected in their "base" for wealth and cost comparisons such as tax equity. Also this lowest 20% rarely pay federal income taxes (and get more back than is withheld), and often don't pay FICA/Medicare either.

As is the case with most of these agenda-serving studies, the author compared apples to oranges and produced a lemon.

Now for the first part. Meyerson apparently found a table he liked that showed Californians are 18th in the percentage of personal income paid to state government. However: "At 8.25%, California has the highest state sales tax, which can total up to 10.25% with local sales tax included."

Another table shows that California has the 2nd highest personal income tax rate at 9.3%, slightly lower than Vermont's 9.5% (although the California rate can be higher because some local governments can add taxes).

Then I found a table that showed California #9 in per capita state taxes paid. Interestingly, I found that Wyoming was #2, ranked higher than California even though Wyoming had a much lower sales tax, no personal or corporate income taxes, and lower gas and cigarette taxes. What's the story here?

The answer surprised me, and showed me how some analysts used statistics to pull the wool over over taxpayer eyes. Wyoming produces a lot of coal and gas, and is paid royalties by the companies that extract it. These royalties are lumped into the state tax receipts, then the total is divided by the Wyoming popultation, making it look like Wyoming folks are among the highest taxed in the nation when the opposite is true. This also appears in statistics for other resouces rich states like Alaska, South Dakota, and Louisiana, and makes states like California look like they are not taxed as highly in comparison.

As a Californian born and raised, I know we pay a lot of California taxes. Our problem is not that California taxes us too little, but that California spends too much, particularly on entitlement programs. Some Californians want that to continue, and feel that Californians, particularly the wealthy, should be taxed even more. Apparently they think California has a captive tax base, even as wealthy Californians and businesses move to more tax-friendly environs.

I'm sure as our tax base shrinks because of this exodus, our Liberal brain trust will answer by proposing even higher taxes. And wait for Obama to bail California out.

Another Right-Wing Extremist

Today Alice and I celebrate our minority status: we're part of the shrinking minority that actually pays income taxes. The majority that pays no income taxes is growing rapidly, and they vote Democrat.

The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money. Alexis de Tocqueville

Rather, the American Republic will endure until Congress creates a majority that pays no taxes, and rewards them by redistributing the wealth of the tax-paying minority to the majority.

This is analogous to two wolves and a lamb voting on what they're having for dinner.

I would have been joining a Tea Party protest today except we were traveling the past week. We just returned home in time for me to stay up very late last night and to work many hours today so I could submit an extension request for filing our income taxes. So far it looks like we're at a break-even point - what we already paid is about what we owe.

Still, I have a lot more work ahead before I can submit our final tax return.

As I typed and griped, and sorted and analyzed our many tax records and documents, I noticed that my attitudes about big government waste and intrusion, plus my status as a military veteran - a retired one at that - put me on Homeland Security Secretary Janet Napolitano's "rightwing extremist" list.

Ms. Napolitano, I can give you names of hundreds of others who proudly served our nation and are critical of wasteful and oppressive big government. We haven't been in hiding. We were very open in our military service, and we've been up front in exercising our constitutional right to freedom of speech.

Ms. Napolitano, I'll bet that you were very critical of investigations for Muslim extremism after 9/11 - you probably called it a "witch hunt" or "McCarthyism" - but you think it's OK to smear veterans and big-government critics.

Ms. Napolitano, I know you won't investigate left-wing extremists with the same zeal as right wingers like me.

Rest assured, Ms. Napolitano, I'll make it easy for you to find me.

Democrats Like Spending, Not Paying, Taxes

Democrat eagerness to spend taxpayers' money is only exceeded by their reluctance to pay taxes themselves. Former Senator Tom Daschle is the latest of Obama's nominees to get caught doing major tax avoidance, in this case $128,000 over a three-year period.

You have to give Daschle credit for chutzpah. The man who was in on writing our tax laws for decades made "honest mistakes" in determining what should be included in taxable income.

Apparently the only way to get high-ranking Democrats to pay their back taxes is to nominate them for a high position in the Obama administration, and then do a thorough vetting of their background. That leads me to suggest that Obama create more positions, nominate Democrat high-rollers to fill them, then use the tax revenues generated during the review process to help reduce the deficit.

However, the nominee should then be blocked from taking the position, and another nominee selected. The whole process is wasted if you approve the tax cheats for the jobs anyway, because then they'll just soak up and spend more of the taxpayers' money than they paid back.

The compensation Daschle and other former Democrat legislators are paid are clearly legal bribes for access to Democrat power brokers. Yet Daschle and others resent giving a little back after being enriched so much.

Democrats Thanked for Cheating Social Security

While perusing a Google inquiry that led some now-enlightened soul to my post on privatizing Social Security, I came across this website discussing whether the Social Security Trust Fund was worth anything.

I read the post by Angry Bear (slightly left of center economic commentary on news, politics, and the economy) and his readers’ comments, and soon felt I was witnessing the rearrangement of deck chairs on the Titanic. Their debate spent inordinate time and energy discussing the Special Treasury Bonds held in the Social Security Trust Fund that are issued when its surplus is transferred to the General Fund. Angry Bear and cubs felt these bonds were real, and could be negotiated on the bond market the same as any other Treasury Bond. Others disagreed, characterizing them as “play money.”

The cause of the historical diversion of the Social Security surplus occasioned a prolonged round of partisan finger pointing, although it is clearly the love child of LBJ and the Democrats as they sought a means to finance the Great Society, create Medicare, expand the Vietnam War, and do it all without raising taxes.

However, astute bond traders/investors/students of finance noted that the Special Social Security Trust Fund bonds are government bonds that can only be redeemed by our government issuing regular Treasury Bonds redeemable from the General Fund, which would require the General Fund to reduce expenditures and/or raise taxes to fund their redemption.

Hallelujah, they got it right! Of course Angry Bear and his cubs fought on, laying down smoke screens including a gratuitous offer to buy the doubters’ shares of Trust Fund bonds at 10 cents on the dollar.

Their silliness reminded me of my silliness twenty years ago, when I offered to relinquish any and all claims I had for all time against Social Security if they would only refund my and my employers’ total contributions to Social Security. I pledged if Social Security would do this, I would be responsible for me for the rest of my life.

Further, in terms of healthcare, all I asked was that I could stop paying into Medicare and only receive the lifetime medical coverage through the United States military medical system that I was promised upon retirement from the Air Force.

Social Security and Medicare never accepted my generous offer. Had they, I would have taken the $47,935, invested it in an S&P 500 index fund, and each month thereafter increased my investment in the fund by 12.4% (the FICA rate) of my income. At the end of this year I would have an account valued at over $500,000, based on the actual performance of the S&P 500 during the past twenty years.

I get under $2,000 per month from Social Security, so if I stopped investing the $500,000 and took out $2,000 a month, it would last over twenty years (my current life expectancy is fourteen more years, or to age 80). Of course I would keep it invested, and since the rate of return of the S&P 500 since January 1980 for all full-year increment holding periods is 13.9%, I could withdraw an average of $5,790 each month and never touch the principal. That’s almost triple what I’m getting from Social Security, and I would still have half a million dollars for special needs or to ease us through hard times.

Unlike under Social Security, if I died young – like right now at age 66, which is the life expectancy for Black American males – I would still have $500,000 to pass on to Alice and my sons, grandchildren, and great-grandchild.

Mentioning Alice reminds me that if she could have opted out of Social Security only twenty years ago, she would now have an S&P 500 index fund valued at over $600,000, and our combined annual income from our privatized equivalent of Social Security would be over $150,000 without pulling a penny from our total principal of over $1.1 million.

There is an obvious bottom line here, and I’ll spell it out. Like John McCain said, Social Security is an absolute disgrace.

I’ll spell out another obvious conclusion. If Democrats had not demagogued reforming Social Security, our senior citizens would not have shot down their own chances for luxurious retirements by fanatically defending the present abomination.

Not only is it an absolute disgrace, but it is a political football and cash cow for Democrat politicians. They shamelessly pander saving Social Security to gain senior votes, while even more shamelessly diverting the surplus to pander to special interest groups and buy their votes.

In the end it’s poetic justice: Democrats cheat the old of incomes and estates they could have had, and are thanked for doing it, then spend the Social Security surplus to buy the votes of younger Americans so they can be cheated of their futures too, while profusely thanking their cheaters.

I just wish I didn't have to be an unwilling participant in their stupidity.

From Fat Congressional Earmarks, to Pork in Berkeley

Few things illustrate the difference between liberals and conservatives like the spending of taxpayers’ money. The recent stupidity in Berkeley, where their witless City Council tried to expel a Marine recruitment office, has resulted in another case study of spending philosophies.

On the one hand we have the Republicans, who note that: “…the city of Berkeley insulted our troops and their constitutional mission to defend our country, while still coming to the federal government asking for special taxpayer-funded handouts.”

The total of $2,145,000 in special handouts to Berkeley, also known as congressional earmarks, include $87,000 for a school garden, $750,000 for ferry service between Berkeley and Albany, $94,000 for an emergency communications system, $975,000 for the Robert T. Matsui Foundation for Public Service at UC Berkeley, and $239,000 for the Ed Roberts Campus.

Before I go any farther, there are obviously going to be many proponents and defenders of federal government funding for each of these programs, and a lot more. Gardening is good, ferries are good, emergency communications are essential, public service is mother’s milk for Democrats (since their strongest support comes from public service unions), and the Ed Roberts Campus serves disabled adults and children.

So why should federal funds be taken from these programs?

That’s not the question.

Why were federal funds given these programs in the first place? Better yet, how were federal funds given these programs?

The answer to the second question first. The funds were given via congressional earmarks, also know as “pork-barrel spending,” or “pork” for short. Each item was approved as a part of a process that enables a congressperson to show their constituents that they can “bring home the bacon.”

The primary reason that the Berkeley earmarks won’t be eliminated by congressional action is simple: congresspersons don’t want to invite retaliation to remove their own earmarks. The earmark process is based on the old adage, “You scratch my back and I’ll scratch yours,” but what perpetuates the system is the clear threat, “You gore my ox, and I’ll barbeque yours.”

To answer the first question of why these particular items were chosen for federal funding is to delve deeply into the confused psyche of political perceptions. The first step is to consider the nature of resources. They are finite and limited, whereas the need for resources verges on the infinite and unlimited.

Therefore, since unlimited needs are pursuing limited resources, who gets what becomes a reflection of who has the power.

For example, why does a Berkeley school get funds for a school garden when an Oakland school can’t provide enough textbooks for its classes?

Because Congresswoman Barbara Lee wants to show Berkeley voters she can bring home the bacon for them. She knows that Oakland voters will vote for her up to the point her vital signs are flat lines, and probably even after that, so she doesn’t have to prove anything to them.

Senator Barbara Boxer, of course was apoplectic about punishing Berkeley by having earmarks withdrawn and given to the Marines. “Why on Earth would we punish decent citizens because some members of their local government…say something that’s highly offensive?”

Why indeed?

One reason is that the decent citizens of Berkeley chose their members of local government, and can choose to remove them if they don’t agree with what they did.

A better reason would be that the programs funded by the earmarks are not the urgent and valid responsibilities of our federal government anyway, whereas funding the Marine Corps is. Doubters of this point should read the Constitution of the United States of America.

Another point would be that Berkeley aided and abetted activities that interfere with the lawful functioning of an agency of the federal government.

What does Barbara Boxer have to add to defend Berkeley’s right to retain federally earmarked funds? Does she think Berkeley has a right to them, regardless of what is said or done? Does she think there is no better use for the funds, such as in the defense of our borders?

I wonder if she is aware that defending our borders is a federal government responsibility under our Constitution, whereas school gardens, ferry services, etc., are not?

I bet she thinks it’s the other way around.

Even if Berkeley apologized to the Marines and rescinded Code Pink’s parking space, the correct action would still be to take away Berkeley’s earmarks and put them to better use.

In fact, all earmarks should be rescinded and the funds put to better use.

If that were to happen, I would consider the “Battle of Berkeley” one of the most significant of all Marine victories, one that should be proudly added to the “Marine’s Hymn.”

From fat congressional earmarks, to Pork in Berkeley
We shot down constitutional abuses, while setting the budget free
If the Senators and Congressmen, ever look at their responsibilities
They would find they include Marine recruiting
And not the school gardens of Berkeley.

(With humble apologies to the Marine Corps. I'm saluting them at the same time I'm ridiculing Democrats and Berkeley. Some of my best friends, and a few relatives, are or were proud Marines.

Alice and I just returned from Peleliu, where 1,500 Marines and 300 GIs gave their lives, and so did 11,000 Japanese, to ensure that Democrats and Berkeley residents are free to disrespect our soldiers and to praise our enemies. However, the hard-won American freedoms that so many bought so dearly don't included a right to pork-barrel funding.)

Semper Fi

California - Under Taxed or Over Spent?

California hit the budget wall a long time ago, but it has taken a long time for the sound of the crash to penetrate the isolation wards of state government. As the California budget hemorrhaged tanks of red ink, state politicians labored long and hard to devise new, incredibly expensive plans to spend money that was already earmarked to go towards previous over commitments.

The problem was not that Californians weren’t being taxed enough. In fact, much of the recent rosy budget picture was due to a relatively low rate of taxation applied to an enormous base of rapidly increasing economic activity, spurred on by low taxes.

Unfortunately, parading a healthy budget in front of politicians is like running through a pack of wolves wearing pork chop underwear.

To the politicians of California, when they looked upon the vast waves of tax revenues splashing over Sacramento, what they saw was the answers to each of their pleading constituent’s wants, and the means of buying their vote and eternal gratitude – at least until they come with their next whining need.

So the California legislature spent and spent – and the governor, a Republican in name only (RINO), signed and signed those spending bills.

Republican legislators, on the other hand, used their meager power to obstruct the passage of spending bills. When they were successful, instead of earning praise for their fiscal responsibility, they were roundly condemned for being tight fisted and mean spirited. In the Age of Oprah, that’s about the nastiest thing you can call a politician. The only way you can win the hearts of Oprah’s Acolytes is to cry while you pass a bill to succor the teller of every sad tale.

The loudest teller of sad tales is the education empire. It consumes forty percent of the state budget, is very powerful politically because of their sheer numbers and the way they allocate union dues to political campaigns, and supports an ever growing administrative overhead that sucks resources from the classrooms. Wherever in California public schools are faced with challenges – children from low-income families, high percentages of non-English speaking students, uninvolved parents – those schools almost always fail the challenges.

However, that doesn’t stop the heavily unionized public school system from opposing reforms and resisting measurement of their results.

Of course, every state spending program has its supporters and promoters, and each is adamant that, rather than cutting spending, the funding for their program should be increased. Each is fully prepared to demonstrate how spending more for their program will produce future benefits far in excess of additional expenses.

Unfortunately, much is promised, little is produced.

This morning I paid particular attention to the comments by San Francisco Chronicle readers concerning Governor Schwarzenegger’s proposals. Distilled to their essence, they were: we don’t need cuts, we need increases; we don’t need less state services, we need more; wealthy taxpayers and businesses should pay more taxes; and that everyone, except those that actually need the services, should pay more taxes.

Or “don’t tax you, don’t tax me, tax the fellow behind the tree.”

As usual, the Chronicle readers drew on vast stores of ignorance to take their positions. Their first assumption is that, in a global economy, the wealthy and businesses will act like the world outside California doesn’t exist, and will continue to participate in having their wealth confiscated and redistributed to the “more deserving.”

The second ignorance based assumption is that businesses pay taxes, instead of just serving as a distribution point to pass them through to ultimate consumers in their cost of goods sold or services provided. The only times businesses are concerned about taxes are when competitive or economic pressures prevent passing them fully on to consumers.

For a San Francisco example, their increased mandatory contributions to health care costs will force restaurants to increase their menu prices, and they will make fewer sales. If no employees are cut, total expenses will increase. The higher prices may result in more or less revenue, depending on how far sales drop as prices go up. As employees are cut and profits shrink, fewer taxes will be paid into a system based on the assumption that tax revenues will be increasing substantially to meet the higher benefit levels, both for employees and the homeless and unemployed.

In a competitive economic environment, increased business taxes create a competitive disadvantage for businesses being taxed, since they can’t pass on the increases without raising prices.

Of course, business tax increases always hurt consumers, the ones cheering for taxes to soak big business, since they are the ones who actually pay the taxes when they buy the product.

Whenever I hear someone calling for more taxes on businesses because “they aren’t paying their fair share,” I mentally picture them with an “Ignoramus” sticker on their foreheads.

Right next to their “Democrat” badge.

Alternative Minimum Tax Cuts - More Fun Than a Barrel of Democrats

Democrats are always good for a laugh, and the way they stumbled all over themselves to cut the Alternative Minimum Tax (AMT) was better than a car full of clowns.

The simple truth about the AMT was that it was never intended to do what it’s doing now. All the Democrats who passed it in 1969 under the late, unlamented reign of LBJ wanted was to soak a few (166) selected wealthy families. It was just the usual simple Democrat program to use governmental power to harass a few people they didn’t like, constitutional protections be damned. Since the Supreme Court was an agent of liberal activism at the time, there was no worry on that front anyway.

However, thanks to the Democrat’s endemic lack of foresight, the AMT soon became extremely effective at extracting taxes from the unintended who, thanks to patterns of urban settlement, politics, and high state taxes, became higher-class, and increasingly middle-class, Democrats.

Therefore, the Democrats seemed to have a simple task ahead: reduce or eliminate the AMT, and with it the unintended but very real tax consequences to their constituents.

But wait. Nothing is ever easy for Democrats. In a vain attempt to hide their “tax and spend” spots, Democrats had coined the un-Democrat phrase of “pay as you go,” aka PAYGO. In essence Democrats said, with particular intent to protect newly elected members from right-leaning areas, that no tax cuts would be made unless they could be rendered “revenue neutral.”

The problem with the AMT was that its ability to generate tax revenues was increasing exponentially, and Democrats being Democrats, they had big plans for the many ways they could spend their largesse.

“But wait again,” you say (and if you don’t, I will). “Democrats had no intention of taking money from the people who are now being (or soon will be) soaked by the AMT.”

I agree most decidedly. Therefore, those tax revenues are like “found money,” or ill-gotten gain to the government, so why continue taking them from the people?

“Because,” Democrats are quick to point out, “it’s a lot of money now, and will soon be a humongous amount of money, and we can’t think of any other way we can get our hands on that much money to spend on our growing stack of pork – oops, sorry, what we really mean to say – to spend on ‘investments’ for the people – for our people, who are highly dependent on us bringing back some bacon, or why would they have elected us in the first place?”

“Sorry, I was carried away by an unexpected wave of honesty. It won’t happen again, you can depend on that, so help me Nancy Pelosi.”

At that point he lowered his left hand and took his right hand off Nancy’s book: “Pork is Your Friend – How to Win Friends and Buy Their Votes.”

The “Democrat’s Dilemma” – what a nice book title that would be! Like “Pilgrim’s Progress” with no progress – is that if they do nothing about the AMT they will be recipients of an ever increasing flood of tax revenues to pass out amongst their poorer and very hopeful supporters. The problem that creates is that it will make Republicans of their wealthier, and therefore big contributing, Democrat supporters.

“Let’s see,” said Nancy, “on the one hand (left, of course) we have a bunch of people who support us and want us to give them goodies. Lucky for us they will keep supporting us, even if we don’t give them much, because we’re the only goodies-giving game in town.”

“On the other hand,” she continued, but still using only her left hand, “we have a bunch of people who support us who give us goodies. If we don’t cut the AMT, they won’t have goodies to give us, but those rascally Republicans will be happy to cut the AMT – they promised to do so anyway, but we stopped them – and will be overjoyed to accept our grateful former supporters’ votes and contributions.”

(In the interest of honesty and full disclosure, at this point I must admit the obvious: all the above are made-up quotes. However, as CBS News and Dan Rather reporting about Texas Air National Guard letters, and the French press reporting Palestinian propaganda as fact would be quick to point out, made-up news is the best news, because it illustrates the “truth” of an issue in a way that real facts, contaminated as they are by actual events, cannot. Therefore I follow their examples, except I do what they don’t, I admit it when I make things up.)

In the end, Democrats cut the AMT and didn’t raise the taxes on the wealthy.

Even “Dimocrats” have seen the light that “Trickle Down” works, and that it’s not good politics to demonize the rich, then beg for their contributions.

Democrat's Alternative Minimum Tax Fiasco

The editorial staff of the San Francisco Chronicle has never been accused of rational analysis of an issue, and their position on the Alternative Minimum Tax (AMT) perpetuates their irrationality.

They begin their analysis by stating that the AMT was an all-time winner of the Good Idea Gone Bad award. That leaves me to wonder, why was it a good idea in the first place?

Because Democrats created it, and now don't know what to do to prevent current and future catastrophes?

What was the purpose of the AMT?

The answer, to prevent people from dodging taxes by adhering to tax law and taking legal and permitted deductions (including long-term capital gains, accelerated depreciation, certain medical expenses, percentage depletion, certain tax-exempt income, certain credits, personal exemptions, and the standard deduction).

The tax laws, of course, were crafted by Congress to encourage and reward taxpayers to do certain things, but Congress didn’t intend that people actually do those things scrupulously and not pay any income tax at all. That offended Congress’ sense of fair play, thinking that in such circumstances that taxpayers should do their civic duty and overpay their taxes.

Since no taxpayers with significant incomes could be found that were so stupid that they paid taxes they didn’t have to, a Democrat Congress and President decided to fix the problem and created the AMT in 1969.

As with the rest of LBJ’s programs, the AMT rapidly became what it wasn’t intended to be, a sloppily devised program that fed on gains from inflation, and increasingly preyed upon taxpayers in high income, high tax urban areas, predominantly Democrats.

Unfortunately for Democrats, the AMT was so successful at taxing inflationary gains that their plans for spending increases are highly dependent upon the increased tax revenues the AMT unchanged would generate.

At this point the Democrats, and their mouthpieces like the San Francisco Chronicle, protest that the tax revenues lost by eliminating or scaling back the AMT must be replaced by increasing some other tax.

What is the logic in that?

If this misbegotten legislation had never been passed there would not be a huge pot sitting at the end of the IRS rainbow causing spendaholic congress-people to desperately search for replacement revenue.

Even Democrats admit that the taxes generated by the AMT are by mistake, that there never was intent to penalize middle-class taxpayers for the sin of scrupulous compliance with tax law by the wealthy. In fact, the original intent was to nail only 155 taxpayers, but it immediately went totally out of control.

And these are the folks you want running health care?

San Francisco Screws Small Businesses

San Francisco not only screws small businesses, but their workers too.

“How could that be?” you Liberals ask. “Don’t you know that San Francisco is the nearest thing to Heaven that has ever graced this planet, and undoubtedly the Universe?”

“Muslims have Mecca. Liberals have San Francisco.”

The news of San Francisco’s callous regard for the small businessman and his key employees was uncovered by the unlikeliest of sources, the socialist welfare state’s most ardent supporter, the San Francisco Chronicle.

The Chronicle, which has the same relationship with news as Hillary has with candor (for example, in Iowa), John Kerry has with Christmas in Cambodia, or Al Gore has with world peace, in some way put ideology aside long enough to note that small San Francisco restaurants were put on a fast track to failure by the minimum wage and health insurance mandates the San Francisco Board of Stupidvisors laid on.

Of course, the San Francisco Supervisors are not the only economic illiterates in San Francisco, where most of the electorate firmly believe that there is such a thing as a free lunch, and take every chance offered them to destroy San Francisco’s job base while saving San Francisco workers. At the rate they’re going, the San Francisco worker will soon join the San Francisco businessperson on the Extinct Species List.

Liberal San Franciscans (please excuse the advertent redundancy) have never absorbed the simple truths that brought down Communism – that for every centrally planned and mandated assault on free market forces, there are unintended consequence that result in economic damages far outweighing conceived benefits.

A case in point. San Francisco is renowned for small, high quality restaurants, and these restaurants are high on the list of reasons that San Francisco is a Mecca for tourists. Good restaurants need good cooks. It would also help if they have good waitpersons too, but if the cooks are good, good wait staff will be abundantly available.

So what does San Francisco, one of the most tourist dependant cities in the world, do? It mandates minimum wage and health care benefits that drive up the cost of waitpersons while pulling money from the pot available to pay cooks. Unlike other more rational cities, which include all the other cities of the world except those run by Communist or Islamic ideologues, San Francisco does not allow a “tip credit” to the wait staff to offset a portion of the minimum wage.

Even New York, almost as beknighted by liberalism as San Francisco, allows a tip credit which reduces their minimum wage to $4.60 per hour, versus $9.14 per hour in San Francisco. That minimum wage differential, plus the San Francisco mandate to give paid time off and health care to employees working ten hours or more a week, means that a dining room staff of twelve costs $285,696 in San Francisco, and only $128,064 (45%) in New York.

Of course, San Francisco restaurants are not competing directly with New York restaurants. However, small San Francisco restaurants are competing directly with large San Francisco restaurants, many of which are owned and operated by large corporations. Because of economies of scale, buying clout, and such things as already existing corporation employee benefit plans, the corporate restaurants are not in the least inconvenienced by the minimum wage and health care mandates.

In fact, the corporate restaurants will be directly benefited by the mandates, because many of their competitors will be driven out of business, or will have to raise their prices precipitously

Wealthy San Franciscans and well-heeled tourists won’t mind, and won’t even notice.

The Middle Class, and the Poor, the ones Liberals are always caring about, will notice, and they’ll dine out less often, and have fewer medium priced and sized restaurants to choose among.

Many high priced restaurants, many fast food restaurants, but very few of the kinds of restaurants that have given San Francisco its reputation for quality and variety.

More Liberal unintended consequences.

Index of Posts Except Political

(Please mouse click on the red, underlined link titles to be magically transported to the articles described. I'll be glad you did. How you will feel about the process may be something else entirely, but go ahead, take a chance!)

Link to Political Posts - Politics is funny, especially when Liberals get serious.

The Galapagos Island cruise and Ecuador trip, January 2006

It's the Family After All - That is no stranger hanging on the cross.
Finding Real Beauty in the Galapagos Islands - A human mind can be beautiful too.

Point Arena Stories, 1949-1960

Big and Smart - Mom, Pop, the Runt and I
Eight-Man Football at Point Arena High - The more you goof off and take things easy, the longer you get to do them.
Jesus Saves, and the Little Red Truck - A thoughtful message from a friend I never met.
Point Arena Apprentice Poker Players - One day we thought we would be the big boys.
The Great Point Arena Fire of 1954 - Everyone likes to help
After the Summer of 1954 - You can't do a "kiss and tell," if you didn't do the kiss.
Pete Bjornavik, a Point Arena character - Fun to be around
Gopher Capital of the World? - There's a bit of larceny in all of us
1960 NCAA Basketball Championships - Thanks, "Chub" Ohleyer - A very generous man
Sweethearts Dance 1960 - Bad weather makes a special memory
Number, Please? - Personal connections before the dial telephone
Puddles the Pup - A big part of the best childhood in the whole world
You Gotta Ring Them Bells - Some wedding nights you don't forget, but you try!
After The Summer of 1954 - 7th and 8th grade, 60 students, one great teacher
The House We Built - Brother Ron and I dug the basement in 1954, with help from "Prince"
The Old High School - When we came to Pt. Arena in 1949, we lived in one big room of an abandoned high school building.
A Capsule Summary of My Life - So far, so good.
Humboldt State Lumberjack Reporter - The beginning of a nine-year, seven-college odyssey.

The Air Force Years, 1962 to 1984

You're in the Air Force Now - A very tiny thing can change a life.
It's a Gig - Sometimes the hard times are the best.
Sober Reflections on Memorial Day - Trying to find my place in Memorial Day.
They Also Served - Marilynn and our three sons were in the front lines.
England, 1970 to 1975 - My best job at my best base.
Traveling with a Water Bed - It's not often your guests bring their own.
Why Planes Break Down in Christchurch - Not just mechanical parts can delay a mission!
The Pineapple Express - Jimmuh and me have something in common.

Life in Gualala, 1998 to present

Our 2006 Christmas Letter - A Christmas letter is like a box of chocolates.
Europe Bicycle Trip of a Lifetime - When you haven't biked much, a four-month trip on bikes through Europe is a natural choice to celebrate retirement.
We Arrive in Europe - Our bike hike, continued.
Klein Gumpen, Here We Come! - Our bike hike, continued.
Uncle Jack - You're never to old to teach or to learn.
The Dublin to Tralee Train, and how Alice stopped it!
Running - Now Buddy keeps me going.
Same Time Next Year - Finding out how the other half live.
Excitement in Anchor Bay - Big doin's in a one potty town.
Mixed Company - When Alice and I stepped in, the company became mixed.

Tales of Alice

Feliz Ano Nuevo! - Wish your friends a new one! Just don't tell them what "it" is!
Alice and Vulcan Incorporated - Only in America
"Heartless" Capitalism is the Most Compassionate - Alice succeeds while France fails.
Alice's Project Complete! - It is worth it
Great Expectations - The tale of our whirlwind "story book" romance, featuring me picking Alice from a book.
The Dublin to Tralee Train, and how Alice stopped it!
Alice, the California Can Carrier - I think the Italian men liked the way she carried her can.
A Burning Desire - How lust landed me on the ski slopes
Murder by Wasabi - Was watching Monday Night Football a capital offense?
The Strong Woman Myth - In conclusion, a tribute to Alice and her daughters
Christmas Letter, 2005 - Alice had a busy year
A Fool Such As I - In a letter to the editor of our local paper, someone called me a fool. Alice didn't like that, and replied.

Some Observations

Almost Fetch With Buddy - It's a great game
Science Fiction - Where's the Science? - UFO's don't exist, and won't ever show up here. Why would they?
Really Dumb Football Players - NFL players are getting bigger, stronger, faster, and a whole lot dumber!
Garcia vs. Owens - Class Against No-Class - Jeff Garcia has class and the courage, Terrell Owens has neither
My Ancestors Owned Slaves - And I haven't.
Country and Western, Telling Life's Stories - Songs for adults.
Making the Army of Reconquista - There's more than one way to build an army of conquest!
Pardo's Push - Bravery, ingenuity, loyalty. It was an honor to serve with guys like these.
The Devil Made Me Do It - When you mess up, you have to blame someone.
Revolutionary Jesus - Seeking Truth at Christmas - It’s time for weak-kneed agnostics to stand up and be counted!
Free Will or Preordination? - Amen
Of Mensa and Me - No excuse for doing dumb things.
For Veterans Today, And Tomorrow - "For it's Tommy this, an' Tommy that, an' "Chuck him out, the brute!" But it's "Saviour of 'is country," when the guns begin to shoot"
The Deadly Bigotry of Low Expectations - It's easy to live down to expectations
If I Received a Love Poem - An expanded view of love.
Greatest Baseball Player of All - Willie and the Babe, forever number one.
Fight to get Your Virginity Back! - Once you lose it, abstinence won't get it back.
Cargo Cults, Reparations, and Casinos - The dreams are alive!
Review of Global Warming, What You Need to Know - I was happy to be chosen to review Tom Brokaw's special.
Keep it Simple, Simplifiers - There are two types of people in the world, simplifiers and complicators, and you know who you are.

The Global Warming Suite (Global Warming is science, not politics, according to Liberals, so it can go in this index)

Al Gore and his Merry Band of Global Warming Deniers - In denial that global warming is natural.
Preacher Al Gore and the Global Warming Fundies - "Brothers, let me hear you say 'Hot!' Sisters, let me hear you say 'Real Hot!' What have we got!? "A lot a' hot brothers and sisters! Turn on the air conditioning!"
Global Warming Consensus is not Science - At one time scientific consensus was the earth was flat; now it's global warming is man-made.
We have to get rid of the Medieval Warm Period! - If Al Gore can't get rid of it, his "science" is toast
Harvard Study Disproves Unprecedented Global Warming - And Harvard is not a right-wing stronghold
Global Warming - A Stroll Through the European Countryside - Liberals should be very careful as they stroll, since they can't look down and see signs of the Medieval Warm Period. With any luck they'll fall off the "man-made global warming" cliff.
A Sign of the Coming of the Global Warming Plagues - The Gospel according to Preacher Al Gore
Science Opposed to Global Warming Theory - An Index - If you still believe in Preacher Al Gore's Global Warming after you read these articles, you really got the faith!
Ain't No Big Thing - My advice to Al concerning rising sea levels.
Chilling Out Global Warming Hype - A pre-review of Tom Brokaw's Global Warming, What You Need to Know
Review of Global Warming, What You Need to Know - Presenting the other side.
Bring On Global Warming! - Please! Before we freeze!
The Four Whorsemen Of Global Warming - There are more than four now. Maybe I can add a few by having them ride double.
Hypocrisy of New York Times and Liberals - The champions of personal liberty and freedom of the press look the other way when the Left is doing the violating.

Please click on the labels below to see all my articles on each topic.