There is a real IRS scandal that is being mostly ignored by the main stream media.
It is also being mostly ignored by the conservatives.
And also by the liberals.
Try doing a google search on the words "IRS ADOPTION"
Sixty Nine percent of people that adopt children get audited
This compares with 1% of people that don't adopt.
Some people get audited TWICE for the same claim.
Of course, this makes perfect sense because the fraud rate was as high as zero. Yes zero. In fact, after auditing, additional taxes was due 17% (from honest errors, not fraud) - as compared to an average of 86% of the time for audits for non-adoptions. (Source)
Adoption is a complicated process that often involves huge fees, with a lot of bureaucratic paperwork. If it is an international adoption, sometimes those fees are more like bribes. You are told to bring cash and they don't give receipts. It is in fact legal for the US citizen to claim these expenses as as an Adoption Tax Credit (upto $112,650). Even if they are cash and you don't have paper receipts.
It is made worse because the IRS does not do a good job telling taxpayers what records they need, how to fill out their forms, or put those forms in their e-filing process. (Source)
This is what a real scandal looks like. 69% auditing with zero fraud found and a relatively small amount of additional taxes owed.
The partisan crap? It is not worth of the name scandal. It's low level partisan bull that has been going on since the IRS was founded. The only real difference now is that they got a couple of incriminating emails from low level employees. It is being talked up because the GOP wish it went much higher than it really is. So they keep digging, hoping to find proof of something that doesn't exist.
P.S. Warning, some of the people that discovered this adoption scandal are partisan fools.
They see everything through a lens of 'it must be liberals doing it to hurt conservatives". They can't conceive of people not giving a crap about their personal political wars.
So they come up with ridiculous theories to try and blame this on Obama and the liberals. (Silly ideas such as the belief that liberals think that people that
adopt must be conservatives, because religious people adopt)
That is bull.
This is a real problem but it is not a conservative-liberal thing. It is a bureaucratic government screw up that has nothing to do with partisan politics and everything to do with incompetence.
Showing posts with label Taxes. Show all posts
Showing posts with label Taxes. Show all posts
Wednesday, June 5, 2013
Friday, May 24, 2013
Why Government Should Fund Science.
One of the Republican Party's tropes is to kill government sponsored science. They consider it to be a waste of money. While they admit the obvious fact that scientific research is very profitable for the government (the Internet is just the most recent and obvious example), they think business can do it better. Instead of having the government fund research, they want business and non-profits, such as universities to do it.
They base this trope on several false assumptions.
Lets start with part 1. There are a lot of science that can't make a profit. I could talk about the endless number of orphan diseases (diseases too rare for cures/treatments to be profitable). I could also talk about the big science questions that require HUGE expenditures to answer - such as the age of the universe. These things are worthwhile even without a profit, yet for various reasons are not appropriate for for non-profits to answer. Among other things, sometimes these huge expenditures need steady funding that can't depend upon non-profit. Which brings us to part 2.
The biggest tech boons of the past 50 years derive from government funded initiatives. But there is a corollary to this fact, which is more importantly: There was nothing stopping businesses from doing the research themselves. The most obvious one is the internet, but the space program also counts. Business could have created the internet, but failed to step up to the plate. So businesses have demonstrated an INABILITY to fund key, profitable research.
Government uses different standards to decide upon funding than businesses do. Businesses do in fact make good decisions. They invest in a lot of valid scientific research, and ignore many bogus ones. But so does government - and more importantly government invests in different technology than business does.
Business has a rather short timeline. Small business has to make a profit asap. If they don't, they change their business model right away, and if they can't get a profit within two years, they die. Public corporations usually can't look further than 1 year, and die after six years or so of losses. Private business can look three-four years ahead but will die after ten years without a profit.
A lot of science however takes decades. Most of the twentieth century owes itself to the scientific work of Nikola Tesla. Make no mistake, Tesla made a lot of money - when he was young. But he gave up his patents to save Westinghouse (which failed to work, GE eventually stole them). But even after he lost the money, he proceeded to invent a multiple of advanced scientific devices, all of which took DECADES to become profitable. He made discoveries related to radar, microwave ovens, computers, and even VTOL airplanes. Business did not actually follow his research until decades after he died. They had their chance and failed.
Goddard did his first rocket work in 1926, but it didn't really become profitable until the early1940's when the Germans turned them into a viable weapon of war. That's more than a decade. Not to mention it took over fifty years from Goddard's first rocket to the big business of satellites.
The internet started before 1969, but it didn't become truly profitable until 1990, and internet commerce didn't start for another 4 years.
Lots of big, profitable science takes many, many decades to make a profit. That far exceeds the schedule that business uses. Worse, if you waited on these things, it would mean waiting for the results. Some things you need to pay to do asap. Which brings us to part 3.
Bad timing isn't the only reason why businesses miss profit opportunities. Businesses tend to be moralistic. They have to worry about PR and can't get involved in certain things. Banks will reject financially sensible loans because they don't want to get involved in sex businesses. Not to mention prejudice about gays, women, etc. Business can't research how ducks have sex, even if the biochemistry is incredibly interesting and can lead to real scientific progress with actual financial awards.
Sometimes businesses care more about security than profit. As in, they would rather maintain their existing business then try to create a better business model that undercuts their current one. Worse, they are quite willing to legal (and sometimes illegal) monopolistic tactics to prevent others from doing it. Look at Tesla and their business model. Existing large corporations undermine new companies research, just as they undermine new business models.
Why? Because the risk-reward is is MUCH lower to undermine something than to try something new.
People and organizations with large amounts of money care more about risk than about reward. Not that hard to understand, the more you have to lose, the more you care about losing it.
Governments have several specific immunities to this kind of risk. Usually they don't have to answer to anyone about specific programs - in part because they are often looked at as jobs programs, in part because they amalgamate so many programs that some are doing well even if some are doing it poorly. In the US, the government has so much money that even large science projects take up such a small part of the budget that no one cares if they fail.
For all of these reasons, government should continue to fund science. They don't always do it better than business does, but the different priorities of government allows it to make hugely profitable investments that the business world simply can not or will not make.
Now a couple of extra points.
They base this trope on several false assumptions.
- Any science that doesn't make a profit and can't be funded by by a non-profit is not worth investigating. They typically bring up moralistic examples (research into the sex lives of animals).
- Business are better suited to decided which scientific endeavors can make a profit.
- Businesses care more about profit than about anything else, and therefore will investigate all potentially profitable areas.
Lets start with part 1. There are a lot of science that can't make a profit. I could talk about the endless number of orphan diseases (diseases too rare for cures/treatments to be profitable). I could also talk about the big science questions that require HUGE expenditures to answer - such as the age of the universe. These things are worthwhile even without a profit, yet for various reasons are not appropriate for for non-profits to answer. Among other things, sometimes these huge expenditures need steady funding that can't depend upon non-profit. Which brings us to part 2.
The biggest tech boons of the past 50 years derive from government funded initiatives. But there is a corollary to this fact, which is more importantly: There was nothing stopping businesses from doing the research themselves. The most obvious one is the internet, but the space program also counts. Business could have created the internet, but failed to step up to the plate. So businesses have demonstrated an INABILITY to fund key, profitable research.
Government uses different standards to decide upon funding than businesses do. Businesses do in fact make good decisions. They invest in a lot of valid scientific research, and ignore many bogus ones. But so does government - and more importantly government invests in different technology than business does.
Business has a rather short timeline. Small business has to make a profit asap. If they don't, they change their business model right away, and if they can't get a profit within two years, they die. Public corporations usually can't look further than 1 year, and die after six years or so of losses. Private business can look three-four years ahead but will die after ten years without a profit.
A lot of science however takes decades. Most of the twentieth century owes itself to the scientific work of Nikola Tesla. Make no mistake, Tesla made a lot of money - when he was young. But he gave up his patents to save Westinghouse (which failed to work, GE eventually stole them). But even after he lost the money, he proceeded to invent a multiple of advanced scientific devices, all of which took DECADES to become profitable. He made discoveries related to radar, microwave ovens, computers, and even VTOL airplanes. Business did not actually follow his research until decades after he died. They had their chance and failed.
Goddard did his first rocket work in 1926, but it didn't really become profitable until the early1940's when the Germans turned them into a viable weapon of war. That's more than a decade. Not to mention it took over fifty years from Goddard's first rocket to the big business of satellites.
The internet started before 1969, but it didn't become truly profitable until 1990, and internet commerce didn't start for another 4 years.
Lots of big, profitable science takes many, many decades to make a profit. That far exceeds the schedule that business uses. Worse, if you waited on these things, it would mean waiting for the results. Some things you need to pay to do asap. Which brings us to part 3.
Bad timing isn't the only reason why businesses miss profit opportunities. Businesses tend to be moralistic. They have to worry about PR and can't get involved in certain things. Banks will reject financially sensible loans because they don't want to get involved in sex businesses. Not to mention prejudice about gays, women, etc. Business can't research how ducks have sex, even if the biochemistry is incredibly interesting and can lead to real scientific progress with actual financial awards.
Sometimes businesses care more about security than profit. As in, they would rather maintain their existing business then try to create a better business model that undercuts their current one. Worse, they are quite willing to legal (and sometimes illegal) monopolistic tactics to prevent others from doing it. Look at Tesla and their business model. Existing large corporations undermine new companies research, just as they undermine new business models.
Why? Because the risk-reward is is MUCH lower to undermine something than to try something new.
People and organizations with large amounts of money care more about risk than about reward. Not that hard to understand, the more you have to lose, the more you care about losing it.
Governments have several specific immunities to this kind of risk. Usually they don't have to answer to anyone about specific programs - in part because they are often looked at as jobs programs, in part because they amalgamate so many programs that some are doing well even if some are doing it poorly. In the US, the government has so much money that even large science projects take up such a small part of the budget that no one cares if they fail.
For all of these reasons, government should continue to fund science. They don't always do it better than business does, but the different priorities of government allows it to make hugely profitable investments that the business world simply can not or will not make.
Now a couple of extra points.
- I am talking about funding science, not restricting research. Funding is good, restricting is bad. Laws restricting research is about picking winners and losers. They stop better technology by laws, not through money.
- Funding is not picking winners or losers. You can still win if your opponent is better funded. Just ask Nikola Tesla. General Electric and Edison had much better funding than Westinghouse and Tesla. As a direct result GE strong armed Westinghouse, but they ended up using TESLA's inventions. Nikola Tesla won the science, even if Edison won the money. While it might be unfair to Tesla, the country as a whole came out ahead, despite Edison's attempts to push into using the wrong technology.
Wednesday, March 13, 2013
Soda Ban
Bloomberg committed a horrible offense against liberty. Not because he attacked soda, but because of HOW he did it. Which is why the Judge overturned his ridiculous law.
As I have said before, the appropriate way to deal with activities the government wants to discourage ids to TAX it, not outlaw it. Just like we do with cigarettes. Specifically we can tax large containers of soda versus small ones (just like Bloomberg only planned on banning large containers).
There was no reason whatsoever to ban it. It was, as the judge said, capricious. It did not actually prevent you fro drinking more soda, it just made it less convenient. Or, as my friends say "a dick move'.
It was done without regard to reason, without regard to freedom, and without regard to others.
At heart, his 'inconvenience' technique is a poor attempt at mind control. I am not against attempts at mind control, but I am against POOR attempts at mind control. If the government wants to brainwash me, they have to put forth some effort!
Taxes are a much better method of behavior modification than portion control.
The judge made the right decision to overthrow Bloomberg's capricious law. Maybe now Bloomberg will get off his dictatorial butt and realize he should just tax large Soda containers as opposed to banning them..
As I have said before, the appropriate way to deal with activities the government wants to discourage ids to TAX it, not outlaw it. Just like we do with cigarettes. Specifically we can tax large containers of soda versus small ones (just like Bloomberg only planned on banning large containers).
There was no reason whatsoever to ban it. It was, as the judge said, capricious. It did not actually prevent you fro drinking more soda, it just made it less convenient. Or, as my friends say "a dick move'.
It was done without regard to reason, without regard to freedom, and without regard to others.
At heart, his 'inconvenience' technique is a poor attempt at mind control. I am not against attempts at mind control, but I am against POOR attempts at mind control. If the government wants to brainwash me, they have to put forth some effort!
Taxes are a much better method of behavior modification than portion control.
- The reason the stores like to sell the big portions rather than small is the minimum transaction cost (you pay the same rent and server salary whether they sell 10 ounces or 30 ounces, but you can charge more for 30 ounces). So they just switch to "2 for 1" and sell two 16 ounce cups - maybe even glued together), negating your ban with no gain whatsoever. Taxes however lower sales.
- Even if the taxes fail to lower sales, it gives the government money, which it desperately needs.
- Bans anger people more than taxes. We live with taxes, they make us mutter, not sue.
- Taxes can easily be set to auto adjust for inflation. Ban's don't adjust for anything.
Why didn't Bloomberg tax it away? Mainly because he is wealthy and therefore did not consider a tax as effective. He knows how to get around it, and can easily afford the tax. Also, the GOP is anti-tax, and while Bloomberg is not a Republican, he is affected by partisan politics.
The judge made the right decision to overthrow Bloomberg's capricious law. Maybe now Bloomberg will get off his dictatorial butt and realize he should just tax large Soda containers as opposed to banning them..
Monday, March 11, 2013
The Activated Sequester
As I have said before, the Sequester is basically what the GOP claims it wants. A reduction in spending. That is why they aren't fixing it. They don't want a tax increase, so they simply will not make any kind of deal that takes a non-tax increase solution for a tax-increase version. No matter how much better they get for a tax-increase version
Instead they have used it to cause the government to cut programs the GOP doesn't like. They are accepting cuts in some programs they do like, in exchange.
The Senate should reject their attempts to 'help' out just the government departments the GOP likes (i.e. the military).
If the GOP is really serious about fixing ANY problems with the Sequester, they must be willing to spend as much money and power fixing the things the Democrats want.
Trying to solve just the programs they like is evil.
It's like if two parents decided to cut back on spending for their kids because of budgetary problems, then the father says "but lets put in an exception to let Billy Bob go on a field trip for the Boy Scouts" while still refusing to send Jill-Anne to her baking class.
You can't just fix the programs you like, while screwing over your partner.
When the senate rejects the GOP's recommendations remember that the Sequester is supposed to be a PUNISHMENT for the GOP, not a real budget.
Yes the Sequester is stupid. It was supposed to be stupid.
No you can't make it smarter for your favorite programs, not without making it smarter for your opponents programs.
This is basic prisoner's dilemma logic. You want to get something, but if you betray your opponent, they will betray you too.
No, you can't complain about your opponent's screwing you over while you are still screwing them over.
Instead they have used it to cause the government to cut programs the GOP doesn't like. They are accepting cuts in some programs they do like, in exchange.
The Senate should reject their attempts to 'help' out just the government departments the GOP likes (i.e. the military).
If the GOP is really serious about fixing ANY problems with the Sequester, they must be willing to spend as much money and power fixing the things the Democrats want.
Trying to solve just the programs they like is evil.
It's like if two parents decided to cut back on spending for their kids because of budgetary problems, then the father says "but lets put in an exception to let Billy Bob go on a field trip for the Boy Scouts" while still refusing to send Jill-Anne to her baking class.
You can't just fix the programs you like, while screwing over your partner.
When the senate rejects the GOP's recommendations remember that the Sequester is supposed to be a PUNISHMENT for the GOP, not a real budget.
Yes the Sequester is stupid. It was supposed to be stupid.
No you can't make it smarter for your favorite programs, not without making it smarter for your opponents programs.
This is basic prisoner's dilemma logic. You want to get something, but if you betray your opponent, they will betray you too.
No, you can't complain about your opponent's screwing you over while you are still screwing them over.
Wednesday, January 30, 2013
Taxes, Taxes, Taxes.
Recently Phil Mickelson (professional athlete) complained about his taxes. He pays over 60% taxes, and is wealthy.
The reason is simple - he actually works for a living, as opposed to most wealthy Americans.
You see there are three different ways to be rich in America.
Edward J McCaffery wrote an interesting article on CNN about it. While worth reading because of his concise explanation of the problem, his solution sucks. He wants a sales tax. His strategy fails to recognize the existence of method #2 above, or how sales tax typically work in the USA.
Basically, sales tax are always regressive. By that I mean, if you are poor and live in a state with a 10% sales tax, you pay 10% of your income in tax. If you are wealthy however, you often pay far less than 10% of your income on tax. The poor spend all their earning, while the wealthy always invest it. The wealthier you are, the lower the percent of your earnings you spend. In fact, the truly poor spend MORE (credit cards and other debt) than 100% of their earnings and the truly wealthy spend less than 1% of their income every year.
Sales tax are by definition regressive and ALWAYS taxes the poor too much and the wealthy not enough. Because the wealthy always have the option of not spending, while the poor never have that option.
So lets look at something reasonable as opposed to yet another 'tax the poor' proposal.
First let me delve deeper into the three methods of making money.
1) Earn it means you get a salary. You income each year is taxes at the progressive income tax rates. The more you earn, the higher the tax you pay.
It is in fact how most of our federal funding is done - mostly on the middle class/ lower upper class. In states with high sate income tax , it is perhaps a bit unfair, but in other states with low income taxes, it is pretty much the ONLY way we tax the wealthy. If you are wealthy and can move to a lower tax state, it makes sense to do so.
This taxation system is reasonable - the wealthy get far more for their money than anyone else does. Economies of scale ensure that happen. They benefit far more from the government's actions than we do.
I see no real reason to increase their taxes.
Again, I do not really see the need for significantly higher income tax. Is the extra 3% going to kill them? No. Nor will it help a huge amount.
2) Dividend it. Also Capital Gain it. Here you don't earn your profit, you put your money to work and it earns for you. You pay no tax on this money if you are poor (making less than $36,250 single), and only 15% if you are middle class (single making $26,250 to $250k), if you are lower upper class (earning between $250k and $400k) you pay 15%+3.8% (medicare) =18.8%. If you are truly wealthy (over 400K for single), you pay 20+3.8=23.8%
Note 23.8% is still very low compared to the 39.6% those suckers who try to EARN their money have to pay. As in half the rate.
This is a joke. It was put in by the GOP who try to pretend that all Americans earn their money, and they wanted to encourage 'investing". Fine, encourage investing by offering a 5% tax discount, not 17.8% discount.
They need to be taxed just like regular income - with perhaps a freebee $10k a year, and special treatment for real estate gains for houses you live in for at least the past year.
3) Trust plan it. As McCaffery wrote, the truly rich don't even bother to pay capital gains taxes. They make investments, take out loans on their wealth, and pay no taxes - not even capital gains or dividend taxes. When they die, their heirs get new cost basis. No taxes EVER on their yearly earnings. Instead they pay interest on their living expenses till they die. Occasionally, they take small gains, offset by losses to pay off loans. But they leave the big gains alone. If they do it right, their heirs don't even have to pay much inheritance tax because of the trust plan they set up.
The only reason for these trust plans and loans are to avoid paying taxes. These people need to be taxed and taxed up the wazoo. They are not contributing to the system, they are instead manipulating it and abusing it. They are not 'investing in America', they are raping America. And we stand back and let them. No, we point the way, with tons of tax attorneys and lobbyists.
I am all in favor of letting people inherit their wealth. I am not in favor of letting the truly wealthy avoid paying taxes by pretending to leave it to their children.
----------------------
Early I have suggested replacing income tax with a wealth tax. Well, if you don't want to do that, here is a simpler, easier solution.
Ten Year Unrealized Capital Gains Tax at 40%.
Right now we encourage people to invest by giving them a low capital gains rate for investments more than one year. Fine. But if you have held an asset for more than 10 years, we don't need to encourage you to invest, we need to encourage you to SPEND. So put a ten year extra high capital gain.
Simple rule - if you have owned any security for more than ten years and it is worth more than when you bought it, you must pay taxes as if you had sold it for a gain and bought it again 1 month later (tax rules currently consider a sale + re-buy to be a false sale if done within 30 days.)
Your cost basis gets adjusted up, you owe the taxes, and we destroy the entire loophole.
Also, arrange for the Inheritance tax to be substantially reduced - ten years after this law goes into effect. Let's be fair.
P.S. Yes people, we can put in exceptions, as always, for the home that you live in, and slightly different rules for a business property you earn money on. You could for example allow business property to pay 4% tax on the gain every year, offset by business losses as opposed to 40% at the end of ten years.
It will still be far simpler than the convoluted estate and trust garbage we let people get away with every year.
The reason is simple - he actually works for a living, as opposed to most wealthy Americans.
You see there are three different ways to be rich in America.
- Earn It. Here you pay your fair share of taxes - perhaps even a little bit more.
- Dividend it. Her you pay far less than your share of taxes.
- Trust Plan It. Here you pay no taxes - even if you are the guy setting up the trust, as opposed to the kid inheriting it.
Edward J McCaffery wrote an interesting article on CNN about it. While worth reading because of his concise explanation of the problem, his solution sucks. He wants a sales tax. His strategy fails to recognize the existence of method #2 above, or how sales tax typically work in the USA.
Basically, sales tax are always regressive. By that I mean, if you are poor and live in a state with a 10% sales tax, you pay 10% of your income in tax. If you are wealthy however, you often pay far less than 10% of your income on tax. The poor spend all their earning, while the wealthy always invest it. The wealthier you are, the lower the percent of your earnings you spend. In fact, the truly poor spend MORE (credit cards and other debt) than 100% of their earnings and the truly wealthy spend less than 1% of their income every year.
Sales tax are by definition regressive and ALWAYS taxes the poor too much and the wealthy not enough. Because the wealthy always have the option of not spending, while the poor never have that option.
So lets look at something reasonable as opposed to yet another 'tax the poor' proposal.
First let me delve deeper into the three methods of making money.
1) Earn it means you get a salary. You income each year is taxes at the progressive income tax rates. The more you earn, the higher the tax you pay.
It is in fact how most of our federal funding is done - mostly on the middle class/ lower upper class. In states with high sate income tax , it is perhaps a bit unfair, but in other states with low income taxes, it is pretty much the ONLY way we tax the wealthy. If you are wealthy and can move to a lower tax state, it makes sense to do so.
This taxation system is reasonable - the wealthy get far more for their money than anyone else does. Economies of scale ensure that happen. They benefit far more from the government's actions than we do.
I see no real reason to increase their taxes.
Again, I do not really see the need for significantly higher income tax. Is the extra 3% going to kill them? No. Nor will it help a huge amount.
2) Dividend it. Also Capital Gain it. Here you don't earn your profit, you put your money to work and it earns for you. You pay no tax on this money if you are poor (making less than $36,250 single), and only 15% if you are middle class (single making $26,250 to $250k), if you are lower upper class (earning between $250k and $400k) you pay 15%+3.8% (medicare) =18.8%. If you are truly wealthy (over 400K for single), you pay 20+3.8=23.8%
Note 23.8% is still very low compared to the 39.6% those suckers who try to EARN their money have to pay. As in half the rate.
This is a joke. It was put in by the GOP who try to pretend that all Americans earn their money, and they wanted to encourage 'investing". Fine, encourage investing by offering a 5% tax discount, not 17.8% discount.
They need to be taxed just like regular income - with perhaps a freebee $10k a year, and special treatment for real estate gains for houses you live in for at least the past year.
3) Trust plan it. As McCaffery wrote, the truly rich don't even bother to pay capital gains taxes. They make investments, take out loans on their wealth, and pay no taxes - not even capital gains or dividend taxes. When they die, their heirs get new cost basis. No taxes EVER on their yearly earnings. Instead they pay interest on their living expenses till they die. Occasionally, they take small gains, offset by losses to pay off loans. But they leave the big gains alone. If they do it right, their heirs don't even have to pay much inheritance tax because of the trust plan they set up.
The only reason for these trust plans and loans are to avoid paying taxes. These people need to be taxed and taxed up the wazoo. They are not contributing to the system, they are instead manipulating it and abusing it. They are not 'investing in America', they are raping America. And we stand back and let them. No, we point the way, with tons of tax attorneys and lobbyists.
I am all in favor of letting people inherit their wealth. I am not in favor of letting the truly wealthy avoid paying taxes by pretending to leave it to their children.
----------------------
Early I have suggested replacing income tax with a wealth tax. Well, if you don't want to do that, here is a simpler, easier solution.
Ten Year Unrealized Capital Gains Tax at 40%.
Right now we encourage people to invest by giving them a low capital gains rate for investments more than one year. Fine. But if you have held an asset for more than 10 years, we don't need to encourage you to invest, we need to encourage you to SPEND. So put a ten year extra high capital gain.
Simple rule - if you have owned any security for more than ten years and it is worth more than when you bought it, you must pay taxes as if you had sold it for a gain and bought it again 1 month later (tax rules currently consider a sale + re-buy to be a false sale if done within 30 days.)
Your cost basis gets adjusted up, you owe the taxes, and we destroy the entire loophole.
Also, arrange for the Inheritance tax to be substantially reduced - ten years after this law goes into effect. Let's be fair.
P.S. Yes people, we can put in exceptions, as always, for the home that you live in, and slightly different rules for a business property you earn money on. You could for example allow business property to pay 4% tax on the gain every year, offset by business losses as opposed to 40% at the end of ten years.
It will still be far simpler than the convoluted estate and trust garbage we let people get away with every year.
Wednesday, January 23, 2013
National Debt.
The National Debt is a very complex topic. This is not surprising, the larger a monetary value, the easier it is to take small portions of it and do strange things. If you have $1, in America, basically, the most you can do is keep it in 100 different places (in pennies), and that would be silly. But if you have $1 trillion dollars, there are a lot of little secrets and tricks you can use.
Currently the US has an "official" national debt of just under 16.5 trillion dollars. (source). Not the word "official". I will get back to it later.
The first question is: "Is that a lot?"
It seems like a lot. But it might not be. If the US tax revenue was 500 trillion, then debt of 16.5 is not that much.
So lets figure out is it a lot by comparing it to other things
So each year we add another 6% to the debt. That is not horrible. Obama has done a pretty good job of reducing the huge deficits that he inherited from Bush (the last budget GW Bush created was for 2009 - which he passed during 20008 - was 1.4 trillion.)
The debt is about 6 times what we earn. That's not good. If you earn 100k a year, then you should not get a 600k home(Mortgage Calculator), not unless you have more than 200k in down-payment.
But on the other hand, interest rates are incredibly low. It costs the US less than 2% for 10 year, and just over 3% for 30 year. At those rates it is almost stupid not to borrow,
But lets get back to the beginning. Remember when I talked about "official"? Guess why. Because a dirty little secret is that about 1/3 of that debt is debt the government itself owns. (source) Yes, we sell ourselves treasuries.
Specifically. the Fed itself owns $1.66 trillion. It holds the bonds to trade. We use it to control the interest rates. Right now they are below 2% for 10 years and around 3% for thirty years. The Fed is allowed to sell when it wants, or buy more.
That isn't real debt in any way, shape or form. It's basically part of a cash advance from our credit cart that we keep in our wallet because the bank gave us a better rate if we took out more than we actually need. Drop that 16.5 trillion down to 14.84
But wait, I'm not done. Lots of federal agencies have extra cash and guess what they hold it in before they use it? Yup, US Treasuries. Effectively, these are loans from our retirement plan currently being kept in our bank accounts till we actually pay the contractors that are working on our home. Yeah, eventually we will pay them out, but the contractor is taking decades to finish the work he said would be done in two weeks.
Social Security is the big one at 2.72 trillion, but if you add up all the "Intragovernmental debt", it comes to another 4.9 trillion on top of the 1.66 held by the Fed. That debt is kind of like Dad borrowing fro his own 401K to put in his own bank account labelled 'vacation'. It's not real debt, it's just a way to track which agencies are owed money by the federal government. The whole "Lock Box" idea for social security.
Subtract out the 4.9 trillion from the 14.84 and you get the real debt of just under 10 trillion dollars.
The real debt each person owes is about 33 thousand dollars, not 50k. That's a big difference.
The real debt is about 3.4 times what we earn, not 6 times. A person can borrow 3.4 times their salary to buy a home. It's totally reasonable.
Is it a great situation? No. But given the incredibly low interest rates, it's OK. In my opinion the federal government should be converting short term debt to 30 year treasuries as fast as it can, then let inflation go a bit. If we did it just right, then in 5 years, our national debt would be gone.
Currently the US has an "official" national debt of just under 16.5 trillion dollars. (source). Not the word "official". I will get back to it later.
The first question is: "Is that a lot?"
It seems like a lot. But it might not be. If the US tax revenue was 500 trillion, then debt of 16.5 is not that much.
So lets figure out is it a lot by comparing it to other things
- If you break it down per person, 16.5 trillion is more than $50,000 per citizen.
- The Federal government earns about 2.9 trillion a year (source)
- The Federal government spends about 3.8 trillion a year (source)
- The current (2013 estimate) US deficit is about 1 trillion a year (source)
- It's a little bit over our National GDP, which puts us (just barely) in the top ten debtor nations (source)
So each year we add another 6% to the debt. That is not horrible. Obama has done a pretty good job of reducing the huge deficits that he inherited from Bush (the last budget GW Bush created was for 2009 - which he passed during 20008 - was 1.4 trillion.)
The debt is about 6 times what we earn. That's not good. If you earn 100k a year, then you should not get a 600k home(Mortgage Calculator), not unless you have more than 200k in down-payment.
But on the other hand, interest rates are incredibly low. It costs the US less than 2% for 10 year, and just over 3% for 30 year. At those rates it is almost stupid not to borrow,
But lets get back to the beginning. Remember when I talked about "official"? Guess why. Because a dirty little secret is that about 1/3 of that debt is debt the government itself owns. (source) Yes, we sell ourselves treasuries.
Specifically. the Fed itself owns $1.66 trillion. It holds the bonds to trade. We use it to control the interest rates. Right now they are below 2% for 10 years and around 3% for thirty years. The Fed is allowed to sell when it wants, or buy more.
That isn't real debt in any way, shape or form. It's basically part of a cash advance from our credit cart that we keep in our wallet because the bank gave us a better rate if we took out more than we actually need. Drop that 16.5 trillion down to 14.84
But wait, I'm not done. Lots of federal agencies have extra cash and guess what they hold it in before they use it? Yup, US Treasuries. Effectively, these are loans from our retirement plan currently being kept in our bank accounts till we actually pay the contractors that are working on our home. Yeah, eventually we will pay them out, but the contractor is taking decades to finish the work he said would be done in two weeks.
Social Security is the big one at 2.72 trillion, but if you add up all the "Intragovernmental debt", it comes to another 4.9 trillion on top of the 1.66 held by the Fed. That debt is kind of like Dad borrowing fro his own 401K to put in his own bank account labelled 'vacation'. It's not real debt, it's just a way to track which agencies are owed money by the federal government. The whole "Lock Box" idea for social security.
Subtract out the 4.9 trillion from the 14.84 and you get the real debt of just under 10 trillion dollars.
The real debt each person owes is about 33 thousand dollars, not 50k. That's a big difference.
The real debt is about 3.4 times what we earn, not 6 times. A person can borrow 3.4 times their salary to buy a home. It's totally reasonable.
Is it a great situation? No. But given the incredibly low interest rates, it's OK. In my opinion the federal government should be converting short term debt to 30 year treasuries as fast as it can, then let inflation go a bit. If we did it just right, then in 5 years, our national debt would be gone.
Wednesday, January 16, 2013
One Trillion Dollar Coin.
First, let me talk about the obvious things. A one trillion dollar platinum coin is not composed of one trillion dollars worth of platinum.
Similarly, a one hundred dollar bill is not made out of one hundred dollars worth of paper. Or make that cotton, as US 'paper' currency is actually made out of cotton (plus some plastics and other synthetics). It's called a one trillion dollar simply because that's what we engrave on it and claim it's worth.
Why a platinum coin - as opposed to say a gold one, or even a cotton/paper bill? Because congress has put in rules and regulations affecting how much paper currency we can print and also how much gold, silver, and other coins we can mint. But they put in a loophole to let Federal government mint any amount of platinum coins they want.
They did this to support coin collectors - both the sane ones doing it as a hobby with minor investment potential and the insane 'PUT YOUR MONEY IN GOLD AND PRECIOUS METAL! THE WORLD IS ENDING!!! NOW!" Glen Beck people.
Done with the basics, now let's talk about the results of doing this.
Inflation.
Lots of it.
That's why congress put limitations on printing currency in the first place.
Is it an option? Yes. It is even a legal one. Would I personally recommend it? YES. Will the president do it? He said no.
America has had a huge period of low inflation. For the past 70 or so years we avoided deflation entirely, but for the past 30 years we have had almost no inflation. This is in fact one of the reasons why we had the housing problem. If we had had some nice standard 10% inflation in 2005, 2006, and 2007, then houses would have gone up in value. They could have sold most houses for more than their worth and the housing crisis would not have happened.
More importantly, inflation has been relatively low (see chart below) since the 1980's. Our economy could definitely deal with a short period of inflation. It might even be good for it. Yes, some people are hurt by inflation (all those on a fixed income or who have most of their money tied up with long term fixed low rate securities). But at the same time, many would benefit - for example those who have long term fixed rate debt (i.e. 30 year fixed rate mortgages). Full disclosure - I have a 30 year fixed rate mortgage.
Is it going to happen?
NO.
Obama announced he won't. A foolish move on his part - he should have used it as a threat to get the GOP will cave.
Why? Because the GOP loves the wealthy and the wealthy have a lot of their money tied up in the long term fixed rate securities. They also don't want to piss off the elderly, as they have already screwed up with failed attempts to 'fix' social security.
So Obama should have threatened the GOP and they would have caved. Because it is exactly the kind of threat the GOP would like to use against the DNC. Which also makes it is exactly the kind of threat they would bow down to.
Similarly, a one hundred dollar bill is not made out of one hundred dollars worth of paper. Or make that cotton, as US 'paper' currency is actually made out of cotton (plus some plastics and other synthetics). It's called a one trillion dollar simply because that's what we engrave on it and claim it's worth.
Why a platinum coin - as opposed to say a gold one, or even a cotton/paper bill? Because congress has put in rules and regulations affecting how much paper currency we can print and also how much gold, silver, and other coins we can mint. But they put in a loophole to let Federal government mint any amount of platinum coins they want.
They did this to support coin collectors - both the sane ones doing it as a hobby with minor investment potential and the insane 'PUT YOUR MONEY IN GOLD AND PRECIOUS METAL! THE WORLD IS ENDING!!! NOW!" Glen Beck people.
Done with the basics, now let's talk about the results of doing this.
Inflation.
Lots of it.
That's why congress put limitations on printing currency in the first place.
Is it an option? Yes. It is even a legal one. Would I personally recommend it? YES. Will the president do it? He said no.
America has had a huge period of low inflation. For the past 70 or so years we avoided deflation entirely, but for the past 30 years we have had almost no inflation. This is in fact one of the reasons why we had the housing problem. If we had had some nice standard 10% inflation in 2005, 2006, and 2007, then houses would have gone up in value. They could have sold most houses for more than their worth and the housing crisis would not have happened.
More importantly, inflation has been relatively low (see chart below) since the 1980's. Our economy could definitely deal with a short period of inflation. It might even be good for it. Yes, some people are hurt by inflation (all those on a fixed income or who have most of their money tied up with long term fixed low rate securities). But at the same time, many would benefit - for example those who have long term fixed rate debt (i.e. 30 year fixed rate mortgages). Full disclosure - I have a 30 year fixed rate mortgage.
Is it going to happen?
NO.
Obama announced he won't. A foolish move on his part - he should have used it as a threat to get the GOP will cave.
Why? Because the GOP loves the wealthy and the wealthy have a lot of their money tied up in the long term fixed rate securities. They also don't want to piss off the elderly, as they have already screwed up with failed attempts to 'fix' social security.
So Obama should have threatened the GOP and they would have caved. Because it is exactly the kind of threat the GOP would like to use against the DNC. Which also makes it is exactly the kind of threat they would bow down to.
Wednesday, January 2, 2013
The Two GOP's
It is increasingly clear that the GOP has unofficially split into two parties. The Tea Party and the Skilled GOP.
The Tea Party knows what it wants. They have no idea how to get it. They have no idea that democracy is all about compromise. They also have no idea that a lot of what they want is actually impossible. They have been fed lies by FOX and the Skilled GOP and believe them.
The Skilled GOP is very different. They no exactly how things work and how to get things done. They value compromise. They remember all the lies they told (and convinced Fox to tell). The problem is, most of the world right blames them for everything. They failed on so many levels no one trusts them. Not the traditional GOP base, not the T Party, and definitely not the Democrats.
So what can they do? What is their path forward?
They need a leader. A real one.
Like Reagan. Or Clinton. Or Obama. All three of those men grabbed hold of the reigns and marched them in on direction. Among other things leaders make decisions about which goals to emphasize and which to put off for another day. Which is the exact thing the GOP needs - they keep trying to go in two different directions.
So lets talk a bit about which direction they can go.
Money:
Deficit Reduction or Tax Reduction. There are two entirely different themes, no one seriously thinks you can do both. Pick one and make it your priority. You can NOT push for both. It's like trying to build a device that flies in the air and also swims down to the depths of the ocean.
Abortion:
Here there are two paths - 'regulate it to a minimum in as many states as possible' and 'quietly accept the current status quo.' Let's be honest hear. The majority of the country considers it to be legal and just. The Supreme Court is on our side, and won't change for the next 4 years - and honestly probably not ever. The far right never likes to admit it, but most of the country dis-agrees with them on this issue. The only way they win is on local votes and even then only because most of the people are not energized. When you talk about abortion, the democrats win national votes. Every single time the right opens their mouth about abortion, they convince one more independent to turn liberal.
Immigration:
They realize they are a party loved by racists. As such, they actively try to prevent immigration in general, and Hispanic immigration in particular. The problem is that while most of the GOP is anti-immigration, the far majority of the country is pro immigration. Worse, the GOP has consistently used anti-immigration as an excuse for outright illegal, racist discrimination. From ignoring rape accusations by hispanic women, to calling children whose parents broke the law criminals, to cutting funding for Hispanic books. They lost votes from this and they know they lost votes. They have given up on the black vote, the Asian vote, the Jewish vote. They can't give up on the Hispanic vote. They need to not just stop blocking immigration reform, they need to cave entirely and end the discussion.
Homosexuality:
This is one area where they can keep their prejudice. Yes, they are losing ground on this issue, and will continue to do so. But honestly, their hatred has made such an enemy that even if they turned around today, it would not matter. The Republicans won't win the majority of Gays votes for the next ten or twenty years even if the GOP ended their discrimination today. More importantly, gays, unlike Hispanic and Black, do not make up the majority of any congressional district that is not already super-liberal. The very dispersed, everywhere nature of homosexuality dilutes it's political power.
Military:
Here again they need to pick one direction. They can either go for the strong nationalistic super-power of the post World War II times, or the isolationism of the pre war politics. But trying for both makes gets you nowhere. Honestly, if they were to move towards isolationism, with a 10% reduction in the military, (either using the savings to cut taxes or cut the deficit - their choice), they could win back quite a lot of independents. Or they could stop talking about money and insist on greater military spending to 'help the economy' and make the world s safer place.
Pollution:
The 'denial' strategy was always a short term tactic. It can't win, as times goes by it becomes clearer and clearer that the world is warming, in large part due to man's behavior. Every day it becomes more and more obvious that pollution is affecting the weather. They need a new lie, or as they prefer to call it, a new narrative
The Tea Party knows what it wants. They have no idea how to get it. They have no idea that democracy is all about compromise. They also have no idea that a lot of what they want is actually impossible. They have been fed lies by FOX and the Skilled GOP and believe them.
The Skilled GOP is very different. They no exactly how things work and how to get things done. They value compromise. They remember all the lies they told (and convinced Fox to tell). The problem is, most of the world right blames them for everything. They failed on so many levels no one trusts them. Not the traditional GOP base, not the T Party, and definitely not the Democrats.
So what can they do? What is their path forward?
They need a leader. A real one.
Like Reagan. Or Clinton. Or Obama. All three of those men grabbed hold of the reigns and marched them in on direction. Among other things leaders make decisions about which goals to emphasize and which to put off for another day. Which is the exact thing the GOP needs - they keep trying to go in two different directions.
So lets talk a bit about which direction they can go.
Money:
Deficit Reduction or Tax Reduction. There are two entirely different themes, no one seriously thinks you can do both. Pick one and make it your priority. You can NOT push for both. It's like trying to build a device that flies in the air and also swims down to the depths of the ocean.
Abortion:
Here there are two paths - 'regulate it to a minimum in as many states as possible' and 'quietly accept the current status quo.' Let's be honest hear. The majority of the country considers it to be legal and just. The Supreme Court is on our side, and won't change for the next 4 years - and honestly probably not ever. The far right never likes to admit it, but most of the country dis-agrees with them on this issue. The only way they win is on local votes and even then only because most of the people are not energized. When you talk about abortion, the democrats win national votes. Every single time the right opens their mouth about abortion, they convince one more independent to turn liberal.
Immigration:
They realize they are a party loved by racists. As such, they actively try to prevent immigration in general, and Hispanic immigration in particular. The problem is that while most of the GOP is anti-immigration, the far majority of the country is pro immigration. Worse, the GOP has consistently used anti-immigration as an excuse for outright illegal, racist discrimination. From ignoring rape accusations by hispanic women, to calling children whose parents broke the law criminals, to cutting funding for Hispanic books. They lost votes from this and they know they lost votes. They have given up on the black vote, the Asian vote, the Jewish vote. They can't give up on the Hispanic vote. They need to not just stop blocking immigration reform, they need to cave entirely and end the discussion.
Homosexuality:
This is one area where they can keep their prejudice. Yes, they are losing ground on this issue, and will continue to do so. But honestly, their hatred has made such an enemy that even if they turned around today, it would not matter. The Republicans won't win the majority of Gays votes for the next ten or twenty years even if the GOP ended their discrimination today. More importantly, gays, unlike Hispanic and Black, do not make up the majority of any congressional district that is not already super-liberal. The very dispersed, everywhere nature of homosexuality dilutes it's political power.
Military:
Here again they need to pick one direction. They can either go for the strong nationalistic super-power of the post World War II times, or the isolationism of the pre war politics. But trying for both makes gets you nowhere. Honestly, if they were to move towards isolationism, with a 10% reduction in the military, (either using the savings to cut taxes or cut the deficit - their choice), they could win back quite a lot of independents. Or they could stop talking about money and insist on greater military spending to 'help the economy' and make the world s safer place.
Pollution:
The 'denial' strategy was always a short term tactic. It can't win, as times goes by it becomes clearer and clearer that the world is warming, in large part due to man's behavior. Every day it becomes more and more obvious that pollution is affecting the weather. They need a new lie, or as they prefer to call it, a new narrative
Friday, December 28, 2012
Why they aren't fixing the "Fiscal Cliff"
Because they don't want to.
Specifically:
There is a basic negotiating tactic called High Ball. You start with something ridiculous that you know they won't get. Everyone does this. It's normal. But there is a higher stakes version.
It is something called Padding. You start not at something you really want but instead something that you have zero interest in, that you call essential - something called 'padding'. You try to convince your opponent that giving up your padding is a huge concession. Then you don't have to give up much more.
It's the difference between saying "I will only vote to raise the debt ceiling if you cut entitlements on a one for one basis with tax hikes on the rich." and saying "I don't want to raise the debt ceiling at all, just to get me to do that, you have to say no new taxes. Then we can negotiate where to cut spending."
A variant of this is called 'false concession'. That's what they did this time. They put forth a bunch of crap and said "What do I get for this?"
Obama did not fall for that trap. He responded with "Nothing. You get nothing for that. It's the base value."
I know, you guys are going to say "But they were offering something." No, they weren't. they offered nothing, and for nothing, you get nothing.
You see, the base start of the negotiation is not your ideal platform, because anyone can pad the ideal platform.
The base start of every budget negotiation is the last agreement you have. The current agreement is as follows:
1) All of Bush's tax cuts go away.
2) Debt ceiling goes up, preventing us from paying back the loans we already have.
3) Sequestration of the budget
4) AMT tax rates start applying at the low, un-indexed for inflation rate.
Oh, and one more thing - Obama was re-elected and the GOP lost Congressmen which puts the DNC. The GOP had the chance to negotiate before hand.
The GOP CHOOSE to not try for a negotiation before the election. They stupidly thought they would win the election and have a better shot.
They lost that bet. That means they start out at a disadvantage. That's how that works. Obama doesn't have to get re-elected. he doesn't have to worry about pissing off the voters. He doesn't have to worry about anything.
It's the GOP that has to worry - and they damn well better.
What's going to happen with the budget negotiations? I think we will go off the fiscal cliff and then they will have a new agreement:
1) Debt Ceiling will go up.
2) AMT indexing will be at least temporarily extended (if not permanently - or perhaps the AMT will go away with some other simpler method put in).
3) Sequestration will not happen (or it it does, it will be quickly ended)
4) Taxes will go up for people making over somewhere between 250 and 500 k. They won't go up for people making less. Pay roll tax will probably be modified as well.
Specifically:
- The Democrats think that if the tax cuts expire, then when Obama re-instates new ones, then everyone will believe that the Bush Tax Cuts were a failure and the new, Obama Tax Cuts, are good. This of course ignores the budget deficit and sequestration issues. Not to mention worrying everyone that just wants things to go back to 'normal'.
- The Republicans would rather vote to create new tax cuts (even if they are "Obama Tax Cuts"), than vote to 'raise taxes'. Note, they are not afraid of losing to Democrats, they are afraid of losing primary elections to "T partiers". In effect, they think their own people are so stupid, they can't tell that voting to extend tax cuts only for a small group is exactly the same as letting them expire and voting for new tax cuts for only that small group.
There is a basic negotiating tactic called High Ball. You start with something ridiculous that you know they won't get. Everyone does this. It's normal. But there is a higher stakes version.
It is something called Padding. You start not at something you really want but instead something that you have zero interest in, that you call essential - something called 'padding'. You try to convince your opponent that giving up your padding is a huge concession. Then you don't have to give up much more.
It's the difference between saying "I will only vote to raise the debt ceiling if you cut entitlements on a one for one basis with tax hikes on the rich." and saying "I don't want to raise the debt ceiling at all, just to get me to do that, you have to say no new taxes. Then we can negotiate where to cut spending."
A variant of this is called 'false concession'. That's what they did this time. They put forth a bunch of crap and said "What do I get for this?"
Obama did not fall for that trap. He responded with "Nothing. You get nothing for that. It's the base value."
I know, you guys are going to say "But they were offering something." No, they weren't. they offered nothing, and for nothing, you get nothing.
You see, the base start of the negotiation is not your ideal platform, because anyone can pad the ideal platform.
The base start of every budget negotiation is the last agreement you have. The current agreement is as follows:
1) All of Bush's tax cuts go away.
2) Debt ceiling goes up, preventing us from paying back the loans we already have.
3) Sequestration of the budget
4) AMT tax rates start applying at the low, un-indexed for inflation rate.
Oh, and one more thing - Obama was re-elected and the GOP lost Congressmen which puts the DNC. The GOP had the chance to negotiate before hand.
The GOP CHOOSE to not try for a negotiation before the election. They stupidly thought they would win the election and have a better shot.
They lost that bet. That means they start out at a disadvantage. That's how that works. Obama doesn't have to get re-elected. he doesn't have to worry about pissing off the voters. He doesn't have to worry about anything.
It's the GOP that has to worry - and they damn well better.
What's going to happen with the budget negotiations? I think we will go off the fiscal cliff and then they will have a new agreement:
1) Debt Ceiling will go up.
2) AMT indexing will be at least temporarily extended (if not permanently - or perhaps the AMT will go away with some other simpler method put in).
3) Sequestration will not happen (or it it does, it will be quickly ended)
4) Taxes will go up for people making over somewhere between 250 and 500 k. They won't go up for people making less. Pay roll tax will probably be modified as well.
Friday, December 21, 2012
How to fix the Fiscal Cliff without raising taxes
First, we should raise taxes to the Clinton era. Under Clinton, the economy not only grew, but we actually had a balanced budget - in large part due to the tax rate he used.
But given hat the Republicans staked their reputation on not doing this. Their incredibly stupid pledge of "Don't raise taxes"- mainly at the insistence of an un-elected lobbyist Grover Norquist- may force us to do this.
But lets talk about how to do this.
These three rules basically eliminate massive unfair advantages that the wealthy have. It won't affect the poor at all. The middle class would have to have rather unusual tax situation to be significantly affected. But the wealthy would lose massive tax advantages they have. As a side note it makes Social Security solvent again and is a step towards fixing Medicare and Medicaid.
Then lets talk about cutting spending. The military are ripe for tax cuts. Use the original sequestration formula - For every $1 that the House Majority (GOP) take from the military, the Senate Majority (DNC) will take away $1 from non-military spending.
Note, by Tax Deductions, I am not referring to business expenses. Those should paid directly (or re-reimbursed) by your business, subtracting from their bottom line, so they don't pay taxes on it in the first place. Instead I am referring to charity giving, 401K contributions, retirement account expenses, mortgage taxes, etc.
Some will the claim this will reduce charity giving, because you can only get deductions for the first $85,561. Trust me, if you give more than $85,561 to charity, you are not doing it for the tax deduction. Similar arguments apply for Tax Credits.
These short, simple rules will raise substantially raise the tax on the wealthy
But given hat the Republicans staked their reputation on not doing this. Their incredibly stupid pledge of "Don't raise taxes"- mainly at the insistence of an un-elected lobbyist Grover Norquist- may force us to do this.
But lets talk about how to do this.
- Cap Tax Credits to no more than the minimum tax rate for 25% Currently that would be $35,351. Why the weird wording? To make it automatically rise when the tax brackets do. Note Tax Credits are far more valuable than tax deductions - they directly reduce your tax bill on a $1 for $1 basis.
- Cap Tax Deductions to no more than the minimum tax rate for 28%. Currently that would be $85,561.
- While we are capping credits and deductions, eliminate the caps for all federal taxes. Currently you only pay payroll taxes on the first $110,000. So wealthy people basically pay far less a percentage of their wages than the average person for Social Security, Medicare and Medicaid. Similarly unemployment taxes are currently capped at $1,000 per employee. No longer will we let the wealthy pay less than their fair share of taxes - they have to pay tax on every dollar they make, not just the first $100,000 or so.
- Rule that any capital gains or dividends over $100,000 count as regular income, with an exception for the sale of any home you have lived in for more than 5 years continuously.
These three rules basically eliminate massive unfair advantages that the wealthy have. It won't affect the poor at all. The middle class would have to have rather unusual tax situation to be significantly affected. But the wealthy would lose massive tax advantages they have. As a side note it makes Social Security solvent again and is a step towards fixing Medicare and Medicaid.
Then lets talk about cutting spending. The military are ripe for tax cuts. Use the original sequestration formula - For every $1 that the House Majority (GOP) take from the military, the Senate Majority (DNC) will take away $1 from non-military spending.
Note, by Tax Deductions, I am not referring to business expenses. Those should paid directly (or re-reimbursed) by your business, subtracting from their bottom line, so they don't pay taxes on it in the first place. Instead I am referring to charity giving, 401K contributions, retirement account expenses, mortgage taxes, etc.
Some will the claim this will reduce charity giving, because you can only get deductions for the first $85,561. Trust me, if you give more than $85,561 to charity, you are not doing it for the tax deduction. Similar arguments apply for Tax Credits.
These short, simple rules will raise substantially raise the tax on the wealthy
Wednesday, December 5, 2012
On raising other taxes (besides income)
Here is one article (of many, from many different sources) that talks about raising the gas tax.
Basically, it says we should follow through on the non-partisan Simpson-Bowles recommendation of raising the Gas Tax. by about 15 cents. Why that much? Well, the gas tax was created to fund the cost to build and repair roads, bridges, etc. But it only raises about $32 Billion a year, while we spend about $50 billion a year. The rest of the money gets funded by your income taxes (which basically means Chinese debt). If we raise the gas tax by 15 cents, then the tax on gas would do what it was supposed to do.
The federal gas tax is currently at 18.4 cents a gallon (plus states of 10-33 cents - which totals about 17% of the price of gas). This is very cheap compared to other countries. India uses a tax rate of about 50%. The Netherlands has a tax rate of over $3.50 a gallon (Wikipedia as source)
But we don't need to copy those crazy foreigners. All we want is the gas tax to pay for the infrastructure used by cars.
An interesting article, but I think we should expand it a bit.
In general, all taxes designated to fund a program (except those designated to fund charity type programs should cover the programs costs.
The Federal government should either reduce spending on programs or raise use taxes whenever the use taxes are not paying for their own use. If transportation expenses cost the US government more money than the transportation based taxes we pay, then those taxes should go up, or cut out spending on transportation.
That's how capitalism works. If you can't afford something, you stop using it, which reduces your cost. You don't keep the low taxes and the high spending. Simple economics: Balance the internal budgets before you try balancing the total budget.
Here are a few taxes that I found that, like the gas tax, do not entirely fund the programs they were supposed to fund:
Note, this ignores a couple of charity programs, such as Medicaid, Medicare, services to the poor, and of course national parks. Those are things we want no matter what, not things we want to
I am sure there are a whole bunch of others that I am just not aware about.
Basically, it says we should follow through on the non-partisan Simpson-Bowles recommendation of raising the Gas Tax. by about 15 cents. Why that much? Well, the gas tax was created to fund the cost to build and repair roads, bridges, etc. But it only raises about $32 Billion a year, while we spend about $50 billion a year. The rest of the money gets funded by your income taxes (which basically means Chinese debt). If we raise the gas tax by 15 cents, then the tax on gas would do what it was supposed to do.
The federal gas tax is currently at 18.4 cents a gallon (plus states of 10-33 cents - which totals about 17% of the price of gas). This is very cheap compared to other countries. India uses a tax rate of about 50%. The Netherlands has a tax rate of over $3.50 a gallon (Wikipedia as source)
But we don't need to copy those crazy foreigners. All we want is the gas tax to pay for the infrastructure used by cars.
An interesting article, but I think we should expand it a bit.
In general, all taxes designated to fund a program (except those designated to fund charity type programs should cover the programs costs.
The Federal government should either reduce spending on programs or raise use taxes whenever the use taxes are not paying for their own use. If transportation expenses cost the US government more money than the transportation based taxes we pay, then those taxes should go up, or cut out spending on transportation.
That's how capitalism works. If you can't afford something, you stop using it, which reduces your cost. You don't keep the low taxes and the high spending. Simple economics: Balance the internal budgets before you try balancing the total budget.
Here are a few taxes that I found that, like the gas tax, do not entirely fund the programs they were supposed to fund:
- Gasoline Tax
- Aviation Taxes (though we should cut the ridiculously expensive TSA that has never caught anyone)
- Tobacco tax (health care costs to Medicare and Medicaid from lung cancer, etc. exceed the money brought in)
- Mining Taxes (costs to lean up coal and other mining activities exceed the taxes we get)
Note, this ignores a couple of charity programs, such as Medicaid, Medicare, services to the poor, and of course national parks. Those are things we want no matter what, not things we want to
I am sure there are a whole bunch of others that I am just not aware about.
Wednesday, November 28, 2012
Corporate Tax Simplification
I've talked before about how the major reason taxes are considered unfair is that we tax income, not wealth. Income is always a much more dynamic and changeable term than wealth.
A single, 21 adult with no kids, healthy parents making $125,000/year is wealthy.
A divorced and remarried 45 man, making $125,000/year, paying alimony and child support, with two kids from his first marriage and a set of twin newborns, who is also supporting his aging mother, while he is undergoing cancer treatment is POOR. And worried about what's going to happen if he dies and can't support 4 kids, his mom, and current wife (let alone the ex.)
But if they had different salaries and both have exactly one million dollars in assets, then both are probably wealthy (barring either of them having the wealth from sudden good fortune). This is in large part because wealth tends to vanish quickly if income is not sufficient to maintain it.
The tax code is complicated in part because of these kinds of issues. Their are tons of rules and regulations dealing with alimony, child support payments, marriage rules, and health payments for elderly parents.
The world is not a simple place, and no simplified tax code (for people) could be fair. This is the main reason why individual income taxes are so complicated and also the main reasons why trying to simplify them is not always a good idea.
Another reason why the tax code is so complicated is that we often like to use it to encourage good behavior. We lower your taxes if you buy a home, go green, pay for education, employ more people, etc. etc. etc.
We do this to keep government SMALL. That is, instead of having the government buy solar panels, we let people do it and give them a tax deduction. In both cases, the solar panels get bought. In effect, we are trying to out source the administration of the government program. As government is all about administration, this should be a huge savings.
Except... people try to cheat on their taxes. As such, we need to check the deductions. So we replace administering of the government program with administering the tax code. Worse, the new administrators are accountants, not specially trained in all the programs.
As we outsourced more and more of the government's administration to taxpayers (and the IRS), it also started annoying the crap out of the taxpayers. No one likes to be treated as cheap labor. If you are wealthy, you can pay an accountant to do that administration work, and if you earn enough money, you might make a profit (i.e. make more money from the tax deductions then you paid the accountant). If you are poor, then chances are the payment from the government exceed your hourly wage, so it is worth it. But there are a bunch of people in the middle that do their own taxes and who just get angry about having to fill out complicated math tests for less money than their yearly salary.
Could we get rid of some of the individual based tax adjustments? Sure. But not all of them and the big ones can't be cut without major issues (Fair warning, I live in a tax heavy state and own a nice home - I might have to sell it if some moron got rid of the mortgage tax deduction entirely).
But.... corporate taxes are slightly different. Corporations don't get married or divorced. They don't have children or elderly parents. They don't pay alimony or child support. They are not home makers. More importantly, capitalism is all about letting corporations die. No extraordinary means to keep companies alive. If they catch the corporate equivalent of cancer, they die. They also already have an accountant. He get's paid the same for his tax work as anything else.
Most importantly, quite frankly, we don't have to be fair to corporations. If they die, it's not as big a deal.
There is a difference between large corporations and small corporations - how many people they hire. I can easily see giving a slightly different, lower tax rate for small corporations. This would have to be done in such away so as not to let a large corporation create a small US subsidiary to earn the profit, while the work is done by a larger related entity. Big corporations tend to have extra ways they can avoid paying taxes. Things like the "No Sale Sale", "The Double Irish", among many others.
But aside from this, the only reason to give corporations large deductions is to outsource government work. But corporations LIKE THIS. They make a profit over it. That assumes of course that they are profitable and thus owe taxes. If they are unprofitable they don't gain from taxes.
In effect, we end up helping the companies that don't need the help and hurting the companies
I say we should simplify the corporate tax codes. Rip out all the corporate tax deductions, create equivalent government programs for those we think are worthy, cancel the ones we don't like.
Note doing this will in all likelihood increase government spending somewhat, as I do not think
But honestly, because of international shenanigans like the Double Irish, I am not sure an income tax is the right way to go at all. I have previously discussed a wealth tax. a Wealth Tax is a tax based on how much you own, not how much you make. For public corporations, that is pretty easy to figure out, it's called the Market Value (total shares times price per share). Oh, we can talk about book value and other methods but honestly, those are side issues. It's harder to implement for private corporations, but not impossible. You can always do the "Value it at whatever you want, but by law if someone offers to buy it at that price, you have to sell it, or re-value it and pay back-taxes for the past 10 years" trick.
If it were up to me, I'd probably change the tax rules. Even if you don't want to use wealth taxes for individuals, you can easily do it for corporations. A solid 3% of the value each six months works well. If you want to help out small corporations, you can always put in a one year delay. That is, at the end of 2012 you pay taxes based on your value at the end of 2011. That way new companies don't pay taxes the first year. If the company is growing, you pay less money each year than your real value and the taxes are known ahead of time. Put in a rule so that if you declare bankruptcy you don't pay taxes for the next two six-month periods (equivalent of starting a new corporation).
A single, 21 adult with no kids, healthy parents making $125,000/year is wealthy.
A divorced and remarried 45 man, making $125,000/year, paying alimony and child support, with two kids from his first marriage and a set of twin newborns, who is also supporting his aging mother, while he is undergoing cancer treatment is POOR. And worried about what's going to happen if he dies and can't support 4 kids, his mom, and current wife (let alone the ex.)
But if they had different salaries and both have exactly one million dollars in assets, then both are probably wealthy (barring either of them having the wealth from sudden good fortune). This is in large part because wealth tends to vanish quickly if income is not sufficient to maintain it.
The tax code is complicated in part because of these kinds of issues. Their are tons of rules and regulations dealing with alimony, child support payments, marriage rules, and health payments for elderly parents.
The world is not a simple place, and no simplified tax code (for people) could be fair. This is the main reason why individual income taxes are so complicated and also the main reasons why trying to simplify them is not always a good idea.
Another reason why the tax code is so complicated is that we often like to use it to encourage good behavior. We lower your taxes if you buy a home, go green, pay for education, employ more people, etc. etc. etc.
We do this to keep government SMALL. That is, instead of having the government buy solar panels, we let people do it and give them a tax deduction. In both cases, the solar panels get bought. In effect, we are trying to out source the administration of the government program. As government is all about administration, this should be a huge savings.
Except... people try to cheat on their taxes. As such, we need to check the deductions. So we replace administering of the government program with administering the tax code. Worse, the new administrators are accountants, not specially trained in all the programs.
As we outsourced more and more of the government's administration to taxpayers (and the IRS), it also started annoying the crap out of the taxpayers. No one likes to be treated as cheap labor. If you are wealthy, you can pay an accountant to do that administration work, and if you earn enough money, you might make a profit (i.e. make more money from the tax deductions then you paid the accountant). If you are poor, then chances are the payment from the government exceed your hourly wage, so it is worth it. But there are a bunch of people in the middle that do their own taxes and who just get angry about having to fill out complicated math tests for less money than their yearly salary.
Could we get rid of some of the individual based tax adjustments? Sure. But not all of them and the big ones can't be cut without major issues (Fair warning, I live in a tax heavy state and own a nice home - I might have to sell it if some moron got rid of the mortgage tax deduction entirely).
But.... corporate taxes are slightly different. Corporations don't get married or divorced. They don't have children or elderly parents. They don't pay alimony or child support. They are not home makers. More importantly, capitalism is all about letting corporations die. No extraordinary means to keep companies alive. If they catch the corporate equivalent of cancer, they die. They also already have an accountant. He get's paid the same for his tax work as anything else.
Most importantly, quite frankly, we don't have to be fair to corporations. If they die, it's not as big a deal.
There is a difference between large corporations and small corporations - how many people they hire. I can easily see giving a slightly different, lower tax rate for small corporations. This would have to be done in such away so as not to let a large corporation create a small US subsidiary to earn the profit, while the work is done by a larger related entity. Big corporations tend to have extra ways they can avoid paying taxes. Things like the "No Sale Sale", "The Double Irish", among many others.
But aside from this, the only reason to give corporations large deductions is to outsource government work. But corporations LIKE THIS. They make a profit over it. That assumes of course that they are profitable and thus owe taxes. If they are unprofitable they don't gain from taxes.
In effect, we end up helping the companies that don't need the help and hurting the companies
I say we should simplify the corporate tax codes. Rip out all the corporate tax deductions, create equivalent government programs for those we think are worthy, cancel the ones we don't like.
Note doing this will in all likelihood increase government spending somewhat, as I do not think
But honestly, because of international shenanigans like the Double Irish, I am not sure an income tax is the right way to go at all. I have previously discussed a wealth tax. a Wealth Tax is a tax based on how much you own, not how much you make. For public corporations, that is pretty easy to figure out, it's called the Market Value (total shares times price per share). Oh, we can talk about book value and other methods but honestly, those are side issues. It's harder to implement for private corporations, but not impossible. You can always do the "Value it at whatever you want, but by law if someone offers to buy it at that price, you have to sell it, or re-value it and pay back-taxes for the past 10 years" trick.
If it were up to me, I'd probably change the tax rules. Even if you don't want to use wealth taxes for individuals, you can easily do it for corporations. A solid 3% of the value each six months works well. If you want to help out small corporations, you can always put in a one year delay. That is, at the end of 2012 you pay taxes based on your value at the end of 2011. That way new companies don't pay taxes the first year. If the company is growing, you pay less money each year than your real value and the taxes are known ahead of time. Put in a rule so that if you declare bankruptcy you don't pay taxes for the next two six-month periods (equivalent of starting a new corporation).
Friday, November 16, 2012
More about how to cut the military
I've already talked about how the US has a ridiculous number of aircraft carriers. But I found out I was wrong. I underestimated the issue.
The US doesn't have 11 air craft carriers, it has 11 super carriers. These are the huge, double runway things seen in movies and TV. Other countries mostly have small single run way carriers (except for China, Russia and France - their single carriers are double runways, but are still smaller than the US.) As for Italy and Spain the only other country that have more than one air craft carrier, they both have one small one and one TINY one. (Source)
But the navy isn't just about aircraft carriers. The next big, expensive ship are Submarines. Non-nuclear submarines are basically worthless. They can't stay down very long, travel very slowly and can rather easily be identified when they surface. Which is why the US doesn't own any military non-nuclear subs. All of the US military submarines are nuclear powered.
There are three main types of nuclear powered submarines:
The US owns about 74 nuclear powered submarines, of these 54 are declared to be attack nuclear powered submarines. We don't talk about the other 20. Russia owns 45 submarines, 40 of which are attack, England owns 13, 8 of which are attack, France and China both own 10 each and each has six attack submarines. (Source - yes, I had to look up Russia's flag - in my head it was still the old USSR flag)
It's hard to talk about the Bunker and Spy subs, because we don't know how many of each each country has. But we can talk about the attack submarines. Right now, the US has eight more attack submarines (54) than Russia (40) and China combined (6). Not to mention the fact that we can depend on England, if not France to help us out if we go to war with both China AND Russia? How about cutting down the attack submarines from 54 down to 49? We give up 10% of our attack submarines, keeping the bunkers and the spy ships, and still have more than Russia and China combined, without depending on our allies.
Lets look a the air force next. No other country has reliable, tested stealth aircraft. Everyone else has tried to build them but not tested them in a war. We currently have 3 different stealth aircraft being designed/built. No other country has more than one design and only: Russia, India, China, South Korea, and Japan have even bothered to try. (Source) They are the F-35 Joint strike, the F-22 Raptor fighter and the B-2 Spirit bomber. Aircraft are already incredibly expensive, stealth ones doubly so.
But that's OK, we've already moved on to drones. Of which once again, we have far more battle testing than they have (although recently Israel shot down an unarmed drone.)
Our drone programs are still relatively small. For example, as per Wikipedia, the Reaper (one of the biggest and deadliest drones we use), costs less than $40 million and we ordered less than 60 of them. Compare that with the B-2 , which costs over 1,000 times that much - and we ordered 21 of them.
I like drones. They are cheap - both in dollars and in lives. They can be launched from our yet to be launched new 'rail gun' Ford class aircraft carriers (coming 2015). But most importantly, they work well against terrorists. We can have them out spying where we don't dare send people. I don't see a need to cut drones. I do see a need to replace B-2 bombers with drones.
Which do you think is more cost effective? Sending one B-2 Bomber to take out a radar site, letting our fighters fly in behind them. Or sending 500 Reapers to destroy the radar site. Say we lose 100 of the reapers each time.
I see no problem in reducing our navy and air force expenditures by 10%. The army is more problematic, but it is not impossible. A general 10% reduction in the US military looks more and more possible. We simply don't need to have that large a military because we are facing small insurgents, not Russia and/or China. Drones do more than replace one grunt, they replace a highly trained, flying, hidden person.
We could take 1/10 of that 10% budget reduction and spend it on foreign intelligence and counter-intelligence. We need to fight the next war - terrorism, rather than the old cold war. Save the rest to cut down the deficit.
We spend about $900 billion a year on the military. 10% of that is $90 billion. The sequester that everyone is talking about? It saves 100 billion. We only need another 10 billion to trade for it. Raise taxes by 5 billion on the wealthy and cut 5 billion from welfare and we can cancel the sequestration.
The US doesn't have 11 air craft carriers, it has 11 super carriers. These are the huge, double runway things seen in movies and TV. Other countries mostly have small single run way carriers (except for China, Russia and France - their single carriers are double runways, but are still smaller than the US.) As for Italy and Spain the only other country that have more than one air craft carrier, they both have one small one and one TINY one. (Source)
But the navy isn't just about aircraft carriers. The next big, expensive ship are Submarines. Non-nuclear submarines are basically worthless. They can't stay down very long, travel very slowly and can rather easily be identified when they surface. Which is why the US doesn't own any military non-nuclear subs. All of the US military submarines are nuclear powered.
There are three main types of nuclear powered submarines:
- Attack submarines - designed to kill ships
- Nuclear bunkers - designed to hold missiles in a hidden, moving location
- "Information/rescue" ships - designed to get up close and spy, do research or retrieve people.
The US owns about 74 nuclear powered submarines, of these 54 are declared to be attack nuclear powered submarines. We don't talk about the other 20. Russia owns 45 submarines, 40 of which are attack, England owns 13, 8 of which are attack, France and China both own 10 each and each has six attack submarines. (Source - yes, I had to look up Russia's flag - in my head it was still the old USSR flag)
It's hard to talk about the Bunker and Spy subs, because we don't know how many of each each country has. But we can talk about the attack submarines. Right now, the US has eight more attack submarines (54) than Russia (40) and China combined (6). Not to mention the fact that we can depend on England, if not France to help us out if we go to war with both China AND Russia? How about cutting down the attack submarines from 54 down to 49? We give up 10% of our attack submarines, keeping the bunkers and the spy ships, and still have more than Russia and China combined, without depending on our allies.
Lets look a the air force next. No other country has reliable, tested stealth aircraft. Everyone else has tried to build them but not tested them in a war. We currently have 3 different stealth aircraft being designed/built. No other country has more than one design and only: Russia, India, China, South Korea, and Japan have even bothered to try. (Source) They are the F-35 Joint strike, the F-22 Raptor fighter and the B-2 Spirit bomber. Aircraft are already incredibly expensive, stealth ones doubly so.
But that's OK, we've already moved on to drones. Of which once again, we have far more battle testing than they have (although recently Israel shot down an unarmed drone.)
Our drone programs are still relatively small. For example, as per Wikipedia, the Reaper (one of the biggest and deadliest drones we use), costs less than $40 million and we ordered less than 60 of them. Compare that with the B-2 , which costs over 1,000 times that much - and we ordered 21 of them.
I like drones. They are cheap - both in dollars and in lives. They can be launched from our yet to be launched new 'rail gun' Ford class aircraft carriers (coming 2015). But most importantly, they work well against terrorists. We can have them out spying where we don't dare send people. I don't see a need to cut drones. I do see a need to replace B-2 bombers with drones.
Which do you think is more cost effective? Sending one B-2 Bomber to take out a radar site, letting our fighters fly in behind them. Or sending 500 Reapers to destroy the radar site. Say we lose 100 of the reapers each time.
I see no problem in reducing our navy and air force expenditures by 10%. The army is more problematic, but it is not impossible. A general 10% reduction in the US military looks more and more possible. We simply don't need to have that large a military because we are facing small insurgents, not Russia and/or China. Drones do more than replace one grunt, they replace a highly trained, flying, hidden person.
We could take 1/10 of that 10% budget reduction and spend it on foreign intelligence and counter-intelligence. We need to fight the next war - terrorism, rather than the old cold war. Save the rest to cut down the deficit.
We spend about $900 billion a year on the military. 10% of that is $90 billion. The sequester that everyone is talking about? It saves 100 billion. We only need another 10 billion to trade for it. Raise taxes by 5 billion on the wealthy and cut 5 billion from welfare and we can cancel the sequestration.
Friday, October 19, 2012
Deficit Math
Every once in a while, someone tries to trot out a list of things the government spends money on. They pick out things to cut - either entirely or merely reducing the amount spent. They then pretend they have solved the problem by cutting fat, not muscle. The thing is, they tend to lie - not about the numbers but how they present the numbers. I thought I'd go through one such list to show you the lies and tricks they use.
I am looking at one attributed to VP Nominee Paul Ryan, but actually proposed by Representative Jim Jordan of Ohio. It is fairly typical, containing multiple deceptions.
1) One off items. The list in question contains some one off items. I.E. things that we can do only once, not every year, so while it might help with the national debt a little bit, it won't actually affect the deficit, which is the real problem. It's like selling your old clothing. It helps pay off the credit cards, but doesn't stop you from over-spending. This list for example includes the idea of selling off 'excess' Federal Property. Assuming that property in question really is 'excess' - i.e. commercial and not in use, a rather than park space, then we can only do it once. This accounted for 15 billion dollars - the single highest number (aside from the grand total at the end).
That right there is a red flag, showing that the creator of the list is trying to deceive us. The single biggest cut you want to make should not be a one-off, not if your plan is actually intended to actually solve the problem, as opposed to just scoring some political points.
Which brings me to his next attempt to deceive the American People. The last line is (underline added):
* Total Savings: $2.5 Trillion over Ten Years.
2) Multiple years analysis.
The budget is a yearly thing. Among other things, it gets changed every year. Why did Mr. Jordan total it up over ten years? Because his numbers are so small that they don't do. So he multiplied them by ten to make it seem like they were significant. THEY AREN'T.
To further confuse the matter, some of the things he talked about were over ten years, but most were over one years. The only reason to do this was to make small things look bigger. As a result, all he did was confuse people.
The current US National Debt is over 16,182,000,000,000 That would be 16 Trillion dollars. The US yearly Budget Deficit is about 1.1 trillion dollars. We are adding tot he debt by about 6.25% a year. His 2.5 trillion sounds like a lot, but that's over ten years. When you divide by 10, to get the yearly amount it comes out to only 0.25 trillion, or less than one quarter of what we need to cut.
Not very impressive. Not impressive at all. Lets bring those numbers down to something reasonable. If you found that last year you overspent by $1000, and some idiot suggest you don't have to cut back, just stop wasting $250 a year, you would laugh at the guy and say "So you only want me to overspend by $750 a year?"
No. We need to cut the budget deficit by the full $1.1 trillion. Doing it by 1/4 doesn't make any sense.
3) Include tiny amounts. Next, when you go over his list you see a whole bunch of tiny stuff. Remember, we are trying to get rid of $1 trillion deficit. Talking about millions is stupid. A trillion is one thousand billion. A billion is one thousand million. A thousandth of a thousands is nothing. If the deficit was $1,000, then the equivelent of millions, would be a tenth of a penny. If it isn't at least 50 cents, don't talk about it. Fifty cents out of $1,000 translates to $500 million in the US budget.Rep. Jordan included things as low as $1 million annual savings (Mohair Subsidies).
Why did he did do this? Because the small things often seem silly and the uninformed are impressed by the word 'million'. They think it is a lot, but it isn't, not when we are talking about trillions.
Yes, Mohair is a silly thing to subsidies - that's why the liar Representative Jordan put it on the list. But the amount of money is so small (less than 1/3 of one cents per American citizen), that it isn't worth talking about. Cutting it doesn't do anything to the budget at all. Why do we do fund it? I am sure it was put in to get some congressman's vote on a major bill. It's a single sprinkle to make something else more palatable. We spend more on each congressman's office. As per this new story, 13 North Carolina Congressmen spent $4.3 million every 3 months, or about $16 million a year, or $1.23 million per congressman per year.
So that means Representative Jordan probably spent more more this year on his staff than we spent on Mohair. At least the Mohair subsidy wasn't spent trying to deceive American citizens.
4) List programs without telling us how much money. Presumably because they are even less than one million. Things like the HUD Ph.D Program or the Deficit Reduction Check-Off Act. If you can't be bothered to tell us how much it would save, then don't include it in the list.
5) Don't show the entire list or show your math. By not showing the math, it means he is leaving out the important stuff. Below is the list of just the expensive things (over $500 million) the artful Representative wanted to cut They total to a mere 29 billion dollars a year. Far short of the 250 billion he claimed as a total. I know, some of you are thinking that if he has enough stuff less than 1/2 a billion, it might add up to the other things. You are right. But if everything else was exactly 1/2 a billion, then he would need another (250-29 = 231 / 0.5 = 462) 462 items. But he didn't list 462 items. Why not? Because most of the things he wrote about are important to people and we would laugh at him for trying to cut them.
The actual truth is you can't cut the deficit without cutting bone as well as fat. Because the amount of fat in the budget is relative low. The six main budget items are Medicare, Medicaid, Social Security, Defense, Interest on the debt, and Pensions. You want to cut the deficit? You need to cut something on that list. Compared to other developed countries, the US overspends on Defense, but not on any of the other stuff. It's not that hard to figure out what we need to cut.
We need to reduce Defense spending. Start by cutting any program that Congress insists on funding even if the Defense Department says they don't want.
The article linked above listed four programs: Global Hawk Block 30 drone program, C-27J Spartan cargo aircraft, upgrades to the M1 Abrams tank, Air National Guard funding and the proposed East Coast missile defense system. These programs don't cost a huge amount. But they are an honest start.
To me, I think we need to look at each of the military branches. The navy is relatively easy to pick on, because they tend to buy single big ticket items. I will discuss them, but similar cost reductions should be done to the Army and the Air Force. China and Russia each have only one Aircraft Carrier. Spain and Italy each have two. No other country has more than one. Except the United States. We have eleven. Do we really need to have more than 5 times as much as any other single country? More than five times greater than China and Russia combined? Cut it down to 9. That lets us put two in the northern Pacific, two in the southern Pacific, one in North Atlantic, one in the South Atlantic, one in the Indian ocean, one in the Mediterranean, and still have one back home being serviced.
I am looking at one attributed to VP Nominee Paul Ryan, but actually proposed by Representative Jim Jordan of Ohio. It is fairly typical, containing multiple deceptions.
1) One off items. The list in question contains some one off items. I.E. things that we can do only once, not every year, so while it might help with the national debt a little bit, it won't actually affect the deficit, which is the real problem. It's like selling your old clothing. It helps pay off the credit cards, but doesn't stop you from over-spending. This list for example includes the idea of selling off 'excess' Federal Property. Assuming that property in question really is 'excess' - i.e. commercial and not in use, a rather than park space, then we can only do it once. This accounted for 15 billion dollars - the single highest number (aside from the grand total at the end).
That right there is a red flag, showing that the creator of the list is trying to deceive us. The single biggest cut you want to make should not be a one-off, not if your plan is actually intended to actually solve the problem, as opposed to just scoring some political points.
Which brings me to his next attempt to deceive the American People. The last line is (underline added):
* Total Savings: $2.5 Trillion over Ten Years.
2) Multiple years analysis.
The budget is a yearly thing. Among other things, it gets changed every year. Why did Mr. Jordan total it up over ten years? Because his numbers are so small that they don't do. So he multiplied them by ten to make it seem like they were significant. THEY AREN'T.
To further confuse the matter, some of the things he talked about were over ten years, but most were over one years. The only reason to do this was to make small things look bigger. As a result, all he did was confuse people.
The current US National Debt is over 16,182,000,000,000 That would be 16 Trillion dollars. The US yearly Budget Deficit is about 1.1 trillion dollars. We are adding tot he debt by about 6.25% a year. His 2.5 trillion sounds like a lot, but that's over ten years. When you divide by 10, to get the yearly amount it comes out to only 0.25 trillion, or less than one quarter of what we need to cut.
Not very impressive. Not impressive at all. Lets bring those numbers down to something reasonable. If you found that last year you overspent by $1000, and some idiot suggest you don't have to cut back, just stop wasting $250 a year, you would laugh at the guy and say "So you only want me to overspend by $750 a year?"
No. We need to cut the budget deficit by the full $1.1 trillion. Doing it by 1/4 doesn't make any sense.
3) Include tiny amounts. Next, when you go over his list you see a whole bunch of tiny stuff. Remember, we are trying to get rid of $1 trillion deficit. Talking about millions is stupid. A trillion is one thousand billion. A billion is one thousand million. A thousandth of a thousands is nothing. If the deficit was $1,000, then the equivelent of millions, would be a tenth of a penny. If it isn't at least 50 cents, don't talk about it. Fifty cents out of $1,000 translates to $500 million in the US budget.Rep. Jordan included things as low as $1 million annual savings (Mohair Subsidies).
Why did he did do this? Because the small things often seem silly and the uninformed are impressed by the word 'million'. They think it is a lot, but it isn't, not when we are talking about trillions.
Yes, Mohair is a silly thing to subsidies - that's why the liar Representative Jordan put it on the list. But the amount of money is so small (less than 1/3 of one cents per American citizen), that it isn't worth talking about. Cutting it doesn't do anything to the budget at all. Why do we do fund it? I am sure it was put in to get some congressman's vote on a major bill. It's a single sprinkle to make something else more palatable. We spend more on each congressman's office. As per this new story, 13 North Carolina Congressmen spent $4.3 million every 3 months, or about $16 million a year, or $1.23 million per congressman per year.
So that means Representative Jordan probably spent more more this year on his staff than we spent on Mohair. At least the Mohair subsidy wasn't spent trying to deceive American citizens.
4) List programs without telling us how much money. Presumably because they are even less than one million. Things like the HUD Ph.D Program or the Deficit Reduction Check-Off Act. If you can't be bothered to tell us how much it would save, then don't include it in the list.
5) Don't show the entire list or show your math. By not showing the math, it means he is leaving out the important stuff. Below is the list of just the expensive things (over $500 million) the artful Representative wanted to cut They total to a mere 29 billion dollars a year. Far short of the 250 billion he claimed as a total. I know, some of you are thinking that if he has enough stuff less than 1/2 a billion, it might add up to the other things. You are right. But if everything else was exactly 1/2 a billion, then he would need another (250-29 = 231 / 0.5 = 462) 462 items. But he didn't list 462 items. Why not? Because most of the things he wrote about are important to people and we would laugh at him for trying to cut them.
| Program | Billions in savings > | |
| Amtrack | 1.565 | |
| "Duplicative Education" | 1.3 | |
| Community Development | 4.5 | |
| 1/2 Federal Travel Budget | 7.5 | |
| Federal Vehicle Budget by 20% | 0.6 | |
| Department Energy Weatherization grants | 0.53 | |
| New Starts Transit | 2 | |
| Intercity High Speed Rail | 2.5 | |
| National Community Services Act | 1.15 | |
| Applied Research DOE | 1.27 | |
| US Agency International Development | 1.39 | |
| Davis Bacon Act | 1 | |
| Cut IRS Budget by | 1.8 | |
| Collection unpaid taxes by federal employees | 1 | |
| ObamaCare Admin costs | 0.9 | |
| Total of yearly savings: | 29.005 | |
| Plus the one time stuff: | ||
| Federal Office space acquisition | 0.864 | |
| Sell excess Federal Property | 15 | (one time) |
The actual truth is you can't cut the deficit without cutting bone as well as fat. Because the amount of fat in the budget is relative low. The six main budget items are Medicare, Medicaid, Social Security, Defense, Interest on the debt, and Pensions. You want to cut the deficit? You need to cut something on that list. Compared to other developed countries, the US overspends on Defense, but not on any of the other stuff. It's not that hard to figure out what we need to cut.
We need to reduce Defense spending. Start by cutting any program that Congress insists on funding even if the Defense Department says they don't want.
The article linked above listed four programs: Global Hawk Block 30 drone program, C-27J Spartan cargo aircraft, upgrades to the M1 Abrams tank, Air National Guard funding and the proposed East Coast missile defense system. These programs don't cost a huge amount. But they are an honest start.
To me, I think we need to look at each of the military branches. The navy is relatively easy to pick on, because they tend to buy single big ticket items. I will discuss them, but similar cost reductions should be done to the Army and the Air Force. China and Russia each have only one Aircraft Carrier. Spain and Italy each have two. No other country has more than one. Except the United States. We have eleven. Do we really need to have more than 5 times as much as any other single country? More than five times greater than China and Russia combined? Cut it down to 9. That lets us put two in the northern Pacific, two in the southern Pacific, one in North Atlantic, one in the South Atlantic, one in the Indian ocean, one in the Mediterranean, and still have one back home being serviced.
Wednesday, September 19, 2012
How to fix Medicare and Medicaid.
Medicare and Medicaid are in serious trouble. Shortly their costs will skyrocket above their assets and income from the taxes designed to pay for them. There are three distinct ways we can deal with this situation.
First, those are the not the only possible ways to cure the problem. We could theoretically grow the economy to a huge extent, giving jobs for all and offering huge salaries so retired people choose to go back to work, moving them to private insurance. Or if you prefer a nightmare as opposed to a fantasy, we could be swept by disease, famine, or war, which would kill significant numbers of the poor and elderly. But for obvious reasons, I am going to ignore these possible 'solutions'. Enough fantasy and nightmares, lets move back to the real world.
Lets' start out by saying that we already do all three of these things and that in all likely-hood the solution will continue to be a combination of all three.
Now let's talk about which of these three reasonable situations we should focus on.
Well, we have a large national debt, so option 1 is not the best idea. Note, if we do nothing at all, it automatically gets used (as there is no law preventing the government from using general taxes to fund those health care programs) so it would probably be a better idea to work on the other options.
Option # 2 is slightly better - have medicare/medicaid not pay for certain extremely expensive treatments. Right away, someone is going to shout 'rationing'. Nope. Rationing is some group decides who gets a treatment and who doesn't. If insurance doesn't pay for anyone to get that treatment, it's simply called an uncovered treatment. Or, if you are Ayn Rand, CAPITALISM. There are a lot of uncovered treatments.
This is not a liberal/democrat plan, it is a conservative/republican plan. When you privatize insurance without regulations, that is exactly what happens. It does so in a rather irregular manner, but it happens. As I said earlier, it is the heart of capitalism: if you want the procedure, you can pay for it - either by getting better insurance/supplemental insurance, or by paying for it out of pocket.
This "soft limit" method means that we pay some money even for things that are questionable, but not excessive. Trust me when you need the treatment, you will be glad for that money, particularly if you don't have to complain to get it.
This brings us to the the best option, #3. It requires some massive changes in our research an development. Right now there are huge incentives to come up with more expensive treatments or cures, not cheaper ones. The only 'cheaper' option we have is generic drugs. We don't need new expensive and slightly better treatments. We need to change the focus of our research.
We could for example change the laws as follows:
Oh and there is one more thing we can do to cut costs without affecting service: Eliminate medical mistakes. Currently, medical mistakes are a leading cause of death - killing more people that Aids. (Source) The current system evolved as a response to law suits, so it focuses on hiding what really happened. We need to fix that system.
I suggest the following: By law require all hospitals to offer 'Open Surgery'. If the patient chooses 'Open Surgery', then they give up all right to sue for anything more than medical costs caused by the surgery, or $300,000 for death. Put in a requirement that the doctor must be fully certified, sober, and broke no laws (or the legal limits vanish). In exchange, they get a full video record of the surgery, and a copy goes to the AMA, which would be instructed to create new surgical procedures based on what they find. We still would need to find some way to discover and prevent non-surgical errors.
Finally, remember that we are probably going to have to do a mix of all three of these fixes. One alone won't solve the problem. But a combination of limited general tax support, reasonable limits on what we pay for and cheaper medical procedures can solve the problem.
- Tax the general population to pay for the elderly health care and/or healthcare for the poor.
- Have Medicare/Medicaid not pay for certain extremely expensive treatments.
- Focus medical research on finding cheaper ways to treat/cure illness, as opposed to finding new ways to treat/cure diseases that we do not currently have effective treatments
First, those are the not the only possible ways to cure the problem. We could theoretically grow the economy to a huge extent, giving jobs for all and offering huge salaries so retired people choose to go back to work, moving them to private insurance. Or if you prefer a nightmare as opposed to a fantasy, we could be swept by disease, famine, or war, which would kill significant numbers of the poor and elderly. But for obvious reasons, I am going to ignore these possible 'solutions'. Enough fantasy and nightmares, lets move back to the real world.
Lets' start out by saying that we already do all three of these things and that in all likely-hood the solution will continue to be a combination of all three.
Now let's talk about which of these three reasonable situations we should focus on.
Well, we have a large national debt, so option 1 is not the best idea. Note, if we do nothing at all, it automatically gets used (as there is no law preventing the government from using general taxes to fund those health care programs) so it would probably be a better idea to work on the other options.
Option # 2 is slightly better - have medicare/medicaid not pay for certain extremely expensive treatments. Right away, someone is going to shout 'rationing'. Nope. Rationing is some group decides who gets a treatment and who doesn't. If insurance doesn't pay for anyone to get that treatment, it's simply called an uncovered treatment. Or, if you are Ayn Rand, CAPITALISM. There are a lot of uncovered treatments.
This is not a liberal/democrat plan, it is a conservative/republican plan. When you privatize insurance without regulations, that is exactly what happens. It does so in a rather irregular manner, but it happens. As I said earlier, it is the heart of capitalism: if you want the procedure, you can pay for it - either by getting better insurance/supplemental insurance, or by paying for it out of pocket.
- For example, you medicare and medicaid don't pay for crystal therapy to cure brain cancer. Why? Because the medical community doesn't think it works. (They are correct.)
- It also doesn't pay for 'experimental treatments', such as face transplants. Many people think these do work, but we don't really have enough evidence.
- But insurance also does not pay for certain things simply because they are too expensive for the benefit. In Spain, you pay tens of thousands of dollars to get electrical implants that paralyze the nerves that cause migraines. But Medicare and Medicaid don't offer that treatment because migraines aren't worth it.
This "soft limit" method means that we pay some money even for things that are questionable, but not excessive. Trust me when you need the treatment, you will be glad for that money, particularly if you don't have to complain to get it.
This brings us to the the best option, #3. It requires some massive changes in our research an development. Right now there are huge incentives to come up with more expensive treatments or cures, not cheaper ones. The only 'cheaper' option we have is generic drugs. We don't need new expensive and slightly better treatments. We need to change the focus of our research.
We could for example change the laws as follows:
- Offer only a 10 year patent protection for treatments or diagnostic methods unless they fall into the 'cheaper' categories below.
- Offer a 20 year patent protection for treatments /diagnostic methods that are at least half the cost of current methods. If we don't have any treatment/diagnostic method yet, then the comparison cost is infinite.
- Offer a 20 year patent protection for cures - assuming the cure costs less than 10% of the estimated current treatment for the life of the patient.
- Offer a 30 year patent protection for cures that are at least half the cost of the current method/treatment - but the price can not rise above that for the duration of the patent (or the patent vanishes).
Oh and there is one more thing we can do to cut costs without affecting service: Eliminate medical mistakes. Currently, medical mistakes are a leading cause of death - killing more people that Aids. (Source) The current system evolved as a response to law suits, so it focuses on hiding what really happened. We need to fix that system.
I suggest the following: By law require all hospitals to offer 'Open Surgery'. If the patient chooses 'Open Surgery', then they give up all right to sue for anything more than medical costs caused by the surgery, or $300,000 for death. Put in a requirement that the doctor must be fully certified, sober, and broke no laws (or the legal limits vanish). In exchange, they get a full video record of the surgery, and a copy goes to the AMA, which would be instructed to create new surgical procedures based on what they find. We still would need to find some way to discover and prevent non-surgical errors.
Finally, remember that we are probably going to have to do a mix of all three of these fixes. One alone won't solve the problem. But a combination of limited general tax support, reasonable limits on what we pay for and cheaper medical procedures can solve the problem.
Monday, August 6, 2012
Conservatives: You Can Always Move to Puerto Rico?
Puerto Rico is a great place. It is an unincorporated territory of the United States, located in the Caribbean.
It's part of an archipelago, with one big island and lots of smaller ones. Sure, it gets some hurricanes (like the rest of the gulf area) but it enjoys a great tropical climate.
All Puerto Ricans are United States Citizens. It is under the direct control of the United State Congress.
You don't like federal tax? Well, as a resident of Puerto Rico, you don't pay US Federal Income tax - and you still get federal money.
You keep most (but not all) Constitutional rights. Specifically, you get freedom of religion, freedom of speech, freedom of the the press, assembly (protest), due process in court, unreasonable search and seizure (they need a warrant)
So, what do you give up by moving to Puerto Rico?
So why don't conservatives move to Puerto Rico?
Well, without all that federal 'entitlement' spending, Puerto Rico ends up as DIRT POOR(Source). Over 80% of children live in high poverty areas (vs. 11% in the US). Simultaneously, only 56% of Puerto Ricans children are actually poor, while 22% of the US children are poor.
Stop and think about those two sets of numbers. First,it means that 24% of Puerto Rican children are not poor, but live in high poverty areas - even the middle class kids live next to or in a slum. Second it means that 11% of US children that are poor live in wealthy neighborhoods - even the poor kids live in middle class neighborhoods. But back to Puerto Rico.
Puerto Rico is not as nice a place to live. These poor areas don't have sewage systems - the waste sits in canals - that over flow on rainy days. You don't have high end stores, the areas are not wired for electricity and internet, the roads are not as nice.
Why is Puerto Rico like this? Well, that's what you get if you get rid of 'big government spending'.
P.S. Puerto Rico is voting this month - August, 2012 to ask Congress to become a state or remain as a commonwealth. Even if they decide to become a state, they need approval from the US Congress to do it.
It's part of an archipelago, with one big island and lots of smaller ones. Sure, it gets some hurricanes (like the rest of the gulf area) but it enjoys a great tropical climate.
All Puerto Ricans are United States Citizens. It is under the direct control of the United State Congress.
You don't like federal tax? Well, as a resident of Puerto Rico, you don't pay US Federal Income tax - and you still get federal money.
You keep most (but not all) Constitutional rights. Specifically, you get freedom of religion, freedom of speech, freedom of the the press, assembly (protest), due process in court, unreasonable search and seizure (they need a warrant)
So, what do you give up by moving to Puerto Rico?
- You can vote in a primary presidential election, but not in the actual Presidential election. If you maintain a house back in a state, then you could vote in absentee - but that might make you subject to the federal income tax.
- You MAY give up the right to have an abortion. Article 99 of the Puerto Rican Penal Code states that abortions (except to save the life or health of the mother) is punishable by two years. Note, this goes against the Puerto Rico's supreme court ruling in 1980 case Pueblo v. Duarte.(Source), but no court has invalidated it, yet (Source). Their has been only one abortion reported in Puerto Rico since 2007 - and that was by a citizen that left the country and got it outside of Puerto Rico (Source). But most people believe that others are getting abortions and not reporting them.
- You lose some gun rights. No Second amendment (they had an attempted revolt back int he 50's.) You do have the right to own guns and keep it in your house (with bullets). But transporting it requires the gun be unloaded (with empty magazines). Concealed carry, loaded with a permit only - no open carry. Ownership costs $400, shooting range permit costs $50 and concealed carry costs $1000 - all are 5 year licenses.(source)
- You don't have to pay Federal income taxes (you still pay social security taxes). You do pay taxes to Puerto Rico, just as you have to pay state taxes. Granted their Puerto Rico taxes are closer to federal rates than states, but you still come out ahead (i.e. in the states you pay Federal + state taxes, while in Puerto Rico you pay PR taxes that are about equivalent to Federal but no state tax equivalents).
- You give up the right to obtain Supplemental Security Income (an add on to Social Security for the poor that are either old, blind or disabled). You still get Social Security, but not the Supplemental stuff.
- You give up most medicaid benefits (PR gets 15% of the medicaid money it would if it was a state) and your doctors get less medicare money (mainly because healthcare is cheaper in P.R.than the US)
So why don't conservatives move to Puerto Rico?
Well, without all that federal 'entitlement' spending, Puerto Rico ends up as DIRT POOR(Source). Over 80% of children live in high poverty areas (vs. 11% in the US). Simultaneously, only 56% of Puerto Ricans children are actually poor, while 22% of the US children are poor.
Stop and think about those two sets of numbers. First,it means that 24% of Puerto Rican children are not poor, but live in high poverty areas - even the middle class kids live next to or in a slum. Second it means that 11% of US children that are poor live in wealthy neighborhoods - even the poor kids live in middle class neighborhoods. But back to Puerto Rico.
Puerto Rico is not as nice a place to live. These poor areas don't have sewage systems - the waste sits in canals - that over flow on rainy days. You don't have high end stores, the areas are not wired for electricity and internet, the roads are not as nice.
Why is Puerto Rico like this? Well, that's what you get if you get rid of 'big government spending'.
P.S. Puerto Rico is voting this month - August, 2012 to ask Congress to become a state or remain as a commonwealth. Even if they decide to become a state, they need approval from the US Congress to do it.
Tuesday, July 24, 2012
Sometimes government gets it wrong.
I love to talk about how the federal government is more competent and less corrupt than state governments. But they are not perfect. Right now there is a very interesting legal case.
An artist by the name of Robert Raushenberg created a piece of art entitled "Canyon", that includes a stuffed bald eagle. It is therefore a felony to try and sell it (bald eagle feathers, The art dealer that owned the piece died, and it was inherited by her children. The only reason they can hold it is because of an agreement with the United States Fish and Wild Life Service, and as a condition it states the piece must be on long term loan to the Metropolitan Museum of Art - which does ensure it (but that value is 'confidential')
Keep in mind that while the heirs technically 'own' it, that is just a technicality. They can't sell it, keep it in their home, or even MOVE it to a different museum.
Since it can't be sold, (and they can't keep it or even move it) their accountant valued it as $0 (three different appraisers did that). The IRS said it is worth $65 million and is demanding $29.2 million taxers. Note that this is in addition to the $471 million in estate taxes they already paid. The $29.2 million includes penalty tax rates. In addition, they will owe an extra $11.7 million in penalties, for a total tax of $40.9 million dollars.
Given the fact that the MET ensures it, you would think it would be possible to price. However, the IRS has been incompetent - they originally valued it at $15 million, but upped the price.
The $15 million value was based "solely on artistic value', without reference to the laws, despite the fact that the IRS's official policy is to take account of the laws, which should of course LOWER the price - as it makes it harder to sell. For example, some machine guns are legal to buy in the US without expensive permits and licenses because they were grandfathered in, before the ban on machine guns. They sell for FAR more than similar guns that are illegal to buy without said permits.
The IRS however got the $65 million figure by assuming the item would be sold on the black market.
Both sides have acted in bad faith - the IRS is being just as stupid as the heirs.
The really stupid thing is the eagle can easily be separated from the rest of the artwork.
This is how I what I would do.
First, state I am judge and the law is all about technicalities, not justice. If I declare something is not a sale, then it's not a sale - even if it looks like a sale. Then give both parties an ultimatum. Have the IRS state an amount of money that they think it is worth. Then give the heirs a choice.
The judge could tell the heirs that if they want to donate it to a museum of their choice, that he would be willing to declare it worth $100, and have them pay taxes on that money. If the judge is being a smartaleck, he could even have them pay the penalty tax rates on that $100.
Usually it makes far more sense to settle an issue out of court. With the right judge, and a bit of creative thinking, you can solve most issues - as long as both parties are willing to negotiate IN GOOD FAITH.
An artist by the name of Robert Raushenberg created a piece of art entitled "Canyon", that includes a stuffed bald eagle. It is therefore a felony to try and sell it (bald eagle feathers, The art dealer that owned the piece died, and it was inherited by her children. The only reason they can hold it is because of an agreement with the United States Fish and Wild Life Service, and as a condition it states the piece must be on long term loan to the Metropolitan Museum of Art - which does ensure it (but that value is 'confidential')
Keep in mind that while the heirs technically 'own' it, that is just a technicality. They can't sell it, keep it in their home, or even MOVE it to a different museum.
Since it can't be sold, (and they can't keep it or even move it) their accountant valued it as $0 (three different appraisers did that). The IRS said it is worth $65 million and is demanding $29.2 million taxers. Note that this is in addition to the $471 million in estate taxes they already paid. The $29.2 million includes penalty tax rates. In addition, they will owe an extra $11.7 million in penalties, for a total tax of $40.9 million dollars.
Given the fact that the MET ensures it, you would think it would be possible to price. However, the IRS has been incompetent - they originally valued it at $15 million, but upped the price.
The $15 million value was based "solely on artistic value', without reference to the laws, despite the fact that the IRS's official policy is to take account of the laws, which should of course LOWER the price - as it makes it harder to sell. For example, some machine guns are legal to buy in the US without expensive permits and licenses because they were grandfathered in, before the ban on machine guns. They sell for FAR more than similar guns that are illegal to buy without said permits.
The IRS however got the $65 million figure by assuming the item would be sold on the black market.
Both sides have acted in bad faith - the IRS is being just as stupid as the heirs.
The really stupid thing is the eagle can easily be separated from the rest of the artwork.
This is how I what I would do.
First, state I am judge and the law is all about technicalities, not justice. If I declare something is not a sale, then it's not a sale - even if it looks like a sale. Then give both parties an ultimatum. Have the IRS state an amount of money that they think it is worth. Then give the heirs a choice.
- Pay taxes on that value - without penalties of any kind (don't punish them for making a fairly reasonable decision, especially when the IRS is being a moron.)
- Donate the eagle and only the eagle to the IRS, and accept the IRS's offer (the same one the IRS wanted them to pay taxes on) as a legal sale of the rest of the artwork to the IRS. Subtract out the tax bill for that value. As a judge, he can declare that it is not a sale of the eagle, even if it looks like a sale. Declare it to be a sale of the non-eagle bits, and the eagle is being donated with a states valued of $100. If the IRS chooses to keep their two separate pieces of property together, as per the original art, that's their business.
- If the IRS refuses to pay the money, then the judge declares the bird the property of the Smithsonian, on condition that the Smithosian loan it out to any museum that purchases the rest of the art. Declare the eagle worth $100, while the heirs keep the rest of the art and put it up for bid. Also, throw the IRS representatives that priced it but refused to buy it (excuse me, refused to buy the non-eagle portion of the art) at that price in jail for contempt of court.
The judge could tell the heirs that if they want to donate it to a museum of their choice, that he would be willing to declare it worth $100, and have them pay taxes on that money. If the judge is being a smartaleck, he could even have them pay the penalty tax rates on that $100.
Usually it makes far more sense to settle an issue out of court. With the right judge, and a bit of creative thinking, you can solve most issues - as long as both parties are willing to negotiate IN GOOD FAITH.
Wednesday, July 11, 2012
An examination of conservative thought process
Dan Mitchell, a top conservative fiscal expert, likes to use a beer tab explanation of why conservatives want to tax the poor and let the rich off scott free. I find his explanation very misleading, to the point of fraud, but it is helpful in revealing his thought process. (You can find his incredibly poorly thought out analogy here.)
A quick summary: ten men go to a bar, they have a $100 bar tab, and they split it up in a way similar to the current tax bill. They get a discount 'because they are such good customers'. Then they argue about how the discount was divided. Eventually they beat up the rich guy, who paid over 60% of the original bill because he got about 50% of the discount. Next time they go the bar, the rich guy doesn't show up, and they can't pay their bill.
This analogy is amazing poor for our current tax system. It's only true importance is in describing the mindset of a conservative. For purposes of this piece, I will pretend all conservatives think the way Dan Mitchell does. Yes, I know that is a bit of a stretch, but in my experience his core beliefs are rather typical.
Conservatives thinks governments are a luxury, not a necessity. Bars are luxuries, you don't need them. Governments are a necessity, more akin to a grocery store. That's why we have them. No one LIKES government - not liberals or conservatives, we need it. We do argue about what it needs to do.
Conservatives thinks that country is owned/controlled just by the conservatives, as opposed to all Americans, ignoring the liberals and the moderates. He had the bar tender willing offer a a discount - but tax cuts are a Republican 'solution' looking for a problem. It is NOT something Democrats are known for. To correct the analogy, it it should be the customers demanding a discount, claiming that if they get a discount, they can buy more stuff and it will all even out. (aka - the core GOP belief that lower taxes rates grow the economy - higher tax income).
Conservatives refuses to admit that the wealthy are the ones in control, as opposed to the poor. In the analogy, the rich guy isn't demanding the discount, but in real life, he is. The top 1% don't sit back and accept what everyone else offers. Congressmen are almost all wealthy, they give access to the wealthy and most of the money in politics comes from the wealthy. Ignoring this fact is ridiculous.
Conservatives ignore the fact that while they are giving things to the wealthy, they are also taking from the poor. Because the GOP doesn't just insist on tax cuts, they also want to cut services to the poor. A better analogy would be if our wealthier patrons insist that the grocers store stop giving away water to thirsty people, claiming it is just a waste of money and they want to get all the money back in discounts, not in free sample. Suddenly, having the wealthy guy get beat up at the end of the story makes a lot more sense if he was cutting off free water to thirsty people, just to lower his bill.
Conservatives insists that everyone else is picking on him, during the exact same time that he is throwing punches. Jon Stewart makes a career of throwing exact hypocritical quotes from Fox back at the people that spew filth out. Anyone that watches the news or politics hears far more comments protecting the wealthy than the rich guy. There is not a single comment on Fox news about how bad the wealthy people are - unless they are wealthy Democrats. Even CNN is more likely to talk about 'job creators' than about 'robber barons'. In reality, we aren't beating up a poor defenseless wealthy guy - at the very least it is a fair fight, and many of us think he gets in far more low blows than we get in.
Conservatives love to 'focus the discussion', not acknowledging the counterpoint. Effectively, it's like saying look how you don't need to spend more on your house because you just had the roof done, even though the foundation is rotten. If his analogy was fair, the business should have a flat entree fee just to get in the door that everyone has to pay - and it's about the same amount - rich or poor. In real life, in addition to Federal income taxes, which does tax the wealthy slightly more than the poor, (except for the very wealthy who pay less tax than the middle class), there are a ton of state and federal taxes that affect the poor far far more than the wealthy - from FICA, sales tax, state income tax, etc.etc. etc. Our tax system is set up to have the wealthy pay federal income tax and not much else, while the poor pay the majority of other taxes.
(Side note - You shouldn't be fixing the federal income tax first. A prime example of this is sales tax. High sales tax directly affects business sales. When you have a tax holiday, sales go up. The same can NOT be said about income tax. Salaries are higher in states with high state income taxes, lower in states with low state income taxes. Top 5 states with highest income per person are Connecticut, Massachusetts, New Jersey, Maryland, New York. (average income by state) The top 6 states with the highest income tax are: California, Hawaii, Iowa, New Jersey, New York, Rhode Island. (income tax by state). Note, the low end gets weird because states try to attract retirees and they don't have salaries (Florida most famously.), and we are talking about income tax affecting salaries.)
Conservatives want to kow-tow to the rich to keep them happy. The 'moral' of his story is that if we keep unfairly requiring the rich to pay an equal share of their wealth as taxes, then they will pick up and leave. To that I say, FINE. As long as we tax their wealth on the way out, I am totally OK with wealthy people deciding they don't want to be Americans. If they go, that just will create more opportunities for new wealthy people to rise in America.
We are not a cold war communist country with a Berlin wall. We don't need to keep people in. If you don't like this country, leave. If you'd rather live in a third world hell hole where the poor get no services just so that you don't have to pay taxes, then GO THERE, and leave America as it is. Because we will be just fine without you. But we will tax your money on the way out - you earned it here, you need to pay your fair share of taxes. Also, don't come crying to us when the poor people overthrow your government and take your wealth.
Real Americans are Americans not because of greed or wealth, but because we believe in:
Note the total absence of reverence for money. If you value money above and beyond Life, Liberty and the pursuit of Happiness, then we don't need you.
I would pay double taxes to stay in this country - as long as everyone else has to do the same thing. That's a very important thing - because while that single sentence I quoted above makes no mention of money, it does state that all men are created EQUAL.
This is of course the most revealing of all - certain conservatives think money is the single most important thing in the world and the only reason anyone would ever select a country to live in. They would give up their rights, freedoms, all to get money. Which quite obviously demonstrates their value system.
A quick summary: ten men go to a bar, they have a $100 bar tab, and they split it up in a way similar to the current tax bill. They get a discount 'because they are such good customers'. Then they argue about how the discount was divided. Eventually they beat up the rich guy, who paid over 60% of the original bill because he got about 50% of the discount. Next time they go the bar, the rich guy doesn't show up, and they can't pay their bill.
This analogy is amazing poor for our current tax system. It's only true importance is in describing the mindset of a conservative. For purposes of this piece, I will pretend all conservatives think the way Dan Mitchell does. Yes, I know that is a bit of a stretch, but in my experience his core beliefs are rather typical.
Conservatives thinks governments are a luxury, not a necessity. Bars are luxuries, you don't need them. Governments are a necessity, more akin to a grocery store. That's why we have them. No one LIKES government - not liberals or conservatives, we need it. We do argue about what it needs to do.
Conservatives thinks that country is owned/controlled just by the conservatives, as opposed to all Americans, ignoring the liberals and the moderates. He had the bar tender willing offer a a discount - but tax cuts are a Republican 'solution' looking for a problem. It is NOT something Democrats are known for. To correct the analogy, it it should be the customers demanding a discount, claiming that if they get a discount, they can buy more stuff and it will all even out. (aka - the core GOP belief that lower taxes rates grow the economy - higher tax income).
Conservatives refuses to admit that the wealthy are the ones in control, as opposed to the poor. In the analogy, the rich guy isn't demanding the discount, but in real life, he is. The top 1% don't sit back and accept what everyone else offers. Congressmen are almost all wealthy, they give access to the wealthy and most of the money in politics comes from the wealthy. Ignoring this fact is ridiculous.
Conservatives ignore the fact that while they are giving things to the wealthy, they are also taking from the poor. Because the GOP doesn't just insist on tax cuts, they also want to cut services to the poor. A better analogy would be if our wealthier patrons insist that the grocers store stop giving away water to thirsty people, claiming it is just a waste of money and they want to get all the money back in discounts, not in free sample. Suddenly, having the wealthy guy get beat up at the end of the story makes a lot more sense if he was cutting off free water to thirsty people, just to lower his bill.
Conservatives insists that everyone else is picking on him, during the exact same time that he is throwing punches. Jon Stewart makes a career of throwing exact hypocritical quotes from Fox back at the people that spew filth out. Anyone that watches the news or politics hears far more comments protecting the wealthy than the rich guy. There is not a single comment on Fox news about how bad the wealthy people are - unless they are wealthy Democrats. Even CNN is more likely to talk about 'job creators' than about 'robber barons'. In reality, we aren't beating up a poor defenseless wealthy guy - at the very least it is a fair fight, and many of us think he gets in far more low blows than we get in.
Conservatives love to 'focus the discussion', not acknowledging the counterpoint. Effectively, it's like saying look how you don't need to spend more on your house because you just had the roof done, even though the foundation is rotten. If his analogy was fair, the business should have a flat entree fee just to get in the door that everyone has to pay - and it's about the same amount - rich or poor. In real life, in addition to Federal income taxes, which does tax the wealthy slightly more than the poor, (except for the very wealthy who pay less tax than the middle class), there are a ton of state and federal taxes that affect the poor far far more than the wealthy - from FICA, sales tax, state income tax, etc.etc. etc. Our tax system is set up to have the wealthy pay federal income tax and not much else, while the poor pay the majority of other taxes.
(Side note - You shouldn't be fixing the federal income tax first. A prime example of this is sales tax. High sales tax directly affects business sales. When you have a tax holiday, sales go up. The same can NOT be said about income tax. Salaries are higher in states with high state income taxes, lower in states with low state income taxes. Top 5 states with highest income per person are Connecticut, Massachusetts, New Jersey, Maryland, New York. (average income by state) The top 6 states with the highest income tax are: California, Hawaii, Iowa, New Jersey, New York, Rhode Island. (income tax by state). Note, the low end gets weird because states try to attract retirees and they don't have salaries (Florida most famously.), and we are talking about income tax affecting salaries.)
Conservatives want to kow-tow to the rich to keep them happy. The 'moral' of his story is that if we keep unfairly requiring the rich to pay an equal share of their wealth as taxes, then they will pick up and leave. To that I say, FINE. As long as we tax their wealth on the way out, I am totally OK with wealthy people deciding they don't want to be Americans. If they go, that just will create more opportunities for new wealthy people to rise in America.
We are not a cold war communist country with a Berlin wall. We don't need to keep people in. If you don't like this country, leave. If you'd rather live in a third world hell hole where the poor get no services just so that you don't have to pay taxes, then GO THERE, and leave America as it is. Because we will be just fine without you. But we will tax your money on the way out - you earned it here, you need to pay your fair share of taxes. Also, don't come crying to us when the poor people overthrow your government and take your wealth.
Real Americans are Americans not because of greed or wealth, but because we believe in:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
Note the total absence of reverence for money. If you value money above and beyond Life, Liberty and the pursuit of Happiness, then we don't need you.
I would pay double taxes to stay in this country - as long as everyone else has to do the same thing. That's a very important thing - because while that single sentence I quoted above makes no mention of money, it does state that all men are created EQUAL.
This is of course the most revealing of all - certain conservatives think money is the single most important thing in the world and the only reason anyone would ever select a country to live in. They would give up their rights, freedoms, all to get money. Which quite obviously demonstrates their value system.
Saturday, June 30, 2012
About the 3% Bush Tax Cuts
The Bush Tax cuts were relatively small - about 3%. It's not enough to fix the tax rate. I heard Senator Rubio (Most Dangerous Republican for 20116) talk on the Daily Show recently. He made a lot of comments that indicate immense failures of basic logic. Mostly things where he argued one way to support himself, then ignored his own logic when it proved him wrong. Here are some simple facts that he seems not to know. I am grouping together supporting facts with conclusions.
About tax raises not helping the deficit:
The government is far more likely to 'buy American'. Moreover, money spent by the government tends to go to poorer people than money spent by wealthy people. Guess what, poorer people are in debt which means, like the US government, they spend it BEFORE they get it. Net result, money collected by the government helps the GDP quicker. Higher taxes can in fact raise the GDP.
Finally, Rubio made some blatantly wrong assumptions.
About tax raises not helping the deficit:
- In 2012, the tax deficit is about $1.17 trillion (source). In 2011, the US Gross Domestic Product (GDP) was about $15 trillion (source). Note the economy is significantly more than 10x bigger than the deficit.
- By his own admittance, the economy is affected by many more things besides taxes, as proven by the fact that GW Bush lowered taxes but the economy got bad. Tax rates have a direct result on tax income, but a REDUCED effected on the economy, as it has to go through the filter of the Government.
- If something is too small to significantly affect the deficit then it must also be too small to significantly affect the economy.
- Granted, if taxes are set at 100%, no one works, so you get no taxes, and lowering taxes rates would increase tax revenue. But but similarly, if you lower tax rates to 0, you get no taxes. So it IS possible to raise tax revenue by raising taxes, at least under certain circumstances. Somewhere between 100% and 0% is the optimal tax rate. At that rate if you change it in either direction (raise or lower), then total revenue goes down. But we don't know where it is. It could be at 20%, it could be at 80%. I'm fairly confident that it is in fact between those two numbers.
- I'm not saying that taxes are already that low, but I am saying that you CAN'T just claim that taxes are already too high. We don't KNOW and the GOP has made no attempt to prove it. They just go with the wild ass guess that it has to be lower than the current tax rate because if they say that people vote for them - even if they are wrong and doing so would make things worse.
- When they passed their tax rate, they economy got worse.
- Worse, not only don't we know the 'perfect rate', it could VARY. That is, in a good economy, it could be say 30%, and in a bad economy it might be 20% - lower to encourage people to take more risks and make profit. Or maybe in a bad economy it could be 40% - higher to encourage people to work harder to make more money.
The government is far more likely to 'buy American'. Moreover, money spent by the government tends to go to poorer people than money spent by wealthy people. Guess what, poorer people are in debt which means, like the US government, they spend it BEFORE they get it. Net result, money collected by the government helps the GDP quicker. Higher taxes can in fact raise the GDP.
Finally, Rubio made some blatantly wrong assumptions.
- He claimed that the deficit was the single most important thing. No. We can fix the deficit simply by allowing inflation to run wild - or even simply declaring bankruptcy and not paying it. Our lives are more important than the deficit. Similarly we will NOT give China all of our military hardware and have them pay off the debt. Nor will we sell US Citizenship to illegal immigrants to get rid of the deficit. Nor will we abandon our Constition just to eliminate the deficit. There are LOTS of things more important than the deficit. Rubio used this false assumption to ignore anything that Democrats like, but casually 'forgets' about it when he wanted to do things the GOP likes.
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