"European Tax Rates"

I'm hearing folks say that Bernie Sanders would bring "European tax levels" to America...

Unfortunately, we already pay "European tax levels". And we don't even get free healthcare or free college out of it (and many European countries actually pay you to live while you go to college or raise children).

The total "tax burden" for the United States as a country is 26.9%, which ranks us behind European countries like Switzerland (29.4%), Greece (30.0%) and Ireland (30.8%). (BTW, Canada is at 32.2%).

BUT ... that 26.9% doesn't include all of our state and local taxes! Because we are the only country in the world with 50 different tax systems. In Connecticut, for example, we add another 13.05% in income tax and sales tax. Plus another 6.452% in property taxes (as an average spread out over the state population). That brings the overall tax burden up to 46.4% for those of us in the Nutmeg State.

That's more than Germany (40.6%), France (44.6), Norway (43.6%), Finland (43.6%) or even Sweden (45.8%). In fact there is only ONE country in the world (Denmark) with higher taxes.

BTW, these tax rates are even worse for the middle class, because the one place where the U.S. *does* have low tax rates is for millionaires and billionaires. (As business owners, and actual "job creators", my wife and paid more than 50% of our income in taxes in 2014).

So, why do we pay so much and get so little?

The biggest reason is "defense". We spent $596 billion on the Department of Defense in 2014 and another $98.8 billion on "Homeland Security". We might think "defense" is a good thing -- that we are supporting our troops and veterans. But the VA is an entirely separate budget (~$150 billion) and most of the $596 billion isn't going to pay our soldiers. Our army is the smallest it's been since 1940 and the navy is the smallest since 1915. Instead, we are spending $400 billion on projects like the F-35 Strike Fighter, which can't fly in bad weather or at night, and still has never been used in combat.

The 2nd biggest reason is healthcare. Our GOVERNMENT spends more on healthcare than any other country in the world. That doesn't even include the amount that we are all paying for PRIVATE health insurance. The reasons for high medical costs are too much to go into here (the Affordable Care Act was 1000+ pages and it only started to tackle the problem). But, compared to other countries we are completely wasting the 24% of that money that goes directly to insurance companies instead of treating patients. And we have the highest-paid doctors in the world thanks to a monopoly (the AMA) that limits the total number of doctors.

The 3rd biggest reason is prisons. It costs more to keep an 18-year-old kid in prison than to send him to Harvard. But as a country we've decided that violent crime is "rampant" (it's not) and "drugs are bad" (even though marijuana is now decrimalized in 20 states, and yet it's the #1 reason we send people to jail).

Sources:

http://norml.org/aboutmarijuana/item/states-that-have-decriminalized

https://www.whitehouse.gov/omb/budget/Appendix

http://boards.straightdope.com/sdmb/showthread.php?t=724209

https://en.wikipedia.org/wiki/United_States_federal_budget

http://en.wikipedia.org/wiki/Lockheed_Martin_F-35_Lightning_II

http://www.politifact.com/truth-o-meter/statements/2014/oct/05/lindsey-graham/lindsey-graham-army-smallest-1940-navy-smallest-19/

http://www.cbsnews.com/news/the-high-price-of-americas-incarceration-80-billion/

https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

The Poor Get Screwed ... Again

This post should be short, as the graph speaks for itself.

Congress just passed, and Obama just signed, the "American Taxpayer Relief Act of 2012" (aka "ATRA").

Since Obama won the election, we know that ATRA shifted the federal tax burden from working people towards the top 2%. Right?

Wrong.

The percentage increase, by household income group, of federal tax burden, from last year to this year:

As expected, everyone's taxes went up. But the poor got hit with a 120.9% tax hike.

Before the comment section fills up, I do realize that those earning $500,000 pay more taxes in terms of absolute value than someone earning $20,000. (In fact, I used to be a Republican).

For example, a family earning $20,000 that had a $2,000 federal tax bill could see their taxes go up to $4,418 -- an increase of $2,418.

Meanwhile, a young stock trader making $500,000 on Wall Street might see his federal taxes go from $75,000 to $77,850 -- an increase of $2,850.

$2,850 is bigger than $2,418. Therefore, Congress is soaking the rich! Your logic is impeccable. Now go fuck yourself.

Seriously, which family can better absorb a big tax hike?

As the poor already pay much more in taxes as a share of their income, this is horrible news for those families hit hardest by the recession.

Mitt Romney famously said: "I'm not concerned about the very poor."

It appears that Obama and Congress feel the same way.

Source: Tax Policy Center

Middle-Aged White Man Denounces GOP

Dear Republican Party,

Allow me to introduce myself:

1) I am a white male. I am over 40 years of age. My family is white. My wife is so white that she has solar urticaria. She is literally allergic to sunlight.

2) I love America, the best country on earth. I am extremely patriotic and I strongly support our men and women in uniforms. My parents met in the Air Force -- I literally wouldn't be here without our armed forces. My company gives away all of our products, for free, to active members of the military.

3) I revere the Constitution. Our founding document is so brilliant that it hints at divine inspiration.

4) I can trace my family line in the New World back to 1630. My great great great great great great grandfather was a Revolutionary war hero.

5) I am pissed off at the current immigration situation. I work hard and pay my taxes while illegal immigrants and their employers get off scot-free.

6) I believe that the Federal government is way too big and that government bureaucracy is one of the greatest threats to our economy and to our freedom.

7) I am a business owner and job creator. Because our product is internationally popular, more than 60% of our revenue over the last two years came from overseas. In other words, I am doing my part to fix the trade imbalance and create American jobs.

8) I voted for George W. Bush and John McCain.

9) I am a workaholic. I haven't taken a real vacation since 1998. At the age of 14, I spent the summer literally "breaking rocks in the hot sun" for $4.00 an hour.

10) I believe in self-sufficiency and abhor debt. When I was laid off, I didn't collect unemployment insurance, because we didn't need it. Even though I have a disability that prevents me from working most jobs, I have never applied for benefits. My wife and I have no debt and we paid off a 30-year mortgage in less than 8 years.

Based on the above, you know that I voted for Mitt Romney yesterday. Right?

Wrong.

Here's why:

1. Fiscal Irresponsibility
I grew up learning that the GOP excelled at fiscal responsibility and economic growth. Roosevelt cranked up the national debt (from below 25% of GDP, to more than 100%) in order to pay for Social Security and World War II. Then Eisenhower was elected in 1952 and he brought the debt from 60% of GDP down to 45% over the next 8 years.

Lyndon Johnson didn't significantly increase the debt, but he did create two huge government programs (Medicaid and Medicare) and escalate the War in Vietnam. By the time President Nixon left office, the debt had reached its lowest point since the Great Depression (just 23.9% of GDP).

Alas, the Republican Party since Richard Nixon has looked more like the Bizarro Republican Party. And these failures by the GOP over the last 40 years cannot be blamed on external events or on Democrats in congress. They are a direct result of Republican policy.

Between the Bush Tax Cuts (a huge handout to the rich), Medicare Part D (a huge handout to pharmaceutical companies) and the War in Iraq (a huge handout to private defense contractors), George W. Bush added more than $7 trillion to the national debt.

By comparison, the Democrats have looked like Scrooge McDuck, pinching pennies and lowering the deficit. Clinton ended welfare as we knew it and turned Reagan's huge budget deficit into an actual budget surplus. Even Obama the "socialist" has reduced the deficit by over 3% of GDP in the last three years. This is more than in any 3-year period since the early 1950s.

2. Your Hatred Of The Free Market
Our government is giving more than $78 billion to oil companies over the next 10 years. That's more than $8,000 out of my family's pocket. Obama tried to end these subsidies, but he was voted down by 51 senators. Forty-seven of these senators were Republicans.

In 2005, Dick Cheney and Republicans in congress exempted Halliburton and other natural gas drillers from regulation under the Safe Drinking Water Act. If I compost broccoli stems in my backyard, I have to comply with the SDWA -- but Halliburton doesn't.

These examples are just the tip of the iceberg. This isn't the free market. This is the antithesis of the free market. This is the government taking tax dollars from my pocket and giving them to rich people.

3. "Job Creators"
John Boehner is either an idiot or a liar. He describes those benefiting from the Bush tax cuts as "job creators" and claims that raising their taxes will cripple our economy. This is not only specious, it is the opposite of the truth. Increasing top marginal tax rates increases the incentive for business owners to hire more people and reinvest in their company, because such investments are entirely tax-deductible.

All evidence from the last 70 years shows that the economy does much better when we at least try (with high marginal tax rates) to get the rich to pay their fair share of taxes. This is because the rich do not create jobs. Small businesses do. According to ADP, small businesses (with fewer than 50 employees) created 5.5 million new jobs between 2001 and 2007. Large businesses (with 500 or more employees) actually eliminated more than 600,000 jobs during the same time period.

Virtually all small business owners earn less than $250,000 per year. Unlike Sam Walton and the Koch brothers, small businesses can't use political power to get giant handouts from the government. Instead, I pay more than my fair share of taxes while creating American jobs. If every American earning more than $250,000 had the same trade surplus that I do, we would have a national trade surplus of more than $1.3 trillion (instead of our current trade deficit of about $550 billion).

The next time you see a small business succeed, remember: I built that! John Boehner and Paul Ryan didn't build it. And the Republican party certainly didn't build it.

4. National Defense
The Iraq War wasted trillions of dollars, killed 4,487 American soldiers and injured almost 32,000 more. It also made us less safe: "Al Qaeda In Iraq" didn't exist before we invaded.

Barack Obama issued the order to kill Osama Bin Laden. Mitt Romney said it wasn't worth the effort to "catch one person".

5. Integrity
My breakup with the GOP started that day in 2003 when President Bush lied to me about WMDs in Iraq.

President Clinton lied about oral sex. President Bush lied to get us into an unnecessary war that killed more than 4,400 American soldiers and over 100,000 civilians. Both of those lies were wrong. One of those lies was evil.

6. Wealth Redistribution
I paid over $200,000 in taxes last year. And yet my wife volunteers at food pantries so that American children won't go hungry. We have had to give money to friends to keep them from becoming homeless. Meanwhile, the Koch brothers are busy trying to steal more than $10.6 billion each year from middle class taxpayers.

The GOP complains that wealth is being "redistributed" from the rich class to the poor. The truth is that the Federal government primarily redistributes wealth from the middle class (actual job creators) to the rich. Democrats like Obama and Biden realize this, and are making an honest effort to reverse this ruinous trend. If we continue transferring wealth from the middle class to the super-rich, we will have the same income inequality as Brazil in just 6 years.

If you don't know why having the same Gini coefficicent as Brazil would be a bad thing, you need to spend more time reading international news and less time reading Ayn Rand.

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Take note that I didn't mention Obamacare, abortion, climate change, racism, gender discrimination, gay marriage or other "social issues". I haven't abandoned the GOP because the GOP hates gays. I have abandoned the GOP because you no longer stand for the things that you say that you stand for.

National politics in my lifetime can be easily summarized. The GOP espouses a set of beliefs that are important to the American people such as: integrity; self-reliance; fiscal responsibility; economic opportunity; rewarding hard work; protecting families; securing our borders; and maintaining a strong defense. Then, when we elect Republicans to advance these ideals, you fail on every count and we have to wait for a Democrat like Bill Clinton or Barack Obama to actually govern according to these principles.

I can no longer call myself a "Republican" when that label has come to mean "rich white guy pillaging the middle class for personal gain".

I'm Not Concerned About The Very Poor

Photos by Gage Skidmore and Robert Couse-Baker

Sources: Congressional Budget Office, New York Times

Click graphic for larger version (http://bit.ly/xKp1K6).

We Are The 53%!

Photo by Gage Skidmore

Michelle Bachmann (R-MN) pointed out yesterday that 47% of Americans pay no taxes. In her defense, I think she meant to say that 47% of U.S. households don't pay federal income taxes. Nevertheless, income taxes are the biggest part of my yearly tax bill, so it seems that she has a point. As someone in the 53% that actually does pay income taxes, I'd like to know how our income tax system lets 47% of us get by paying nothing.

Here are the income tax rates, by income category, provided by the Congressional Budget Office:

Representative Bachmann is right. There are about 140 million Americans on the left side of the graph that aren't paying any taxes. But income taxes aren't the only federal taxes. Almost $900 billion in annual revenue is collected through payroll taxes on each and every paycheck. Another $75 billion is collected in excise taxes, such as those on gasoline. When we add these things in, things become a bit more equal.

However, it's clear that federal taxes still fall disproportionately on the top 20%.

Unfortunately, those aren't the only taxes we pay. More than 40% of our yearly tax bill goes to state and local governments, mostly in the form of sales and property taxes.

When we add together all taxes, we see that "the poor" (the bottom 20%) are the ones paying the highest tax rate.

Wow. This is hard to believe. But the more you think about it, the more it makes sense. The working poor spend the highest share of their income on basic necessities like housing and transportation. This is where property and sales taxes hit the hardest.

When I started researching this, I honestly thought that I would find out that the richest Americans were paying the highest tax rates. After all, we are constantly told that our tax system is progressive, meaning that tax rates rise as income levels rise.

As it turns out, the U.S. tax system isn't progressive. Of all the groups above, the top 1% actually have the 2nd lowest tax rate. The poorest Americans have a tax rate that is 38% higher than the rate paid by the richest Americans.

Wow.

So, the next time someone tells you that 47% of Americans don't pay any taxes, show them this graph:

Sources:
Historical Effective Tax Rates: 1979-2006. Congressional Budget Office.
Additional Data on Sources of Income and High-Income Households. Congressional Budget Office.