You probably missed this in Saturday's paper

Even if you noticed the headline, what the article is *actually* about is nothing short of a reason to go to DC and hunt down Pelosi and Reid. I certainly have not seen or heard anything on CNN, NBC, etc.

http://www.ajc.com/metro/content/printedition/2009/04/25/budget0425.html

Headline:

Democrats close in on budget pact

Subhead is much more accurate:

Agreement would move Obama plan to overhaul health care system forward without threat of Republican filibuster

What Dems are doing here is using a procedural rule that allows budget bill to not face filibuster. Since Obama's health-care bill would *never* pass on it's own merit at this point Reid & Pelosi are tacking the health-care bill onto a budget bill.

So...something as important and that will change the countries economy (esp. taxation and governance) will be subject to a maximum of 20 hours of debate and will require only a simple majority in the Senate:

Under typical Senate rules, 60 votes are needed to advance a bill, but passage of the budget plan would allow for a so-called reconciliation bill that can pass with just a simple majority and only 20 hours of debate.

And this statement is laughable:

Democrats, including Obama, say they genuinely want a bipartisan health care bill and that the filibuster-proof process would be used only if the GOP obstructs.

So, if you disagree with us, we'll do a procedural end-run because then you're simply be "obstructionist".

Combine the above with what follows. Under government health-care, the state, not your doctor determines how you will be treated. And rationing of health-care is predicted as an inevitability. I hate to say "I told you so" but...

http://www.ajc.com/printedition/content/printedition/2009/04/25/medicaid0425.html

A federal appeals court in Atlanta says Medicaid providers and state health officials should have a say along with physicians in determining how to treat patients.

Florida, Georgia and Alabama argued that their Medicaid officials should make the final decision in treating Anna Moore, a 14-year-old Georgia girl who suffers from almost daily seizures. The state is trying to reduce the number of hours she is treated by a home nurse, despite the recommendations of her doctor.

And for comic relief, we have Homeland Security Secretary Napolitano sticking both feet full into her mouth recently. First, she releases a report that lumps veterans, pro-life advocates, anti-illegal immigration groups, and tea-partiers in with skinhead and neo-Nazis as "right-wing extremists" who might be using the economic downturn to recruit for home-grown terror cells.

http://www.thelibertypapers.org/2009/04/12/homeland-security-document-targets-most-conservatives-and-libertarians-in-the-country/

Rightwing extremism in the United States can be broadly divided into those groups, movements, and adherents that are primarily hate-oriented (based on hatred of particular religious, racial or ethnic groups), and those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or rejecting government authority entirely. It may include groups and individuals that are dedicated to a single issue, such as opposition to abortion or immigration.

Then this week she goes on to say that entering the country illegally is not even a crime..."Crossing the border is not a crime per se. It is civil.”

So the Secretary for Homeland Security thinks veterans are likely to become terrorists (after all Tim McVeigh...) and doesn't even know the law regarding simple border security. She needs to read the US Code, Title 8 Section 1325...if the penalty includes imprisonment, it's criminal not civil...

§ 1325. Improper entry by alien

(a) Improper time or place; avoidance of examination or inspection; misrepresentation and concealment of facts
Any alien who
(1) enters or attempts to enter the United States at any time or place other than as designated by immigration officers, or
(2) eludes examination or inspection by immigration officers, or
(3) attempts to enter or obtains entry to the United States by a willfully false or misleading representation or the willful concealment of a material fact, shall, for the first commission of any such offense, be fined under title 18 or imprisoned not more than 6 months, or both, and, for a subsequent commission of any such offense, be fined under title 18, or imprisoned not more than 2 years, or both.

On the former screwup, she threw her office under the bus...

Napolitano blamed one of her agency’s analysts for prematurely sending out the intelligence assessment to law enforcement...

And on the latter:

Napolitano spokesman Sean Smith said: “Americans can rest assured that she understands what the law is along the border,” he said.

I don't think she does.

Joining Ms. Napolitano in the political doublespeak category, although perhaps saying what he really feels, is AG Holder regarding gun control (specifically, having the US bend to Mexico's demands):

"I don't think our Second Amendment will stand in the way of efforts we have begun and will expand upon."

So now the Constitution is just something that might "stand in the way" of the Administration's desire to control yet another aspect of our lives.

Interesting Tax Figures

For what they're worth (all numbers are for federal income taxes only).

The data below comes from tables at this link, which also has some reminders (emphasis mine):

Some important facts to keep in mind about the information provided on this page.

(1) All tax returns that have a positive AGI are included, even those that do not have a positive income tax liability.

(2) Income tax after credits (the tax measure above) does not account for the refundable portion of EITC. If it were included (as is often the case with other organizations), the tax share of the top income groups would be higher. The refundable portion is legally classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.

In 1980:

• the top 1% consisted of 932 thousand taxpayers who had AGI greater than $80,580
• they had a total of $138B in AGI, which comprised 8.4% of overall AGI
• they paid a total of $47B in taxes, which comprised 19.05% of the overall taxes
• their average effective tax rate was 34.47%
• per taxpayer, average revenue was $50,429

In 2006:

• the top 1% consisted of 1,357,192 taxpayers who had AGI greater than $388,806
  
• they had a total of $1,792B in AGI, which comprised 22.06% of overall AGI
• they paid a total of $408B in taxes, which comprised 39.89% of overall taxes
• their average effective tax rate was 22.79%
• per taxpayer, average revenue was $300,663

Even though the effective rate went down markedly, the amount of tax collected per taxpayer went up even more markedly, rising by a factor nearly six. And the share of taxes collected from this group more than doubled, although their share of income also went up 2.5x.

In 1980:

• the bottom 50% consisted of 46,619 thousand taxpayers who had positive AGI less than $12,936
• they had a total of $288B in AGI, which comprised 17.68% of overall AGI
• they paid a total of $18B in taxes, which comprised 7.05% of the overall taxes
• their average effective tax rate was 6.10%
• per taxpayer, average revenue was $386

In 2006:

• the bottom 50% consisted of 67,859,580 taxpayers who had postive AGI less than $31,987
• they had a total of $1,016B in AGI, which comprised 12.51% of overall AGI
• they paid a total of $31B in taxes, which comprised 2.99% of overall taxes
• their average effective tax rate was 3.01%
• per taxpayer, average revenue was $456

So their effective tax rate was cut in half, while their income went up 2.4x. Even though the effective rate went down markedly, the amount of tax collected per taxpayer not surprisingly did go up a bit (1.2x). However, the share of taxes collected from this group dropped quite a bit.

It is worth noting that the income figure for the lower 50% is the upper limit, while the figure for the top 1% is a lower limit. So comparisons of those numbers should keep that in mind. However, this fact must also be balanced with the recognition that a very large number of the bottom 50% actually had zero or even negative tax liability.

Following this link, we can see that in 2004, there were a total of 131,113,969 tax returns filed. Of those, 42,545,501 (32.4%) had $0 tax liability, or even had negative tax liability and actually received money from the IRS. An estimated 15 million more people earned some income but did not file a return. When these non-filers are added to the non-payers, they add up to 57.5 million income-earning people who will be paying no income taxes. Even 57.5 million is not the actual number of people because one tax return often represents several people. When all of the dependents of these income-producing people are counted, roughly 120 million Americans – 40 percent of the U.S. population – are outside of the federal income tax system.

We can also learn from that same link that

Despite the charges of critics that the tax cuts enacted in 2001, 2003 and 2004 favored the “rich,” these cuts actually reduced the tax burden of low- and middle-income taxpayers and shifted the tax burden onto wealthier taxpayers.

Tea Party

My extended family here in ATL went to the "Tea Party" last night. Accounts vary, but I would certainly believe 15,000 people were there.

Of course, the media mostly got it wrong. We weren't there protesting taxes or even Obama, per se, but run-away government as a whole. CNN reporters I saw on TV later tried to portray protesters as stupid "Don't you realize Pres. Obama has cut taxes for 95% of Americans and that you might be eligible for a $400 credit?". CNN's website to day barely mentions the event, but does have an iReport from someone who claims that he and his wife are both unemployed, but are happy to be paying their taxes and what are these people crying about.

Given how Obama carried something like 95% of black voters, admittedly, I had expected the crowd to be mostly angry white men like myself and also mostly Republicans. I was a bit surprised on the way dowtown on MARTA to be standing next to an older black gentleman who was asking me directions to get to the rally and we chatted a bit about how many people were goign to be there, that sort of thing. As we approached our stop, he said "Let's hope this is enough to get someting really started". Arriving on the scene, I was further surprised by the mixture of people there--especially the number of 20-somethings and the number of black and Hispanic folks. And there were plenty of signs along the lines of "I'm a Democrat and I didn't vote for this!"

Perhaps the most interesting twist was the number of people who left shortly after 9:00, which is when Sean Hannity came on stage. We did. Getting back on MARTA we were commenting on it, wondering if it was mostly people with kids (it was a schoolnight), and a 20-something turned around and said "It's the Hannity factor." Yep, I can agree with that.

The AJC had this to say:

The Atlanta rally was one of 20 around the state and more than 300 across the country. Billed as grassroots protests, the gatherings were attacked by critics as frauds created by Republican advocacy groups with the backing of deep-pocketed lobbyists and Fox News Channel, which reported prominently on the movement.

To which I can only respond with a statement and a question. My family are not Republicans, were not paid to be there, and rarely watch Fox News (esp. Hannity, O'Reilly, or that godawful morning show--I do like that Megan Kelly though!). For the question: when Obama campaign rallies around the country were funded by Mr. Soros and the DNC, and the supporters were flogged into a frenzy by the DailyKos and MoveOn.org, those were proclaimed to be grassroots events representing an uprising force for "change"? Oh, one more thing too, for the record, every speaker I heard was quick to criticize spending by both parties, and usually pointed out that this is nothing new but is something that has reached a limit with the "stimulus" bill and the pork-laden budget with $1T+ deficit passed are just the back-breaking straws for us camels.

President's virtual Town Hall meeting: sham

The virtual town hall meeting was on TV the other night. Here's a summary of it.

The phrase use in this article

"In a first for the White House, the president braved a public grilling from a pool of around 100,000 people who had submitted questions via the internet."

is, quite simply, false. The questions were not an ad hoc "grilling" but a carefully culled selection of questions, pre-prepared answers to which the President was able to read from his teleprompter.

I, in fact, submitted a question that I knew stood little chance of getting answered:

Would you eliminate corporate income taxes? This would provide more than $500B of stimulus and make the US the most favorable nation for doing business. You could offset $370B lost
revenue by collecting $300B in annual unpaid personal income taxes.

[Questions were limited to 250 characters. Otherwise my question would have been more detailed, along the lines of my previous blog entry.

Not only were the questions not only carefully selected to enable maximal proselytizing by Mr. Obama, even the people asking the "live" questions were actually all former Obama staffers.


BTW, the #1 submitted question, which they figured they *had* to address even if it was off-topic simply because it was by far the most asked question, was a variation on a theme: "Will you legalize marijuana?"

The answer to that was a simple no, then they moved on the the real show.

Vent and an answer

From today's AJC Vent column:

The U.S. Postal Service has to cut services and jobs because it is losing money, but can you tell me a single U.S. agency that makes money?

How about the U.S. Mint?

Recession hitting latinos, blacks harder

There's this article that says so.

But I'd like to mention the racism exhibited by one of the people interviewed in the article:

Salter's mother worked as a housekeeper, and his father was a custodian. Before his divorce, Salter's stepdaughter and her four children lived with him for many years. Professional blacks "don't usually start out with an inheritance," he said. "On top of that, quite often things happen in our families to cause us stress. An unexpected child or grandchild, drug problems. When you try to set aside money to put your kids through college, all of a sudden you have to say, 'I can't let this family member fall and become homeless.'

"I would say eight out of 10 people I know have a similar situation."

The main implication I get from that is that white people usually start out with an inheritance, and it's that reason why they succeed where so many black people may fail.

For the record, when my father died, he left each of my two brothers $10,000. He left me nothing, except the non-binding suggestion to his wife (my stepmother) that she sell me his share of the family place on Lake Ontario for the price of $1. On which I immediately began paying taxes. I was 31, hardly "starting out with an inheritance." It's unlikely we would have gotten anything had he lived beyond the age of 55.

Having said that, inheritance is hardly a fact of life for anyone. According to a study conducted by Jagadeesh Gokhale and Laurence Kotlikoff for the Federal Reserve Board, 92% of Americans will receive inheritances of $0, while slightly more than 4% will receive a modest sum (less than $25k).

Nearly 92 percent of the population will receive nothing at all, the study concluded.

Of the 8 percent who stand to inherit something, half will inherit less than $25,000, while just 1.7 percent of the population can expect to inherit more than $50,000.

The study was initially published in 2000, but the authors say if anything, the picture has worsened.

That means that for most Americans, any inheritance will not be a “life-changing event.”

Clearly it is the case that the very rich will accumulate wealth that is passed down. And further I will submit that the top 1% are very probably white. But it is disingenuous, if not outright racially offensive, to portray that tiny slice of the uber-rich as being representative of the experience of all white people.

For those who do inherit, the primary source of that inheritance is value of the parent's home, and we know where that all just went.

Certainly there is less inherited wealth among blacks because of previous institutional racism. Segregation prevented eariler generations from accumulating wealth. And the numbers now continue to paint a bleak picture, but again, it is not fair to point at white people and say they succeed because they inherited wealth--because it just doesn't happen in any substantial way for 95% of people of any race. Further, this book, says that only 10-20% of the black-white difference in wealth is attributable to inheritance.

According to this book, there's some not-so-shocking nor racist tidbits:

• 62% of households headed by single parents have no savings or other financial assets
• 40% of households with only high-school educations have no nest egg
• nearly 1/3 of all households are without financial resources
  

The same book goes on to demonstrate that when occupation, education, and income are factored out (i.e., given similar levels of each) black households still end up with $25k less in savings than their white counterparts. Middle-class blacks earn 70-cents for every dollar their white counterparts make, but only accumulate 15 cents of wealth for every dollar of wealth accumulated by their white counterparts.

Racism may be a factor, but it ain't the only factor. I think most people would agree that institutional racism has decreased steadily since the '60s. Yet the disparity in wealth between whites and blacks and hispanics has hardly changed at all in the last 20 years. One reason explored in this paper is that blacks may have lower risk-tolerance than whites, and therefore when they do have similar income, education, etc. they simply choose less-risky--and therefore often less lucrative-- investments. On the other hand, stock ownership rates among blacks "grew much more rapidly" than whites between 1996 and 2001, but then the trend reversed between 2001 and 2004.

Based on a logistic regression model, Black households had the same predicted stock ownership rates in 1998 and 2001 as White households that were otherwise similar in terms of income, net worth, risk tolerance, and other characteristics, but in 2004 Black households had significantly lower predicted stock ownership rates than White households.

All researchers have found that Black and Hispanic households are less likely than White households to own risky assets than White households. Previous research has also found that Black and Hispanic respondents are less willing to take investment risk than White respondents. The level of investment risk a household is willing to take has implications for the household’s financial behavior and future well being. Owning high return investments is necessary for households to be able to reach long term goals such as having a comfortable retirement.

While doing some reading on this topic, I found some gems:

• "Wealth has never been democratically distributed in U.S. society."
• While the stated intention of most asset building policies is to benefit working and poor families, a deeper look shows that they have failed to benefit low-income families; in large part owing to the predominance of asset building policies that operate through the tax code. Currently, almost $300 billion per year in federal tax expenditures goes to support asset building among individuals in the form of tax credits, deferments, or exemptions for investments, homeownership, and retirement accounts. These policies are of little benefit to many low-income individuals who do not have tax liabilities.
• "Lack of wealth is both a cause and an effect of low income and poverty, and the two are highly correlated."

AIG bonuses returned--tax implications?

Just a quick thought, since I am again too busy to really put in the effort here today.

As I understand it, you owe taxes on money you have been paid. In particular, you are responsible for taxes in the year in which you take constructive receipt. So those AIG folks who were paid bonuses took constructive receipt of that money. At that moment, it became income which they must report and pay taxes on. What they do with it after that is up to them.

Now, many of them have returned the money. They have given AIG a gift. They did not return money paid to them by mistake, as if their paycheck accidentally got an extra zero. They did not refuse to money when it was offered (an act which would negate constructive receipt). They just dipped into their cash-on-hand and wrote a check to AIG. Anytime you render a gift to anyone other than an IRS recognized charity in excess of $13,000 ($26,000 per couple) you will be required to pay a gift tax.

On top of all that, Congress is moving to tax the money at 90%. I don't expect Congress to so carefully craft such a law so as to exempt from normal income or gift taxes money that gets returned. They might not even think to exempt returned money from the 90% threat!

So the people who have returned their bonuses face normal income taxes, plus gift taxes, on money they have returned! And they may owe 90% taxes on top of that!

So a guy who was given a bonus of $1M in January, returns the money in February. He took constructive receipt. He owes 35% income tax on the $1M, ignoring deductions etc. That's $350k. He "returned" his $1M bonus, by giving AIG a gift. He's now out the $1M, but still owes $350k in income tax (maybe $900k!!). Adding insult to the injury, he may face up to 45% gift taxes. So returning his $1M bonus has may now cost him $1.7M.