Archive | Observations on life

Are your taxes going “up?”

6 Dec

From the AP:

The president has been seeking an extension and expansion to the payroll tax cut that will expire at the end of the year. The White House says taxes on the average family would increase by $1,000 if the cuts are not extended.

To make its point, the White House went so far as to put up a countdown clock during spokesman Jay Carney’s briefing to show when middle-class taxes would go up “if Congress doesn’t act.”

Fiddling with the isolated stream of Social Security revenue is a bad idea, we’ve talked about that before.  But it is also a bad idea to propagate false concepts and politically expedient rhetoric. If the scheduled expiration of a temporary reduction of the payroll tax on December 31 is a pending disaster, what will we call it on December 31, 2012?

According to the President, extending the tax reduction “Will spur spending. It will spur hiring and it’s the right thing to do.”  That’s a tall order for a tax reduction that has been in effect for a year with little or no such effect.  The latest version of paying for this is a lower temporary surtax on millionaires and new fees on lenders.

And then we have this from the White House:

Good afternoon,

It’s simple. If lawmakers don’t vote to extend the payroll tax cut, taxes for 160 million Americans will go up on January 1st.

President Obama just left the press briefing room at the White House where he called on Congress to extend the tax cut, pay for it responsibly, and expand it so middle class families get a $1,500 break next year.

He told Congress to put country before party and stop wasting time.

Every day, folks are fighting to make ends meet and businesses are working to keep their doors open. The longer Congress waits to extend the payroll tax cut, the more uncertainty it creates for ordinary Americans. So we’ve put a clock on every page of the White House website, counting down the days, hours, and minutes until taxes for the middle class increase. In the briefing room, where the President just spoke, that same clock is ticking down as well.

And to make sure you have the information you need to know exactly what this means for your family, we’ve put together a calculator to show how much of your money hangs in the balance.

This calculator illustrates for you what nearly every independent economist has said: letting this tax cut expire will be a blow to the economy. We can’t let that happen. Now is the time to make a real difference in the lives of the people who sent us here.
Check it out and pass it along:

http://www.whitehouse.gov/taxcu

Thanks,
David Plouff

Senior Advisor to the President

The clock is also ticking on a 27% reduction in  fees paid  to physicians treating Medicare patients. If that is fixed how  will it be paid for?  Perhaps a new temporary tax on health insurers, that won’t have any negative impact on anyone.    The estate tax was supposed to be temporary and the AMT was only to affect a handful of people who escaped paying any income tax.  Politicians have no common sense and economists find a way to validate that.

Get ready for your tax increase and pay cut in twenty-eight days…ho, ho ho!

3 Dec

While most of us are focused on the number of days until Christmas, politicians are focused on the number of days until Americans get a tax increase and doctors get a pay cut.

 
What the heck is he talking about?

 
Well, that 2% less you are paying for Social Security payroll taxes is set to expire at year end (which we all knew for the last twelve months), but that doesn’t stop some politicians from explaining the expiration of the tax holiday as a tax increase. Just imagine what they will say at the end of 2012 if the tax break is raised from 2% to 3.1% and extended to Jan 2013?

 
Just imagine what you will say when you look at your first pay stub in 2013. Oh what a tangled web we weave.  Better not use that extra cash for ongoing expenses because someday the expenses will still be going and the cash will be gone.

 
And about those doc’s pay, Congress has less than 27 days to figure out how to stop the 27% cut in Medicare’s physician payments scheduled to go into effect next year… again.

 
As I’ll conceived as this fee cut may be, and as obvious as it may be that temporary means temporary, these issues illustrate how politicians can’t deal with giving anyone less or taking away anything given even when Congress passed the laws that specify how the situations are to be handled.

 
And you really think all the parts of the Affordable Care Act will work as planned?

Threatening politicians if they cut Medicare, it’s not only the elite who influence for self interest at our collective peril. What would you do to rein in Medicare costs?

20 Nov
WI: Then-Senator Barack Obama and AFSCME membe...

Lobbying by any other name

Twenty-six year old history majors are protesting on Wall Street, the influence of the wealthy is decried, lobbyists are bedeviled and yet when a politician even thinks of trying to fix problems that were caused by the promises of past politicians and the actions of us all, they are targeted and threatened with unemployment.  

We are shocked at influence peddlers for one group and then do exactly the same thing in the name of seniors, or teachers or public employees.  The answer is not that one group of the other is bad or good, deserving or not, it is that we are unable to grasp the concept that everything we do is connected.  There are consequences, unintended or not, to the promises we make, the policies we establish, the money we borrow, the decisions we make.

In the quest to deal with the deficit, both Medicare and Social Security must be addressed.  They are the two largest components of federal spending and growing.  To ignore that is irresponsible and yet we have groups like the AARP and the unions listed below who choose to ignore the realities of our spending and inability to fulfill unrealistic promises.  You simply cannot look at one element of spending in isolation and expect to solve a spending problem as desirable as that spending may be.

Take a look at this report from Capsules the KHN Blog 

TV Spots Target Three Republicans On Medicare Cuts

By Karl Eisenhower

November 16th, 2011, 4:16 PM

The AFSCME and SEIU trade unions, along with the liberal advocacy group Americans United for Change, are warning Sen. Dean Heller, R-Nev., Sen. Scott Brown, R-Mass. and Rep. Denny Rehberg, R-Mont., that votes in favor of Medicare and Medicaid budget cuts will be unpopular with seniors.

The groups launched ads today featuring the voice of a woman who sounds as though she’s old enough to be eligible for Medicare.  The script of each version is the same, with only the name of the targeted member of Congress changing.  Heller and Brown are seeking reelection, and Rehberg is running for the Senate against Democratic incumbent Jon Tester.

The ad targeting Sen. Brown, embedded below, is running only in the Boston market, and only on cable television.  The Heller ad is running on broadcast stations in Reno, and the Rehberg ad is running on broadcast stations in Billings and Missoula.  All three spots will run through the end of this week.

A transcript follows:

If you vote to cut Medicare, Sen. Brown, I will remember it every time I visit my doctor. I’ll remember you cut Medicare and Medicaid every time I fill a prescription. I’ll remember you cut Medicare if I fall or get hurt. I’ll remember you chose protecting millionaires over protecting my health. My friends will remember it too –- all of them. Call Senator Heller. Tell him to protect Medicare and Medicaid.

Here is a quote from the Americans United for Change website:

For decades, seniors have relied on Medicare being a guaranteed benefit and those less fortunate have depended on Medicaid to provide long-term care and coverage for children. These programs need to be strengthened to ensure they remain available for future generations, which means not gutting and decimating benefits, leaving low-income children, seniors, and people with disabilities out in the cold. The key to making Medicare sustainable is reining in costs, not dumping more expenses onto seniors. We are working to set the right priorities for an economically secure future while continuing to protect health care coverage for those who can least afford it.

They are right, the key to making Medicare sustainable is reining in costs.  Ok, now just tell us how or more important, who will receive less when those costs are reined in?  Here is a check list of possibilities:

 [] doctors [] hospitals [] drug companies [] patients [] high-tech equipment manufacturers [] nursing homes 

The Affordable Care Act already claims to have saved over $400 billion in Medicare costs, plus raising an additional $100 billion plus from new taxes on the wealthy and employers.  The Act contains 160 programs and projects designed to lower costs over time and all this is still not enough.  Doctors are supposed to see their payments cut  27% in January 2012, but that will never happen. 

So, let’s have suggestions for “reining in costs!”

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Public employee unions; Ohio voters shoot themselves in the foot; Mr. Spock, why didn’t you vote? Madam Secretary, have you read your job description?

18 Nov

Some public employees may have gained a victory, but the people of Ohio voted themselves a big loss.

I am not against unions or collective bargaining; I participated in both for many years. Unions serve a valuable and necessary purpose. In fact, I currently work with a union, but to have a fair collective bargaining process both parties must represent their respective interests trying to achieve mutually beneficial goals. That is rarely the case when unions bargain with politicians who are largely dependent on the unions for their jobs. Public employee unions are not the same as other unions.

Many states and cities have gotten themselves to the brink of bankruptcy as labor costs and pension liabilities consume their budgets. That didn’t happen as a result of effective bargaining by government officials. The fact is that collective bargaining in the traditional sense does not work with public employees and their unions and bureaucrats and politicians because no one looks out for the interests of the group with the most at stake; taxpayers. (apparently in Ohio taxpayers don’t even look out for their own interests.)

I am the only logical person around?

In Ohio the unions spent $30 million (of member dues) to defeat legislation limiting collective bargaining for state workers. Ohio unions were still able to negotiate for wages and working conditions. There is no victory for anyone. Where is Mr Spock when you need him? Voters in Ohio threw out all logic with their vote and rather were swayed by some misdirected emotional attachment to firefighters, police officers and teachers. Public employees deserve a fair compensation package, but regardless of the job they do or service they perform, that package must be affordable to the citizens who foot the bill today and into future. It was only the most costly and the most subject to abuse issues that were off the table, mainly pensions and other benefits.

The voter who holds the view that “teachers are underpaid or first responders risk their lives and deserve every penny they get” without regard to economic reality or the total concept of public employment, has no right to complain about taxes or loss of other government services. Attempting to manage public labor costs is not an effort to hold down the middle class; rather it protects the vast middle class dependent on government services.

Even while the OWS crowd blames their woes on the one percent, in many states and cities far more damage is being done by public employee union contracts and the politicians who supported them. Mr. Spock would support the logic of politicians trying to fix long-term problems not overturn their efforts or vote them out of office.

In the meantime our Secretary of Labor makes it clear where the sympathies of the Obama administration reside. How inappropriate is it for a cabinet member to be so one-sided. Read this statement carefully. It hits all the right emotional buttons and mixes the attributes of public and private collective bargaining as if they were the same. Such political pandering is reprehensible.Guess what, government entities are not businesses and don’t operate as if they are, that is the difference.

Official portrait of Secretary of Labor Hilda ...

Ah, sweet victory!

News Release
OPA News Release: [11/09/2011]
Contact Name: Carl Fillichio
Phone Number:
Release Number:

Statement by Secretary of Labor Hilda L. Solis on Ohio labor law vote
WASHINGTON — Secretary of Labor Hilda L. Solis today issued the following statement on the Nov. 8 Ohio labor referendum, in which a majority of voters rejected a state law limiting collective bargaining:

“Last night, Ohio voters delivered a bona fide victory for public sector workers everywhere.

“After months of advocacy and organizing, the people of Ohio have defeated a law that would have silenced the middle class and curtailed the collective bargaining rights of thousands of teachers, firefighters and police officers. Ohio has made it clear: these dedicated public servants still need a seat at the table to demand fairness, dignity and respect — especially in tough economic times. Through their unions, they have a voice in their workplace, in their future and, most importantly, in our future.

“In my time as labor secretary, I’ve seen firsthand time and time again how unions make remarkable contributions to the strength and prosperity of our nation. In workplaces across the country, collective bargaining is helping businesses improve their bottom line, providing tax payers with high-quality services, making workplaces safer and more productive, and ensuring that all Americans have the opportunity to make it into the middle class.

“I am proud to join everyone in Ohio and across the country in celebrating the voice of workers, which can only be guaranteed when they have the right to organize and bargain collectively. Congratulations to all who contributed their time, passion and dedication to achieve this incredible feat for working families.”

While Ohio voters were shooting themselves in the left foot on this issue they couldn’t resist taking aim at their right as well. They overwhelming approved a (meaningless) referendum rejecting the Obamacare mandate to carry health insurance. Hey folks, you may not like the Affordable Care Act or Obama, but the logic and reality is that you cannot have affordable health care if you allow people to game the system, jump in and out of coverage as they need it and dare I say it, not “pay their fair share” in premiums even if they don’t use health care. Everyone has to be in the pool.

Ohio voters, and I suspect many others, seem to think you can deal with selected issues in isolation without extended consequences, you can’t!

Related articles

It’s not just about millionaires

13 Nov

If you would like to read an excellent article about the realities of our deficit and dealing with it, I highly recommend:

“It’s Not Just Millionaires” in the New York Times (can’t believe I just wrote that).

The income and wealth gap, Robert Reich please tell the full story

6 Nov

On his blog Robert Reich writes:

With so much income and wealth concentrated at the top, the vast middle class no longer has the purchasing power to buy what the economy is capable of producing. (People could pretend otherwise as long as they could treat their homes as ATMs, but those days are now gone.) The result is prolonged stagnation and high unemployment as far as the eye can see.

This says to me that the continued growth at Starbucks, attendance at Disney parks, buyers of blow up lawn ornaments for Halloween and all the other buying in America beyond the necessities of life is the sole result of buying by the 1%. Who tells the middle class to fill their oversized shopping carts at the likes of COSTCO or BJs with unnecessary garbage and junk food?

Yes, some Americans are hurting, I know a dozen people who have not had a raise in several years. I know the unemployed must have a tough time as do the uneducated and unskilled. I know people who have their entire raise obliterated because their payroll deduction for health benefits is increased. Tying all this to the top 1% may make good headlines (just like claiming some CEO’s pay caused high health insurance premiums) but it is a liberal line that is getting old.

If the economy was humming along all these years because of the home equity ATM then the reality is that too many people were living beyond their means for a very long time. They are not worse off today, they are back to normal.

Instead of harping on the income gap Reich, Krugman and others should tell Americans the truth about structural unemployment, about world competition, and about the kinds of jobs America needs and can create. They should tell them a degree in art history isn’t going to get them a job out of the lower middle class. But most of all, they need to explain how Bill Gates, Warren Buffett, George Soros and thousands of other high achievers hold down the rest of our citizens.

Members of Congress receive their salary for life…More Internet nonsense

5 Nov

Here is the text of an e-mail circulating around the internet:

Subject: Wages

Salary of retired US Presidents …………..$180,000 FOR LIFE

Salary of House/Senate ………………………$174,000 FOR LIFE

Salary of Speaker of the House …………..$223,500 FOR LIFE

Salary of Majority/Minority Leaders …… $193,400 FOR LIFE

Average Salary of Soldier DEPLOYED IN AFGHANISTAN $38,000

Average income for SOCIAL SECURITY seniors $12,000 

 None of the salaries for members of Congress are for life.  However, they may earn a pension.

And they say I'm lower on the road to evolution

In fact, the retirement benefits received by former Presidents include a pension, Secret Service protection (for ten years), and reimbursements for staff, travel, mail, and office expenses. The Presidential pension is not a fixed amount, rather it matches the current salary of Cabinet members (or Executive Level I personnel), which is $191,300/year as of March, 2008.  That figure is 47.8% of the President’s salary, not overly generous by any means. You may not like or agree with any given President, but you have to agree that it is not an easy job and one that takes its toll on all who hold it.

The average workers Social Security benefit as of September 2011 is $14,196 (plus 50% more if married) and of course does not include other sources of income (or other assets) beyond Social Security.

Members of Congress do participate in the federal pension system, contribute into the system and are vested in the benefit after five years of service. Therefore, a member of the House of Representatives would have to be re-elected twice to become vested in a pension.  By law the pension cannot exceed 80% of pay (which would require a substantial period of congressional service).  Here are some facts about actual Congressional pensions from about.com

According to the Congressional Research Service, 413 retired Members of Congress were receiving federal pensions based fully or in part on their congressional service as of Oct. 1, 2006. Of this number, 290 had retired under CSRS and were receiving an average annual pension of $60,972. A total of 123 Members had retired with service under both CSRS and FERS or with service under FERS only. Their average annual pension was $35,952 in 2006.

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Cutting Medicare and Social Security benefits: senior citizens do not have a right to special treatment. AARP is doing America a great disservice.

31 Oct

While the AARP runs TV ads threatening politicians that 50 million seniors will get even on election day if they touch Social Security or Medicare, there are a few of us who see it differently.  Take this comment from a blog post of mine that I fully agree with.

Keep up the good work. Some of us older folks who have been on “senior wefare” enjoying the unwarranted payments from Medicare and Social Security look in horror at the bills to be paid by our kids and grandkids. AARP, the largest special interest group in the country, has just sent out a request to contact our representatives to preserve our Social Security and Medicare benefits. It seems as if seniors should not have to share in the effort to reduce our national debt.

* * * * * * * * * * * *

From the AARP website:

AARP’s new national television ad tells lawmakers to cut waste and tax loopholes, not Social Security and Medicare. It urges lawmakers not to treat seniors like line items in a budget and lets them know that 50 million seniors are counting on them to protect their benefits.

Cuts to Medicare and Social Security benefits could:

dramatically increase health care costs for seniors and future retirees.
threaten seniors’ access to doctors and hospitals.
reduce the benefit checks seniors rely on to pay their bills.

Watch the latest advocacy video from AARP telling lawmakers that “before you even think” about cutting Medicare or Social Security, remember the 50 million seniors who have earned their benefits. Seniors are putting Washington on notice that they will speak out as long as Medicare and Social Security benefits are threatened .

Those of us who paid our Social Security taxes for decades must realize that those taxes paid the benefits of Social Security recipients during those decades and the surplus purchased special treasury bonds. Today the incoming taxes are insufficient to pay our benefits and those payments are supplemented by interest on bonds…there is no surplus to purchase bonds for our children.

Oops, the next generation wants theirs too.

Medicare is funded by a combination of payroll taxes, general revenue and current premiums. We may count on these benefits because we assume they will always be there, but we have been and are paying only a fraction of the cost.

Consider this from Bloomberg.com

“In 1959, seniors were the poorest demographic cohort, with 35 percent living in poverty, compared with 27 percent of children in poor families. In 2010, only 9 percent of people age 65 and older were poor, while 22 percent of those under 18 were living in poverty, according to U.S. Census Bureau data.

The trend coincides with a generational gap in federal spending. In 2008, per capita federal spending on those 19 and younger was $3,660, compared with $23,900 for those 65 and older, according to a report by the Urban Institute and Brookings in Washington.”

Have we “earned” our benefits any more than younger people have earned the right to support their families and save for their futures?  Have we earned these benefits so that we have a right to take more from future generations?

The AARP wants to cut waste and loopholes, so does everyone else. Except even if that is done, less spending and more revenue is needed for many areas of the federal budget, not just Social Security and Medicare although those two items equal more than forty percent of federal spending.

We seniors have a right to be treated fairly along with all other Americans. We do not have a right to be protected as a special class. We do not have a right to have our benefits protected to the detriment of others.

Nobody is talking about reducing benefits for existing beneficiaries, or reducing benefit checks. What has to be done is to reduce the future long-term liability of these programs and that means changing the growth of future benefits and asking future generations to pay more for these generous benefits. It may also mean that us seniors who no longer pay Social Security or Medicare taxes will have to give up some of our health care flexibility and pay a bit more for services. Why should it be otherwise for the common good?

Tell the AARP to go sell insurance.

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Why do our laws discourage marriage?

30 Oct

Given the declining status of marriage in general it seems strange that tax laws are inclined to further provide an incentive to avoid tying the knot. Look at all the limits on family income for things like contributions to IRAs. They are never twice that of two single people, but less.

Consider the popular definition of “wealthy” these days, $200,000 for a single person and $250,000 for a married couple. So, a couple of living together each earning $200,000 can avoid higher taxes and the stigma of being in the 1% simply by avoiding the official seal of approval on their relationship, but a married couple earning

Married Couple in a Garden WGA

What's living together?

$400,000 are “millionaires” or is it billionaires? Two people each earning $150,000 are ok, but if they marry, OWS camps on their lawn.

Similar discrepancies apply to Social Security and welfare programs. In this day and age when we easily redefine marriage to the point you may be able to marry your pet turtle, it seems like the fairness of our laws is lagging.

Bail out student loans …

19 Oct

I am sixty-eight years old and still have a $59,000 mortgage on a house I purchased in 1976. How is that possible you say? I know, he took home equity loans to buy nice cars, remodel kitchens, etc., vacations and stuff. Well my car is eleven years old and besides that I won it. No that’s not it.

In fact, I re-mortgaged my house for one thing, college costs for four children and I don’t regret it for one minute. To my way of thinking that is part of a parents responsibility. My kids all paid their share working and graduating with modest loans, but even twenty years ago $500,000 was a lot of money.

Now I see the Occupy Wall Street gang carrying signs reading “Bail out student loans”. Then I read things like this as reported in the Huffington Post:

John Smith, 31, of Brooklyn, N.Y., works part-time at Trader Joe’s because he hasn’t been able to find work in his field for over a year, despite having a master’s degree. He has about $45,000 in student loan debt. His girlfriend, Meropi Peponides, 27, a graduate student at Columbia University, will have about $50,000 by the time she graduates.

“I don’t know in the end what exactly this will achieve, if anything. But if it makes people wake up just a little bit, it’s worth it,” Peponides said. “The potential is huge. That’s why I’m here. I felt the potential somehow.”

Smith said he has sent out about 200 resumes in his search. He’s looking mainly for work with non-profit organizations. “The jobs that I’ve been applying for are all entry-level jobs in my career field. I don’t think I’m shooting for the stars trying to get those jobs.” Smith said, noting that five years ago, before grad school, he was able to get work at that level.

Tracy Blevins, 41-year-old Manhattan resident, has a doctorate in biomedical science but lost her job as an adjunct professor at Touro College this spring. She’s since been getting by on odd jobs; most recently, she acted as a cross-country driver for $2,000.

“I’m earning money off a license I got when I was 16, and still paying off the loans I had to take out to get my degree,” she said.

Even after nine years of paying down her loans, Blevins said she owes $10,000. She’s current on payments now, but said the loans have crippled her credit score and even prevented her from getting work in the past.

“I have paid and paid and paid and I still owe $10,000. It’s the interest that keeps me in debt,” she said.

Joe Foley, a 48-year-old freelance cinematographer living in Manhattan, finished paying off his $45,000 in student loans just five years ago. His girlfriend has $120,000 in student loans.

Let’s see, Columbia University, (not exactly your typical state college), looking for work in a non-profit (not the greatest paying field), a graduate student, a doctorate and an adjunct professor-the interest keeps me in debt (you need a doctorate to figure that out?), $120,000 in student loans (that ain’t your average BA)

Here we seem to have a collection of bright, albeit naive people, who made the choice to go to top schools and obtain advance degrees and perhaps chose noble but less productive careers and they are the type of people who resent other people who made other choices? These are the people who see it unfair to carry student loans and would rather have loan forgiveness?

Why doesn’t all this resonate with me?  Hey, who am I to criticize, my nine years of night school in two different community colleges and one state college to get a BA was partially subsidized by benefits I earned from two years in the army. I’m making my own sign.

Stop Whining!

Who doesn’t pay a fair share of income taxes, you may be surprised

17 Oct

At this point we are all convinced that despite the fact they pay the bulk of taxes while fifty percent of Americans pay no income taxes, millionaires and billionaires (defined by our divisive President as families earning over $250,000 a year) are not paying their fair share. So called tax loop holes are now considered tax avoidance despite each and every provision of the IRC being passed by Congress and signed into law by a President. Public employee unions enter the fray denouncing the “wealthy” as underpaying taxes and yet public employees benefit from the greatest and most costly tax loop-hole of all; free employer paid employee benefits especially health benefits while these workers have the most generous and costly programs of all paid for by the taxpayers they profess to support.

Not paying ones fair share is indeed a problem. As the following report notes the IRS estimated a few years ago the gap between the taxes paid and what should have been paid at $345 billion for one year. That kind of money would go a long way in dealing with budgets and deficits. All it would take is for all Americans to be honest and pay their fair share… remember, cash is taxable income.

Millionaires and billionaires may have resources to maximum the value of the tax code, but their income is tracked, frequently publicly reported in corporate filings and reported directly to the IRS. Contrary to popular opinion, the wealthiest pay taxes on their taxable income whereas that is not always the case with those Americans who do not have a third-party reporting their earnings.

While it Is SOP these days to blame someone else for just about everything, more Americans should be looking in the mirror before they start camping on Wall Street.

IR-2006-28, Feb. 14, 2006

Washington — Internal Revenue Service officials announced today that they have updated their estimates of the Tax Year 2001 tax gap based on the National Research Program (NRP).

The updated estimate of the overall gross tax gap for Tax Year 2001 – the difference between what taxpayers should have paid and what they actually paid on a timely basis – comes to $345 billion.  This figure falls at the high end of the range of $312 billion to $353 billion per year, an estimate released last March.

IRS enforcement activities, coupled with other late payments, recover about $55 billion of the tax gap, leaving a net tax gap of $290 billion for Tax Year 2001.

“The vast majority of Americans pay their taxes accurately and are shortchanged by those who don’t pay their fair share,” said IRS Commissioner Mark W. Everson.  “The magnitude of the tax gap highlights the critical role of enforcement in keeping our system of tax administration healthy.”

The complexity of the tax law is also a significant factor in causing the tax gap, which can be seriously addressed only in the context of fundamental tax reform and simplification…

As with prior estimates, the updated estimate of the tax gap shows that the largest component of this gap, more than 80 percent, comes from underreported taxes. Underreported income tax is the largest component of this (see attached Tax Gap Map for Tax Year 2001). Nonfiling and underpayment of tax comprise the rest of the tax gap.

Though the net misreporting percentage varies by category of income, the rates reflect that compliance is highest where there is third-party reporting or withholding.
 
“Simply stated, compliance is highest where there is third-party reporting,” Everson said.

For example, one percent of all wage, salary, and tip income is misreported, contributing an estimated $10 billion to the tax gap.  In contrast, nonfarm sole proprietor income, which is reported on a Schedule C and is subject to little third-party reporting or withholding, has a net misreporting percentage of 57 percent, contributing about $68 billion to the tax gap…

Take a look at some IRS charts on the tax gap

Before you occupy Wall Street get the facts and try to understand what is really going on and who is doing what. I DARE YOU TO READ THIS!

14 Oct

What is the current state of America, how did we get this way, who is to blame? Look at the following random list, arrange it anyway you like, determine which item directly impacts other items. Do this carefully, think of the consequences of each item interacting with others and you have the answer to the current state of America. You may not like the answer and it may not agree with your preconceived ideas, but there it is for you to see.

Caution: some of these points are quite obvious, others more abstract requiring more thought and consideration. Have fun!

On the back of my iPhone is says “Designed in Cupertino California. Assembled in China”

The average unemployment rate between 1990 through 2008 was 5.2% so our current gap from the norm is about 4% unemployment.

Apple Inc. received more than one million pre-orders for the iPhone 4S in a single day, 67 percent more than for the previous version of the device.

Populist rhetoric mostly from our President has caused many people to believe that the cause of high health insurance premiums is outrageous CEO pay. The pay may be outrageous and not deserved in some cases, but is has virtually nothing to do with premiums, do the math.

Millionaires and billionaires don’t pay their fair share … or at least that sounds good except the top 1% of earners pay about 40% of all income taxes. “Hey, I can do better on the price if you pay in cash.”

Many people are convinced business can be given incentives to hire more workers, needed or not.

If you buy something made in China it costs less; conversely if the same product is made in the US it costs considerably more. Where do you want your TVs, iPhones, DVD players and clothes made?

Why aren’t you spending more? Consumer spending equals nearly 70% of our economy.

If you borrow from the future to live above your means today, what happens when the future is today?

How did Wall Street and the banks screw up the economy without the eager participation, greed, ignorance and complacency of the people taking unaffordable and risky mortgages?

Who set policy, cajoled and strong armed banks and other institutions to underwrite subprime mortgages? Members of Congress of both parties and Republican and Democratic administrations.

More than two-thirds of Americans, including a majority of Republicans, say wealthier people should pay more in taxes to bring down the budget deficit, and even larger numbers think Medicare and Social Security benefits should be left alone.

More than 8 out of 10 Americans say the middle class will have to make financial sacrifices to cut the federal deficit even as the public just as strongly opposes higher taxes on middle-income families, according to a Bloomberg-Washington Post national poll conducted Oct. 6-9.

“While Americans see sacrifice as inevitable for the middle-class, the only sacrifice to win majority support is a tax on those too wealthy to be considered middle-class,” says J. Ann Selzer, president of Des Moines, Iowa-based Selzer & Co., which consults with Bloomberg News on polls – Dont touch my marbles

According to a June 2010 report in the Christian Science Monitor, the high school graduation rate is 68.8% (2007 latest available). Racial and ethnic gaps persist, the report notes. Forty-six percent of black students, 44 percent of Latinos, and 49 percent of native Americans did not earn a diploma in four years.

36 percent: the percentage of women 15 to 50 with a birth in the past year (2009) who were not currently married.

Among Tea Party members many believe that foreign aid composes 20% of the federal budget – it’s actually less than 1%.

Do people understand where the money goes?  Mandatory Spending within the federal budget (sometimes called entitlements), is at $2.109 trillion in FY 2012.

The largest mandatory spending programs were Social Security and Medicare, as follows:

Social Security – $761 billion
Medicare – $468 billion
Medicaid – $269 billion
TARP – $13 billion

All other mandatory programs – $598 billion.

These programs include Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, Supplemental Security for the Disabled and Student Loans.
(Source: OMB, Table S-3)

The vast majority of Americans receiving these mandatory benefits do not pay income taxes.

More than Half of the Federal Budget Goes Towards Mandatory Spending:

Mandatory spending is 57% of total Federal spending. It is almost three times as much as the military budget, and 1 1/2 times all discretionary spending. The mandatory budget is, as its name implies, mandated by Congress to be spent outside of the annual budgetary process. It cannot be changed without a change in the laws that set up the programs.(Source: OMB, Table S-4)

Section 162(m) of the Internal Revenue Code limits the tax deduction that a publicly held corporation may take with respect to annual compensation paid to its chief executive officer and the three other most highly compensated executive officers, other than the chief financial officer. If such employees fiscal year annual compensation (excluding “qualified performance-based” compensation) exceeds $1 million, then the employer may not take an income tax deduction with respect to any such compensation amounts that exceed $1 million.  Section 162(m) regulations provide certain exemptions from this annual $1 million deduction limit. “Qualified performance-based” compensation paid pursuant to a stockholder-approved compensation plan that sets forth certain maximum payment limits can be excluded from counting towards the $1 million limit. – Congress has the power and has limited the taxpayer supported compensation of executives.  Many CEOs are overpaid, that’s true.  However, most of their pay is in the form of stock in their companies and subject to the risks of the stock market.  It is also true that many of the performance-based compensation programs are a farce, but that is the problem of a company’s board of directors and shareholders who get to approve or reject such compensation.

The all time top contributors to political campaigns are unions, not corporations and among the top fifteen contributing organizations, virtually all the money has gone to democratic campaigns. Here is the list of contributions since 1989.   Here is the President’s reaction to the Supreme Court decision on political contributions:

President Obama said the high court had “given a green light to a new stampede of special interest money in our politics.” He called it a “major victory” for Wall Street, health insurance companies and other interests which would diminish the influence of Americans who give small donations. Obama pledged to “work immediately” with Congress to develop a “forceful response.” 
 

It would appear the President forgot to mention the largest group of influence peddlers, no doubt an oversight.

 

So, if you are frustrated and you want change and even a little hope, and you want to sleep in a tent for a few weeks, the Washington Mall (or your front lawn) is nice this time of the year.

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Occupy Wall Street … and now what?

13 Oct

The following comment is an excerpt from an editorial by David Leonhardt in the October 9, 2011 New York Times:

For now, the main cause of the economic funk remains the financial crisis. The bursting of a generation-long, debt-enabled consumer bubble has left households rebuilding their balance sheets and businesses wary of hiring until they are confident that consumer spending will pick up. Even now, sales of many big-ticket items — houses, cars, appliances, many services — remain far below their pre-crisis peaks.

Got it!  It’s not the banks, Wall Street or any other sinister organization, it’s us.  Pass that on to the “students, activists, PhD candidates, psychologists, experienced protesters” and even the President.  Occupy Wall Street is certainly an expression of frustration as misdirected at it may be.  It is fueled by two and a half years of political rhetoric designed to pit Americans against each other and to deflect blame.  The problems are complex and immense to be sure and they are not going away anytime soon, protests in the streets or not.

Debit cards and credit cards, let’s make them all “free”

12 Oct

Image by sotheavy via Flickr

The uproar over BoA charging some customers a monthly fee to use a debit card is a perfect example of the impact of the President’s anti business, scapegoating rhetoric having an impact on the common sense thinking of the average person.

While Congress saw fit to cut the fees banks charge merchants for a debit card transaction resulting in banks making the fee more visible by charging a small portion of it to customers, we hear no outcry over the fees credit card organizations charge merchants for a credit card purchase. These charges are typically a percentage of each sale with the percentage dropping as the total volume and dollar value of each purchase rises.  Thus the fees are structured to benefit the largest volume retailers and cost the most for the mom and pop local store.  The percentage can range from 1% to near 5%.  In addition, there are various other processing fees paid by the merchant who hopes to offset this expense by increasing sales volume and adjusting prices accordingly.  The variation in credit card fees is why some merchants accept Visa or Mastercard, but will not accept American Express which of course, they are free to do. It is also why some merchants will not accept any credit cards, that and they want to have only cash sales…I wonder why (that’s another story).

Do people think all this convenience is free?  Given that most people now think that preventive health care services and even contraceptives are “free,” perhaps it is not unexpected that they also think it outrageous that they must pay directly for the convenience of a debit card.  Who should pay? 

Sure banks save money by encouraging the use of debit cards, so do merchants and all of us grain a great deal of convenience, does that mean that every time an industry finds a way to be more efficient and save money those savings are all passed on to someone else.  What do you think is the profit margin on an iPhone, do you really care?

I tried to transfer frequent flyer miles from my wife’s account to mine just to consolidate them, the fee was $15.00 for each 1,000 miles, now there is a rip off. Or how about paying $99.00 for extra leg room in the exit aisle where the seat only reclines on a limited basis only to learn that “limited” really means not at all – and we get excised over a $5.00 monthly fee for unlimited use of a debit card? Where is the uproar when a gas station charges ten cents a gallon more if you use a credit card?

None of this is logical, it is more of the mainstream press jumping on the scapegoat campaign bus. If you don’t think the convenience of a debit card is worth $5.00, change banks or to really make a statement about the value of debit cards, give yours up!  Don’t we have more important problems to whine about?

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New debit card fees and how the consumer got screwed, who did it and why

1 Oct
Basic creditcard / debitcard / smartcard graph...

Image via Wikipedia

So, who do we blame for the new fees on debit card use being imposed by some banks?  No doubt the inclination is to blame those greedy banks.  But wait a minute, in the past banks charged retailers a fee when a customer used a debit card for a purchase, about $.44. The retailer is relieved of handling and processing cash and receives its money electronically; quite efficient I would say.  The customer was also relieved of the need for cash.

Along comes the Dodd-Frank legislation to straighten out those bad banks and their practices. Included was the Sen. Durbin amendment that cut the debit card fees imposed by banks in half thereby cutting the revenue of the very organizations that the legislation and bail outs attempted to shore up and increase their capitalization.

In the process the large retailers such as Wal-Mart, Target, etc. receive a windfall because their debit card fees are cut in half (oh, did I mention those same organizations were reportedly behind the Durbin amendment in the first place?). Needles to say Durbin is slamming Bank of America for charging these fees. However, Bank of America repaid all the bailout money it received in late 2009 — the federal government made more than $4 billion off the arrangement. I wonder if this politician assumes the retailers will share their new found twenty-two cents per transaction with customers?

In the end we have a politician influenced by large retailers shifting costs from those retailers to banks who then shift the cost to consumers.  What if the banks simply absorbed this loss revenue?  Well in some cases it would help sustain the shaky ground they are already on. 

Now that we have another lesson in unintended consequences, what have we accomplished other than to make life tougher for middle and lower-income people (the ones most likely to shop at the big box retailers)?  Perhaps we have also learned another lesson about the short-sighted, easily influenced, dumb politicians we have employed.

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