Thursday, April 28, 2011

In Grateful Memory
Sgt. David P. Day (U.S. Marine Corps) 26, Gaylord, Michigan. Killed by a roadside bomb, Badghis Province, Afghanistan, April 24, 2011.
The Right Mix for the USA
Those Cats are Too Fat 

A Cocktail Party Position on Taxes

Now that some of the smoke and hot air has blown away and we are into serious discussions about federal budgets and how to stop the deficit bleeding, it is time to start talking sense about income tax rates. As usual, quite a few statements by politicians on both ends of the political spectrum twist the facts, or simply are not true.

One common assertion is almost true. The most recent Bush-era tax cuts are derided by political opponents as a gift to the wealthy. Actually, all taxpayers got a reduction. However, the very rich did benefit the most because the top dogs saw the maximum rate reduced from 44 percent to 35 percent, a huge advantage for them.

That brings up something often misunderstood about income taxes. Using an example that might apply to some of us mere mortals, let’s compare a couple filing jointly with taxable income of $50,000 and one whose income is $4 million. The tax rate for the little guys is 13.3 percent. The tax rate for the wealthy couple on the first $50,000 of their taxable income also is 13.3 percent—exactly the same. Higher rates for the high earners gradually kick-in at higher levels of income; the fat cat couple does not pay 35 percent on all of their income, only the amount that exceeds $379,150.

Consider President Obama’s income taxes this year. All recent presidents have made their return information public—a good thing. The Obamas filed jointly. Their income totaled $1.73 million. Most of it was the President’s $400,000 salary and royalties from three books he authored that sold millions of copies. The Obamas paid $453,770 in income taxes. That’s a lot of cash, but it is 26 percent and change, not 35 percent.

Knowing their tax records will be made public no doubt inhibits the Obamas from using tax loopholes to reduce their rate to an even lower level. Most wealthy folks have no such constraints. They can hire accountants and attorneys the little guys cannot afford. It is well-documented that the experts guide their clients to numerous legal ways to avoid a whole lot of income taxes. The rich don’t need much help in finding ways to profit from capital gains; these rates are lower than the income tax levels. People at the low end of the income spectrum have little or no ability to earn capital gains.

Some of the wealthy like to point out that they support millions of low-income people who pay no income taxes at all. It is true that nearly half of Americans pay no income taxes through their annual returns to the Internal Revenue Service, but some of those filers are quite well-to-do. And, everyone who works is liable for payroll taxes that finance Social Security and Medicare. These amounts are income taxes, even if we choose to call them something else.

Congress responded to an Obama proposal by using some trickery to give employees a gift throughout 2011. The usual 6.2 percent Social Security tax on wages was reduced to 4.2 percent. The difference, the legislation says, will be made up in transfers of funds from the treasury to the Social Security trust funds. The trouble with that is the treasury is broke, and the gift contributes to the ballooning deficit. The Social Security trust funds were doing just fine, with a multi-trillion dollar surplus, before this ruse went into effect. It is going to be difficult for Congress to take back this unnecessary gift at the end of 2011. If this tax reduction is not rescinded, it will seriously weaken the Social Security system.

Opponents of any income tax increase claim a return to the 44 percent top rate for the wealthy would retard the creation of badly needed jobs, and even contribute to increases in unemployment. That line of thinking is at odds with reality. The top rate peaked at 92 percent in the early 1950s. It was reduced to 77 percent in 1964 and later to 70 percent, where it stayed throughout most of the 1970s. The three decades when very high rates were in effect were among the most prosperous times in American history.

As the top income tax rate was lowered, we experienced a massive redistribution of wealth in the U.S. from the poor and the middle class to the rich. Reports based on Internal Revenue Service statistics show this clearly. One appearing in The Washington Post last summer said the average income for the top one percent of earners rose 281 percent, or about $973,000 per household, in the previous 10 years. The bottom 20 percent of earners saw their incomes rise only 16 percent, or $2,400 per household, during the same period. When inflation is factored in, poor and middle-class workers actually lost money while the fat cats grew much fatter.

The top one percent of Americans now take in nearly 25 percent of the annual income generated in the country. They control 40 percent of the wealth. These figures have risen dramatically recently as unemployment also rose to high levels.

Americans are fascinated by the rich and famous, and most of us admire those who climb up the economic ladder through their hard work, often coupled with risk-taking. We think they deserve to be well-rewarded. But we know instinctively that the current vast and growing gap between the rich and poor in the U.S. is unhealthy. Respect for the rich is turning to anger over huge Wall Street bonuses and outlandish salaries for corporate officers and a government that seems unable or unwilling to make adjustments to compensate for the excesses.

What we feel in our guts is bad for America has a scientific basis. A 2009 best-seller, The Spirit Level: Why Greater Equality Makes Societies Stronger, describes links between wide income gaps in nations and social problems. The problems including obesity, mental illness, drug and alcohol abuse, homicides, imprisonment rates, lowered life expectancies, over consumption of resources, teen pregnancy, and lack of upward mobility.

Surprisingly, the scientists state that many of the problems are experienced by the rich as well as the poor when wealth is very unequally distributed. And the connections to wealth inequality prevail in rich as well as poor nations. The scientists once again confirm the link between income gaps and poverty, which has been described many times.

Error rates can be high in studies involving the human condition and interpretations of data always are somewhat subjective in the social sciences. But if the authors of The Spirit Level are correct about only a few of the links they describe, we have compelling evidence that huge gaps in income and wealth within nations contribute to vexing problems that have high costs for all citizens. The ultimate solution when the gaps become too wide is revolution. No thinking American wants that.

The Cocktail Party endorses three actions to reduce the gap between the haves and have-nots in America to a more reasonable level, help reduce the federal deficit, and preserve Social Security:

1. Restore the top income tax rate to the 44 percent level when the current tax legislation authorizing the 35 percent rate expires.

2. Return the Social Security payroll tax rate for employees to 6.2 percent at the end of 2011.

3. Remove the cap on Social Security payroll taxation, which currently is $106,800, but leave the maximum payout where it is. Currently, the Social Security payout for workers who earned high salaries and retire at age 66 is nearly $26,000 per year. It rises through cost-of-living adjustments as do all payouts. That’s plenty of safety net for any destitute fat cats who manage to lose their millions. Removing the taxation limit coupled with minor changes in the way cost-of-living adjustments are calculated is sufficient to assure Social Security will be solvent for the foreseeable future.

The fat cats can well afford to slim down a little for their own good and the common good.

To review the announcement of the founding of the Great American Cocktail Party visit the August 5, 2010 post titled “Coffee, Tea, or . . .” in the archive on the right-hand column of this Blog.

Tuesday, April 26, 2011

In Grateful Memory
Lance Cpl. Dominic J. Ciaramitaro (U.S. Marine Corps) 19, South Lyon, Michigan. Killed in combat, Helmand Province, Afghanistan, April 23, 2011.

Thursday, April 21, 2011

Put That in Your Cart and . . .

Beautiful wife Sandy is a shopping wizard. She can ferret out bargains obtainable with no sacrifice in quality and develop schemes for visits to stores that rank right up there with some of the more successful military campaigns in history. Sandy is at her best in dealing with the supermarket scene.

With rare exceptions, Wednesday is grocery shopping day. Sandy spends about a half-hour taking inventory, checking for coupon deals, and developing a list. Visits to two, and sometimes three, supermarkets are planned. I go along on the shopping trips often enough to maintain a barely adequate ability to handle the tasks on the infrequent occasions when Sandy is not available to replenish our supplies.

Wednesday is the day of choice for several reasons. All three markets get major deliveries on the same days, and Sandy long ago coordinated her visits with those events. At all three, shelves are fully stocked with fresh merchandise on Wednesday. Also, weekend advertised specials are in effect, but by making a mid-week trip we avoid the clogged aisles and long checkout lines that make supermarket visits miserable on a Saturday or Sunday.

The first market on our route gives a 5 percent senior discount on all purchases—only on Wednesdays. Best of all for me, the same store offers free coffee to fully mature adults on Wednesdays. Yes, Wednesday is the day.

Our next stop generally has lower prices, and Sandy buys items there priced below the 5-percent discount level at stop one. Coffee is 50 cents a cup at the second market, not a bad deal at all if I haven’t fueled up sufficiently at the first place.

Because my only important contributions to successful market-going are sipping coffee and pushing the cart, I have ample time to observe the strange attire and activities of fellow shoppers. It is cheap entertainment—almost as good as sitting in an airport, one of our long-time favorite spots for people watching. The variety is incredible. I often coin playful names for some of the characters—Go-Cart Gertie, Aisle Blocker Blanche, Chatty Cathy Checkout, The Raucous Rug Rat—and quite a few not for publication here or elsewhere.

On a recent visit to what is the cleanest and best-maintained of the three markets, I noticed the door of the toilet enclosure for handicapped folks in the men’s room had been vandalized. Someone had inflicted numerous dents in the metal panel, as though the perpetrator had been pounding on the door with a club.

Could it have been the work of Harvey Stall Banger?

Thursday, April 14, 2011

Buckets of Buds

Sure signs of spring have arrived. Golfers are out in droves, advertisers are extolling the virtues of the latest gardening gadgets and products, and the “Boys of Summer” are back at it doing their best to whack baseballs out of the park or prevent the other guys from hitting them “where they ain’t.”

For me, spring always sets off a bit of reflection back to the days when I served as Sports Editor of the Wisconsin Rapids Daily Tribune. Spring meant a new crop of young pro baseball players would arrive to start a 124-game schedule in the Midwest League. Covering the team, a farm club of the Minnesota Twins, was my primary task until falling leaves signaled the end of summer. The local club played home games at Witter Field.

Witter Field was a nice ballpark, but no one would mistake it for Yankee Stadium. The press box perched atop the roof over the stands directly behind home plate resembled an enlarged chicken coop.

The box was clean, but far from fancy. It included a counter across the area beneath the two open windows and a few folding chairs. Bill Nobles and Dave Van Wormer joined me there on many summer evenings. They served as public address announcers, and broadcast most of the Class A minor league games for radio station WFHR. They occasionally asked me to fill in some dead time with a statistical report. Those moments probably set radio announcing back quite a few years.

Equipment perhaps unique to our press box occupied one corner. A pail tied to a lengthy coil of rope stood ready for a midway point in the game when one or all of us usually got thirsty. The beer stand was directly below the press box.

We would put two dollars in the bucket, lower it to the beer dispenser, and wait until he tugged on the rope. We then reeled up three Buds and our change.

Our radio broadcasts and newspaper reports didn't suffer. We almost always confined ourselves to one Bud per game. For young Wisconsin men, that hardly amounted to anything. Fans near the beer stand often greeted the appearance of our bucket with a cheer, so we thought we were making a worthy contribution to fan entertainment in addition to slaking our thirst.

Ah, springtime at the old ballpark.

Wednesday, April 13, 2011

In Grateful Memory          

Hospitalman Benjamin D. Rast (U.S. Navy) 23, Niles, Michigan. Killed by a missile fired from an American drone, Helmand Province, Afghanistan, April 6, 2011.

Thursday, April 07, 2011

What about Libya?

A reader posed the question regarding our latest military adventure after reading the geezer’s opinions (March 20 post, “When Will We Ever Learn?) regarding American involvement in Iraq and Afghanistan. Those opinions could be summarized as: “Get out.”

I’m a little nervous about another military entanglement in the Muslim world, but I believe the U.S engagement in Libya was justified. President Obama is being vilified just about equally by those who say we should have gone in sooner and those who claim we should not have entered the fray at all. Somewhere in the middle are various members of Congress who are complaining that they weren’t consulted, or even that Obama’s action was illegal without their approval.

It all reminds me of what many wise old U.S. Forest Service managers said during my career with that organization when we were in the middle of a controversy: “When we’re catching hell equally from the timber industry and the preservationists, we’ve got it about right.”

I think Obama got it about, but not quite, right this time.

To ignore the pleas for help from the young rebels in Libya would have sent a terribly wrong message to other youths calling for more freedom and democratic institutions throughout the Middle East. It would have sent an equally wrong signal to tyrants we have traditionally supported, such as the Saudi royal family. This, I think, is just the right time in history to change the course of our foreign policy to what we say it always has been—supporting freedom and democracy.

We don’t need to launch another dozen wars to pursue humane, rather than economic, goals. But we do need to demonstrate to the tyrants that they must make concrete progress toward reforms that benefit their people or they will lose any support we are giving them, and we will join international military opposition to them should it develop. We can help make the world a better place with that sort of policy.

Obama, I believe, made only one serious mistake in his approach to the Libyan situation. Early on, he announced to one and all that “Gadhafi must go.” That defined a not necessarily essential end point to the conflict. The current civil war could end in a stalemate, resulting in an east-west partitioning of Libya. I think a partition separating traditionally unfriendly tribes, although not entirely satisfactory, would represent progress. There was no reason to rule it out with an emotional declaration stating only one outcome is acceptable.

Otherwise, Obama did the correct things. He declines to agree with those who say he actually created an “Obama Doctrine” for dealing with rebellions against dictators, but I think he did. If he did, it’s a good doctrine.

He studied the situation carefully, almost until the last possible minute available to save the rebels. He waited for a commitment from the Arab League to oppose Gadhafi and a commitment from NATO allies to assume military leadership after our major involvement was completed. He helped get United Nations Security Council approval of action to protect Libyan civilians. He stated clearly that American troops would not be involved, and we were not going to accept a leadership position throughout the conflict.

This approach is superior to what we have done recently in the Middle East—launching an assault by all available American forces, dragging along only those allies we could coerce into participating. That’s the kind of action that got us in all the trouble in Iraq and Afghanistan, trouble we can’t seem to get out of.

Of course, the fact that the two wars have emptied our treasury may have been the primary factor in putting us on a better course than usual. Letting others take the military lead after a no-fly zone was established was a big cost saver for us. But it wasn’t a five-and-dime variety military action, either. Those Tomahawk cruise missiles (we fired about 112 the first night of our activities) cost $1 million to $1.3 million apiece. We had more than 2,000 stockpiled when we opened fire, so the costs won’t be immediate, but the bill will come due when we replenish the arsenal.

Those expensive missiles needed to be fired. Military leaders are unanimous in stating that the first step in establishing a “no-fly zone” is to knock out anti-aircraft weapons and detection systems. We did that pretty quickly. Now our involvement is limited to things we are very good at, such as aerial refueling and surveillance and related intelligence and communications operations. The rebels and our allies who have the biggest stake in creating a democratic Libya are handling the rest.

Our involvement in Libya has cost us some cash, but so far not one American life has been lost and we have saved many, many lives. Gadhafi said he would kill civilian opponents “like rats,” and go door to door to do it when he had the chance. There’s no reason to doubt his word on that. Our air and missile power attacks helped prevent slaughter on a giant scale. Obama needs only to stick to the limits he has set for American participation to make our part in the Libyan intervention a success we can take pride in.

Call the new approach whatever you want—a doctrine, a policy, a blunder, an accident of history. I call it a welcome, new approach when force becomes necessary to carrying out our responsibilities to help improve the human condition.