Thursday, October 20, 2011

Elizabeth Warren and a Very Strange Bedfellow

Everyone knows that Elizabeth Warren is a champion of financial reform, right?  She's got a good reputation, which is one of the reasons that she's running for U.S. Senate in Massachusetts.  She's the darling of Occupy Wall Street people looking for real reform of the American political system, supposedly free from the corrupting influence of big-money politics.

They say that politics makes for strange bedfellows.  Need a blatant example?  He's an invitation for a fundraiser for Elizabeth Warren's campaign.  See anything unusual?  Let's just focus on one name.
Why would ANYBODY pretending to be a champion for middle-class, against the supposed oppression and corruption of the super-rich, associate themselves with George Soros?

George Soros is a speculator and hedge-fund manager who currently ranks at number 7 on the Forbes list of richest Americans.  While the fortunes of most Americans plummeted  during the financial crisis, his increased.

George Soros is also the #4 top funder of shadowy 527 committees.

George Soros is also one of the founding members of the so-called "Shadow Party" within the Democratic Party.

Soros is a New York resident.  Ms. Warren is running for office in Massachusetts.  George Soros is active in the politics of other states, including here in California.  He and other well-connected, big-money Democrats funded Proposition 27, designed to eliminate citizen-based reforms of California's redistricting process.

In my opinion, Proposition 27 was a very anti-democratic piece of legislation (which was supported, naturally, by various Progressive politicians and labor unions).

Be careful, people.  You can tell a lot about someone by the people with whom they associate.

Tuesday, October 18, 2011

American Federation of Teachers: Part of the Solution or Part of the Problem?

According to a recent article in the San Jose Mercury News, the American Federation of Teachers (AFT) is pursuing  a possible ballot initiative to raise taxes YET AGAIN on California's millionaires. I certainly wish that the members of the American Federation of Teachers (AFT) would actually apply their math, economics, history, and critical reasoning skills. AFT is right. We do have a problem, but the problem is NOT that California's taxes are too low for upper-income earners.

First, a caveat: I am not now, nor have I ever been a "millionaire."  However, in 2007, 2008, and 2010, I spent more on federal, state, and payroll taxes than all my other family living expenses COMBINED!

California ALREADY has the second highest marginal tax rate (10.3%) in the nation. Only Hawaii has higher marginal rates (11%).  California's 2nd highest tax rate of 9.3% is the fourth highest in the nation behind Hawaii, California's top tax rate, and Oregon.  California's 2nd highest tax bracket starts at 48,000 in income.

California's millionaires ALREADY pay a surtax supposedly to fund mental health services proving, I guess, that you must be crazy to be a millionaire and officially live in California.

California ALREADY implements President Obama's so-called "Buffett Test."  Capital gains in California are ALREADY taxed EXACTLY like ordinary income.

California's wealthy ALREADY pay the bulk of the state's income taxes.  The top 2% pay roughly HALF OF ALL PERSONAL INCOME TAXES (PIT).

The top 33% minority ALREADY pays 94% of the entire Personal Income Tax load.  Meanwhile, the bottom two-thirds supermajority contributes JUST 6%. But who has more voting power to raise taxes on the minority?

Similarly, the 33% minority contributes more than half of California's General Fund revenue.

California's upper-income taxpayers ALREADY pay a much higher effective tax rate than do the majority of Californians.  I ask you, looking at the chart in the article below, who isn't paying their fair share?

Even though a majority of Californians pay a lower state income tax rate than do a small minority, California's overall state tax burden is ALREADY one of the highest in the nation.

California's high taxes ALREADY places the state at or near the bottom on a variety of business climate surveys.  On one survey of 500 CEOs from around the country, California has ranked DEAD LAST as a place to do business since at least 2005!  In another survey, 70.5% of respondents ranked California as the least favorable business climate in the U.S.! (See Appendix C).

Is it any surprise then that California also has the nation's second-worst unemployment rate?

Of course, as part of the AFL-CIO, the American Federation of Teachers (AFT) enjoys tremendous clout both in Sacramento and Washington, as does its cousin organization, the California Teachers Association (CTA).  The California Teachers Association (CTA) is the #1 top spender in California politics according to the California Fair Political Practices Commission (FPPC).  CTA outspends the #2 top spender, SEIU, by almost double!

AFT is #11 on the list of top all-time national political donors, giving 91% of their member's state-mandated contributions to Democrats, 0% to Republicans. Hmmm.

California's politicians kowtow to the unions.  Even fellow career Democrats like former Assembly Speaker Willie Brown recognize this.  As he stated in his article, "Jerry Brown won't challenge teachers union," ...
"No one knows the power of such unions in California better than Gov. Jerry Brown.
"You'll notice that even as he's proposed draconian cuts to health and welfare programs and the state's universities, and asked taxpayers to pony up extra for several more years, BROWN HAS BEEN CAREFUL NOT TO TOUCH TEACHERS.
Here's the ironic part of the story.

  • BOTH the American Federation of Teachers (AFT) and the California Teachers Association (CTA) are tax-exempt 501(c)(5) organizations, according to Form 990 disclosures on file with the U.S. Government and with
  • BOTH the American Federation of Teachers (AFT) and the California Teachers Association (CTA) derive the majority of their revenues from state-mandated union dues, paid by hard-working public school teachers.
  • This begs the next obvious question:  Who pays teachers' salaries?  Naturally, these come from the taxpayer.

Instead of using their political clout on REAL solutions, the American Federation of Teachers (AFT) is wasting their member's dues and our time on yet more non-solutions.  AFT, how about using your political clout on tax reform, spending reform, or pension reform?  For too long, organizations like AFT have blocked prudent reforms in California and in Washington.  Consequently, there are likely massive spending cuts coming as part of the Super Committee process, which likely means jobs cuts for AFT members and other public employees.  AFT, if you refuse to be part of the solution, then by definition, you become part of the problem.

Tuesday, October 4, 2011

Who Pays Their "Fair Share" in California?

See also "California Proposition 30: Jerry Brown's Big Government Tax Hike" that gave Californians the nation's highest state sales tax rate and the nation's 1st-, 2nd-, 3rd-, 5th-, and 7th-highest marginal state income tax rates.

President Obama is fond of saying that "millionaires and billionaires" are not paying their "fair share" of taxes.  Of course, the President never explicitly defines what someone's "fair share" should be.

Here is a chart showing the average effective tax rate for California taxpayers, paying the state's highly income-progressive Personal Income Tax (PIT).  The effective rate is the tax paid divided by the Adjusted Gross Income (AGI).  The effective tax rate for the supermajority (66.67%) of Californian taxpayer's was between 0% and 1.5% in 2008--the latest tax data available. Meanwhile, the superminority (33.33%) paid between 1.5% and 8.97%.  Why is this important?  California requires a two-thirds majority to pass a tax increase.  Effectively, the supermajority of Californian's impose excess taxes on the one-third majority.

Revenues from Personal Income Tax (PIT) contributed over half (58%) of the state's General Fund (see Figure SUM-04), ...

... which pays for the majority of California's governmental services, including K-12 and secondary education, corrections, health and human services, etc. (see Figure SUM-05).

The General Fund also pays off California's General Obligation Bonds. In 2011-12, about 5.57% of the General Fund is allocated to paying off California's debt-financed projects.  An October 2011 report from the California Treasurer indicates that debt service is over 7% and will spike at over 9%, even without new borrowing.

The 33.33% superminority pays roughly 94% of all California Personal Income Taxes (PIT), effectively contributing over half of the entire General FundThe 66.67% supermajority contributes just the remaining 6% of PIT, and roughly 3% of the General Fund.  Those with an Adjusted Gross Income (AGI) of $50,000 or less were in the bottom 66.67% in 2008.

At the ballot box, however, every taxpayer has the equivalent voice.  Consequently, the supermajority decides the projects and programs for which the superminority shall pay and how much the superminority will be charged for the privilege. 

The Occupy Wall Street movement employs divisive "us-versus-them" class-warfare rhetoric when it talks of "The 99%" and "The 1%."  Maybe the "The 1%" in California aren't pulling their weight.  Let's look at the data.  Despite being only 1% of the taxpaying population, "The 1%" paid 42% of all California Personal Income Tax (PIT) in 2008--the latest data available.  On average, the tax rate paid by "The 1%"  was over three times higher than the average rate paid by "The 99%."  At the ballot box, "The 1%" represents about 0.86% of all registered voters.  Want to understand why there is so much money distorting our political process?  It's because one set of voters decides how to spend the money raised by a minority of wealthy voters, who cannot prevail at the ballot box.

Again, 58% of California's General Fund revenues comes from Personal Income Tax (PIT) revenues.  Consequently, due to California's highly income-progressive tax system, "The 1%" pays 24% of the entire General Fund while the remaining 99% pay 34%.

It should be noted that California ALREADY implements President Obama's "Buffett Test."
  • California ALREADY imposes significantly higher marginal tax rates on upper-income taxpayers.  Consequently, California has one of the most income-progressive tax systems in the United States.
  • California taxes capital gains exactly like it does ordinary income.  There is NO capital gains tax preference in California.
If the "Buffett Test" really provided a solution, then California wouldn't have significant budget shortfalls.

Also, in honor of Governor Brown's tax increase proposal, the following chart cuts the day by those making over $300,000 (the target of most of the increases) and the 2/3rds majority of taxpayers, required to pass a tax increase (and who happen to earn $60,000 or less).

See also ...