Wednesday, September 28, 2011

The Stagecraft President Stages More Political Kabuki

Oops, he did it again.  President Obama is already on record with a number of news organizations for carefully stage-crafting town hall meetings with well-placed planted questions.  There were many such events during the health care "debate."  Here's but one example.

Of course, the President and his team insist that it's all just great luck.  Uh huh, right.



The latest example is the planted question by a well-connected, big-money donor to the Democratic Party at a town hall meeting scheduled staged at LinkedIn.  Uncharacteristically, the President had a well-thought-out, eloquent, impromptu answer, all without the aid of a teleprompter.

The man who asked the staged question was Doug Edwards, a former Google marketing executive and author of "I'm Feeling Lucky: The Confessions of Google Employee Number 59".

The media, of course, lapped it up.

Surprisingly, I saw little follow up investigation by the media.  Who was this guy?  What would prompt him to ask such a question?  What's his angle?

Well, according to campaign finance disclosures for "Doug Edwards" and "Douglas Edwards" of Los Altos, CA and Campbell, CA, the esteemed Mr. Campbell graciously donated some $465,682 to various political causes between 2004 and 2012.  Amazingly, every single recipient is either a member of the Democratic Party or associated with the Democratic Party.  What are the odds?

Despite residing in California, Mr. Edwards' generosity extended to a variety of other states, including Montana, Wisconsin, Ohio, Minnesota, Massachusetts, and Tennessee.  Similarly, over $144,000 went to ActBlue, a money-laundering organization for the Democratic Party who bills themselves as "the online clearinghouse for Democratic action."  According to OpenSecrets.org, who tracks campaign spending at the national level, ActBlue is the #1 top all-time political donor with 99% of their money going to Democrats and 0% going to Republicans.

Mr. Edwards' biggest benefactors include:
  • ActBlue (money-launderer for the Democratic Party): $144,100
  • Democratic Congressional Campaign Committee (DCCC): $73,900
  • Democratic Senatorial Campaign Committee (DSCC): $68,900
  • Gillibrand for Senate (Democrat): $12,000
  • Ohio Democratic Party: $10,000 
You can find a detailed list of Mr. Edwards' political contributions here.  The few apparent duplicated contributions are because of simultaneous contributions to both primary and general election campaigns, given on the same date.  It is more difficult to find spending records for the state level, but records show that Mr. Edwards spent at least $14,500 across California, Wisconsin, and Iowa.  Some of his ActBlue spending may actually be for state candidates.

Mr. Edwards is also a public member of the self-proclaimed "Patriotic Millionaires for Fiscal Strength".

In a few cases, Mr. Edwards' donated the maximum legal amount to various campaigns--well, the maximum legal amount unless you happen to be married.  Then, your wife can also contribute to the cause.

Mr. Edwards has indeed married very well. His amazingly bright and talented wife, Kristen, has a Ph.D. and M.A. from Stanford, degrees from Brown University and Middlebury College, and even studied at the Leningrad State University in the Soviet Union during the height of the Cold War, before it later became Saint Petersberg State University.

According to public campaign records, "Kristen Edwards" of Los Altos, CA gave another $113,400 to the Democratic Party and its causes.

Mrs. Edward's biggest benefactors include:
  • ActBlue (money-launderer for the Democratic Party): $33,100
  • Democratic Senatorial Campaign Committee (DSCC): $28,500
You can find a detailed list of Mrs. Edwards' political contributions here.  State donations are more difficult to track, but Mrs. Edwards spent at least $9,500 in California.  Some of her ActBlue spending may actually be for state candidates.

Ironically, the Edwards' don't need action from the President of the United States or even from the ineffectual U.S. Congress to increase their tax burden.  The Edwards' can contribute more of their money to taxes now, of their own free will, without waiting for the government to act.  Here's how.

Useful Information for Under-taxed Individuals
http://soquelbythecreek.blogspot.com/2010/09/useful-information-for-under-taxed.html

So, we are left with a few possible conclusions:
  1. The President is the luckiest man on the planet and just happened to call on someone in the audience who just happens to agree completely with the President's stance on taxation and his job bill.
  2. That the Democratic Party really isn't the crack, money-making machine that we all believed and the President had no idea that someone who's family gave over $500,000 to the Party, over multiple years, across multiple states, was in the audience.  Me?  I give a minor amount to one Democratic Party candidate and I'm on their mailing list forever!
  3. The President and his handlers have little respect for the intelligence of the American public or the American press.
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Wednesday, September 21, 2011

"Most of Us" Recognize Divisive Rhetoric When We See It



Elizabeth Warren, Candidate for Senate, Massachusetts 2012
"I hear all this, you know, 'Well, this is class warfare, this is whatever.' No. There is nobody in this country who got rich on his own -- nobody.
"You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.
"Now look, you built a factory and it turned into something terrific, or a great idea. God bless--keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along."
I agree very much in principle with Elizabeth Warren's passion, but I'm sorry, Ms. Warren, your comments DO INDEED sound like "class warfare."

Who paid to build the roads?  You say, "the rest of us."  I say, "most of us, including ME!"  In fact, some of us paid MANY TIMES MORE for those very same roads than did the majority of Americans.

Who paid to educate my workers?  You say, "the rest of us."  I say, "most of us, including ME!"  In fact, some of us paid MANY TIMES MORE to educate my workers and my children than did the majority of Americans.  At my company, we provide fairly expensive training for employees after they come on board so that they can be productive, internationally competitive, that my company can be successful, and that all of us can be happy, productive taxpayers.  My employees and I volunteer at local public and private schools to enhance math, science, and technology classes.  Yet, some failed politicians vilify us for not paying or doing our "fair share" (which mysteriously has never been explicitly defined).

Who paid for police and fire protection services?  You say, "the rest of us."  I say, "most of us, including ME!"  If fact, some of us paid MANY TIMES MORE for the very same police and fire protection service than did the majority of Americans.

If you look at the FACTS--not the feel good rhetorical bullshiloney from certain Progressives--the MAJORITY of upper-income taxpayers pay their "fair share" of taxes and more.  In 2002, 2003, 2004, 2005, 2006, 2007, and 2008, federal, and state taxes were my single largest expense item--greater than my mortgage payment, insurance, food, and car payment COMBINED.

Don't take my word for it.  Check for yourself.  The data is readily available to all.  You can start your education here.


Never mind that President Obama's "Buffett Test" tax plan is a side-show and a distracts from needed, real tax reform.  Never mind that an estimated 46% of households will PAY ZERO INCOME TAX in 2011.  Never mind that taxpayers paid $4.2 BILLION in tax incentives to people who are in the United State illegally.

Every taxpayer I know would actually agree to pay more IF (and it's a very significant IF) we actually believed that giving more money and more power to the state and federal governments would actually help solve the problem. Most taxpayers are appalled at the dysfunction, corruption, and absolute lack of leadership in our state houses and in Washington, D.C.

I'm sorry, Ms. Warren, but "most of us" recognize your statement as yet more divisive rhetoric.

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Tuesday, August 30, 2011

What Percentage of the Congressional Black Caucus (CBC) Are Also Members of the Congressional Progressive Caucus (CPC)?


In a post last year, I noticed that a number of members of the Left-leaning Congressional Progressive Caucus (CPC) are also members of the Left-leaning Congressional Black Caucus (CBC). I was wondering how many CBC members were also CPC members and vice versa.

Using the lists of CBC members and CPC members as of 30-AUG-2011, I compared the names and tallied how many members there were in each group and how many members were common to both groups. Interestingly, most members of the Congressional Black Caucus (CBC) tend to have Left-leaning political views. The noticeable exception is Congressman Allen West of Florida, who is a former Lt. Colonel in the U.S. Army and an outspoken favorite of the Tea Party. Congressman West is the only Republican on the CBC. Although, due to racist rhetoric coming from members of the Congressional Black Caucus itself, Congressman West is apparently reconsidering his decision.

Perhaps not surprisingly, 89% of CBC members where also members of the CPC. Similarly, more than half of the CPC membership is from members of the CBC. I'd call that significant overlap.
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Thursday, August 25, 2011

CHART: Average Federal Income Tax Rate by Income Group (1998-2008)

(Click image to enlarge)


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Wednesday, August 24, 2011

Is Warren Buffett Paying His "Fair Share"?

I have tremendous respect for Warren Buffett. I own shares in Berkshire Hathaway and he and his group of companies have generated some reasonable gains over the years.

But, is Mr. Buffett right? Do the superwealthy like him pay less than their "fair share" of taxes as he seemingly claims is his New York Times editorial? Mr. Buffett's non-scientific technique was to ask 20 of his employees how much tax they pay.

Likewise, Mr. Buffett didn't distinguish between income taxes, sales taxes, corporate taxes, estate taxes, or payroll taxes. I'll focus on federal income taxes, which generates one of the largest shares of revenue for the federal government. Payroll taxes (Social Security and Medicare) are another matter that I'll cover in a later post. Likewise, Mr. Buffett didn't distinguish between MARGINAL tax rate or EFFECTIVE tax rate. The MARGINAL rate is the amount that you pay on each additional dollar of income. The EFFECTIVE rate is how much you pay in total taxes, divided by your total income. The EFFECTIVE rate is nearly always less than the MARGINAL rate, although most people remember the MARGINAL tax rate because it usually seems so extreme. See "Pretty Pictures and a Political Rorschach Test" to see how marginal rates have changed over time.

Unfortunately, Mr. Buffett's non-scientific sample of 21 taxpayers represents just 0.000015% of the total population of 140 million taxpayers, or about 1 in 6.664 MILLION taxpayers. In statistics, this is called a non-representative sample. Given that Mr. Buffett by himself is also a member of an elite group, the Top 400 taxpayers, any result will be highly skewed.

Wouldn't it be great if we could use real IRS data and could validate if wealthy taxpayers were indeed not paying their "fair share"? Oh wait, we can! The IRS provides freely downloadable summary statistics for all income taxes filed by year, income group, etc. Groups like the Tax Foundation and the Tax Policy Center use this data to report on how the tax burden falls on taxpayers.


According to Warren Buffett's editorial, he paid $6,938,744 ($6.938 MILLION) in federal income taxes in 2010, representing 17.4% of his taxable income. So, is Warren Buffett scamming the system? The average tax bill for all taxpayers in 2008 (the latest year of data from the IRS), was $7,373, down from $7,911 in 2007. The average taxpayer paid 12.24% of his taxable income in federal income tax in 2008. Taxpayers in the Top 0.1% population paid an average $1,357,143 in taxes in 2008. Warren Buffet paid over $5 MILLION more! The Top 0.1% also paid 22.7% of their total income as income tax. Warren Buffet paid about 5.3% less. However, Mr. Buffett is 80 years old and like many others his age, he likely receives considerable income from long-term capital gains, which are presently taxed at 15%. Likewise, being a shrewd investor and having lived through prior times with much higher tax rates, Mr. Buffett likely has an extensive portfolio of tax-free municipal bonds and U.S. Treasuries, but this is conjecture.

To summarize ...
  • Warren Buffett paid significantly more in absolute dollars than did the average taxpayer ($6.938 MILLION vs. $7,373).
  • Warren Buffet paid a higher percentage of adjusted income in taxes than the average taxpayer (17.4% vs. 12.24%) but less than those in the Top 0.1% of taxpayers (17.4% vs. 22.7%)
(Click image to enlarge)

QUESTION: Does Warren Buffett pay more or less of the total share of income taxes than his total share of income?

Let's determine how much he made last year. He claims that he paid $6.939 MILLION in taxes and had a 17.4% effective tax rate. Divide $6.939 MILLION by 17.4% and you derive that his adjusted gross income was around $39.878 MILLION (a nice job, if you can get it!). Because 2010 tax data isn't yet available, I'll mix some apples and oranges using the top-line 2009 tax summary data. In 2009, the total US adjusted gross income (for tax purposes) was $7.63 TRILLION. The total 2009 federal income tax bill was $865.95 BILLION.
  • Warren Buffett's share of total U.S. income = 0.00052% ($39.878 MILLION / $7.626 TRILLION)
  • Warren Buffett's share of total U.S. income tax bill = 0.00080% ($6.939 MILLION / $7.626 TRILLION)
As do most wealthy taxpayers, Warren Buffett also pays a higher share of the total tax bill than his total share of US income. In fact, Warren Buffett pays 53% more in taxes than his share of income ((share of taxes / share of income) - 100%). A number greater than 0% indicates that the taxpayer is taxed on both income and on a fraction of accumulated wealth. A number less than 0% indicates that the taxpayer potentially receives government services that are subsidized by all other taxpayers.



(Click chart to enlarge)

Using 2008 historical data for the Top 0.1% taxpayers (again, Mr. Buffett is in the Top 400 group or the Top 0.0003%), his share of taxes versus total income should be around 85%. His tax payments current are more in line with the Top 1% to 5% of taxpayers. If this Top 0.0003% taxpayer wants to keep up with the Top 0.1% of taxpayers, then his 2010 tax bill should be in the neighborhood of $11.128 MILLION instead of a "measly" $6.939 MILLION. However, if he wants to pay 22.7% of his income as tax to match the Top 0.1%, then he only needs to contribute another 5.3% of his income or $2.144 MILLION. Instead of waiting for the slow-moving Congress to take action, Mr. Buffett is free to voluntarily write a check for an addition $2.114 MILLION or $4.189 MILLION or more, unless perhaps he has better use of that money such as investing in the U.S. economy and creating jobs--two actions that the federal government that is seemingly incapable of doing.

The last time that Congress attempted to address "inequalities" in the U.S. tax code, it created the ill-conceived and poorly-constructed Alternative Minimum Tax (AMT). AMT was originally targeted at just 155 high-income taxpayers, who paid $0 in income tax but broke no law and merely followed existing U.S. tax code. Ultimately, because AMT was not indexed to inflation, it impacted millions of middle-class taxpayers (myself included).

Back to our fundamental question: Does Warren Buffett pay his "fair share" of income tax? He pays significantly more taxes than the average taxpayer, both in total dollars, as a percent of his income, and as a percent of his share of total income. Could he pay more? Undoubtedly. Is he paying his "fair share"? First, tell me what your definition of "fair share" is.

You know what we're not discussing while wasting time on the definition of "fair share"? TAX REFORM! I believe that all sides agree that our current income tax system is antiquated and internationally un-competitive. Generally, you get less of whatever you tax. The U.S. government currently taxes work (jobs), investments, and savings. Instead, we should be taxing consumption! But, there will likely be no changes until the next major crisis.
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Wednesday, August 10, 2011

Another Example of California's Flawed Government

California is home to some of the nation's toughest anti-smoking legislation. The state collects an extra $0.25 tax per pack to pay for the adverse health effects of smoking and to fund a public-service campaign that advertises against tobacco use.

California is also home to CalWORKS, a program designed to help unemployed and low-income families. The California Legislature moved to close obvious fraud when CalWORKS cards were used out of state to fund extravagances such as vacations, casino gambling, and at strip clubs--all at taxpayer expense.

Despite that California leads the way on public efforts to discourage smoking and the California Legislature feels free to mandate the behavior of every-day Californians by banning certain incandescent light bulbs, the California Legislature rejected common-sense CalWORKS reforms (SB 417) designed to prevent those that receive taxpayer-funded CalWORKS benefits from purchasing alcohol and tobacco using those same benefits.

It really makes you wonder about what passes for logic in Sacramento--either that or they really need to check the old plumbing in the Capitol for lead contamination.
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Friday, August 5, 2011

The Debt Ceiling and Where Do You Hide $238 BILLION?

If you followed the USA's debt-ceiling debate, you may remember that U.S. Treasury Secretary Timothy Geithner said that the U.S. Government would reach the Congress-imposed debt ceiling on 16-MAY-2011.

As Congress did little to act on the debt ceiling up to that point, the debt-ceiling debate was delayed until a 1-AUG-2011 drop-dead date. The Treasury admitted to delaying payments to certain federal retirement and disability funds to postpone the date beyond 16-MAY-2011. Using the ever-popular "everybody-does-it" defense, Secretary Geithner claims, "Each of these actions has been taken in the past by my predecessors during previous debt limit impasses."

After tortuous debate and political wrangling, the U.S. Congress agreed to increase the debt ceiling. Immediately afterward, the U.S. Treasury borrowed a record $238.3 BILLION in a single day!

(click to enlarge)


The chart above uses data directly from the U.S. Treasury and shows the accumulated total public debt from 1-JAN-2011 until 3-AUG-2011. The red line shows the TOTAL public debt. Not all of the debt is subject to the debt ceiling (as described here and here), so the line seemingly crosses the official debt ceiling limit. However, the red line flattens out on 16-MAY-2011, the day that Treasury Secretary Timothy Geithner says that the U.S. hit the official debt limit.

At first glance, it would appear that the U.S. debt did not increase from 16-MAY-2011 until 2-AUG-2011 and then suddenly the debt increases by $238.3 BILLION. However, from the historical "burn-rate", the U.S. Government was in reality still borrowing an average of $2.72 BILLION per day! The blue dashed line shows extrapolated borrowing even during the period where the official total debt flat-lines.

In essence, the Government merely stopped borrowing on the open market and instead borrowed from federal employees and retirees--many whom where likely unknowing and unwilling U.S. creditors.

So, where did the U.S. Treasury "hide" this $238.3 BILLION? If a public company acted this way, these actions would likely trigger an SEC investigation (and shareholder lawsuits). But, as we sadly know, the U.S. government isn't constrained by the same rules that it mandates for everybody else.

In a side note, the total USA public debt is rapidly reaching the size of the U.S. gross domestic product (GDP). In 2010, the U.S. GDP was $14.658 TRILLION.

QUESTIONS:
  • Where did the U.S. Treasury "hide" this $238.3 BILLION?
  • Were their actions legal?
  • Were their action ethical?
  • The Congress delayed action on handling the debt crisis well beyond the original 16-MAY-2011 date. How much did Congress' inaction cost the nation?
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