Who's Payin' Taxes Up There?

I have been seeing the figure 100,000 for the number of millionaires who don't pay any federal taxes. This sounded incredible to me, so I followed the link which led...nowhere.

The proof was supposed to be at The Center for American Progress, but the best that I could find there was the figure 1,470 in 2009.

Derek Thompson at The Atlantic gives a figure of 7,000 for 2011. But he explains that there are good reasons (and some bad ones-- tax tricks, he calls them) why this can be so. Taxable income, even a million dollars of it, can be reduced to zero because of write-offs from a terrible tragedy, for example a home or business is wiped out by a natural disaster, or someone in the family comes down with a hugely expensive form of cancer. People can put lots of money into tax deferred investments. There's nothing wrong with that. Oh, and then there are those tax deductible charitable donations that liberals seem to hate. If you give most of your money to the Salvation Army or to Feed the Children, do you become an enemy of the people?

Megan McArdle, also writing for The Atlantic, gives much more detail on the complexity of the millionaire tax situation. But consider this:

You cannot build a tax code on the principle that no millionaire, ever, should ever have an effective tax rate lower than their secretary.  The tax code covers 300 million people.  Rules written to cover that many people, in a complex economy where there are lots of different ways to make money, and some uncertainty as to what constitutes income, will not produce the same result that we would get if the economy were the size of a kindergarten class, and we had an omnipotent teacher charged with making the income distribution perfectly fair. ...

The only way to actually ensure that no millionaire, anywhere, pays less than 20% on their annual income would be to essentially suspend the rule of law for wealthy people, and give the IRS power to seize income from rich people at will within some very broad guideline about fair shares.  This strikes me (she said, with dramatic understatement) as a very bad idea.

But when it's so easy to demagogue the question into a larger ideological victory, what do individuals and the particulars of justice matter?

Show Biz Economics Debate

Here is a debate over basic rax and economic policy between Bill OReilly, Jon Stewart, Richie Cunningham, and Bill Clinton.



Quite a roundtable (with O'Reilly moderating, of course).

It's Coming! Doom! Doom!

Back in June, I put some indicators together in my non-economist mind and wrote that 2011 will be our Second Plunge Recession. At Worldmag.com, I entitled a fuller version of this "We're Doomed." (You should be able to get the gist of a column or chapter by its title.)

Some people who left comments at World were skeptical. Various award winning economists say we're pulling out of this mess. They cite data. Who is this Innes guy? But remember, economics is not a science, though it has a strong quantitative component. Human elements like political passions and wishful thinking enter even into the minds of laureates.

They fester in my mind too, but I'm sorry to say that developments are confirming Innes's prognostications. Look at these headlines:

"Dow Slumps Again" (Jonathan Cheng, WSJ, August 24, 2010).

U.S. stocks slid again Wednesday as blue chips bobbed above and below 10000 as economic data continued to disappoint. ... Investors were responding to a second consecutive day of weak news from the housing sector, as new-home buying fell to a record low in July amid rising inventories, another signal that the market could continue struggling without support from the government's first-time home buyer's tax credit.

"Plunge in Home Sales Stokes Economy Fears" (Sudeep Reddy and Nick Timiraos, WSJ, August 25, 2010).

U.S. home sales plummeted in July to a level not seen in more than a decade, spurring fears of renewed weakness in housing prices and the broader economy. ... The expiration of a home-buyer tax credit in the spring was expected to damp buying, though less severely. Economists said the sales drop—together with a corresponding rise in the inventory of unsold homes—meant another decline in housing prices was on the horizon. House prices had stabilized last year after declining since 2006.

This article quoted Paul Dales of Capital Economics as stopping short of saying this means a double dip recession for sure. "At this point in the recovery, every little bit counts. A double dip in the housing market and house prices would not be enough to generate another recession. It would certainly help to hold back the recovery."

So what would send us over the edge if this doesn't? (That's an if.) Repealing the Bush tax cuts seems like a big enough blow to finish us off. So if you love your family, your job, your neighbors, lobby your Democratic Congressman to back off on that plan. In fact, if you support the President's broader agenda and would like to see him win a second term, you should also lobby to leave the tax cuts in place.

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In my column, I say that Social Security is a big Ponzi scheme. Rassmussen Reports surveyed the American public on that question, and the results are here.

Biblical Levels of Taxation?

I try never to miss Sunday School in my church, Franklin Square Orthodox Presbyterian Church on Long Island. Our pastors have a way of engaging serious questions while elaborating the teaching of the Bible but in way that ordinary people can grasp. I always learn something of great value. Sometimes it shows up in my classes. Sometimes it shows up on my blog. Last Sunday, as part of a (blissfully) long series on The Westminster Confession of Faith, Pastor Ben Miller took us to I Samuel 8 to consider the relationship between the fifth commandment, pertaining to obeying authority, and the seventh commandment regarding stealing. This got me started. This is where I ended up. (I am to blame for all these thoughts, however.)

If you would like to read my thoughts on "all-volunteer war-funding," i.e., the way we pay for political campaigns, go to the full article at WORLDmag.com.

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"The Prophet Speaks for Low Taxes"

We are still in the shadow of Tax Day, perhaps still smarting from it. But even if you did not pay taxes or are getting a big tax refund, you would nonetheless be legitimately concerned about the trillion of dollars the present government is adding to our national debt, and the corresponding expansion of government involvement in the economy and in each of our lives.


Notice what the prophet Samuel says about taxes when—in describing the model of pagan kingship—he warns Israel against their desire to have a king “like all the nations”:

“So Samuel told all the words of the LORD to the people who were asking for a king from him. He said, ‘These will be the ways of the king who will reign over you: he will take your sons and appoint them to his chariots and to be his horsemen and to run before his chariots. And he will appoint for himself commanders of thousands and commanders of fifties, and some to plow his ground and to reap his harvest, and to make his implements of war and the equipment of his chariots. He will take your daughters to be perfumers and cooks and bakers. He will take the best of your fields and vineyards and olive orchards and give them to his servants. He will take the tenth of your grain and of your vineyards and give it to his officers and to his servants. He will take your male servants and female servants and the best of your young men and your donkeys, and put them to his work. He will take the tenth of your flocks, and you shall be his slaves. And in that day you will cry out because of your king, whom you have chosen for yourselves, but the LORD will not answer you in that day’” (1 Samuel 8:10-18).

This rapacious king will take a 10th of their grain and flocks. Samuel implies that 10 percent is more than enough for government to finance all its legitimate responsibilities. If it claims to need even that much, then either it is doing what it has no business doing, or government leaders are serving their selfish advantage with public funds as we see in the 1 Samuel passage. While it may be overburdening the passage to see an implicit prohibition from God against an average tax rate of 10 percent or more, it is instructive nonetheless.

One might object that modern life is vastly more complicated than Samuel’s nomadic social and economic state, and so a larger, more expensive administrative state is required. But a more complex economy is also a vastly more productive economy. A flat tax of 10 percent would be a generous sum of money to pay for good government in modern America.

Bear in mind that the presupposition of “the administrative state” is that there is no legitimate limit to its administrative reach. It has inherently totalitarian tendencies. Wherever there is a good to be done, it sees a need for at least government regulation, and perhaps also government service providing the good itself. By contrast, the Apostle Peter tells Christians that the purpose of government is to punish evildoers and praise those who do good:

“Be subject for the Lord’s sake to every human institution, whether it be to the emperor as supreme, or to governors as sent by him to punish those who do evil and to praise those who do good” (1 Peter 2:13-14).

Unlike the libertarian, Peter sees a moral relationship between government and the people it governs, and amongst the people themselves as a political community. Healthy civil society is a network of consciously benevolent relationships, and government has an important role in encouraging (certainly not hindering, as activist government does) that mutual well-doing. Government is not to grow impatient or cynical regarding private benevolence and substitute government services in its place. But the administrative state attempts to accomplish by public authority what is legitimately and most productively accomplished only by private means.

One might also suspect that restricting taxation levels to below 10 percent does not account for emergency situations such as war. But if a free people who believe in their country have an all-volunteer army precisely because they are free, why not also all-volunteer war funding?...


If government were limited to a flat tax, or an average tax, of no more than 10 percent, we would establish a moral principle concerning limited government and personal responsibility, and we would have serious public debates concerning spending priorities, living within limits, and the legitimate role of government among a free people.

Remind Them Who They Work For

I'm going to Morristown NJ today to join the grass roots tax protest that Rick Santelli got started back in February with his on air rant about intrusive government. I hope all of you reading this will join us for tea somewhere in a village green near you. This could be the beginning of wresting back some modicum of control for the people of whom, by whom, and for whom our government theoretically exists. Theoretically I say; it is beginning to feel like a cruel joke to speak of a free, elective government, instituted and controlled by the people whose consent alone to be governed makes that governing legitimate. We have already had a revolution of sorts, a decades-long, slow-motion blanketing of our established rights and freedoms by the blob of big government bureaucracy and the machinations of petty tyrants on the make.

John Locke had a revolutionary thought: when the controversy between a government and the people erupts over infringement of right and law-abidingness, it is the legislative that is in rebellion, not the people.

"[W]hen they, who were set up for the protection, and preservation of the People, their liberties and Properties, shall by force invade, and endeavor to take them away; and so putting themselves into a state of war with those, who made them the Protectors and Guardians of their Peace, are properly, and with the greatest aggravation, Rebellantes, Rebels." (sec 227)

And if, he goes on to say, someone should think that a doctrine of resistance to such tyranny is not to be allowed, "they may as well say upon the same ground, that honest men may not oppose robbers and pirates, because this may occasion disorder or bloodshed. If any mischief come in such cases, it is not to be charged upon him, who defends his own right, but on him that invades his neighbors." (sec 228)

Do they really want to press this rebellion against us any longer?

Barack Obama's Flying Circus

When Barack Obama is not reading up on Abraham Lincoln for tips on how to be President, it seems that he is combing through the collected works of Monty Python for ideas on how to increase tax revenues.

Well, perhaps it was not an idea the administration floated by means of the sucker at the head of the Department of Transportation. Perhaps the idea actually originated there.

The Obama administration will not support a policy of taxing drivers based on their mileage, the Transportation Department said Friday after a published interview in which Secretary Ray LaHood called it an idea "we should look at." In a written statement, the department said, "The policy of taxing motorists based on how many miles they have traveled is not and will not be Obama administration policy."

Speaking to The Associated Press, Transportation Secretary LaHood, an Illinois Republican, said, "We should look at the vehicular miles program where people are actually clocked on the number of miles that they traveled." The remark was part of a discussion about various options to help make up for the highway funding shortfall on the federal level (CNN, February 20, 2009).

If not the policy itself, at least the approach bears a striking resemblance to the Monty Python's Flying Circus "Tax on Thingy" sketch (1970). (The sketch itself starts at 1 minute 40 seconds on the clip.)



Should we anticipate the establishment of a Department of Silly Walks? It could mean a million new jobs.



But apparently I am not the first to connect Mr. Obama's approach to government with the zany, madcap comedy troupe. This picture, along with several others, comes from Comedy Central's Indecision 2008. One commenter wondered how, if he were elected President, Sen. Obama would protect the country against attacks with fresh fruit. A month into his administration, we still don't have an answer to that question.

Signs of Hope in 2009

If you pulled out of the stock market in 2008, if you hope to enter the housing market in 2009, or if you fear either the level of personal debt in America or Democratic taxing and spending plans, Alan Murray has a calming message for you ("2009 Could Be Better Than You Think," Wall Street Journal, Jan. 4, 2009).

He argues five points:

1. This will be a good year to invest in stocks.

2. It will be a good year to invest in real estate.

3. Americans will learn to live within their means.

4. President Obama will have a historic opportunity to reshape public policy.

5. Your (federal) taxes won't rise.

Defining the Capitalist Enemy Down

We've all watched the shifting line of demarcation between those rich and criminal enough to expropriate from and those to be showered with the largess. The number started out at $250K; then Obama casually lowered it to $200K; Joe Biden, possibly in error, but who knows? mentioned $150K; next, the always unpredictable Governor Richardson made it $120K.

Now this video, from 2003, has Obama talking more in his native tongue--and sounding much more believable. Now we hear numbers like "50, 60, 70 thousand a year" Remember that paying taxes is about the only thing mentioned by this campaign as being patriotic; they'll be extending the opportunity for patriotic expression far and wide--kind of like spreading the wealth. Oh--and don't forget Obama's definition of selfishness: being against his brand of redistribution as fairness.

Wanting to keep the money you earn is no virtue; expropriation of capital is no vice.




In describing the ever-widening gyre that took in increasingly improbable "enemies", the French Revolution was famously said to have "eaten its own children." Similarly, as more and more parts of the coalition for hope and change find themselves on the wrong side of the wealth line, they'll have reason to reget their ardor for the revolution they brought about.

Government, Beer, and Our Tax System

Someone putting himself forward to be President of the United States should know at least the basics of economics. But the Democrats in general show little evidence that they know anything of the subject. They seem more concerned about what they call "fairness" than about general prosperity.

For example, after the Democratic Congress passes Barack Obama's tax increases on "the wealthy" and sends checks to everyone else--thus establishing "fairness"--48% of the voting population will be paying no federal income tax. Another 11% will be paying very low taxes.

Surely, you can see the problem. What do you think happens in a democracy when the majority of the people pays no taxes, and yet has the power through Congress to raise the taxes of those who do pay, and gives itself ever increasing benefits with other people's money?

After passing that tipping point is there any going back? Why would people who pay no taxes vote for going back to paying taxes? They will view freedom from taxation as an entitlement. Tax cuts will become a thing of the past. Any proposed tax cut would be a "giveaway" to the rich because they would be the only people left paying any taxes.

But as government spending for those who pay nothing goes up and up, and the tax rates on an ever shrinking minority get increasingly burdensome, those who pay the bills will have ever incentive to work, or at least to work in America. Again, you see the problem. Eventually, in the throws of national bankruptcy and poverty, seeing that we have killed the goose that lays the golden egg, or driven her into exile, we will have to mend our ways and resume the broad civic responsibility of paying taxes. In the meantime, we will see likely two generations of unnecessary suffering.

Adam Lerrick, economics professor at Carnegie Mellon University, explains this crisis in "Obama and the Tax Tipping Point" (Wall Street Journal, Oct. 22, 2008). Michael Boskin mentions the same point today in "Our Next President and the Perfect Economic Storm" (WSJ): "[Obama's] refundable tax credits will raise the share of those making no contribution to the funding of general government to 48% from 38%, hastening, perhaps cementing, the unhealthy budgetary dynamic of a majority of voters receiving more in public payments than they pay in taxes."

Here is a different approach to the same lesson stated more playfully and perhaps for that reason more effectively:

How Taxes Work ― or, 'How to Pay for Beer'

"Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by $20.' Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20′ declared the sixth man. Then he pointed at the tenth man, 'but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

This illustration has been attributed to David R. Kamerschen, a professor of economics at the University of Georgia, but on his webpage he denies authorship.

Snopes.com has investigated all leads on the authorship of this brilliance and come up dry.

Always check your sources! Always footnote!