Tuesday, October 11, 2011

Dear 53% "Movement": Read Closely

So I heard today about a so-called "53% movement" - a fledgling organization from our buddies on the Right that claim to represent the 53% of Americans who actually pay taxes.  They have set up a Tumblr very similar to that of the #OccupyWallStreet folks, shown here, in which photos of real people are coupled with their stories.

Hey, fair enough, right?  Tumblr whatever you want.  However, when you read through some of these pictures, you start to see that the similarities are more striking than the differences.  Firstly, a few differences: while there might be a sound bite or two from some of the #OWS crowd to the effect that they "deserve" a handout, or are "entitled" to being supported by the rest of society, almost none of them seem to be coming at this indignantly - ie, "how DARE the 1% not support us entirely when we have bad fortunes or we are actually taken advantage of???".

What I'm seeing are hundreds of people with stories reflecting a solid work ethic, if not always coupled with a more traditional strategy of get diploma - get hired - work steadily and improve your career.  Statistically speaking, these letters reflect Group A (#OWS) which tends to have had bad experiences, vs. Group B (#53%) which tends to have been at least somewhat successful in their efforts. Both sides have in common a strong work ethic and a strong desire to get ahead for themselves.

[What we REALLY need is a control group of some sort... or at least, an idea of whether anyone from either side EVER was in a position where they wound up paying no taxes at all.  I should point out that unemployment benefits ARE subject to various forms of taxation, including federal income taxes.]

Furthermore, looking at research, both second-hand and original, it is obvious that our tax system is untenable.  However, please remember that one of the most important--and most often unmentioned--taxes to wealthy individuals is the capital gains tax rate - NOT the income tax rate.  It is quite possible to earn substantial amounts of money, tax free (think municipal bonds, which, by the way, also pay a VERY healthy return with very little downside risk) if your nest egg is large enough.  If it isn't, an entry-level financial advisor could point you in the right directions to combine a tax-free income portfolio along with the proper real estate investments, such that even if you DID report a six-figure income, your deductions and the nature of that income would reduce your tax liability to virtually zero.

A napkin-sketch outline of how capital gains rates help enable many wealthy people to be taxed at MUCH lower rates can be found here.

In contrast, I am seeing a great deal of "stop whining" and "don't come crying to us for a handout" stories on the #53% site.  Here are two examples:


I'm going to go on the assumption that this guy is actually trying to MAKE puppy eyes in an attempt at irony.

And then there are examples like this one, which to me looks exactly like many of the #OWS pictures, except that she hasn't yet had substantial misfortune:
So what are the real differences?  Neither side is against wealth, in and of itself.  Neither side is against success, in and of itself.  Neither side wants to see people penalized for being successful.

One side paints themselves as hardworking, bootstraps kind of people... and so does the other (except one side hasn't yet had catastrophic financial problems, and the other has.  So, as people, what are the differences?

This is something neither side is talking about, and they should, if they want to sound serious.  The #OWS group differentiates themselves from the top 1% of earners/wealthy in the US - their main point doesn't seem to be the fact that almost half of Americans pay no taxes.  The #53% group, by definition, claims to represent the 53% of Americans that pay some sort of taxes.

Now, remember that taxpayers who either owed no tax or were entitled to refunds (ie, the 47%) come from all areas of the income curve.  There are billionaires in there (be honest - even if a billionaire DID wind up owing $100,000 in total taxes, does that qualify as being reasonable if their total income was $30 million?)... there are zero-income people in there... there are couples with families earning $150,000 per year in there.  There are multi-millionaires who derive almost all of their income from post-tax, untaxed investment vehicles.  It all comes down to the type of income and the deductions.  Thus, it all comes down to the tax code.

What I see the #OWS side as wanting, most of all, is a threefold solution that involves strong accountability (and, yes, jailtime if warranted) for individuals on Wall Street who blatantly abuse regulatory loopholes, flagrantly defy best ethical practices, and sneer at their detractors secure in the knowledge that they're "too big to fail."  Next, they'd like to see some substantial restructuring of various elements of our system, including healthcare, the social safety net, and tax policy.  Lastly, they'd really like it if they weren't painted as non-taxpaying, wanting-a-handout, lazy jerks who just want to slide through life at the expense of their neighbors.

What I see on the #53% side is an undeveloped, reactionary group whose primary purpose seems to be the painting of the #OWS folks as part of the 47%, AND painting them as a group of whiners because they aren't being supported by Uncle Sam. I also see them sharing success stories involving a great deal of struggle and hard work - this is really cool!  But the fact that you've struggled and worked and done your best for years is NOT THE POINT, 53% people.  Every one of the #OWS people did the best they could with what they had, too.

The point is that it is so depressing when you do the best you can, year after year, and wind up losing your job for basically no other reason that some assholes on some asshole exchange recklessly (and deliberately) invested in assets they knew they weren't allowed to, for the sake of a short-term profit, and then are never prosecuted, never held to account, and on top of that their asshole firms with their asshole CEO's with their asshole golden parachutes get bailed out via carte blanche, enabling them to continue playing their asshole games for another 5 years, after which the whole asshole process will repeat itself.

Dear 53% - you'd be more honest if you joined the #OWS folks.  At the minimum, you wouldn't come across as being (in many ways) just as snide and asshole-esque as those people on Wall Street.

And remember also the primary difference between yourselves and the #OWS people: you haven't yet been victimized by that 1%.  Yet.

Friday, October 7, 2011

Dear Right Wing: Capital Gains are Different Than Ordinary Income

Very simply put, if a person has no ordinary income (such as from wages), instead deriving their income from investments (dividends, capital gains on the sale of assets), then talking about tax brackets is irrelevant.

The top capital gains rate has been at 15% for roughly 10 years. This is why many extremely wealthy people clock in at an effective tax rate of under 20%, if they pay taxes at all. If they earn $2 million in a year, and only $250,000 of that is in the form of wages, then only 12.5% of their income is subject to payroll withholding as well as ordinary income tax rates. These rates are applied to their AGI (adjusted gross income), which is the $250,000 minus any qualifying deductions they claim (mortgage interest, charitable giving, standard deductions, all as applicable).

There have been a number of periods in recent history where the top tax rates (and cap gains rates) have been at least twice as high as they are at present, yet the economy was booming, employment was a more tolerable 4-6%, etc. GDP steadily rising, new companies *voluntarily* forming, creating jobs, etc etc.

It really pisses me off when the Right continually claims that raising taxes and closing loopholes would kill jobs. Shows that they either don't understand taxes or are intentionally misleading their listeners about how taxes really work.

Wednesday, October 5, 2011

Steve Jobs dead: just the PR for now

I can't believe it, but I have to. I can think of few other people who in such a short period of time affected the way most people on Earth interact with one another.

Here's the press release announcing his passing:

CUPERTINO, Calif.—(BUSINESS WIRE)— We are deeply saddened to announce that Steve Jobs passed away today.

Steve’s brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve.

His greatest love was for his wife, Laurene, and his family. Our hearts go out to them and to all who were touched by his extraordinary gifts.