Tag Archives: taxes

The military passes a financial audit for the first time

For the first time since 1990, when the Congress approved the Chief Financial Officers Act, which among other things, required all federal agencies and departments to produce what would be regarded as a clean financial statement on their budgets, a branch of the U.S. military passed a financial audit.

As reported by Jamie Dupree:

“It was the first time any branch of the military service had been given an “unqualified favorable audit” for being able to show where billions in funding had gone.

Let me repeat that – it was the first time that any part of the service had been able to fully account for where all of its money was spent.”

This begs the question: What are the consequences for committing fraud, failing audits, and abusing tax dollars? Apparently nothing. What is the point of an audit if there is no enforcement?

Taxes, Bankruptsy, and the Future of the American Economy

Three things are happening to the American economy that are ultimately unsustainable:

1. Rising national debt.
2. Simultaneous increase in military  presence and social programs.
3. The federal reserve continues to pump $85 billion dollars into the economy monthly.

The only solution seems to be a massive overhaul of our current economic methodology, but first we need to understand where are our tax dollars are going and what solutions are available.

Tax Expenditure in America

Major areas of spending breaks down as follows [source]:

Military: $929B
Mandatory Spending:
Medicare & Medicaid: $802B
Social Security: $768B

These three programs account for about 75% of the total national budget. This means that, without major budget overhaul, mandatory spending alone will quickly exceed all federal revenues.

“Since the federal government has historically collected about 18.4% of GDP in tax revenues, this means these three mandatory programs may absorb all federal revenues sometime around 2050. Unless these long-term fiscal imbalances are addressed by reforms to these programs, raising taxes or drastic cuts in discretionary programs, the federal government will at some point be unable to pay its obligations without significant risk to the value of the dollar (inflation).” [source]

If the United States continues its current model without significant reductions in military or entitlement programs we can safely assume that taxes will continue to increase until we are more closely aligned to western European countries.

Comparables: Tax in the U.S and Europe

Currently the United States collects 26.2% of total GDP in taxes (State + Federal). That puts us at number 62 between South Africa and Kazakhstan. [source] We can compare this to the top 10, which include countries like Denmark and France, who each collect well over 40% of GDP in tax Revenue. But that number doesn’t mean much because every country has a different GDP and population. So we have to look at something else.

Perhaps a better number to look at is total tax revenue per capita where the United States ranks 14th.  [source] The U.S. collects about $13,084.80 per person in Tax Revenue, which puts us more closely in line with countries like Denmark ($18,100) and France ($15,120). Maybe that doesn’t sound like much, but it would take over 1.5 trillion dollars in tax revenue to catch up to Denmark or 600 billion to catch up to France. That would be about ¼ of our current budget.

Solutions: What should we do?

It seems pretty clear that doing nothing is not an option. We can’t cut taxes, expand military, and social programs. That doesn’t work. So what gives?

To avoid bankruptcy the most likely scenario is a combination of modest reductions in spending and increased taxes. Considering the size of our economy and military these changes could be relatively nominal.

For example, if the U.S. were to reduce military by 25% and increase taxes by 2.5% of GDP that would be a swing of $624.25B. Maybe we could even do some unorthodox thing like legalize marijuana and tax the hell out of it. Some studies estimate another $8.7B in federal tax revenue a year. That would put us at $632.25B.

A number like that wouldn’t burden the economy and would put us right up there with Western European countries like France. Perhaps that is something we can all live with.

Hurricane Sandy Relief – More Conservative States Actually Receive Federal Aid than their Liberal Counterparts

I ran across this Wikipedia article today that listed each state by net contribution per capita. Those with a negative net contribution per capita (in red) actually receive more federal aid per person than they pay in tax dollars.

Rank State Revenue (millions) Population Revenue per capita Spending (millions) Spending per capita Net contribution per capita
1 Delaware $16,858 864,764 $19,494 $6,234 $7,209 $12,285
2 Minnesota $78,697 5,197,621 $15,141 $40,075 $7,710 $7,431
3 New Jersey $121,678 8,685,920 $14,009 $63,972 $7,365 $6,644
4 Connecticut $54,236 3,502,309 $15,486 $32,378 $9,245 $6,241
5 New York $244,673 19,297,729 $12,679 $157,789 $8,177 $4,502
6 Illinois $135,458 12,852,548 $10,539 $88,669 $6,899 $3,640
7 Nebraska $19,043 1,774,571 $10,731 $13,986 $7,881 $2,850
8 Rhode Island $11,967 1,057,832 $11,313 $9,077 $8,581 $2,732
9 Texas $225,391 23,904,380 $9,429 $171,766 $7,186 $2,243
10 Colorado $45,404 4,861,515 $9,340 $34,828 $7,164 $2,176
11 Massachusetts $74,782 6,449,755 $11,595 $61,028 $9,462 $2,133
12 Arkansas $27,340 2,834,797 $9,644 $22,454 $7,921 $1,723
13 Nevada $19,619 2,565,382 $7,648 $15,474 $6,032 $1,616
14 California $313,999 36,553,215 $8,590 $260,422 $7,124 $1,466
15 North Carolina $75,904 9,061,032 $8,377 $65,863 $7,269 $1,108
16 Wisconsin $43,778 5,601,640 $7,815 $38,177 $6,815 $1,000
17 Washington $57,450 6,468,424 $8,882 $52,455 $8,109 $773
18 Georgia $75,218 9,544,750 $7,881 $71,079 $7,447 $433
19 Ohio $105,773 11,466,917 $9,224 $105,214 $9,175 $49
20 Kansas $22,311 2,775,997 $8,037 $22,737 $8,191 ($154)
21 Michigan $69,924 10,071,822 $6,943 $71,652 $7,114 ($171)
22 New Hampshire $9,304 1,315,828 $7,071 $9,764 $7,420 ($349)
23 Oklahoma $29,325 3,617,316 $8,107 $30,686 $8,483 ($376)
24 Pennsylvania $112,368 12,432,792 $9,038 $117,151 $9,423 ($385)
25 Oregon $23,467 3,747,455 $6,262 $25,242 $6,736 ($474)
26 Florida $136,476 18,251,243 $7,478 $147,091 $8,059 ($581)
27 Tennessee $47,747 6,156,719 $7,755 $51,456 $8,358 ($603)
28 Indiana $42,668 6,345,289 $6,724 $47,254 $7,447 ($723)
29 Utah $15,064 2,645,330 $5,694 $17,158 $6,486 ($792)
30 Iowa $18,437 2,988,046 $6,170 $21,649 $7,245 ($1,075)
31 Missouri $48,568 5,878,415 $8,262 $55,564 $9,452 ($1,190)
32 Wyoming $4,725 522,830 $9,037 $5,355 $10,242 ($1,205)
33 Idaho $9,025 1,499,402 $6,019 $10,946 $7,300 ($1,281)
34 Arizona $35,485 6,338,755 $5,598 $48,012 $7,574 ($1,976)
35 Louisiana $33,677 4,293,204 $7,844 $43,036 $10,024 ($2,180)
36 Vermont $3,806 621,254 $6,126 $5,579 $8,980 ($2,854)
37 Maryland $53,705 5,618,344 $9,559 $70,617 $12,569 ($3,010)
38 Kentucky $23,151 4,241,474 $5,458 $35,927 $8,470 ($3,012)
39 Puerto Rico[5] $3,549 3,941,459 $888 $16,798 $4,262 ($3,374)
40 South Carolina $20,499 4,407,709 $4,651 $37,056 $8,407 ($3,756)
41 Montana $4,523 957,861 $4,722 $8,497 $8,871 ($4,149)
42 Maine $6,289 1,317,207 $4,775 $11,850 $8,996 ($4,221)
43 South Dakota $4,766 796,214 $5,985 $8,280 $10,399 ($4,414)
44 North Dakota $3,660 639,715 $5,721 $6,766 $10,577 ($4,856)
45 Hawaii $7,666 1,283,388 $5,974 $14,062 $10,957 ($4,983)
46 Alabama $24,149 4,627,851 $5,218 $47,889 $10,348 ($5,130)
47 West Virginia $6,522 1,812,035 $3,599 $17,067 $9,419 ($5,820)
48 Virginia $61,990 7,712,091 $8,038 $110,105 $14,277 ($6,239)
49 Mississippi $10,869 2,918,785 $3,724 $30,616 $10,489 ($6,765)
50 New Mexico $8,346 1,969,915 $4,237 $22,418 $11,380 ($7,143)
51 Alaska $4,287 683,478 $6,273 $9,378 $13,721 ($7,448)
52 District of Columbia[6] $20,394 588,292 $34,666 $43,475 $73,900 ($39,234)

As a fiscal conservative I find it a bit ironic that many of those states that claim to be the most conservative actually receive the most federal aid per person. I find it even more troubling that these same conservatives are complaining about the approval of Sandy relief paid for by tax dollars.

Undoubtedly the Sandy relief comes with a ton or pork barrel spending attached to it, but I say it’s better the money goes to Americans who need it rather than senseless wars. In fact, maybe we conservatives should take a look at the aid received by our own state before we start complaining too much.

I’m all for bitching about federal budgets and over spending, but I’m not going to accuse a fellow American, one in the Northeast states affected by Sandy, for being irresponsible for not having enough hurricane insurance. They need and deserve the help. I say we praise the Government for helping people – then condemn them for drone attacks on citizens. Not the other way round.

Thoughts on Obama’s Message about the Debt Ceiling

Here are a few thoughts on Obama’s address on Gun Control and the Debt Ceiling.

Obama Passes Fault to Congress

Obama says that raising the debt ceiling isn’t a license to spend more money, but rather authorizes the Government to pay debt already accrued. Essentially, if Congress raises the debt ceiling the Government can pay the bills. If Congress does not raise the debt ceiling our bills go past due and we default.

If what Obama is saying is true and “Raising the debt ceiling does not authorize [the President] to spend more, but allows [the Government] to pay the bills” then what is the point of the debt ceiling in the first place? If the Government budgets and spends more money than the allocated debt ceiling allows, approves that budget, then doesn’t the Congress already expect and know in advance based on that budget that they will be FORCED to raise the debt ceiling? What is this argument about and why is everyone acting like it just crept up on us?

If you don’t want to raise the debt ceiling then do not authorize the budget in the first place.

Executive Order

Obama also seems to be imply he will use executive order under the 14th Amendment to raise the debt ceiling if Congress fails to act. I’m not sure if he is bluffing to get Congress to act or if will actually do it.

I’m not sure what’s worse – Congress telling the President “Fuck you.” to prove a point or the President using executive order to ignore checks and balances.  Either way sounds bad.

My Proposal

Is it possible to create a sustainable budget that doesn’t require congress (or the President) to raise the debt ceiling? If not – then what the hell are we doing wrong?

The President isn’t fooling anyone when he pretends that the current budget is all Congress’s fault. He pushed and advocated for more spending just like almost everyone else. His hands are as blood stained as any congress person. So the predicament is everyone’s fault. Can we really sustain a cycle of bad budgets, raising debt ceilings, fiscal cliffs, and repeat? I don’t know.

The solution? You tell me.

Over 50% of my income to taxation: Why I’m mad as hell and you should be too!

I think we’ve been bamboozled. We’ve been tricked by catch phrases and fun words like “liberty” and “freedom”. We’ve been fooled into thinking we are somehow better off than everyone else. We’ve been lied to and told that our “capitalist” economy is the strongest, our people the most free, and our opportunity the most rich. Lies.

We are as taxes, as spied on, as lied to, and as manipulated as almost any other Government on Earth. We are kept fat and happy with illusions. By the media telling us how bad it is everywhere else, by “Honey Boo Boo” and cheap hamburgers. Too fat and brainwashed to care. To apathetic to do anything about it.

“At least we aren’t over there.”  We say.

A First For Me

Today marks the first major tax hike I have experienced since the start of my career. I’m mad. I can’t justify this setback internally. Why am I giving away more security for myself and family to an entity that is making no investment in me? How do I benefit? My family? My community? How can I give away over 50% of my income and still the Government ask for take more?

Payroll/Income Taxes. Property Taxes. Sales Taxes. Communication (phone/cell phone) Taxes. Social Security Taxes. State Taxes. City Taxes. Fuel and Energy Taxes. Taxes to pay for my car tags each year. Increased costs of goods via trade and import taxes. Fees for passports and licences. Inheritance Tax. The list goes on forever.

The myth is that the Government is spreading the wealth. Helping the poor. Taxing the rich to give to the needy. Robin Hood. This is a lie – not just because I say so, but because it’s a fucking lie. This increased tax is for everyone. Not just by means of increased costs of goods and services, but actually and really a higher tax for nearly everyone.

Over Taxed, Under Serviced

We may all see at least a 2% loss of take home pay. Is it fair that a guy making $50,000 is expected to survive off of $25,000 a year (or less!)? That person would be considered fairly poor by almost any standard. At what point are we over taxed and under serviced?

Is that point when our nation is 15 Trillion in debt? Is that point when our country has recession as a direct result of our Government’s fiscal policy? Is that point when other nations hate us because our Government instills a feeling of dread and terror on them in the form of Drones and military superiority? Is that point when a man who takes home $25,000 a year is considered middle class? What are we thinking?

Obama promised no new taxes for the middle class. The super-rich begged for more taxes, it seemed. Yet today, while I watch my income fall by at least 2% I see the stock market fly upward at over 200 points. Someone is getting rich today, not me. Someone is laughing about the end of the fiscal cliff, not me. The super-rich are more rich than ever – smart enough to avoid the Government and capitalize on new legislation. We’ve been fooled.

Where do we go from here?

I don’t know. I just want people to stand up and say: “This isn’t right.” Something is broken. We have to admit that when a Government takes by force half your income, there is a problem.

You can’t leave the country. Too much social stigma, too expensive, to much Government, too costly personally. You can’t complain. You are labelled crazy or jailed. You can’t refuse to participate – you will be breaking the law and jailed.

To be honest, nothing will happen. Most people will be happily abused until they become uncomfortable. Until they become hungry, until their cable is shut off, until they can’t drive to Wal-Mart, until it’s too late.

For now, I’ll keep complaining here. A blog no one reads anyways.

Welfare in Georgia: A Rebuttal to Neil deMause

A friend sent me a link today from slate.com which was critical of the difficulty to obtain Welfare (that is cash benefits only – healthcare and food stamps are much easier to obtain) in Georgia. The principal problem the article argues: It’s too hard for Georgians to get cash benefits from the Government.

“What [Georgia's stance on Welfare] has created is a land that welfare forgot, where a collection of private charities struggle to fill the resulting holes. For the Atlanta Community Food Bank, that means sending out more than 3 million pounds of canned goods, bread, and other groceries each month to churches in and around Atlanta to help feed the state’s growing number of poor and near-poor. The food bank’s staff also helps arrange for free tax prep services, and helps the city’s poor apply for food stamps and Medicaid.”

Poverty is terrible. I think everyone can agree with that, but the principal question I keep asking myself is: What is the author complaining about?  He’s not complaining about poverty. He doesn’t seem to be complaining about the fact the poor are being helped. Does he not like the way they are being helped? I don’t get it.

Other than being a simple attack on a conservative State’s methodology on distributing aid to it’s residents I find no value to this very popular article. If the author’s job was to bring traffic to Slate.com he succeeded. If his ultimate goal was to be a journalist, a communicator of valuable information, an advocate for the poor against injustice – he failed miserably.

Personally, I find no fault in Georgia’s Welfare practices. Georgia is essentially doing exactly what their conservative base wants: asking people to voluntarily take care of their community with donations and through charities rather than via Government and tax dollars. Georgia complied to the voters and best of all – it seems to be WORKING! How can this be turned into a negative thing accept for the fact that it does not meet the supposedly “liberal” code?

One commenter points this out:

This *could* have been an article about how ordinary Georgians are looking after their own through private means. Where does the Atlanta Community Food Bank get the resources to distribute 3 million pounds of food per month?

I am personally tired of Liberal (and Conservative) posters on popular websites twisting information to fit an agenda. If anything Georgia proves that it is possible to support the poor without demanding the Government do it for you.

In general, I think giving free cash via welfare to anyone should be tightly controlled – especially when you consider the potential for abuse in such a system. So if people are being fed, cared for, and looked after – by their neighbors no less – then why is this article so popular? Why do some people find Georgia’s methodology so immoral? Isn’t the ultimate goal to help people?

I suppose in the end it’s all about your idea as to the roll of Government. For me, I think putting more power and responsibility in the hands of the people is always a good thing. Asking the Government to centrally plan and disperse aid almost always fails and is a poor replacement for privately ran charities.

Raise Taxes on the Rich?

Spread the wealth. Close the income gap. The Robin Hood effect. Take from the rich to give to the poor. On the surface this seems most admirable, but I am not entirely convinced raising taxes on the rich will do the American people one iota of good. Let me explain.

Loopholes:
I work for a consulting firm that earns millions by exploiting the shortcomings of our tax system. There is no perfect system and anyone who has accumulated any amount of wealth has a team of tax professionals finding the “dreaded” tax loop holes for their clients. It’s not immoral either. It is the fiduciary duty of any corporation to do this – to maximize the value of the stakeholders investments. It would be ignorant to believe that any system can be devised in which this can be avoided.

Incentive:
Fact: The best way to eliminate poverty is via capitalism. We want to bring wealth and jobs to this country and keep it here – not drive it away. The only way to do that is to make it advantageous for businesses to do business in America. We do not want our wealthiest citizens to move their wealth off shore, to invest in countries like China and India, to keep foreign bank accounts, or to move their money and jobs away from the people who desire that capital and employment here. Increase taxation aimed at the rich in the name of the social good is counterproductive.

There is a hole in our bucket:
We are a nation in debt. Not because we do not have enough tax revenue, but because we spend too much. We have a variety of social programs and the largest military in the world. The truth is our tax rate is as high as any country in the world – even highly socialized countries (~ 2.5% GDP). An increased tax on the rich will not solve our debt problem, it won’t even slow it down. We have to reevaluate the way we run this country from top to bottom. You can try to fill a bucket as fast as you can with tax dollars, but when the bottom of your bucket is a hole you can never fill it.

The Government Does not Create Wealth:
The Government does not create wealth and it usually does a poor job of transferring it. I think of the Government like a pipe transferring warm water. The water starts out hot, but as it travels loses heat before it reaches its destination. Similarly, when compared to businesses, because of inefficiency and ineffectiveness, the Government loses wealth during the transfer from the top to the bottom. Sometime the deserving never even see the money and those willing to exploit the system abuse it. Businesses’ sole purpose is creating wealth through innovation and production, thus it is the most efficient method to create and spread wealth. Taxation hinders the creation of real wealth.

We Should do a better job managing what we have before asking for more:
If a bankrupt person request a personal loan would you concede? Would you give a horrible co-worker more responsibility if they had already filed multiple times? Would you promote a person not ready for additional responsibility? No.

Similarly why do we advocate giving a Government, already trillions in debt, more of our hard earned money. Our Government has proven time and time again our tax dollars are used to fund foreign wars and pay for services that do not benefit our citizens. When you ask for more of our tax dollars – however noble the gesture – I just can’t agree.

I am the poster boy for the Democrat’s economic model

When I was growing up there were months I would have went hungry had we not had food stamps. There were years our bills wouldn’t have been paid from month to month if it wasn’t for my Mother’s disability check. There were school years supplies were virtually out of the question and new clothes was something I didn’t even ask for. I wouldn’t have had the opportunity to go to school if it weren’t for public education and college was an option for me because the Government helped me pay for it via the Pell Grant.

Today I have a well paying job, no debt, I am an active member in the community, and I am among the most taxed – paying right back into the system of which I received so much. That, I believe, is exactly what the democrat’s economic model is built upon. I can’t deny it – I directly benefited and thrived from it.

On the other hand
On the other hand, some of my earliest memories of drug addicts trading food stamps for cash to buy a crack rock. The truth is for every guy like me there are 10 people abusing the system and never doing a thing with the opportunities presented to them. It is tax dollars gone to waste – a return on investment never realized.

For example, two of my cousins used their Pell Grant money in an elaborate combination of beer, drugs, clothes, nice cell phones, car payments, etc. and NEVER graduated college. Now they are unemployed/underemployed and getting even more tax breaks and payments from the Government. Even my Father has been living off of the benefits of the welfare system for 20 years and has never paid a dime in taxes. I am not proud of any of this.

When I was a kid I saw drug dealers, alcoholics, addicts, and criminals all benefit from the free programs provided by the Government. Free and reduced rent, free healthcare benefits which provided them with prescription drugs they would later sell for a profit, an the list goes on – all this which gives a person further incentive to continue their lifestyle. Why change when you are rewarded for bad behavior?

Conundrum
So what we have is a conundrum. On the one side we have innocent kids like me who are begging for a chance at success. On the other side we have people who are abusing the system and given incentive by the Government to keep abusing said system. What do we do?

I think what the democrat’s model fails to take into account is the folly of man. We are broken, people take advantage, people are generally self concerned, and thrive on incentive. Does this mean we give up on kids like me? Do we stop social programs because some people choose to abuse them?

The Solution
I really wish I had one. Will I advocate to take away all social programs and to refuse help to other children who were born into the same situation as I was? Will I advocate to further make it impossible for a poor kid to have a level playing field? Should those born into wealthy and good families be the only ones who have an opportunity to succeed? Hell no!

What we need is a better system. A better vetting process. Less waste and a change of culture where neighbors and family hold each other accountable for their actions. We need a system where people realize what a great gift has been given to them by being born into America or any society in which being poor is not necessarily a life sentence of struggle. We need to encourage a culture that correctly uses the system in place and doesn’t break or abuse it.

Update: This article is especially interesting and relevant.

Tax Reforms Economist Agree On

So I read this article by Theo Francis that lists 6 tax changes that he claims most economists (conservative and progressive) agree on.

One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that’s good. Don’t tax companies in an effort to tax rich people.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It’s a kind of consumption tax, and can be structured to make sure it doesn’t disproportionately harm lower-income Americans. More, it’s taxing something that’s bad, which gives people an incentive to stop polluting.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

I REALLY like these ideas. Especially if we can frame them in such a way that the consumption based taxes do not unfairly burden the poor and middle class. Many of these would encourage people to be more budget and environmentally conscious – which I think is a very good thing.

I may add to the list:

1. Reduce military spending with tax dollars: The Government is free to sell war bonds or offer services for money and take donations.
2. Reduce foreign aid (unless it is paid for from a surplus budget): basically stop giving countries billions of dollars when we are trillions in debt.