Monday, March 31, 2008

Giving the other side

Published March 31, in the Gainesville Times.

See my rebuttal below:

Your views: GOP's child income tax credit is a great help to middle class

POSTED March 31, 2008 2 a.m.

Whenever left-wingers start complaining about how President Bush’s tax cuts helped only the rich, they inevitably ignore the biggest cut the president provided for the middle class: the child income tax credit, a decidedly family-friendly policy.

President Bush’s cuts doubled this credit from $500 to $1,000. If you are married and have children ages 17 and under at home, and you pay taxes, you continue to benefit significantly from this cut.

The middle class has benefited greatly over the years from this increase. For example, under President Bush’s cuts, a married couple making only $40,000 a year and with two children got a 96 percent cut in federal income taxes; their federal bill dropped from $1,178 to $45, some $1,000 of that being from the doubling of the child tax credit.

When the median household income in the U.S. in 2006 was $48,201 — about $43,000 in Georgia — this cut means a great deal to the middle class: teachers, many office workers, plumbers, electricians, carpenters, real estate agents, middle- and higher-end factory workers and many others.

If you have children and pay taxes, you might want to keep the Republicans’ increased child tax credit in mind when you hear people claiming the middle class did not get a cut. You might also want to keep in mind that an important segment of Democrats opposed this family-friendly middle class cut originally. In other words, they did not want middle-class families to get this particular cut.

Worse, many Democrats want to end it with other Bush cuts. In fact, their recently released budget and tax plan would end it.

Tommy Sandoval

Gainesville


Gainesville Times

A letter sent to the editor on March 31, 2008.


I am glad the Gainesville Times provides a section of the paper for Letters to the Editors. Recently, Tommy Sandoval wrote a very interesting essay on how President Bush has cut taxes 96% for "a married couple making only $40,000 a year."

I truly welcome dialogue on the subject of government and taxation. But, I wish Mr. Sandoval had provided some sources so everyone could double-check his essay published on March 31st.

Checking some IRS information (http://www.irs.gov/pub/irs-soi/99in11si.xls and http://www.irs.gov/pub/irs-soi/05in11si.xls ), a taxpayer making an average of $34,000 per year paid an average of $2457 in federal income taxes. Not $45 dollars as Mr. Sandoval seems to think.

Checking the 2005 tax returns, taxpayers making between $30,000 and $40,000 per year, the Child Tax Credit did not double. It did increase about 20 percent over the year 1999. That means a decrease in federal income tax of about 7 percent, not "96%."

Mr. Sandoval and other well-meaning people think the Democrats are ending major tax cuts for the middle class. The Economic Growth and Tax Relief Reconciliation Act of 2001 had a sunset clause that automatically terminates the act in 2010. Without the sunset clause, the act would have violated Title XIII of the Omnibus Budget Reconciliation Act, which has been known as Pay-As-You-Go or PAYGO. Obeying PAYGO could have prevented irresponsible politics and prevented the huge deficit spending under President Bush.

Mr. Sandoval thinks the Democrats "want to end" the fictional 96% tax cut for "a married couple making only $40,000 a year" along with the other Bush cuts. In reality, Democrats want to stop borrowing money from China. To stop the borrowing from China and from oil rich Middle Eastern countries, we need to obey the letter of the law. Laws like PAYGO and specifically, the law that forces the Economic Growth and Tax Relief Reconciliation Act of 2001 to die as promised on January 1, 2011.

Being responsible isn't easy. Its just the right thing to do.

Monday, March 24, 2008

Income tax filing

I will be on vacation for a few days.

Ponder this point about our great nation, if you dare.

From the IRS data I've used before, the first 51 percent of all taxpayers have an average income of $14,985 before taxes.

The last one percent?

They have an average income before taxes of $1.667 million.

[Notes: I've used raw data on all income, taxable and non-taxable as presented by the IRS for 2005 on the file named 05in11si.xls. The link is available on this blog. For the first 51 percent, I've slightly overstated income. For the last one percent, I've understated income. I didn't want to wind up having some idiot claim I doctored the numbers to make this distribution look more skewed.]

More from today's frustrated conservative

Let's take another look at how my conservative friend thinks the national debt is going to be paid OFF!

You say they have just raised the debt. Okay. Maybe so. But somebody has to pay that debt off. And a large chunk of that debt is going to be paid off by those very same rich people or their rich children, especially if the Bush tax cuts expire.
The debt is going to be paid off...if the Bush tax cuts expire...

News flash!

The $9.3 trillion dollars in debt will soon vanish in a puff of smoke when the Bush Tax cuts expire as required. ---Bullshit---

No, the Democrats didn't end the tax cuts. The original legislation had a sunset clause that mandated the tax cuts as temporary and set an expiration date. Tough luck for the wealthy. But, good news for the working class.

No, the massive hole in the federal budget can not be healed by letting the sunset clause kick in as per law.

Nor, could a 25 percent across the board increase in all personal taxes pay off the federal debt at the current interest rates within 30 years.

No way.

If ending the Bush tax cuts would pay off the debt anytime, that would be the best argument for the sunshine clause.

Let the law work the way it was written.

Now, for the idea that my children should pay off my debts...

Maybe that is the way Republicans treat family, but that's not the way I treat my family.

Those are not Democratic family values. Democrats have far better family values than the Republicans, based on that asinine idea.

But, it is exactly what will happen.

The money Bush borrowed from China, France, and the European Union will be paid off by children, children not yet born.

Will it be the children of the uberwealthy whose fathers got an obscene increase in take home pay in exchange for that debt?

Think again.

Conservative ideology is dead. Too bad it killed our nation before it died.

Bush Tax Cuts and todays frustrated conservative.

More inane comments from today's frustrated conservative.

1. I don't make these comments up just to increase readership or hits on my blog. There really is someone this stupid.

2. I almost never post a comment unless I like it. It is my blog.

3. I wish I could make up stuff this funny.

From our favorite frustrated conservative:

Also…it’s interesting … you say that the Bush tax cuts only went to the rich. Okay. Maybe so. But then you say they have just raised the debt. Okay. Maybe so. But somebody has to pay that debt off. And a large chunk of that debt is going to be paid off by those very same rich people or their rich children, especially if the Bush tax cuts expire.
No, I didn't say the cuts went only to the rich. Typical disinformation attempt from the frustrated pundit.

I said, "that very fortunate group got all the benefits of the Bush tax exchange." The word benefit being the key to the sentence.

The less fortunate taxpayers saw their share of the federal debt increase by an amount greater than the 'tax benefit' given. As the debt has risen, the dollar has fallen. A cheaper dollar means a huge increase in imported goods, like oil.

For someone making $7.50 to $12.00 an hour, a huge increase in utility bills and gasoline prices easily offsets the itsy bitsy 'tax benefit.'

As recently as December 2001, gasoline was under a $1.10 for the national average pump price. Link to recent gas prices.

The average value of the euro to the dollar for 2001 was $1.11. That means it took 1.11 euros to equal a dollar.

In 2007, it only took an average of .75 euros to equal a dollar.

Today, it takes only .64 euros to equal a dollar.

That's roughly a 42% decline. So, I won't say all the increase in gasoline prices came from a falling dollar, or that all the decrease in the dollars value came from the record federal debt.

I am saying oil could be bought for $20 per barrel in 1996 to as recently as 2002. Now, oil is $110 per barrel. Gasoline was a $1.10 and now it's $3.28 and going up.

I am saying the increases in the debt from the Bush tax cuts hurt much more for the middle class family living on $20,00 a year.

If we assume two wage earners commuting in two cars and only a dollar increase at the pump, gasoline cost the family a $1000 more a year. Assuming the two cars get an average of 24 miles to the gallon. Not very likely on $20,000 per year.

How much did the average family get per year under the Bush plan since 2002? Is there anyone jumping up and down to tell me the average family got $6000 since 2002?

And that is only an analysis of direct gasoline prices. Gasoline prices increased the transportation costs on all goods. Corn has tripled in price with the increased demand for alternative fuels. What did that do to the price of bread?

Who got the benefits?

Not the middle class.

More to come.

Thursday, March 20, 2008

More Raw Income Tax Data

The personal income tax isn’t enough money to fund the entire federal government. In 2005, it was enough to pay the budgeted defense spending and the off budget spending in Iraq and Afghanistan. The left over after national defense couldn’t pay the interest on the debt.

In our country, the most powerful nation in the world, 67 percent of all taxpayers live on an average income of $21,000 before taxes. That totals about $1.8 trillion dollars for 67 percent of our country. The richest 2.7 percent of taxpayers have to make it through a year with just $2.1 trillion dollars . That’s an average of over $600,000 per taxpayer. After taxes that same group has just about as much spending money as the ‘other’ 67 percent of Americans.

Professional Misinformation Idiot strikes again!

Ah, the sweet smell of an internet flame job.

My stalker made some more inane comments.

Let's share some of those.

"As for your income tax/defense budget statement, that too is incorrect. If you look at BEA data, personal income taxes in 2007 were $1.162 trillion. Defense expenditures (incl. investment) was $660.2 billion. Interest payments were $302.4 billion, meaning 1/2 was $151.2 billion.

So in fact, in 2007, we could pay the entire defense expenditures, all interest payments, and still have about $200 billion left. That's far beyond your "barely enough left over to pay the current interest on the debt for six months" comment."
The BEA data is not the best source of information, my dear friend.

Look at the information released by the Treasury Department. The Treasury has to write the checks and balance the books.

The Bureau of Economic Analysis is under the Department of Commerce. The Commerce people are like the Wal-Mart of the federal government.

If the Treasury Department figures at link are correct, and I'm pretty dang sure they are, then in five months, the federal government has paid $198 billion dollars for interest on the debt. In five months.

In December 2007, actual interest expense was $106 billion dollars. Last year's expenses were $429 billion dollars. We haven't paid as little as $300 billion on the debt since 1996, some 12 years ago when the debt was $5.3 trillion dollars.

Where does this stalker get his information?

For his defense spending, Herr Agent would have us all believe the federal government only spends $660 billion on defense!

Not that far off from the real world figures. But, still short of real defense spending.

We should add the defense-related parts of the Department of Energy budget --- $16.6 billion. The Department of Homeland Security --- $69.1 billion. The Department of State and international assistance programs --- $25.3 billion for defense purposes either directly or indirectly. The Department of Veterans Affairs --- $69.8 billion. The Department of the Treasury, which pays military retirement known as the Military Retirement Fund, --- $38.5 billion. Some parts of NASA are defense spending, if only indirectly so. Total --- $728.2 billion.

For 2008, the House passed a $696 billion defense bill on January 16, 2008. We can only guess at the 'emergency appropriations that will be added later by Bush. Bush has run both the Iran invasion and the Afghanistan campaigns with 'emergency supplemental appropriations.

What are 'emergency' or supplemental appropriations?

From the Background Brief: Supplemental Appropriations, March 2007 (OMB)
A “supplemental” appropriation is spending legislation, generally but not exclusively requested by the president, intended to address a need not known or foreseen when the annual budget for the given fiscal year was drawn up. Requests generally lack the level of detail used to justify the government’s annual budget requests. In both houses of Congress, supplemental spending legislation is uniformly referred to the Appropriations Committee, where it is marked-up shortly thereafter, usually without a preliminary hearing. If reported favorably, it is sent to the floor for debate, amendment, and vote. As with other legislation, identical versions must be approved by both houses and signed by the president to be enacted. The result frequently is legislation that passes Congress with perfunctory review, often bearing items that would not survive the normal budgetary review process.

This practice has survived the 2002 expiration of the BEA, and, since then, supplemental spending – “emergency” spending – has, in effect become a way for the federal government to evade annual budget limits and fiscal responsibility controls while increasing spending.

Because emergency supplementals are introduced following submission of a fiscal year’s budget, they are not subject to OMB’s budget accounting rules, and therefore not included in deficit and debt projections (Under its own rules, however, CBO does project all discretionary appropriations into future years, regardless of the purpose of the appropriation).

As if the $696 billion passed by the House in January wasn't enough. Bush requested over $90 billion for Iraq in March 2007. By July, Bush had been given about $124 billion. By using 'emergency' or supplemental appropriations, this money is not included in the 'defense' budget for 2007.

The 'emergency' appropriation for 2008? $154 billion.

So the minimum 'defense spending' for 2008 will be the $696 billion appropriated by the House, plus the $154 billion in 'emergency' appropriations.

That will be over $850 billion for 2008. Not including any 'defense spending' hidden in other departments besides the DOD aka the Pentagon.

$850 billion+$196 billion( only five months of fiscal 2008)=$1.046 trillion which equals ... "barely enough left over to pay the current interest on the debt for six months."

EVEN if the IRS (the IRS does not have final public figures for 2006 or 2007. The 2007 tax filing season is not yet over) collects the BEA figure of $1.162 trillion, which my dear friend loves, our personal income taxes will not be enough to pay the interest on the debt and defense spending for the current fiscal year. I calculate we will be short at the end of March when the quarterly checks for accrued interest are sent out. (Just like in December when payments were over $100 billion, certain debt instruments get quarterly checks while other instruments get monthly checks. March should see another $100 billion paid out by the Treasury.

Our agent smells from being flamed, as the saying goes on the internet.

I will acknowledge that our friend says, "IF you will look at BEA data ... "

There's no reason to look at estimated figures from the Department of Commerce when primary source information from the IRS and the Treasury are equally easy to obtain.

Tuesday, March 18, 2008

Paul Barnes! Take that!

This is a response to my dear friend, Paul Barnes, who wrote a hateful letter to the Gainesville Times.


There goes the neighborhood again.

Just when it seems our state might have learned something important about government and taxes, my friend Paul Barnes regurgitates his hatred and ignorance.

I wouldn’t mind so much if Paul had some reason to hate so much.

What had him so fired up this time?

He thinks his personal income taxes are so much that some money is left over. And, of course, the deadbeat Democrats give that money to other deadbeats who won’t work for a living.

Ignorant Republican fool.

I doubt Paul can fill out a 1040EZ without help from a 13 year old.

Well, what are the facts on personal income tax?

It’s a fact that if all income taxes were applied only to the defense budget , there would be barely enough left over to pay the current interest on the debt for six months.

So much for Paul paying enough money to support a black welfare mother with 20 illegitimate kids and a Cadillac SUV.

Since Paul will never look for facts, I’m not stopping.

Almost every year around this time some allegedly neutral organization reports on the unfairness of the income tax. This years rather doubtful figures showed that 1% of the returns paid 39% of the income taxes. Of course that would be the top 1% of income.

When I reviewed the IRS data, I found a very different story. Of taxable returns, roughly one in every four dollars of income was earned by less than 1 percent of all taxpayers.

Less than a million people have 25% percent of the spending money. This small group of people got over a third of the tax cuts or about a half a million dollars each in take-home pay. Someone should cry for them.

Further, that very fortunate group got all the benefits of the Bush tax exchange. Bush didn’t really cut the personal burden of running government; he just cut taxes for some. The price of running the government and the debt continues to climb at record rates.

Meanwhile, 50% percent of Americans survive on an average income of $15,000 per year .

Since Bush and the Republicans began giving away the country, our national debt has risen to $9.4 trillion dollars. We spend $500 billion a year just to pay the interest. That’s nearly as much as the core defense spending, excluding Iraq and Afghanistan. Oil is selling for $110 dollars a barrel.

Our country has serious problems, at home and around the world. Taxes, the possible gay marriage of two men in San Francisco, and hanging the Ten Commandments in the courthouse bathroom aren’t serious issues.

Making enough money to live, paying the house payment, sending a gifted son or daughter to a good school; these are serious personal problems faced by more than 50% percent of Americans.

As a well informed American, I don’t care to cry crocodile tears for the most fortunate 1% of tax payers or give that bunch of French champagne drinkers another half a million dollars in take-home pay. If the rich need more take-home pay, let them work harder. It’s what my boss tells me every year.

The real job of taxation is simply providing enough money to protect our country.

Proudly pay your share if you still have a job.

Friday, March 14, 2008

Mortgages explained by a Straight Talk Express

Warning!

This is brutal and brutally accurate.

I deny having created even the detailed graphics.

However, I do borrow the graphic language when talking to my bank.

Link to the facts of the mortgage crisis

More Updates on tax information

The IRS does provide a wealth of information on income tax returns.

However, the IRS is careful to note the information is not in exact amounts as if collected from each actual return.

Instead the IRS samples tax returns and estimates figures for most reports.

When I say,"25 percent of all income was concentrated in 1 percent of the taxpayers," I can only be basing my observations on the estimates.

When others say, "1 percent of taxpayers paid 39 percent of the income tax," those others can only be making statements based on estimates.

Estimates vary.

Conclusions drawn from even large samples and good estimates can at best be only a guess.

But, looking at the footnotes clarifies the conclusions.

The IRS uses estimates based on sampling of returns.

The IRS does not include carry-forward credits, carry-forward losses, deferred tax payments, or refunds of taxes paid in previous years to its estimates.

The Tax Foundation and its professional apologists will not tell anyone this basic truth.

"We don't have the exact, finite answer on who earns the most or pays the most."

As they say on the streets, "The Bastards!"

Wednesday, March 12, 2008

More Tax filing information

I've enjoyed several more hours of math and research on the federal income tax.

1. I am not, "one of those people."
I'm not too sure what the ranter meant by "one of those people." It is skin color? Genetic defects like being Jewish? And, do I care about the ranting remarks of anyone that uses a smear like, "one of those people."

2. All IRS data is present in raw form for free public downloads.
There's no reason, unless you have no reason, to not look at the raw data AND the IRS studies. Proper disrespect to the Lax Foundation, aka the Tax Foundation.

3. The Brookings Institute (BI) is a very interesting collection of well rounded individuals who seldom agree with each other.
I've fact checked a few publications from the BI. The BI always seems to have a command of the better sources and I've never caught them using a secondary source when the primary source was available.
Every BI publication or article always contains proper 'footnotes' for other researchers to follow, if a researcher wishes to double check data.
For the uncouth, that means the BI does not ever say, "We got our information from the IRS." Such a statement would be too vague and taint any conclusions presented by such a lame author. The BI would give a direct link to the online data, the proper name of the source, and the date of the sourced information.

4. For the purposes of making public reports and bulletins, the IRS always uses Adjusted Gross Income.
That in its self skews results. For example, the IRS gives Adjusted Gross Income (AGI) for 2005 as being $7.422 trillion dollars. However, Taxable Income drops to $5.023 trillion dollars. Non-taxable interest for 2005 was well over $57 billion. Most of which was in the upper income brackets and it not included in the $7 trillon or the $5 trillion or whatever AGI figure one chooses to use.
There are over 150 categories for exemptions. But, roughly $2.4 trillion in untaxed income after 'statuary adjustments' is a lot of folding cash.

5. There is at least one type of an income tax not included in IRS figures. The Alternative Minimum Tax (AMT).
That kicks in for some people with income of over $33,125 if married filing separately. That's after an exemption. It would seem this AMT hits the middle class, not just the elites.
All AMT collected is excluded from data on 'income tax collected.' That raw data has to be collected by the diligent researcher who wants the best answer on who pays income tax.

I have no interest in professional apologists for the Lax Foundation or "those kind of people" who call other people, "Those kind of people."

Some people can't process large amounts of information and must use snippets and sound bytes.

Who would want to know such a person? Not me.

If I want to hear sound bytes, news snippets, and mental midgets, I can turn on Fox News.

Now 'those people' are highly paid professionals who can read the news script exactly the way it was written.

Tuesday, March 11, 2008

Support our Troops!

How to support our troops. That is the question.

The GOP thinks supporting the troops means voting for wars of aggression against petty dictatorships in puny third world countries. And, then continuing the war for a 100 hundred years.

However, it was revealed today in the AJC that our troops need another kind of support.

The Founder of the Home Depot is writing checks to a local hospital.

Why? Under laws written in Washington, where supporting the troops means giving them a ride into combat, the disabled and discarded veteran is dumped from medical treatment long before healing from combat wounds.

With our country about $10 trillion dollars in debt under Republican Presidents, we have no money to guarantee benefits promised under Social Security or the medical care promised to all our "supported troops."

The GOP promised smaller government but they said nothing about moral bankruptcy.

When grandma gets evicted and Sargent Rock lives under a rock, will voters finally wake up to the defects in GOP promises?

Story in the AJC

Monday, March 10, 2008

Who reads a political blog?

Pretty much no one.

A recent survey found that only 22 percent of American bother looking at political blogs.

Hmmmm.

So why not?

Poor sources, inaccurate information, narrow points of view!

Sounds like ... Fox News, the Tax Foundation, and Ann Coulter all wrapped up into one.

By the way, Ann Coulter is selling adult toys door to door to fund her habit.

I don't need a source for the inaccurate information supporting my narrow point of view.

I'm the only person on the planet who doesn't like Ann Coulters trash mouth.

Sunday, March 9, 2008

Halliburton provides clean water for troops. Sometimes.

From the AP

AP: Water makes US troops in Iraq sick

By LARRY MARGASAK, Associated Press Writer 46 minutes ago

Dozens of U.S. troops in Iraq fell sick at bases using "unmonitored and potentially unsafe" water supplied by the military and a contractor once owned by Vice President Dick Cheney's former company, the Pentagon's internal watchdog says.

A report obtained by The Associated Press said soldiers experienced skin abscesses, cellulitis, skin infections, diarrhea and other illnesses after using discolored, smelly water for personal hygiene and laundry at five U.S. military sites in Iraq.

The Pentagon's inspector general found water quality problems between March 2004 and February 2006 at three sites run by contractor KBR Inc., and between January 2004 and December 2006 at two military-operated locations.

It was impossible to link the dirty water definitively to all the illnesses, according to the report. But it said KBR's water quality "was not maintained in accordance with field water sanitary standards" and the military-run sites "were not performing all required quality control tests."

"Therefore, water suppliers exposed U.S. forces to unmonitored and potentially unsafe water," the report said.

The problems did not extend to troops' drinking water, but rather to water used for washing, bathing, shaving and cleaning. Water used for hygiene and laundry must meet minimum safety standards under military regulations because of the potential for harmful exposure through the eyes, nose, mouth, cuts and wounds.

KBR said its water treatment "has met or exceeded all applicable military and contract standards." The company took exception to many of the inspector general's assertions. "KBR's commitment to the safety of all of its employees remains unwavering," the company said in a statement to the AP.

KBR is a former subsidiary of Halliburton Co., the oil services conglomerate that Cheney once led.

Well, I think it's freaken great KBR has the safety of its employees FIRST, and where is the commitment for the safety of our TROOPS?

Stick that in your little sissy 28 gauge gun, Dick Cheney!

Tax Information for the middle class wage earner

From the free online version of the Wall Street Journal, full story here.

There's Rich, and There's the 'Fortunate 400'
WSJ, March 5, 2008; Page D1

The really rich keep getting richer.

The nation's top 400 taxpayers reported a total of $85.6 billion of income on their federal income-tax returns for 2005 -- an average of $213.9 million apiece, according to Internal Revenue Service data obtained by The Wall Street Journal.

Just to make the cutoff to join this exclusive club, you had to report income of at least $100.3 million, up sharply from $74.5 million the previous year. The average income among the top 400 in 2004 was $172.8 million.

"It's another piece of evidence pointing to the rapidly growing concentration of income in the U.S.," says Joel Slemrod, professor of economics at the Ross School of Business of the University of Michigan. He refers to the group as "the Fortunate 400."

Indeed, the top 400 taxpayers have greatly increased their share of individuals' income since the mid-1990s. The group accounted for 1.15% of total income in 2005, up from 1.02% the prior year -- and more than twice as large as its 0.49% share a decade earlier. It's the highest percentage since the early 1990s, which is as far back as the IRS data go.

Even after adjusting for inflation, the minimum amount of income required to make the top-400 list has nearly tripled since 1992.

"Those numbers are really stunning," says Michael Graetz, a professor of law at Yale Law School and a Treasury Department official under President George H. W. Bush. "One hundred million dollars is an enormous estate to be accumulated over a lifetime, and not what we think of as one year's income for anybody."

The new data actually understate the group of 400's remarkable performance. The income yardstick used by the IRS for its study is known as "adjusted gross income," and it doesn't include tax-exempt interest income from state and local government bonds. (An IRS spokesman says nearly 4.5 million investors reported tax-exempt interest income for 2005 totaling $57.7 billion.) Moreover, adjusted gross income, or AGI, is arrived at after deducting various items, such as moving expenses, alimony payments and the self-employed health-insurance deduction. (For those who file Form 1040 for 2007, it's the amount shown on line 37.)

For its analysis, the IRS relied only on what taxpayers actually reported, without making any independent effort to estimate unreported income. The report doesn't identify anyone by name because of taxpayer-privacy laws. It's also important to remember these figures don't represent wealth or even lifetime earnings -- merely income for a single year.

Capital gains generally were far more important to the ultra-rich than any other single source of income. The group reported net capital gains of nearly $50 billion, an average of $124.9 million per return. That represented about 58% of their income.

Peter Orszag, director of the Congressional Budget Office, says "it's also notable" there was a "very sharp" increase among the group in partnership and S-corporation net income for 2005. Such income surged to nearly $15 billion, from $9.9 billion in 2004 and $8 billion in 2003.

Separately, the Congressional Budget Office recently calculated that a comprehensive measure of U.S. median after-tax household income rose to $55,900 in 2005, up 5.3% since 2000.

The IRS analysis updates a report issued five years ago that drew widespread attention. In that report, which focused on the years 1992-2000, the IRS noted that the members of the club of 400 varied widely from year to year. During those years, a total of 3,600 returns were identified. Of those who appeared in that group, less than 25% appeared more than once, and less than 13% appeared more than twice, the IRS said. Thus, the data shown in that study represented "a changing group of taxpayers over time, rather than a fixed group of taxpayers," the agency said.

No such analysis was available for the latest data. But tax analysts say it's safe to assume there is significant movement into and out of the top 400 list from year to year. For example, the list might include someone who sold a business after many years, or hedge-fund managers who enjoyed a particularly lucrative year.

The average federal income-tax rate for the group was 18.23%. That's up from 18.16% the prior year, but lower than in any other year since 1992 -- and well below the average income-tax rate of nearly 30% back in 1995, when Bill Clinton was in the White House. By contrast, the average income-tax rate for 2005, based on all returns filed, was 12.6%, up from 12.3% for 2004. The IRS calculated this figure by taking total income tax divided by AGI on all returns, taxable and nontaxable.

The 400 returns represent a minuscule fraction of the 134.4 million individual income-tax returns filed for 2005. For that year, the nation's total adjusted gross income was $7.4 trillion, up more than 9% from the previous year. The largest component was salaries and wages, which rose 4.7% to almost $5.2 trillion.
[The Upper Upper Crust]

A few other notable characteristics of this 400 club:

Members paid 1.67% of the nation's total federal income tax bill for 2005. That's up from 1.51% the prior year and is the highest percentage since 1992.

The group included 393 returns with record total charitable donations totaling $7.56 billion. That's an average of $19.2 million per return.

Many people in this group earned hefty wages and salaries. The report says 332 of the returns reported total salaries and wages totaling $7.38 billion. That's an average of $22.2 million per return. Even so, that was only about 8.6% of the group's total AGI.

Taxable interest reported by the group was a record $5.74 billion, or an average of $14.4 million per return -- but only 6.7% of total AGI.

Dividends were reported on 393 of the returns. The total was $5.89 billion, an average of $15 million per return -- or 6.89% of AGI.

The new IRS data provide a rare glimpse of the highest levels of American income-earners. A separate IRS analysis of data for 2005 gives a broader look. It showed, for example, that taxpayers with an adjusted gross income of at least $364,657 ranked in the top 1% of all taxpayers for that year. To be included in the top 5%, a taxpayer must have reported AGI of at least $145,283. To rank in the top 10%, your AGI must have been at least $103,912.

The data might play a role in the continuing debate about who pays taxes in America and whether the nation's tax system is fair. "You look at these numbers, and it makes it hard to believe that Congress should repeal the estate tax," says Yale's Prof. Graetz, co-author of a book called "Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth."

Under current law, the basic federal estate-tax exemption, now $2 million, will soar to $3.5 million next year. In 2010, the tax is scheduled to disappear entirely -- but only for that one year. President Bush has long called for total elimination of what its opponents call the "death tax." But those efforts have fizzled in Congress. A likely compromise might include making the exclusion somewhere around $3.5 million to $5 million and cutting the top estate-tax rate, which is currently 45%.

The IRS numbers might also prompt calls for higher taxes of some kind on the super-rich, such as possibly a higher capital-gains tax rate for those making megamillions a year.
The IRS analysis can be found here, here, and here. These links open Excel files, not simple text files. You were warned.

Tax Time

Dear Andrew,

First stop, www.taxfoundation.org/files/ff104.pdf, this link should open a .pdf file. You'll love it. The conclusion is that the top one percent of 'tax returns' pay 39 percent of "all" income tax.

That document was prepared using an IRS bulletin which can also be downloaded at: IRS Bulletin Article, 2005.

This bulletin very well supports the Tax Foundation conclusion despite some very small differences in the numbers.

So why don't I stop with the Tax Foundation conclusions which are based on the bulletin?

It's a bulletin, not a report.

If I'm watching some Cable TV movie, sometimes a weather bulletin flashes across the bottom of the screen. That bulletin could say tornado warning for all of Georgia.

The next day, should I tell people, "Tornadoes hit all of Georgia yesterday?"

The IRS bulletin has many "mistakes.'

Here are a couple.

Over 43 million tax returns with income, (AGI), were included in the bulletin. But, these returns paid no taxes. The bulletin does not adjust for this. That's about a 30 percent error in the number of returns with taxable income. Where in the 100% of all returns do those 'tax free' returns fit and how do they skew results?

[The tax free returns are in the bottom quintile for the purpose of reporting. In other words, 43 million returns are counted that pay no tax as being among the "other" 99 percent of of 'taxpayers.'

Now, it's very important to look at how the IRS defines the top one percent of "taxpayers" in the bulletin. There are no footnotes containing that information.

That leaves sorting through raw data. Not much fun.

But, there is an IRS Data Release called, The 400 Individual Income Tax Returns Reporting the Highest Adjusted Gross Incomes Each Year, 1992-2000. [Actually, there are more recent studies. I'll get to those next.]

Those 400 tax returns [tax forms not taxpayers] reported taxable income in 2000 of over $60 billion dollars, an average of $150 million each. About 1.32% of all taxable income.

What was the tax burden for the "top one percent of income?" Actual.

$15,507,223,000. Rounded to the nearest $1,000.

That would be 1.58 percent of all "income taxes" as defined by the IRS, the definition as used in all IRS reporting , as used on tax forms.

Since that "statistical study," [Yes, a statistical study prepared by specific authors, "Prepared under the direction of Michael Parisi and Michael Strudler, economists in the Individual Statistics Branch."] the definition of "income tax" has been changed to exclude certain taxes and certain credits.

So direct comparison of the study from 2003 and bulletins issued after the definitional changes are not possible.

If the Tax Foundation were correct in saying that 1 percent of all taxpayers pay 39 percent of all incometaxes, then why doesn't this group pay 3.9 percent or more of all taxes since they get 1.32 percent of all income?

Saturday, March 8, 2008

All Politicians Lie

“All politicians lie!”

That’s just not true. However, the truth does get trampled often by political hacks. But if we look, we can find the truthful politician right after an election. He or she is the one who didn’t get elected.

Speaking truth to the public isn’t the easiest path to political success. Saying things that people want to hear will win elections.

The best example of this comes in our email boxes.

Yesterday, Ann Coulter sent me her latest column on John McCain. I wasn’t as interested in John as I was in the ads neatly tucked into her column and the margins of her email.

I really, really want to know more about how I can gain strength without exercise. I’ve always known that going to a gym was unhealthy. Now, I can be grateful to Ann Coulter for providing with this shocking research that “the fitness industry doesn’t want me to know.”

But before I could cancel that worthless gym membership, Ann had already confirmed that I was paying $50,000 too much in taxes!

“What would you do with an extra $50,000 dollars?” and “Keep your money in your pocket where it belongs!” Those two sentences dumped John McCain, Hillary Clinton, and George Washington into the garbage.

Not only has the ‘fitness industry’ been lying to me, the government has $10,000, $20,000, or even $50,000 dollars of my extra money!

I don’t know where Ann Coulter gets the extra time to talk about politics given the huge burden she must carry providing me with the truth about exercise and taxes!

Now that we know where to buy our snake oil, let’s get back to the truth by using that painful subject of taxes.

Jonathan Hoenig of Fox News sent me a video about the unfairness of the tax burden. According to Jonathan, the richest one percent of taxpayers pay 39 percent of income taxes!

How dare we treat our rich people like this! How dare we!

And, who is responsible for this abuse? According to dear Jonathan, it’s those Wal-Mart workers making ten bucks an hour!

I thought it was very clever for Jonathan and Fox News to blame Wal-Mart workers for the horrible burdens of being super-duper rich.

And since I just saved myself the annual cost of belonging to a gym, signed up with an online CPA service to get my extra $50,000 back from the government, I must be in that richest one percent group, right?

Wrong! And, Fox News is wrong about the unfair burdens of being in the richest one percent of Americans.

The most likely source of the Fox News report is the Tax Foundation. The Tax Foundation, a far right organization, should have gotten its raw data from the IRS.

Now the IRS puts out some really good statistics and publications, but I know the Tax Foundation and Fox News didn’t bother with a statistical analysis or even look at the existing online reports.

The top one percent of Americans with taxable returns had roughly 25 percent of all taxable income in 2005 and paid a tax rate of about 23 percent. If that doesn’t shock anyone, the top 400 taxpayers in 2000, earned an average income of over $170 million dollars each before taxes.

I’d like to be in that very exclusive group, wouldn’t you? What would you do with an income of $170 million before taxes?

Judging by Ann Coulter, Fox News, and their commercial sponsors, we’d cancel our gym memberships, hire an online accountant, and complain about $10 per hour Wal-Mart workers.

Ah, the Republican version of the American dream, to be lazy, ignorant, and rude to people who are doing nothing but working to make a living.