Many people have made much about the lower effective tax rates paid by the rich who can easily shift income from the regular rate to the lower capital gains rate, but much has been ignored in this debate. I will forgo talking about how the problem is understated because in the debate payroll taxes are ignored in this post and focus on the fact that the tax rates we talk about for the rich are rates on taxable income. What we ignore in the discussion, simply because it is hard to quantify is how much lower the tax rates of the rich are because they are better than the average taxpayer at turning taxable income into non-taxable income.
Recently I've read article that contain examples of ways in which this works. Let's look at an article about a tax avoidance strategy that is used by one of the funds that Romney has some of his retirement savings invested in. For now I'm going to ignore the actual strategy and concentrate on a line that was not meant to be a focus of the article: "BCIP Trust Associates III, a Bain fund that holds $5 million to $25 million of Mr. Romney’s retirement savings." The earnings on between $5 and $25 million that Mitt has stuffed into that one account are not included in taxable income.
Wait, it get's better (for Mitt) "Mr. Romney’s I.R.A. holdings, in 25 funds, total from $21 million to $102 million, according to his financial disclosure forms." So, when you see that Mitt paid a tax rate of 14.9% remember that the earnings on between $21 million and $102 million were not included in the base on which that percentage was calculated. Most of us can not stuff tens of millions into retirement accounts and shield substantial portions of our income from all taxation. Where is the outrage over the ability not just for the top earners to pay a lower rate than the average person but over their ability to make so much of their income not count toward the base on which that rate is taxed?
Post-script: The rest of the article is well worth reading. Here are a few choice quotations and a link:
"The technique in question allows nonprofit institutions and large
retirement funds to exploit the advantages of shell companies set up in
tax havens like the Cayman Islands by investing money with private
equity firms like Bain Capital, which Mr. Romney ran."
"For instance, an investor could put $1 in an I.R.A. and purchase a
partnership interest of Bain Capital in the Cayman Islands, which, in
turn, borrows $1,000 to buy 1,001 shares of a company near bankruptcy
that Bain has just purchased. If the shares go to $100, the investor
then has $99,100 after he pays off the $1,000 loan. Such a transaction
would be walloped by the unrelated business tax if done on shore."
Romney’s Returns Revive Scrutiny of Lawful Offshore Tax Shelters
Monday, April 30, 2012
Tuesday, March 27, 2012
Opposed to "ObamaCare?" Be careful what you wish for.
If you are opposed to the Affordable Care Act (a.k.a. Obamacare) you may be hoping that the supreme court rules it unconstitutional. I believe that would be a disaster for many: those with pre-existing conditions who can not give coverage, people who can not switch employers or become entrepreneurs lest they lose coverage, young adults who can not stay on their parents' policies while in college. However, let's assume that disaster comes to pass - the supreme court makes us revert to the status quo of two years ago - what will the long term consequences be?
Well, remember that Obama Care was a response to a set of problems - rising health care costs leading companies to drop coverage and individuals to be priced out of the market leading to many more uninsured people, college kids that could not get coverage, sick people that could not get coverage at any price. All of those problems would come roaring back. Once the supreme court says we can't force people to buy coverage those pressures would build until the public demanded a fix. The logical fix would be to tax everyone and provide universal single payer coverage (a.k.a. Medicare for all). I for one think that's a good solution, but if you oppose ObamaCare I doubt that you do.
Well, remember that Obama Care was a response to a set of problems - rising health care costs leading companies to drop coverage and individuals to be priced out of the market leading to many more uninsured people, college kids that could not get coverage, sick people that could not get coverage at any price. All of those problems would come roaring back. Once the supreme court says we can't force people to buy coverage those pressures would build until the public demanded a fix. The logical fix would be to tax everyone and provide universal single payer coverage (a.k.a. Medicare for all). I for one think that's a good solution, but if you oppose ObamaCare I doubt that you do.
Friday, March 2, 2012
Religious Freedom vs. Women's Health
I am listening to NPR discussing the Blunt amendment trying to allow a religious exemption to providing healthcare. My comment was: Why has nobody mentioned that we routinely restrict religious freedom in other ways. Rastafarians can't smoke pot, Fundamentalist Mormons and Muslims can't practice polygamy, etc. Where is the Republican outrage over those restrictions?
Tuesday, February 28, 2012
Fox News blathered about school prayer being reconsidered in the wake of yesterday's tragic shooting in Ohio. I would suggest that strong gun control laws might be more effective.
Thursday, December 15, 2011
School Choice
I live in one of the best public school districts in Michigan, rated 9 out of 10 stars by greatschools.org. Yet every day I drive my youngest child to an school in a district where the median income is about half that of where I live and the district rating is three stars. The school that my youngest son attends faces some problems: so many students are from poor homes that they just provide every child with a free breakfast and lunch, they were so short on funds for books in kindergarten that they sent home photocopied pages some weeks, students with less than stable home lives come to school unprepared and with behavioral issues.
My middle son also attends a school of choice, but it is in our district. In fact it is in the building that was my oldest son's neighborhood elementary school.
Recently I've seen several articles that decry school choice because it destroys neighborhood schools and many charters are unregulated and no more successful than the public schools which they replace. So, why do I choose to send two of my three kids to schools of choice?
School choice allows my youngest to learn in an immersion Chinese program. Research shows that learning a foreign language before the age of twelve is more effective than learning it later in life and has a host of benefits in general cognitive development. My middle son learns in a Montessori program that suits his learning style far better than a traditional classroom does.
School choice allows my middle son a learning environment better suited to his needs. It also allows students from other districts to be in his classes, making his school more diverse while affording them an opportunity they might not otherwise have.
What about the downsides of school choice mentioned above? I actually believe that they don't exist. My kids schools are regulated just like all other public schools. Neighborhood schools that are failing should be revamped instead of closed. The fact that they are closed is a consequence of a choice (a poor one in my opinion) that our society has made. In fact, instead of detracting from an inner city school system Post Oak Elementary pulled my youngest son from a relatively affluent district. My son brought with him two motivated, educated parents who can donate money for books and time for tutoring. He will ace the standardized tests.
My youngest son is learning Chinese. Additionally, I am pleased to report he ahead of where his brothers were at the same age in math and (on average) in reading. He enriches an impoverished district in many ways and it enriches him. Deregulation and closure of failing schools are awful problems but please don't conflate them with school choice. Taking away my choice won't solve those problems.
My middle son also attends a school of choice, but it is in our district. In fact it is in the building that was my oldest son's neighborhood elementary school.
Recently I've seen several articles that decry school choice because it destroys neighborhood schools and many charters are unregulated and no more successful than the public schools which they replace. So, why do I choose to send two of my three kids to schools of choice?
School choice allows my youngest to learn in an immersion Chinese program. Research shows that learning a foreign language before the age of twelve is more effective than learning it later in life and has a host of benefits in general cognitive development. My middle son learns in a Montessori program that suits his learning style far better than a traditional classroom does.
School choice allows my middle son a learning environment better suited to his needs. It also allows students from other districts to be in his classes, making his school more diverse while affording them an opportunity they might not otherwise have.
What about the downsides of school choice mentioned above? I actually believe that they don't exist. My kids schools are regulated just like all other public schools. Neighborhood schools that are failing should be revamped instead of closed. The fact that they are closed is a consequence of a choice (a poor one in my opinion) that our society has made. In fact, instead of detracting from an inner city school system Post Oak Elementary pulled my youngest son from a relatively affluent district. My son brought with him two motivated, educated parents who can donate money for books and time for tutoring. He will ace the standardized tests.
My youngest son is learning Chinese. Additionally, I am pleased to report he ahead of where his brothers were at the same age in math and (on average) in reading. He enriches an impoverished district in many ways and it enriches him. Deregulation and closure of failing schools are awful problems but please don't conflate them with school choice. Taking away my choice won't solve those problems.
Thursday, October 27, 2011
I am a JOB CREATOR
I learned programming and made a lot of money as an owner of a software company. I look like a self made man, but…
My company would not have been possible without the internet (which grew out of DARPAnet), the interstates my employees used to get to work, the public schools that gave me an educated workforce, the courts that allowed me to enforce contracts with clients, the government agencies that allowed me to know my food and water and medicines were safe, the postal service…
So, while I've been a big success, I owe a lot to the government. More importantly I want my kids to have the same kind of opportunities that I had. I am the 99%
Tuesday, October 4, 2011
SuperFreakonomics makes an unsupported claim
I finished reading SuperFreakonomics which repeatedly claimed that government solutions are more complex than necessary, with no evidence to support the assertion, so I sent them this e-mail. I'm not holding my breath waiting for a response.
I have read your books with great interest. Freakonomics and SuperFreakonomics were in many ways about not accepting the conventional wisdom (drug dealers don't all get rich) and about not allowing your political views to shape your perceptions of how the world works (abortion decreases criminality). You prefer to make claims based on evidence.
Unfortunately, in SuperFreakonomics, you twice repeated an assertion that I believe is rooted in politics and is entirely unsupported by the data. Conservatives hold that government is less efficient than the private sector and that its solutions to problems are more complex than necessary.
It is unarguable that all complex human endeavors involve a large amount of waste. Government is full of bureaucrats engaged in empire building who would spend money more carefully if it were their own money that was being spent. However, I have spent time in private industry, which I can assure you is full of executives engaged in empire building who would spend money more carefully if it were their own money that was being spent.
As far as I can tell, there is no evidence that private industry is more efficient than government. Anecdotaly, we see a huge rate of small business failures (http://www.springerlink.com/content/u5218354gk84k205/). Large businesses also cause huge losses to our society, witness AIG, Enron, WorlCom, and Lehman. Management receives outsized compensation, even when performing so badly that corporate boards fire them (http://www.nytimes.com/2011/10/01/business/lets-stop-rewarding-failed-ceos-common-sense.html?_r=1&ref=business)
Private industry often provides complex solutions (like CDOs) to simple problems like home ownership. Executives laugh all the way to the bank (think Angelo Mozilo) while sticking shareholders and society with the downsides.
In fact, there are many problems for which government provides solutions that are less complex and more cost effective than the private sector (think of health care, education, parks, and highways). Many have argued, I believe correctly, that the U.S. system of delivering health care produces inferior results at greater cost than government run health care in other countries. Even if we only consider the U.S. we see Medicare and the VA providing more cost effective health care than private insurance companies. Medical billing is a private industry solution that is more complex than anything a government could dream up.
Countries without strong government programs such as Pakistan, Zimbabwe, and Somalia do not see complex problems solved effectively. In the history of the world no country has made its average citizen rich relative to the citizens of other countries without a strong government - so the complex problem that government solves best is how do we make our society grow rich. Perhaps you should stop doing our society the dis-service of claiming that governmental solutions are overly complex unless there is evidence to back that claim.
I have read your books with great interest. Freakonomics and SuperFreakonomics were in many ways about not accepting the conventional wisdom (drug dealers don't all get rich) and about not allowing your political views to shape your perceptions of how the world works (abortion decreases criminality). You prefer to make claims based on evidence.
Unfortunately, in SuperFreakonomics, you twice repeated an assertion that I believe is rooted in politics and is entirely unsupported by the data. Conservatives hold that government is less efficient than the private sector and that its solutions to problems are more complex than necessary.
It is unarguable that all complex human endeavors involve a large amount of waste. Government is full of bureaucrats engaged in empire building who would spend money more carefully if it were their own money that was being spent. However, I have spent time in private industry, which I can assure you is full of executives engaged in empire building who would spend money more carefully if it were their own money that was being spent.
As far as I can tell, there is no evidence that private industry is more efficient than government. Anecdotaly, we see a huge rate of small business failures (http://www.springerlink.com/content/u5218354gk84k205/). Large businesses also cause huge losses to our society, witness AIG, Enron, WorlCom, and Lehman. Management receives outsized compensation, even when performing so badly that corporate boards fire them (http://www.nytimes.com/2011/10/01/business/lets-stop-rewarding-failed-ceos-common-sense.html?_r=1&ref=business)
Private industry often provides complex solutions (like CDOs) to simple problems like home ownership. Executives laugh all the way to the bank (think Angelo Mozilo) while sticking shareholders and society with the downsides.
In fact, there are many problems for which government provides solutions that are less complex and more cost effective than the private sector (think of health care, education, parks, and highways). Many have argued, I believe correctly, that the U.S. system of delivering health care produces inferior results at greater cost than government run health care in other countries. Even if we only consider the U.S. we see Medicare and the VA providing more cost effective health care than private insurance companies. Medical billing is a private industry solution that is more complex than anything a government could dream up.
Countries without strong government programs such as Pakistan, Zimbabwe, and Somalia do not see complex problems solved effectively. In the history of the world no country has made its average citizen rich relative to the citizens of other countries without a strong government - so the complex problem that government solves best is how do we make our society grow rich. Perhaps you should stop doing our society the dis-service of claiming that governmental solutions are overly complex unless there is evidence to back that claim.
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