Over the past week or two we have heard a lot about federal income taxes in the news. A Presidential contender has been criticized for he and his wife paying federal income taxes at only a 14% rate. However, the amount of taxes he and his wife paid in two years was about $7 million or $3.5 million per year.
During the President's State of the Union speech last evening, Warren Buffett's secretary was given a place of honor to sit with the first lady. The basis of honor, as indicated by the President in his speech, was that she paid more taxes than Warren Buffett. We will give the President an allowance for perhaps having made an honest mistake. What he likely wanted to say was that Warren Buffett's secretary paid her federal income tax at a higher rate than Warren Buffett.
However, this clearly demonstrates the whole problem of federal income tax discussion. It is silly to talk about federal income tax rates. We have some trillions of dollars in the federal budget deficit and in the federal debt. Notice that these measurements are in dollars, not in rates. When I buy a sack of potatoes or fill my tank with gasoline, I pay in dollars, not in rates. So, when we talk about tax payments or receipts, let's talk about real money, which is dollars. Some persons like to to talk about rates, because it intentionally confuses the situation and makes it easier to establish class distinction based on economics.
Just for kicks, I looked up the income tax rate for a husband and wife making an Adjusted Gross Income of $250,000 per year. Adjusted Gross Income is that amount of income which remains after taking deductions for charity, etc. and personal exemptions. The federal income tax would be $50,000 or a 20% rate. If you like to look at the total income, let's say that the couple donated $50,000 to charity, which would have made $300,000 in total income. Paying $50,000 in federal income tax gives a rate of 17%; not very far off from the 14% paid by the Presidential contender and his wife. But that doesn't say anything. A couple paying $3.5 million per year in federal income tax is certainly doing a lot more to support their government than a couple paying $50,000 per year.
Lets quit fooling around with techniques to make numbers look like what we want them to be. The truth on federal income taxes is in real dollars, not rates.
Wednesday, January 25, 2012
Saturday, January 21, 2012
Pay Your Fair Share
We hear a periodic refrain from Pres. Obama, "Pay your fair share". He doesn't explain what that means, but I believe he's referring to the cost of federal government and since each citizen benefits equally from federal government, we should each pay an equal share of that cost.
The President has submitted a budget of $3.7 trillion. The number of US taxpayers is about 220 million. An equal share for each taxpayer would be $16,800. For my wife and me, that would be $33,600. President Obama's application is correct. My wife and I are not paying our fair share, even though we obtain all the benefits supplied by the federal government, such as patent protection, border protection from terrorists, food stamp availability, and reduced cost of medical care. Come to think of it, we don't get food stamps. Could we get a little credit to reduce our tax for that?
On second thought, I have heard that there are a lot of citizens who don't pay any federal income tax. That makes me feel a little better about my wife and I not paying our fair share, but why aren't these other people paying their fair share?
On another thought, I have heard that 5% of the US citizens are paying 90% of all federal income taxes, even though the total is less than $3.7 trillion. I feel a little sorry for them, because they are paying considerably more than their fair share. But I can rationalize that into thinking that they should be paying more than their fair share, because they're rich. My natural tendency to jealousy makes me believe they probably got rich by stealing from others. I'm not rich, because I don't steal, and yet I am as smart as they are and work as hard as they do. They must be crooks. Some say that rich people are rich, because they work smart and dedicate themselves to accumulating money, and that I could have done the same. I wonder if there's any truth in that?
I have heard that Presidential contender Romney pays only 15% tax on his income. When we start talking about percentages, I get a little confused. I like to talk about real money. The average taxpayer income is said to be $55,000 a year and the average tax is 11%. That means the average taxpayer is paying only about $6500 per year in federal taxes, when his fair share is $16,800. Looks like the average taxpayer is not paying his fair share. It is also said that if the taxpayer earns less than $50,000 a year, his tax rate is only 5%. That means he's only paying $2500 per year, which is way off the fair share. But let's get back to Romney. If his income is $2 million per year, he is paying $300,000 a year. Hey! That's way over his fair share. But then again he's rich and my jealousy streak says forget "the fair share" idea, soak him!
Well. If the fair share idea is not working, why not make it even a little better for most of us. Let's make everybody contribute all their assets to a general pool, which we then divide up, or maybe it would be better to leave it in the hands of the federal government, since the average taxpayer really doesn't know how best to make and spend money. The downside on this might be that few citizens would have any incentive to work. Maybe we can then get out the whips and get back to slavery. That has worked for a few thousand years.
The President has submitted a budget of $3.7 trillion. The number of US taxpayers is about 220 million. An equal share for each taxpayer would be $16,800. For my wife and me, that would be $33,600. President Obama's application is correct. My wife and I are not paying our fair share, even though we obtain all the benefits supplied by the federal government, such as patent protection, border protection from terrorists, food stamp availability, and reduced cost of medical care. Come to think of it, we don't get food stamps. Could we get a little credit to reduce our tax for that?
On second thought, I have heard that there are a lot of citizens who don't pay any federal income tax. That makes me feel a little better about my wife and I not paying our fair share, but why aren't these other people paying their fair share?
On another thought, I have heard that 5% of the US citizens are paying 90% of all federal income taxes, even though the total is less than $3.7 trillion. I feel a little sorry for them, because they are paying considerably more than their fair share. But I can rationalize that into thinking that they should be paying more than their fair share, because they're rich. My natural tendency to jealousy makes me believe they probably got rich by stealing from others. I'm not rich, because I don't steal, and yet I am as smart as they are and work as hard as they do. They must be crooks. Some say that rich people are rich, because they work smart and dedicate themselves to accumulating money, and that I could have done the same. I wonder if there's any truth in that?
I have heard that Presidential contender Romney pays only 15% tax on his income. When we start talking about percentages, I get a little confused. I like to talk about real money. The average taxpayer income is said to be $55,000 a year and the average tax is 11%. That means the average taxpayer is paying only about $6500 per year in federal taxes, when his fair share is $16,800. Looks like the average taxpayer is not paying his fair share. It is also said that if the taxpayer earns less than $50,000 a year, his tax rate is only 5%. That means he's only paying $2500 per year, which is way off the fair share. But let's get back to Romney. If his income is $2 million per year, he is paying $300,000 a year. Hey! That's way over his fair share. But then again he's rich and my jealousy streak says forget "the fair share" idea, soak him!
Well. If the fair share idea is not working, why not make it even a little better for most of us. Let's make everybody contribute all their assets to a general pool, which we then divide up, or maybe it would be better to leave it in the hands of the federal government, since the average taxpayer really doesn't know how best to make and spend money. The downside on this might be that few citizens would have any incentive to work. Maybe we can then get out the whips and get back to slavery. That has worked for a few thousand years.
Thursday, January 19, 2012
Disbanding the National Science Foundation
I previously wrote a blog recommending that the National Science Foundation (NSF) be disbanded. "Anonymous" responded that the budget of the NSF should be increased.
The National Science Foundation (NSF) is a research agency of the federal government. The 2011 fiscal year appropriation for this agency was $6.9 billion, of which $5.6 billion was specified for research and research equipment. Almost $1 billion was specified for Education and Human Resources.
While the NSF does some research in-house, most of its research is farmed out to universities in the form of grants. The primary question is whether these University grants are of any significant value to the taxpayer.
It is likely that most of the general public is not very clear on what research is. Perhaps the best way to describe it is in its application to private industry. Generally, private industry budgets approximately 5% of total company revenue for research. The purpose of spending money for research is for consideration of whether there are new technolgies, which should be recognized and identified for the ongoing health of the business. An example, is the recent announcement of Kodak's bankruptcy. Kodak had been a world leasder in the manufacture and sale of photographic film. With the advent of the digital camera, the film market dried up, as the public moved to use of the new digital camera in its photography. This is similar to the classic example of the collapse of the buggy whip industry, as automotive vehicles replaced horse drawn vehicles.
A second company research objective is to develop new products, which are consistent with the company's product line and which will help to increase revenue. For example, a faster drying paint for a paint company, or a better braking system for an automobile manufacturer.
However, companies must be alert to see that research expenditures are consistent with the general business plan and not excesive with respect to revenues. Some years ago, Anheuser Busch, the beer producer in St. Louis, was having difficulty with its stock performance, because profits were low. The board of directors decided that since beer was their main business and they had been in the beer business for so long that there was very little to learn further from research, they would disband the research department. In other words, the research budget was cut to zero. This decision and subsequent action considerably helped company profits to return to a normal position. It should be noted that when Anheuser Busch made this decision on limiting its research, it was not bankrupt, was not in budget deficit, nor had extreme debt which it could not pay. Notice the financial difference between Anheuser Busch and the present financial state of the US federal government.
With a fiscal 2011 appropriation of $6.9 biillion, NSF has 1700 employees. Most of these people do not do research. Rather, they oversee the the issuance of 10,000 grants per year. From the Internet, a few of these grants are: "Structural engineering of automobiles". I thought most car manufacturing companies do this routinely in order to remain competitive; "Connect students to real world science". I thought this was the job of local school boards, with some assistance from each state. "How humans & animals affect water quality and the reverse". I thought this was the job of municipal health departments.
About the year 1938, some physicists working in a laboratory in Germany obtained pictures showing that an atom of uranium 235 split with the release of energy. Using this basic research information, a collaboration of US companies and the US government was able to develop
an atomic bomb, which significantly reduced the length of the war with Japan and saved the lives of many American soldiers. Notice that the basic research was from Germany, not the US. American companies have routinely shown their ingenuity by developing a tremendous array of new products from their own research or from anyone else's rresearch, as in the atomic bomb example. Rather than companies frittering away their revenues on adhering to a grand list of federal business restrictions, would it not be more appropriate to have those companies spend some of that revenue on research for new products and their subsequent development? If that sounds like a reasonable approach, the obvious plan should be to eliminate government research, because we can't afford it, and engage in retraction of the various government restrictions which presently inhibit business.
"Anonymous" also said that "eliminating [the NSF] would have as a consequence a drastic decrease of quality and stature of US scientific research, with top foreign students and scientists preferring to work/study in more attractive countries". I was in graduate school in 1942, as a candidate for a Masters in Organic Chemisty. I had chosen a top US Uniiversity, but there were many others of similar stature. In spite of the fact that the NSF did not exist at the time (NSF created in May 1950), we had many forign students. US universities were then recognized as the best in the world. They are stiil the best, but I cannot agree that it is only because of the present contribution of the NSF. There is no doubt that pumping $6 billion of NSF/taxpayer funds into American Universities each year is bound to make American Universities more financially attractive to all university students (cite the "trickle down effect"), but it stiil doesn’t say American Universities would not be the best in the world without these funds. Consider also the rise of the public universities at taxpayer expense, without the NSF.
"Anonymous" says that only the socialist countries have shown to be leaders in government research. My response is what socialist countries? What kind of research? If we mean the Soviet Union, where is it now? Kaput! Did they spend too much money to help them into bankruptcy? Do we remember any outstanfding piece of research they accomplished. What about Cuba? Lots of good research coming from there? What about N. Korea? Same! Yugoslavia? In shambles! East Germany? Absorbed by West Germany! Contrary to these others, China is a growth country., but it is not known for its research. It is known for its development using the research and engineering developed by others, mostly US companies.
As a final personal condemnation, I refer to a basic characteristic of mankind, which is to seek and maintain a oersonal advantage over others. University professors are only human. They see in NSF grants an opportunuty to obtain finances to expand their pet projects, whether of traceable public advantage or not. As intellectually capable as most of these people are, they tend to ignore the idiocy of using the gravy train. The gravy train eventually runs out, but they believe in "get it while you can". The NSF gravy train will eventaully run out, either with the awakening of the general public, which supplies the gravy, or the demise of the US, when there is no more gravy, as in the other defunct socialistic countries. Keep in mind that there are many other applicants for the gravy, through food stamps, unemployment benefits, pensions, etc., which will make it run out faster.
The National Science Foundation (NSF) is a research agency of the federal government. The 2011 fiscal year appropriation for this agency was $6.9 billion, of which $5.6 billion was specified for research and research equipment. Almost $1 billion was specified for Education and Human Resources.
While the NSF does some research in-house, most of its research is farmed out to universities in the form of grants. The primary question is whether these University grants are of any significant value to the taxpayer.
It is likely that most of the general public is not very clear on what research is. Perhaps the best way to describe it is in its application to private industry. Generally, private industry budgets approximately 5% of total company revenue for research. The purpose of spending money for research is for consideration of whether there are new technolgies, which should be recognized and identified for the ongoing health of the business. An example, is the recent announcement of Kodak's bankruptcy. Kodak had been a world leasder in the manufacture and sale of photographic film. With the advent of the digital camera, the film market dried up, as the public moved to use of the new digital camera in its photography. This is similar to the classic example of the collapse of the buggy whip industry, as automotive vehicles replaced horse drawn vehicles.
A second company research objective is to develop new products, which are consistent with the company's product line and which will help to increase revenue. For example, a faster drying paint for a paint company, or a better braking system for an automobile manufacturer.
However, companies must be alert to see that research expenditures are consistent with the general business plan and not excesive with respect to revenues. Some years ago, Anheuser Busch, the beer producer in St. Louis, was having difficulty with its stock performance, because profits were low. The board of directors decided that since beer was their main business and they had been in the beer business for so long that there was very little to learn further from research, they would disband the research department. In other words, the research budget was cut to zero. This decision and subsequent action considerably helped company profits to return to a normal position. It should be noted that when Anheuser Busch made this decision on limiting its research, it was not bankrupt, was not in budget deficit, nor had extreme debt which it could not pay. Notice the financial difference between Anheuser Busch and the present financial state of the US federal government.
With a fiscal 2011 appropriation of $6.9 biillion, NSF has 1700 employees. Most of these people do not do research. Rather, they oversee the the issuance of 10,000 grants per year. From the Internet, a few of these grants are: "Structural engineering of automobiles". I thought most car manufacturing companies do this routinely in order to remain competitive; "Connect students to real world science". I thought this was the job of local school boards, with some assistance from each state. "How humans & animals affect water quality and the reverse". I thought this was the job of municipal health departments.
About the year 1938, some physicists working in a laboratory in Germany obtained pictures showing that an atom of uranium 235 split with the release of energy. Using this basic research information, a collaboration of US companies and the US government was able to develop
an atomic bomb, which significantly reduced the length of the war with Japan and saved the lives of many American soldiers. Notice that the basic research was from Germany, not the US. American companies have routinely shown their ingenuity by developing a tremendous array of new products from their own research or from anyone else's rresearch, as in the atomic bomb example. Rather than companies frittering away their revenues on adhering to a grand list of federal business restrictions, would it not be more appropriate to have those companies spend some of that revenue on research for new products and their subsequent development? If that sounds like a reasonable approach, the obvious plan should be to eliminate government research, because we can't afford it, and engage in retraction of the various government restrictions which presently inhibit business.
"Anonymous" also said that "eliminating [the NSF] would have as a consequence a drastic decrease of quality and stature of US scientific research, with top foreign students and scientists preferring to work/study in more attractive countries". I was in graduate school in 1942, as a candidate for a Masters in Organic Chemisty. I had chosen a top US Uniiversity, but there were many others of similar stature. In spite of the fact that the NSF did not exist at the time (NSF created in May 1950), we had many forign students. US universities were then recognized as the best in the world. They are stiil the best, but I cannot agree that it is only because of the present contribution of the NSF. There is no doubt that pumping $6 billion of NSF/taxpayer funds into American Universities each year is bound to make American Universities more financially attractive to all university students (cite the "trickle down effect"), but it stiil doesn’t say American Universities would not be the best in the world without these funds. Consider also the rise of the public universities at taxpayer expense, without the NSF.
"Anonymous" says that only the socialist countries have shown to be leaders in government research. My response is what socialist countries? What kind of research? If we mean the Soviet Union, where is it now? Kaput! Did they spend too much money to help them into bankruptcy? Do we remember any outstanfding piece of research they accomplished. What about Cuba? Lots of good research coming from there? What about N. Korea? Same! Yugoslavia? In shambles! East Germany? Absorbed by West Germany! Contrary to these others, China is a growth country., but it is not known for its research. It is known for its development using the research and engineering developed by others, mostly US companies.
As a final personal condemnation, I refer to a basic characteristic of mankind, which is to seek and maintain a oersonal advantage over others. University professors are only human. They see in NSF grants an opportunuty to obtain finances to expand their pet projects, whether of traceable public advantage or not. As intellectually capable as most of these people are, they tend to ignore the idiocy of using the gravy train. The gravy train eventually runs out, but they believe in "get it while you can". The NSF gravy train will eventaully run out, either with the awakening of the general public, which supplies the gravy, or the demise of the US, when there is no more gravy, as in the other defunct socialistic countries. Keep in mind that there are many other applicants for the gravy, through food stamps, unemployment benefits, pensions, etc., which will make it run out faster.
Saturday, January 14, 2012
Reducung Federal Government Spending is Just Talk
On his morning radio show, Neal Boortz recently related federal government finances to that of those of the average US family. He did this by eliminating eight zeros from the federal budget numbers and came up with the following numbers. I don't recall Neal's exact numbers, but these are in the ballpark. Average family income was $21,000. Average family annual expenses were $38,000 (note the annual budget deficit of $17,000). Credit card debt was $270,000. With this kind of activity, what could this family due to eventually become solvent? Perhaps a more important question is how long will the credit card company continued\ to advance $17,000 per year in additional debt, when there seems to be no possibility of ever recovering the $250,000?
There has been continuing talk on how to reduce the federal budget and start to pay off the horrendous national debt. The only problem is that it is just talk and nothing is being accomplished.
There are 16 Federal Departments under control of the President, although Congress is responsible for funding. Some of the better-known departments are Department of Energy, Department of education, Department of Defense, and Department of Health and Human Services. Each of these departments has a number of agencies. For example, the National Institutes of Health fall under the Department of Health and Human Services. The Environmental Protection Agency is an independent agency, not associated with any Department.
The Congress recently passed an omnibus appropriations bill for nine agencies. This was on top of an appropriations passed in November. It is difficult to obtain a complete picture from the Internet on the individual appropriations, but a few of them are:
DOEn $25.7 billion
NIH $30.7 billion
EPA $8.4 billion
DOD $72.4 billion
DOEd $39.9 billion
These few Departments and Agencies are only a sprinkling of the 16 Departments and agencies running into 100. Yet, the total appropriation for those few is $536 billion. Using the Boortz technique of knocking off eight zeros to reduce it to family budget analogy, the expenditure is $5360 per year in the family budget. This is obviously a considerable expenditure for a family of $21,000 average income and spending $38,000. If we knocked out this $5360, we could make a significant dent in the family budget deficit. The same could apply to the federal government deficit. Perhaps more significantly, it should be noted that the $536 billion appropriation is approximately the same as it was last year, which means no progress was made to reduce federal expenditures.
There has been continuing talk on how to reduce the federal budget and start to pay off the horrendous national debt. The only problem is that it is just talk and nothing is being accomplished.
There are 16 Federal Departments under control of the President, although Congress is responsible for funding. Some of the better-known departments are Department of Energy, Department of education, Department of Defense, and Department of Health and Human Services. Each of these departments has a number of agencies. For example, the National Institutes of Health fall under the Department of Health and Human Services. The Environmental Protection Agency is an independent agency, not associated with any Department.
The Congress recently passed an omnibus appropriations bill for nine agencies. This was on top of an appropriations passed in November. It is difficult to obtain a complete picture from the Internet on the individual appropriations, but a few of them are:
DOEn $25.7 billion
NIH $30.7 billion
EPA $8.4 billion
DOD $72.4 billion
DOEd $39.9 billion
These few Departments and Agencies are only a sprinkling of the 16 Departments and agencies running into 100. Yet, the total appropriation for those few is $536 billion. Using the Boortz technique of knocking off eight zeros to reduce it to family budget analogy, the expenditure is $5360 per year in the family budget. This is obviously a considerable expenditure for a family of $21,000 average income and spending $38,000. If we knocked out this $5360, we could make a significant dent in the family budget deficit. The same could apply to the federal government deficit. Perhaps more significantly, it should be noted that the $536 billion appropriation is approximately the same as it was last year, which means no progress was made to reduce federal expenditures.
Monday, January 2, 2012
Telephne Taxes at a 64% Rate!
Open E-mail to Rep. Neugebauer:
Randy,
I just paid my monthly land line telephone bill.
Suddenlink's charge for the service was $15.35. Taxes were $9.81.
THE TAX RATE WAS 64%.
Is this part of Obama's Plan to tax the rich or is it something Congress dreamed up?
Randy,
I just paid my monthly land line telephone bill.
Suddenlink's charge for the service was $15.35. Taxes were $9.81.
THE TAX RATE WAS 64%.
Is this part of Obama's Plan to tax the rich or is it something Congress dreamed up?
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