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Posts Tagged ‘New York Times’

Jimmy Hoffa & Tea Party Zombies Game “Take Out” Civility

In Koch Industries, New York Times, Paul Krugman, Political Rhetoric on September 8, 2011 at 12:16 am

Screen shot of "Tea Party Zombies Must Die" game

Was it not just eight months ago, after Tuscon, people on the Left decried “eliminationist rhetoric” and the military technology common in many political campaigns?   

It was.   So where are those New York Times columnists today? 

There is a double standard in the silence from the Left about an online video game called “Tea Party Zombies Must Die”, featuring prominent Tea Party members such as Sarah Palin, Mike Huckabee, Newt Gingrich, Michele Bachmann and even the Koch Brothers.  The gamer is instructed to kill each Tea Party member with weapons like a gun or a crossbar.  [1] [2]  In January, Paul Krugman opined, “It’s true that the shooter in Arizona appears to have been mentally troubled. But that doesn’t mean that his act can or should be treated as an isolated event, having nothing to do with the national climate.” [3]

US Rep. Andre Carson (D-IN) said Tea Party Members of Congress want to see blacks lynched and “hanging on a tree”.  [4]  Let us refresh ourselves of the January words of Paul Krugman: “Where’s that toxic rhetoric coming from? Let’s not make a false pretense of balance: it’s coming, overwhelmingly, from the right. It’s hard to imagine a Democratic member of Congress urging constituents to be “armed and dangerous” without being ostracized” [3]  The Times’ Matt Bai wrote,  “the problem would seem to rest with the political leaders who pander to the margins of the margins, employing whatever words seem likely to win them contributions or TV time, with little regard for the consequences. ” [5]

I provided many other recent examples of uncivil Left-wing rhetoric in my recent post: https://econscius.wordpress.com/2011/08/03/giffords-the-era-of-civility-bidens-terrorists/.

President Obama just attended a Labor Day rally where James Hoffa, head of the Teamsters Union, said:

“We’ve got to keep an eye on the battle that we face — a war on workers. And you see it everywhere. It is the tea party.  And there’s only one way to beat and win that war — the one thing about working people is, we like a good fight.”

President Obama, this is your army, we are ready to march.  But everybody here’s got to vote. If we go back, and keep the eye on the prize, let’s take these son-of-a-bitches out.” [6] [7]

Much has been made about the historic Teamster-Mafia connection and the fact James Hoffa’s father was reportedly “taken out” by the Mob.  Whether “we like a good fight” and “let’s take these son-of-a-bitches out” is intended as speaking purely of elections or not, it is ironic this is akin to the sort of Republican militaristic rhetoric like “take back our country” or “targeted” races that left-wingers like Krugman used to say would cause political murder.  Yet, when a prominent Labor leader makes these sorts of statements, neither the President nor his Press Secretary will raise a word against the violent imagery.
 
Again, let us refer to Krugman in January: “So will the Arizona massacre make our discourse less toxic? It’s really up to G.O.P. leaders. Will they accept the reality of what’s happening to America, and take a stand against eliminationist rhetoric? Or will they try to dismiss the massacre as the mere act of a deranged individual, and go on as before?” [3]
 
I ask Mr. Krugman, will he stand up against “eliminationist rhetoric” when it comes from the Left? 
 
The silence is deafening. 

Do you disagree?  Feel free to post your comments below.

[1] http://www.cbsnews.com/8301-503544_162-20102619-503544.html

[2] http://www.nydailynews.com/news/politics/2011/09/07/2011-09-07_tea_party_zombies_must_die_video_game_gives_political_groups_enemies_a_virtual_b.html

[3] http://www.nytimes.com/2011/01/10/opinion/10krugman.html?_r=1&scp=2&sq=giffords%20shooting%20rhetoric&st=cse

[4] http://www.politico.com/news/stories/0811/62396.html 

[5] http://www.nytimes.com/2011/01/09/us/politics/09bai.html?scp=5&sq=giffords%20shooting%20rhetoric&st=cse

[6] http://www.politico.com/news/stories/0911/62795.html

[7] http://www.politico.com/news/stories/0911/62661.html#ixzz1XKWKVZxdl

[8] http://www.nytimes.com/2011/01/09/us/politics/09capital.html?scp=9&sq=giffords%20shooting%20rhetoric&st=cse p

Picture of Jimmy and James Hoffa from Wikipedia Commons.

Trust A CPA: Warren Buffett is Wrong About Tax Rates

In Federal Deficit, Income Tax Rates on August 19, 2011 at 1:33 am

Legendary investor Warren Buffett penned a New York Times opinion piece about tax rates.   Surprisingly, he presents some very misleading information.  Fortunately, anyone can easily obtain actual average tax data from the helpful IRS website.  Yes, I said “helpful IRS”. 

Mr. Buffett says he calculated his personal average tax rate, including Social Security and Medicare payroll taxes, and came up with 17.7%.  Other people in his office paid more, anywhere “from 33 percent to 41 percent and averaged 36 percent”. [1]    I assume his co-workers’ calculations are accurate.  But Buffett is an aberration among the rich and his staff is not middle class, as we know from comparing them to the IRS’s own tax tables.

The chart below shows the actual average federal income tax paid by 2008 income cohort.  The top 1% paid an average 21.0% of income, the top 50 percent paid an average 13.2% and the bottom 50% paid a mere 2.6%.

FIG.1 [2] Item, tax year             Total
Average tax rate (percentage):  * Top
1 percent
Top
5 percent
Top
10 percent
Top
25 percent
Top
50 percent
Bottom 50 percent All Taxpayers
               
2008 21 18.84 17.33 14.92 13.23 2.59 11.91
               
* The average tax rate was computed by dividing total income tax (see footnote 3) by (positive) adjusted gross income.
Source: IRS, Statistics of Income Division, July 2010    

Mr. Buffett includes payroll taxes in his numbers.  In fact, he includes the portion of payroll taxes paid by his employer on his behalf.  This is interesting because liberals usually ignore the payroll taxes your employer pays on your behalf, in order to show Americans paying lower-income tax rates.  Still, let’s use his numbers.  Social Security and Medicare taxes were set up to loosely match a person’s contributions with the expected benefits.  As a result, both the benefit and tax are capped.  In 2010, the Social Security (6.2%) tax is accessed on the first $106,800 of income and Medicare (1.45%) taxes have no limit.  Your employer pays a matching tax. [3] 

Consider the income tax tables:

FIG. 2 [4] If your filing status is Married filing jointly:
       
If your taxable income is:  
       
Over- But not over- The tax is: of the amount over-
 $             –  $  16,750 10%  $                        –
     16,750       68,000 $1,675 + 15%                 16,750
     68,000    137,300 $9,362.50 + 25%                 68,000
   137,300    209,250 $26,687.50 + 28%               137,300
   209,250    373,650 $46,833.50 + 33%               209,250
   373,650   $101,085.50 + 35%               373,650

I won’t bore you with technicalities, but the term “income” refers to Adjusted Gross Income (“AGI”), which takes out exemptions for individual and dependents and credits such as student loans, 401(k) deductions and pre-tax expenses for health insurance.  Mr. Buffett is misleading by ignoring these credits (he uses “taxable income” which ignores the non-taxable income received by lower and middle-income taxpayers). [5]

Mr. Buffett’s other 20 people in his office are said to pay an average 36% in income taxes.  His office mates cannot be middle class as he portrays them.  The top marginal income tax rate is 35% and the average rate actually paid is always lower because tax rates work like a step-ladder.  The first $16,750 we earn is at a 10% income tax rate, then we pay 15% up to $68,000 and so on.   Taxpayers also take deductions for mortgage interest, state and property taxes, and charitable contributions, which reduces the average income tax rate paid.  We can say conclusively that none of Mr. Buffett’s office workers earn less than $68,000 AGI and appear to be well into the six-figures. 

Here’s the math.  Let’s assume Mr. Buffett’s co-worker has an AGI of $373,650 (actual income would be more because AGI is lowered by 401(k) and pre-tax deductions).  The income tax is $101,085 (27.1%). 

The maximum Social Security tax, including what your employer pays on your behalf, is $13,243.  The Medicare tax on $373,650 is $10,836.  When we add these three taxes together, the average tax rate is 33.5% of AGI.  Do the math on an earner at $209,250 and obtain an average tax rate of 31.6%.  AGI of $137,243 yields 31.9%.  AGI of $68,000 works to 30.8%.

All taxpayers take deductions which reduce “AGI”.  There are itemized deductions for state income taxes, property taxes, mortgage interest, childcare and charitable deductions.  Or you receive a standard deduction if you do not itemize.  These deductions lower the income tax percentages shown above.

Another way of checking Mr. Buffett’s high numbers for his employee tax rates is to use the IRS data above.  A taxpayer in the middle (50th percentile) is paying 13.2% of income in taxes.  Even adding Social Security and Medicare taxes paid by the employee and employer, the percentage is below 30%.

The figures Buffett provides for his 20 office mates are questionable; they do not mesh well with actual IRS data as I just showed above.  Certainly a Buffett employee who is earning $400,000 AGI and paying about 35% in taxes hardly counts as “middle class”.  The IRS data show the middle class is paying much lower rates.

Mr. Buffett is only tracking taxes, but it is worth noting the poor and middle class receive the greatest government benefits as a percentage of their salary.  School lunches, food stamps, financial aid for college and the like logically go primarily to those at the bottom of the tax scale.  The rich pay for private schools while the poor and middle class generally attend public schools. 

What about Warren Buffett himself?

Because of the wage cap on Social Security, Mr.  Buffett’s payroll tax drops as a proportion of his income grows.  The maximum social security and Medicare tax on $373,650 works out to 6.4% of income.  For Mr. Buffett to pay 17.7%, we may safely assume most of his income is in the form of capital gains and that income is very substantial.

Mr. Buffett’s company, Berkshire Hathaway, must file annual proxy statements with the SEC.  We learn Warren Buffett was awarded total compensation of about $519,490 in 2009 to run Berkshire Hathaway.  His salary was “just” $100,000, he received $75,000 in fees for serving as a director of Berkshire investment Washington Post Co., and he received taxable wages in the form of free personal security provided by the company. [6]  His average tax rate on that income would be about 34.9%.  Mr. Buffett tells us the bulk of his income comes from capital gains, which are taxed at a 15% rate. 

A capital gain is derived from the increase in value in a qualified investment (e.g. a stock or business) over time.  An important fact that Mr. Buffett and many liberals ignore is that capital gains are not indexed for inflation.  If your investment only grows at the rate of inflation, you actually pay income taxes on income that is not “real”.

Capital gains enjoy preferred taxation because you are using your own money to make an investment and the money was already taxed before as income.  Secondly, it serves a societal purpose of encouraging people who can to save and invest rather than spending it on caviar and yachts. 

It would seem reasonable to assume Mr.  Buffett maximizes his eligible charitable contributions since  he is a noted philanthropist.  Charitable tax deductions exist to encourage a societal goal.

It is worth noting a “C” corporation already paid high corporate income tax rates on its income before you, I or Mr. Buffett take any capital gains on that income.  The capital gains rate is lower partly in recognition of this fact.

Mr. Buffett is highly unusual in that his personal investment in Berkshire Hathaway has been stunningly successful; he may be the most successful investor of all time.  Most of us who buy a stock or invest “angel” capital in a friend’s start-up are happy if we might double our money in 5 years (unadjusted for inflation).  Only a precious few are able to parlay a modest investment into massive riches the way Mr. Buffet or Bill Gates have.  They are amongst the world’s richest people and biggest philanthropists.  Personally, I bet their charitable contributions are more cost-effective than funneling the same money through Washington D.C.

According to the IRS, the top 1% of earners accounted for 20% of all income but paid 38% of total income taxes. [7]  Mr. Buffett believes the top earners are not paying enough.  That is a matter of opinion and my purpose here is not to debate the proper tax structure or rate [8].  I have instead shown Mr. Buffett’s statistics for his office staff’s average tax rates are misleading and quite possibly wrong.

###

[1] http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=1

[2] Tax Chart by author, source: http://www.irs.gov/taxstats/indtaxstats/article/0,,id=129270,00.html

[3] http://www.ssa.gov/OACT/ProgData/taxRates.html and pg. 19 of http://www.irs.gov/pub/irs-pdf/p15.pdf.   Note the individual rate was lowered by 2.0% to 5.65% for 2011 as a temporary stimulative measure.  

[4] IRS tax table chart by author, source: http://www.irs.gov/pub/irs-pdf/i1040tt.pdf

[5] http://www.irs.gov/pub/irs-pdf/f1040.pdf

[6] http://www.reuters.com/article/2010/03/11/us-berkshire-buffett-compensation-idUSTRE62A5SH20100311  Mr. Buffett runs Berkshire; since he believes his taxes are too low, he could adjust his compensation mix to more salary.  

[7] http://www.irs.gov/pub/irs-soi/08inratesharesnap.pdf

[8] One option that would accomplish what Mr. Buffett wants (and some liberals have advocated) is uncapping Social Security.  Ironically, though, uncapping would crimp people earning $106,800 and above.  While $106,800 is hardly pauper territory, President Obama has exempted people under $250,000  from his proposed income tax hikes as “middle class”.  If liberals were unsuccessful in uncapping Social Security, it will be hitting many people earning $125,000 and $175,000 – people who see themselves as upper “middle class” as does Mr. Obama. 

Social Security payroll taxes were not intended to be used to fund defense, NASA or the TSA, which is what would happen if it were uncapped and the new revenues from the rich were used to fund general government operations.

Pictures from Wikipedia Commons.

Dislosure: the author owns stock in Berkshire Hathaway.

Quiz: What’s This NYT Stimulus Editorial About?

In New York Times, Political Rhetoric on August 12, 2011 at 12:45 am

Guess what this editorial is about:

“An Effective, Responsible Stimulus” by the New York Times:

“[The President] got more specific yesterday about what he wants to do to help the economy… It was a promising start, and the administration should now start working with Congress to deliver a stimulus package as quickly as possible.”

“Under the president’s plan, the total stimulus would amount to 1 percent of gross domestic product, enough to give the economy a good shot in the arm. But its effectiveness will depend on how the relief is delivered….”

“To help businesses the president suggested a range of tax breaks, including temporary tax credits for new investment, accelerated write-offs for spending on buildings and equipment, and a cut in the corporate income tax. The first of these is the best, since it would directly encourage companies to start spending. Accelerated write-offs are less precisely targeted. They would cut the cost of existing assets as well as new ones, and companies’ savings might or might not be used for growth. Of least use is a cut in the corporate income tax, which would have little if any effect on businesses’ decisions on investment and employment.”

“To help consumers, the president suggested extending the duration of cash benefits and health coverage for the unemployed, more tax rebates and accelerating his existing 10-year package of tax cuts. Extending unemployment benefits is important…”

“Tax rebates would certainly give consumers a boost, especially if the rebates went to lower-income Americans whose purchases are most constrained by their earnings.” [1]

What was your guess?  Did you think it was a January 2009 editorial in support of President Obama’s Stimulus plan? 

The answer is it was an October 4, 2001 editorial in support of… President Bush’s Stimulus plan. 

A portrait shot of a smiling older male looking straight ahead. He has short gray hair, and is wearing a dark navy blazer with a blue styled tie over a white collared shirt. In the background is an American flag hanging from a flagpole.

[1] http://www.nytimes.com/2001/10/04/opinion/an-effective-responsible-stimulus.html?scp=10&sq=bush+responsible+unemployment&st=nyt

Pictures from Wikipedia commons.

New York Times Hypocrisy: Recall For Thee But Not For Me

In New York Times, Political Rhetoric, Wisconsin Recall Elections on August 10, 2011 at 11:43 pm

Readers of the New York Times know its editorial board supported yesterday’s recall votes of Wisconsin Republican state senators.  You could be forgiven for thinking the New York Times was a strong backer of citizen initiatives to recall legislators and governors – even if only a few months after their election.

But you would be wrong.

Today’s NYT editorial applauds the recalls and even gives strategic advice on how to structure a recall:

“Five months after Gov. Scott Walker of Wisconsin pushed through a law stripping public unions of their bargaining rights …. Mr. Walker’s opponents did not succeed in turning over the Senate, but it was still an impressive response to the governor’s arrogant overreach.”

“It was probably a stretch for union supporters to go after six incumbent senators, rather than concentrate their forces on the most vulnerable. Nonetheless, voters around the country …  should draw strength from Tuesday’s success, not discouragement.”
 

Back in March, the NYT editors sounded no alarm bells whatsoever about the nascent recall efforts against Governor Walker and Republican state senators:

“It could have serious consequences for the Wisconsin Republicans who voted to do so. Recall efforts against Mr. Walker and several Republican senators are already under way… The place to exercise some power of their own is at the voting booth.” [2]

Contrast the glee over Wisconsin’s “impressive” recalls with New York Times editorial positions in the last major American political recall attempt.  Back in 2003, the NYT editorialized twice against the recall election of California Governor Gray Davis.  In “Wrong Remedy In California”, the NYT wrote:

“Californians have reason to be angry…. Recalling Governor Davis, however, is not the answer. It is an unwise move with potentially damaging ramifications.”

“Allowing wealthy, opportunistic politicians to overturn fair elections when politicians fall out of favor with the public is unhealthy.”

“The state’s Constitution says a recall election is mandated if the effort’s organizers collect enough signatures. Yet Californians can still avoid a political quagmire by voting to keep the governor they already have — at least until the next general election.”  [3]

In “California Chaos”, NYT editors opined:

“California is now rolling inexorably toward a rendezvous with potential political chaos that it does not need in its present fragile condition and that somebody in authority should have found a way to avoid.” [4]

Why the double standard on recalls? 

The answer is obvious:  Walker is a Republican and Gray was a Democrat.  The overtly partisan New York Times hypocritically says ‘Recall for thee, but not for me’.

 

[1] http://www.nytimes.com/2011/08/11/opinion/wisconsins-warning-to-union-busters.html?_r=1&scp=1&sq=wisconsin+recall&st=nyt

[2] http://www.nytimes.com/2011/03/11/opinion/11fri2.html?scp=3&sq=wisconsin+recall&st=nyt

[3] http://www.nytimes.com/2003/07/11/opinion/wrong-remedy-in-california.html?scp=14&sq=gray+davis+recall&st=nyt

 [4] http://www.nytimes.com/2003/07/26/opinion/california-chaos.html?scp=3&sq=gray+davis+recall&st=nyt

Pictures from Wikipedia commons.

No Check For Grandma? Where’s the Social Security Trust Fund?

In Economy, Obama Administration, Social Security on July 18, 2011 at 3:39 am

President Obama is threatening Social Security checks may not go out in August because of his dispute with Congress over raising the Debt Ceiling. 

As pointed out in yesterday’s Wall Street Journal editorial page, how can this be possible when Social Security has a Trust Fund? [1] The Social Security Administration (“SSA”) website reports an impressive Trust Fund balance of $2,669,215,081 as of June 30, 2011 [2].   What happened to your money?

Haven’t we been told by the editors of the New York Times, Paul Krugman and others that the Trust Fund is solid as a rock and people are “peddling nonsense” to imply otherwise? 

Back in 2005, the New York Times said:

“At a recent press conference, Mr. Bush exaggerated the timing of the system’s shortfall by saying that Social Security would cross the “line into red” in 2018…. If you had a trust fund to pay your bills when your income fell short, would you consider yourself insolvent?”

“In suggesting that 2018 is doomsyear, [Bush] is reinforcing a false impression that the trust fund is a worthless pile of I.O.U.’s – as detractors of Social Security so often claim.” [3]

Just last year, the Times’ strongly opinionated columnist Paul Krugman opined:

“So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.”

“It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people — including Alan Simpson, co-chairman of the president’s deficit commission — are peddling this nonsense.” [4]

How can Mr. Krugman and the New York Times editors square their confidence in the strength of the SSA Trust Fund against President Obama’s “I cannot guarantee that those checks go out on August 3”?   Is the President just playing a game or is the Trust Fund really empty?

The possible absence of Social Security checks results from an unusual structure.  If you have a private sector pension or 401(k), your retirement funds are set aside in a segregated account and the funds are invested in stocks and bonds. 

The Federal Government receives payroll and regular taxes every day and makes accounting entries for Social Security receipts vs. Social Security payouts.  SSA built up an excess of payroll tax receipts over payouts as working Baby Boomers paid in for decades.  This accounting entry comprises the Trust Funds. [5]

The issue with August’s Social Security checks is the Trust Fund is not invested like a normal pension.  Every dollar of Trust Fund surplus is invested in US Treasury obligations, meaning the Trust Fund was already spent for the general use of the Federal Government. [6]  Despite New York Times claims to the contrary, the SSA Trust Fund holds $2.7 Trillion in IOUs.

US government debt has traditionally been such a safe IOU it was called the “risk-free asset” back when I took Finance classes.   Still, even before the current Debt Ceiling controversy, trillion Dollar annual deficits led ratings agencies like Standard & Poor’s in May 2009 to issue warnings about a possible downgrade of US debt. [7]  

Grandma’s Social Security check could be held up not only in August but again in the future after the current Debt Ceiling crisis is settled.  The SSA Trust Fund is simply a very large claimant on future tax receipts of the US Treasury.  The New York Times misunderstood how safe the Trust Fund supposedly is as we now have the spectacle of an American President threatening Social Security payments may not be made on account of the supposedly separate matter of the federal budget deficit.  There is no lockbox; there is no firewall between Social Security and the overall budget.  SSA is not quite “separate”; it is linked to the overall fiscal health of the US government.

Ida May Fuller with the first Social Security check. Source: Wikipedia Commons.

[1] pg. A12, 7/16/11 print edition or http://online.wsj.com/article/SB10001424052702304521304576446250270069780.html?KEYWORDS=trust+fund

[2] http://www.ssa.gov/cgi-bin/investheld.cgi

[3] http://www.nytimes.com/2005/01/10/opinion/10mon1.html?ex=1263099600&en=24a380642da9ba1b&ei=5090&partner=rssuserland

[4] http://www.nytimes.com/2010/08/16/opinion/16krugman.html?adxnnl=1&adxnnlx=1310953732-DNwzINppkFOQn5GdGjvUXQ

[5] Technically there are two Trust Funds: Old Age Survivor (retirement) and Disability.

[6]  http://www.ssa.gov/oact/progdata/fundFAQ.html#n1

[7] http://www.huffingtonpost.com/2009/05/27/moodys-us-governments-aaa_n_208298.html