Today comments I sent into the Star Tribune were published on the topic of Targets donation to a pro-business group that subsequently gave money to Rep. Tom Emmer's campaign for Minnesota Governor. The comments posted today is the second time my comments were published by the Star Tribune on this topic. My comment from July 29, 2010 (http://www.startribune.com/opinion/letters/100939139.html?elr=KArksc8P:Pc:Ug8P:Pc:UiD3aPc:_Yyc:aULPQL7PQLanchO7DiUr) were:
The uproar by the gay, lesbian, bisexual and transgender (GLBT) community over Target's $150,000 donation to a group that has placed an ad for Tom Emmer is questionable. Target is one company that recognizes the plight of the GLBT community by offering domestic partnership benefits and donating money to pride parades.
The donation by Target is to back a candidate who is probusiness.
Why is it OK for the GLBT community to focus on one issue when backing a candidate, but not OK for Target?
Since that time advertising and negotiations have been taking place trying to force Target into donating similar money to groups and candidates that a friendly to the GLBT community. After hearing that Target said they would not cave to pressures from outside of Minnesota I wrote this(http://www.startribune.com/opinion/letters/100939139.html?elr=KArksc8P:Pc:Ug8P:Pc:UiD3aPc:_Yyc:aULPQL7PQLanchO7DiUr):
Kudos to Target executives for not being baited by the Human Rights Campaign into an attempt to extort money by a single-issue group ("Target balks at counter contribution," Aug. 17). Does the HRC not realize that Target offers benefit programs that are friendly to the gay, lesbian, bisexual and transgender community while also giving money for the annual Pride festival? Or is this just another case of an outside force coming to Minnesota to push its weight around?
Target executives made a business decision to give money to a probusiness group that in turn helps probusiness candidates get elected. Target did not donate money to an anti-GLBT group. Will the HRC hire all the workers that Target, or any other company, has to let go if the environment in Minnesota becomes too toxic for businesses to thrive?
To paint Target, or any other business, has being anti-GLBT is pathetic. People are boycotting Target as well because of their donation choice. Don't people understand that in order for Target to thrive and offer jobs that it will back pro-business groups? Just take a look at the West Coast. Recently Utah raised their top level tax rate to 11% and the result was many businesses left the state and revenues dropped by $600 million. We need businesses in our communities to keep tax revenue flowing and if that means they donate money to a pro-business candidate then so be it. As I originally posed, "Why is it OK for the GLBT community to focus on one issue when backing a candidate, but not OK for Target?"
Target can "focus" on whatever they want but need to accept the backlash.
ReplyDeleteI don't understand why there needs to be backlash. Now if Target changed their benefit packages and stopped giving money Pride then I can see the backlash.
ReplyDeleteDo you honestly think that Dayton will be looking out for the best interest of business in Minnesota? Without business we have nothing and for a company to give money to a pro-business group it makes sense. I do recognize that we live in a society that allows people to voice their concern.
They also gave money to a guy who many think hates gays. So, some aren't going to seperate those two things. Why? Because the whole is elected. If they didn't want a backlash, give money to a pro business candidate that doesn't have the views on homesexuality that Emmer does. Until then, expect backlash. In the end, we vote for the whole and they supported the whole, and many find the values Emmer has is contrary to what they thought Target stood for. Regardless of why they donated, they still are supporting those beliefs financially.
ReplyDeleteLet's be clear. Target and Best Buy donated money to a pro-business group and not Tom Emmer. Did anyone boycotting take a look at the group that the donations went to?
ReplyDeleteHere is MN Forward's page of candidates they have given money to: http://www.mnforward.com/candidates/
Appears they give money to all parties.
Sure, and one of those is Emmer and they knew it. People can connect the dots and Target is pretty stupid for not seeing this.
ReplyDeleteWho cares? Given the SCOTUS ruling allowing corporations to contribute unlimited funds to campaigns etc, Target/BestBuy et al. can contribute to whomever they please.
ReplyDeleteHowever, anon is correct, they should expect to receive some backlash for any contributions they make regardless of if they actually contributed to a candidate or a PAC. Perception is reality, and if consumers feel you are supporting a platform they do not, they will vote with their feet.
This should be enough of a concern to corporations to give them pause on their political contribution activities.
Viper: "Do you honestly think that Dayton will be looking out for the best interest of business in Minnesota?"
ReplyDeleteYes, I do.
You, Viper, have a different response? If so, why?
Oh, include some facts too. Actually, try to use only facts.
By the way, MN Forward announced their support of the other candidates on August 5th. Well after the Target mess.
ReplyDeleteSmells a bit like trying to please others and shut them up, to me.
"You, Viper, have a different response? If so, why? Oh, include some facts too. Actually, try to use only facts. "
ReplyDeleteLOL...good luck with that.
Funny, is Viper the only that needs to provide facts when offer a counter point? Is Viper the only one that needs to cite references? Rarely do those that leave comments here offer their citations to back up their stats.
ReplyDeleteOn this thread Clark's response is prime example when answering "Do you honestly think that Dayton will be looking out for the best interest of business in Minnesota?" with a simple "Yes, I do." Where is your proof Clark that Dayton will be pro-business because he was not when he was a Senator.
Dayton is proposing(http://markdayton.org/mainsite/wp-content/uploads/2010/07/DaytonDeficitSolution.pdf):
ReplyDeleteAdopt a Corporate Throwback Rule. 25 states of the 45 with corporate income taxes have a throwback rule for corporations that sell their products in more than one state. Such a rule would produce revenues of $39.7 million for the next biennium, according to the MN Department of Revenue's 2010 Tax Expenditure Report.
Elimination of JOBZ Subtractions & Credits. Would save $68.9 million in tax expenditures in the next biennium.
In either case it increases taxes on businesses. How is either of these Pro-business?
Do these?
ReplyDelete"As Commissioner of Economic Development, I expanded the state’s “Star Cities for
Economic Development” program, which trained local Economic Development
Corporations throughout our state in e!ective business recruitment and job creation
strategies. As Governor, I will revitalize that program, and I will work in close
cooperation with Mayors, City Councils, Chambers of Commerce, and other civic leaders
in their e!orts to attract new and expanding businesses in their communities."
"Every dollar the state spends in tourism marketing returns $20 in increased wages and $53
in increased sales. #us, the state’s e!ort is vitally important to the over 250,000
Minnesotans already employed in the tourism industry and to thousands more who could
"nd work in its expansion. Yet, the state’s e!ort has fallen far behind other states. I will
work with our tourism businesses to invest in areas that will bring the greatest return to
them and to our state’s economy."
"Many Minnesota small business owners are ready to expand and create new jobs, but are
unable to obtain loans in the midst of an historic credit crunch. For these aspiring
entrepreneurs, small loans create big growth. I will establish a micro-lending fund that will
guarantee access to capital and ignite small business expansion. I will also create a “Buy
Minnesotan” preference for state contracts, keeping Minnesota tax dollars in Minnesota."
"#e even-year legislative session should be an “Unsession” in which the priority is to undo
unnecessary state regulations, redundant oversight, and excessive reporting requirements for
businesses, individuals, non-pro"t organizations, and local governments. #ose
excessive requirements delay business expansions, consume many thousands of hours of
peoples’ time, and cost millions of dollars in unnecessary expenses. We must have strong
and e!ective oversight in Minnesota; however, we must do so e$ciently and cost effectively."
And the proposals you mentioned were to help balance the budget. Shouldn't that be a good thing?
Okay Anon, maybe this wasn't the right spot to ask for facts. I guess what I wanted to get at, and what Viper is proving by his comment, is that he (Viper) takes an overly simplistic, almost caveman like, view of things: "Oooh, government bad! Taxes bad!!! Business good! Founding Fathers good!"
ReplyDeleteIn his world, asking (or requiring) business to pay more in taxes or not have access to some of the benefits that they may have had is automatically not "pro-business"; it's conceivably anti business.
Are there no circumstances in which business should share in the fun of balancing this state's budget? Or should that entire burden be put on the backs of those among us who may be less fortunate?
It's just too simple in Viper's world. That's my issue. No middle ground, no grey area, no nuanced discussion. Just absolutes.
It blows my mind at how much sympathy Viper seems to have for faceless corporations or the wealthy. Both groups spend significant amounts of money to avoid paying taxes. Both groups have no qualms about not paying what others would say is their fair share. Yes, I know, corporations and the wealthy are our future, we must cherish them and teach them well. But come on. Really!! Mark Dayton is not going to single handedly sink our state and make all businesses or wealthy people run for their lives.
Like a commenter said in another post, Mark Dayton is proposing things that he thinks will ultimately benefit the state and all it's citizens, people, poor or rich, and businesses, big or small. He's not out to ruin the state. If you honestly believe that he is, then I feel sorry for you. Why? Because you are unable to accept the mere possibility that you might not have all the answers, that you might not be right, that there may be another way. It's sad if you are so simple minded. I don't think you (Anon) are, but Viper sure has created quite a body of work to make me think that he is that simple minded.
After looking at Dayton's site, I noticed he had specific cuts/taxes he would do and the amount each would help offset the budget shortfall. And even admitted he was short but still looking. Emmer had no specifics, that I saw, and just essentially said we need to cut the fat and eliminate duplicate programs. Well, I think both sides agree that's important.
ReplyDeleteI'm not judging the candidates but find the different approaches interesting.
I'd be curious to know how much corporations pay in taxes total and the ratio that Daytons cuts are. How much of a precent change is another 100 million really?
Viper, what you and so many others forget (politicians included) is the tax rate doesn't matter, what matters is the effective tax rate.
ReplyDeleteTo answer the question of how much corporations pay in taxes, here's an excerpt from an article from 2005 that details the fortune 500 tax liabilities. It's admittedly 5 years old but tax rates haven't changed much.
"...in 2002 and 2003, the average effective tax rate for all of these 275 companies was less than half the statutory 35 percent rate. Over the 2001-2003 period, effective tax rates ranged from a low of -59.6 percent for Pepco Holdings to a high of 34.5 percent for CVS.
Over the three-year period, the average effective rate for all 275 companies dropped by a fifth, from 21.4 percent in 2001 to 17.2 percent in 2002-2003.
The statistics are startling:
Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003. In the years they paid no income tax, these companies earned $102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury, totaling $12.6 billion. These companies' "negative tax rates" meant that they made more after taxes than before taxes in those no-tax years.
Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-2003 period. These companies, whose pretax U.S. profits totaled $44.9 billion over the three years, included, among others: Pepco Holdings (-59.6 percent tax rate), Prudential Financial (-46.2 percent), ITT Industries (-22.3 percent), Boeing (-18.8 percent), Unisys (-16.0 percent), Fluor (-9.2 percent) and CSX (-7.5 percent), the company previously headed by current Secretary of the Treasury John Snow.
In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46 companies told their shareholders they earned U.S. pretax profits in 2003 of $42.6 billion, yet they received tax rebates totaling $5.4 billion. Almost as many companies, 42, paid no tax in 2002, reporting $43.5 billion in pretax profits, yet receiving $4.9 billion in tax rebates. From 2001 to 2003, the number of no-tax companies jumped from 33 to 46, an increase of 40 percent.
In 2001, the Treasury paid corporations $40 billion in tax refunds, a third more than the 1998-2000 average.
Then in 2002 and 2003, after the law was changed to expand tax subsidies and make it easier for corporations to carry back excess tax breaks to earlier years, corporate tax refunds skyrocketed to an average of $63 billion a year - more than double the 1998-2000 average."
Viper, I'm curious as to how this fits into your "lower corporate tax" matra? Do you feel that 17.2% tax rate is too high?
To give you a frame of reference the following countries are the only ones I could find that were lower:
albania 10%
Bolivia 3%
Bosnia 10%
Bulgaria 10%
Chile 17%
Georgia 15%
Hong Kong 16.50%
Kazakhstan 17.50%
Macau 12%
Montenegro 9%
Romania 10%
Serbia 10%
Singapore 17%
Uzbekistan 12%
I think the evidence here proves that we're amongst the lowest in the world and easily the lowest when it comes to industrialized nations.
My issue isn't with your anti-taxation position. Hell, I'm all for low taxes. But you consistently make claims that are based on political talking points and not facts but you assert them as factual. That's what I personally take issue with. Again, come up with facts, make an argument around them, and share that argument. Don't regurgitate political talking points and think that you will have a leg to stand on since they are usually based upon nothing but opinion, innuendo, hearsay, myth and rumor.
"In either case it increases taxes on businesses. How is either of these Pro-business?"
ReplyDeleteI'd like to clarify something.
Viper, do you think corporations should operate tax free? If so, how would the state make up the budget shortfall due to lower tax receipts?
I ask this because your posts imply that there are very few if any circumstances under which you'd accept taxes or tax increases on business?
Corporations, business and citizens all need to assist in revenues to keep limited government going. In Minnesota, as other states are experiencing, we need to attract and keep businesses here.
ReplyDeleteI noticed looking at Sen. Dayton's website that he used the word flat tax when saying the rich have to pay their fair share. As we all know that with deductions and tax credits one can reduce their tax burden. This is why we need to eliminate the progressive tax system and replace it with a flat tax while eliminating all tax credits - citizens and business alike.
I acknowledge that Dayton is using the business tax code changes to raise revenue and erase the budget deficit. When he does that it will in turn raise the tax rate for business. That is where groups like MN Forward come into play and why companies like Target and Best Buy donate to them.
Clark, perhaps we have made this too complicated and a more simple approach is needed. We, collectively, voted for change back in 2008 and unfortunately all the rhetoric by Obama has fallen flat. Obama has even removed the Transparency Czar.
ReplyDeleteI'd like to see Viper's flat tax idea be given more consideration. It is middle ground in the discussion of taxes. Especially if we eliminate all tax credits as Viper suggests. I don't see that Viper has sympathy for the "faceless corporations or the wealthy" instead I see Viper fighting for a tax friendly environment that allows one to keep their money as they make more money.
Do you not see the flat tax as Viper has laid out a compromise and middle ground found? Or are you stuck in liberal ideals that middle ground only exist on the left side of center?
Truman a corporate tax of 17.2% is only too high if it drives business away. Now if 17.2% attracts new business then I am all for that rate. The trouble is finding that balance.
ReplyDeleteAccording to Tax Foundation Minnesota's current tax rate is 9.8%. Since we are having trouble to attract new business and keep business, I'd say 17.2% is too high. Now Nevada, South Dakota and Texas do not have Corporate tax - so how are they capable of doing that and still meeting the needs of their citizens?
Viper, would you be ok with the Dayton changes if the removed provisions went back into place after we had sufficient revenue for a balanced budget?
ReplyDeleteYou questioned whether Dayton would look out for business interest and said he wasn't acting pro business. I offered other areas where I think he is.
What do you think of those other proposals? Are they not pro business?
I don't believe Sen. Dayton. He used similar rhetoric when he ran for Senate and did very little to help business. I heard an interesting stat yesterday in regards to the federal budget - if we remove all the funds earmarked for the military, education and infrastructure we'd still be in the red. The reason given was entitlements.
ReplyDeleteAre the proposals pro business or not? It doesn't matter if you believe him. And since you don't, there is no reason to discuss it any further.
ReplyDeleteI love the irony of you applauding Target for sticking up to a special interest group who was responding to actions Target did while supporting a special interest group whose purpose is to push Target's special issue agenda.
ReplyDeleteAnon, sad to say, but the issue that I have with Viper's idea of a flat tax is that it won't happen in our lifetime. I don't care if you're 10 years old. It's just not going to happen. A simplified tax code would be nice. No doubt about it. But there's a better chance of me winning the Powerball for the next 12 weeks straight than there is of the tax code being overhauled and transitioned to a flat tax.
ReplyDeleteThe other issue that I have is that there does seem to be, in my opinion, too much concern on Viper's part for corporations and the wealthy. They don't need any more help than they already have. They have well heeled accountants, tax lawyers, financial advisers, lobbyists, etc. You name it, they have people fighting for them; fighting to save them money. Now don't get me wrong, I don't think Viper is an all too powerful voice on behalf of corporations and the wealthy. But I just don't get how that seems to be his cause celebre. He, like me, is middle class. Nothing wrong with that, but focus on those like you. Corporations and the wealthy will do fine on their own. They have, by definition and in general, done that already.
Clark, Why do you think a flat tax would not take place in our life time? If you like it and others like it - why not vote people in that are for it?
ReplyDeleteViper may be of middle class roots but don't you see that he wants to be able to enjoy the spoils if he is able to break out of the middle class? Don't you want that for you and your children?
No one, including the Federal Government, has said that you cannot enjoy the spoils of your success. You can and you would. Yes, the tax rate does go up as you earn more, but that only applies to the dollars earned in a certain range.
ReplyDeleteI still go back to this misconception that we're talking about "average" Americans. If you want to talk about "average" Americans, consider for a moment that the average (median) American household has an income of $52,029 (U.S. Census figure for 2008). They have a top tax rate of 15% but as a percentage of income are paying 13.39% in taxes (married filing jointly).
Double that income to $104,058 and you would see a top tax rate of 25% with 17.66% of income going to taxes (again, married filing jointly). It's not until you reach an income of over $373,650 that a household (married filing jointly) would even touch the top tax rate of 35%. Even then, they are paying less than 30% (27.05%) of their income in taxes. Think about it. A family that is making more than 7 times the income of the "average" American is paying just over twice as much in taxes as a percentage of income.
Clark,while I see your point we are missing something in that equation. We are missing the tax credits that drives down that rate when filing takes place and that is where, I think, Viper's tax idea is good. I went back and read his flat tax idea. While the actual percentage is debatable the concept makes fiscal sense.
ReplyDeleteViper's idea would be a flat tax with no tax credits but it would not kick in until one earned $60,0001. Then one would only be taxed on that $1 and every dollar earned after that point. Doesn't that makes sense? I agree it will be tough to get others on board but it starts with people like us doesn't it?
One thing to be concerned with on the flat tax is unemployment. You know have 100,000 IRS employees out of a job along with any account and tax attorney and would crush companies like HR Block and any other tax driven company.
ReplyDeleteI don't know what the final numbers would be, but I have a feeling it would be substantial. I do wonder what the impact to the economy would be.
Anyone know how much revenue Viper's proposal would generate? From what I recall from a tax law course, a flat tax typically doesn't generate anywhere near the same revenue that our current system does. Without knowing the specifics, it seems silly to spend much time debating the merits.
ReplyDeleteAnonymous, true there would be some re-engineering needed for those involved in the tax industry but we should not allow that to stop progress. Right now Obama is looking to push forward with Green policies even though, per a study done in Spain last year, that shows such policy shifts is a net job loss of 2:1.
ReplyDeleteSince we all agree that Consumerism drives the economy, then with people earning under $60,000 will keep all their money they will be able to purchase more.
True a Flat Tax by itself may result in a lower revenue generation but that is because there is no change in tax credits. If, as Viper proposes, eliminate all tax credits then it may increase revenues.
ReplyDeleteSorry, I should put these thoughts all in one. I also wonder about the impact of losing some deductions. For example, mortage interest and property taxes. Some people,whether rightly or not it doesn't matter, factor these into their tax liability and their decision to by a house.
ReplyDeleteWhat about charitable contributions? I know a lot of wealthy people donate to solely reduce their tax liability.
Why wouldn't a flat tax erase all credits? My understanding is you dump the current system, including credits, and just have one easy form to fill out saying I made X amount. Here is my taxes.
ReplyDeleteLike I said, though, without the specific numbers what's the point? It might be a valid idea, but right now it's just a theory.
According to the IRS website, http://www.irs.gov/taxstats/indtaxstats/article/0,,id=96981,00.html#_grp1, assuming I'm reading this correctly, nearly 64% of filers had an Adjust Gross Income under 50K. Now, eliminate deductions, etc. and that percent goes up slightly. 7.8% had an AGI between 40-50K.
ReplyDeleteLets add them in to the remaining 36%. So a total, roughly, of 44% of Americans would have an income over 50K.
Everyone ok with that so far? One problem with the current system is that it's unfair that others pay more. Is it fair that only, at best because many tax payers would fall out between 50K and 60K, that 44% of Americans would pay tax under the proposed flat tax?
All
ReplyDeleteI recently received a spreadsheet from Sen. Ortman that showed the tax revenue and individual income of Minnesotans. The spreadsheet has only actual data up to Fiscal Year 2008 with projections going forward. I am hoping to get an update soon though.
So, I see a lot of discussion is going on with my flat tax idea. I had planned on creating a separate entry, which I plan still to do when I get the update, but here is a snippet of it.
Based on the data, in 2008 the Federal Adjusted Gross Income for Minnesotans was $156,772,000. The Gross Income for Minnesotans for 2008 was $216,436,250. The tax revenue was $7,759,209 while Minnesotans taking $59,664,250 in tax credits to reduce tax burden. Now, if we assume that 50% of people make more than $60,000 that means we would have $108,218,125 in income to tax at a flat rate. Now, let's say that tax rate is 7.5% the state would see $8,116,359.38 in tax revenue. That increases tax revenue, flat tax vs. current tax system, of $357,150.38. While not a huge amount of money it does not take into account the money saved by having a smaller IRS agency and the money spent by Minnesotans on filing taxes.
You actually confused me because you are talking about state taxes received and a federal agency. It seems you are mixing state taxes and federal taxes, or at least a later savings by a smaller IRS. Of course, they are now all unemployed.
ReplyDelete"According to Tax Foundation Minnesota's current tax rate is 9.8%."
ReplyDeleteGreat, that's their tax rate. What's the effective tax rate because that's what matters.
"Anyone know how much revenue Viper's proposal would generate? From what I recall from a tax law course, a flat tax typically doesn't generate anywhere near the same revenue that our current system does."
This is the primary issue with flat tax codes. The top 2% of the earners pay 40% of the taxes in this nation. If you reduce them to a flat tax, they get a rather massive tax reduction. That reduces the overall tax receipts for the fed by billions. And those that will feel the cuts of programs to save those dollars aren't the rich - it's the poor. The very people who cant' afford it.
You still haven't answered, whether you trust Dayton or believe him or not, if these proposals, as proposals are pro business:
ReplyDelete"As Commissioner of Economic Development, I expanded the state’s “Star Cities for
Economic Development” program, which trained local Economic Development
Corporations throughout our state in e!ective business recruitment and job creation
strategies. As Governor, I will revitalize that program, and I will work in close
cooperation with Mayors, City Councils, Chambers of Commerce, and other civic leaders
in their e!orts to attract new and expanding businesses in their communities."
"Every dollar the state spends in tourism marketing returns $20 in increased wages and $53
in increased sales. #us, the state’s e!ort is vitally important to the over 250,000
Minnesotans already employed in the tourism industry and to thousands more who could
"nd work in its expansion. Yet, the state’s e!ort has fallen far behind other states. I will
work with our tourism businesses to invest in areas that will bring the greatest return to
them and to our state’s economy."
"Many Minnesota small business owners are ready to expand and create new jobs, but are
unable to obtain loans in the midst of an historic credit crunch. For these aspiring
entrepreneurs, small loans create big growth. I will establish a micro-lending fund that will
guarantee access to capital and ignite small business expansion. I will also create a “Buy
Minnesotan” preference for state contracts, keeping Minnesota tax dollars in Minnesota."
"#e even-year legislative session should be an “Unsession” in which the priority is to undo
unnecessary state regulations, redundant oversight, and excessive reporting requirements for
businesses, individuals, non-pro"t organizations, and local governments. #ose
excessive requirements delay business expansions, consume many thousands of hours of
peoples’ time, and cost millions of dollars in unnecessary expenses. We must have strong
and e!ective oversight in Minnesota; however, we must do so e$ciently and cost effectively."
Ok, I sat down and did some math around taxes to discuss the flat tax. Using 2007 federal data:
ReplyDeleteFederal Tax Receipts - $2.5T
Receipts from Individual - $1.125T (45%)
Amt Paid by top 1% - $454B (40.4% of all paid)
Amt Paid if flat tax is 10% - $168B (14.9%)
Shortfall to Current Recepits - $268.4B (25%)
That means that if we took the flat tax for all americans to 10% of income without deductions, the federal government would lose 25% of it's current tax receipts due to the tax cut that is given to the top 1% of earners.
This does not take into account the other reductions to receipts driven by the 2-30% ranges which pay another 40% of the taxes. Yes, 70% of americans only pay 20% of the taxes, but they also only have 43% of the total income income earned. 57% of all income earned is clustered in the top 30% with 22.8% of all earnings in the top 1%.
To put this $268B shortfall in perspective the 2007 federal budget here are some comparable statistics:
Medicaid - $276B
Interest on Debt - $243.7B
Education - $89.9B
Transportation - $76.9B
Foreign affairs - $32.5B
What this means, and my numbers are very conservative, is that if you go to a flat tax, you likely reduce federal tax receipts by 25%+. Given that federal, non-military discretionary spending is only about $380B of the budget, you effectively cut all departments not associated with the military, or medicare/social security. And since Med/Soc cannot be cut immediately due to prior promised benefits, you would bloat the deficit by a staggering $567B per year until the budget is cut far enough to make it balanced.
Someone please explain to me how this is sustainable?
"Now, if we assume that 50% of people make more than $60,000 that means we would have $108,218,125 in income to tax at a flat rate."
ReplyDeleteWhy would you assume this? Because the mean (average) income is $56k?
You understand that in mathematics, the average does not require that 50% be above and 50% be below right? You can get an average of 56k simply because of an outlier.
Take 100 average people, they probably make between 30-100k between them per year. That would make the average around 60k likely. Now add Bill Gates and his 40B per year income to that 100. What is the average? Does that mean that all the people are suddenly making more money or did you add an outlier that skewed your result set?
This is what is the case in US income data. 56k may be the mean (average) household income, but the median (middle) is 41k. That means that you have significant outliers on on the top side dragging the average up.
I guess what I'm saying is that you are using very simplistic assumptions that are not attainable or realistic. This means that any analysis you do with them would have a false result.
Anonymous - the Federal Adjusted Gross Income number used is just of what Minnesotans filed. It does not take any other state into consideration.
ReplyDeleteTruman - What is the total Federal Gross Income of all Americans? That is the number we need to work from not the Federal Tax Receipts. We need the Gross number. My example with Minnesota uses an Adjusted Gross as I have not been able to get a Gross Income number so my revenue would increase even more under a flat tax.
ReplyDeleteI do understand that outliers can influence the median income level but we need to have a starting point for the conversation. I offer solutions and you offer nothing. Are you happy with the current system? Do you think the current system benefits our society or all classes fairly?
"What is the total Federal Gross Income of all Americans?"
ReplyDeleteThat's pretty simple math using IRS stats for 2008:
78,792,000 returns x avg AGI of 57,699) = $4.546T in AGI totally
Given that the 2008 total federal tax receipts for individuals was $1.25T that means that the effective average tax rate on individuals was 27%. (1.25/4.546)
If you reduce that tax rate to 10% with no deductions you see a tax receipt reduction on individuals of 64%. 10%x4.546 = 454.6B in individual receipts. 454.6/1.25T = 64% reduction in tax receipts.
Like I said, my original analysis was conservative, this makes your argument worse.
So how do you reduce the federal budget by 2/3 of 1 trillion dollars when the non-military, discretionary spending is 380B currently?
You are talking about staggering amounts of tax cuts that are unsustainable based upon current federal obligations.
I'm just going to assume based on your lack of answering that you believe the proposals are pro business.
ReplyDeleteTruman
ReplyDeleteYou understand that AGI is not Gross Income right? In my example with the State of Minnesota the gross income for Minnesotans was $216,435,250 while their FAGI was $156,772,000 meaning that Minnesotans took $59,664,250 in tax credits. $59M in tax credits!
You are not using Gross Income in your equation. So your pretty simple math is flawed since I am not asking for AGI; rather I am asking for Gross. You understand the difference right?
Now let's assume the same tax credit percentage applies to all States (which we know in reality it does not). The tax credit percentage of MN Gross is 27.57%. Now if the AGI is $4.546T and we assume the same MN tax credit percentage. Then Gross Income for the United States would be $6,276,408,404. Now let's assume half of the people make less than $60,000 and we apply a flat tax rate of 10%. Tax Revenue would be $313,820,240. Now, I acknowledge 10% may not be the right number but we need to start someplace.
Anonymous...I am sorry that I haven't responded back but I will. Just need to get things done for work.
ReplyDelete"You understand that AGI is not Gross Income right?"
ReplyDeleteI'm fully aware of what that is, BUT it doesn't matter. The GI for american's was ~61500. (IRS stats), which means that the average american had an adjustment to salary of ~4000. Do you really think an additional $400 (10% of 4000) in tax receipts per filing will close that 600B gap you created?
Additionally, if you set your threshold for taxation at 60k, you really really really reduce the number of people paying taxes into the system.
"Now let's assume half of the people make less than $60,000 and we apply a flat tax rate of 10%."
NO! NO NO NO NO NO!
Stop right here. Again, you are making the assumption that the average means that 50% of the people make less and 50% make more. That's a false assumption and completely baseless as I proved above.
Please, for the love of God, go take a statistics course or two, you are killing me.
Oh, by the way, your $4000 per person in "tax credits" equates to 318B in tax credits nationwide. That equates to 31.8B in additional taxes. So instead of a shortfall of 680B you have a shortfall of 649.2B for a reduction in tax receipts of 61.1% instead of 64% cited earlier.
ReplyDeleteIn other words, it doesn't make a difference.
"I still go back to this misconception that we're talking about "average" Americans. If you want to talk about "average" Americans, consider for a moment that the average (median) American household has an income of $52,029 (U.S. Census figure for 2008). They have a top tax rate of 15% but as a percentage of income are paying 13.39% in taxes (married filing jointly).
ReplyDeleteDouble that income to $104,058 and you would see a top tax rate of 25% with 17.66% of income going to taxes (again, married filing jointly). It's not until you reach an income of over $373,650 that a household (married filing jointly) would even touch the top tax rate of 35%. Even then, they are paying less than 30% (27.05%) of their income in taxes. Think about it. A family that is making more than 7 times the income of the "average" American is paying just over twice as much in taxes as a percentage of income. "
Dumb question - but isn't even the same percentage of your income, should it be double mine, MORE money paid in taxes? I mean this not to start an argument. I would like some clarification, because maybe I am actually thinking to simplistic here. In all seriousness and respect.
Anonymous - Yes, in dollar wise if I earn double what you make then my tax burden is twice as much. And you are correct that is not the case with our current system. The thing many people fail to realize with our current system is that the rich do not pay the top tax rate after all the deductions and tax credits are concerned.
ReplyDeleteTo the other Anonymous ( I am assuming two here) - The numbers are priliminary and we both agree that are not the most accurate but they are a jumping off point. We have become a society too dependent on the Government and expect entitlement programs to be doled out because Americans, in general, are to lazy to be held accountable for action or inaction.
The original intent of SSN was to be a supplement for the meek and poor with the expectation that most would be dead before eligible. Let's face it life expentacy was 55-58 when SSN was enacted. We now have a life expectancy of 74-78 but have kept the retirement age relatively the same. SSN original intent was not meant to be the sole source of peoples income in retirement.
That being said, we need to phase out all entitlement programs and scale back other programs for short-term, temporary needs of those less fortunate. Rep Ryan(R-WI) has put forth an interesting roadmap to recovery (http://www.house.gov/budget_republicans/entitlement/roadmap_media_news_kn0521.pdf).
But I digress. The Flat Tax with not tax credits can work and levels the playing field. No longer will we hear reports that Warren Buffet paid only 13% in taxes..well provided we increase the flat tax rate to say 15%. Besides it's a green policy - think of all the paper that will be saved and the trees. Not to mention the gas and oil that is used to lubricate the production of the forms.
Anon, sorry, but I'm not entirely clear on your question. Viper may have actually shed some light on what you were getting at but I'll try to explain further going back to the example of a married filing jointly household and look at three different income levels.
ReplyDeleteHousehold A Income = $52,029
Top Tax Rate = 15%
Tax Paid As a Percentage of Income = 13.39%
Actual Tax Dollars Page = $6,967
Household B Income = $104,058
Top Tax Rate = 25%
Tax Paid As a Percentage of Income = 17.66%
Actual Tax Dollars Paid = $18,377
Household C Income = $373,650
Top Tax Rate = 35%
Tax Paid As a Percentage of Income = 27.05%
Actual Tax Dollars Paid = $101,086
Comparing A to B, the actual tax dollars paid by B is more than 2 1/2 times greater than that of A. Is this what you were getting at? If so, yes, it's interesting. But I still go back to the tax paid as a percentage of income. The difference between A and B is not so drastic.
Finally, I would argue that as your income increases, your ability to effectively shield that income from taxes of any type increases as well. You make more money, you can pay more people to figure out ways to decrease your taxable income. It's just a fact of life and something that I don't think you can really deny. Why does this matter? Because I honestly doubt that any person who collects $373,650 in income in one year lists that as their adjusted gross income. There are deductions or credits coming off of that for sure.
Clark - thank you for the recap. A lot of numbers flying around. And you are correct, Household C may have a tax burden, on paper, of $101K my bet - Buffet example, do not pay that much via various tax credits and loopholes. That is why under the flat tax proposal we eliminate all of them. If we don't then we run into the same trouble we have now - people paying less then their effective tax rate.
ReplyDeleteHow do you stop deductions and credits from creeping back in? They will, in my opinion. Our current system I don't think ever intended to be so muddled.
ReplyDeleteAnonymous, so let's simplify it as Viper has laid out. There is no guarantee they won't but its a good jumping off point; don't you agree?
ReplyDeleteUnder a flat tax of 10% which applies to any dollars earned beyond $60,000:
ReplyDeleteHousehold A
Actual tax dollars paid = $0
Household B
Actual tax dollars paid = $4,405.80
($104,058 - $60,000 = $44,058 x 10% = $4,405.80)
Household C
Actual tax dollars paid = $31,365
($373,650 - $60,000 = $313,650 x 10% = $31,365)
Total tax revenue from A, B and C under 10% flat tax = $35,770.80
Total tax revenue from A, B and C under current tax system = $126,430
If you wanted to maintain the same level of revenues, you would have to do one of two things:
1) Lower the $60,000 threshold AND increase the rate; or
2) Increase the rate
Looking at the 2nd option, you'd have to increase the rate to 35% to get close to current tax revenues. Sure, that's the same top tax rate as Household C already pays, but it's still 8 points above the percentage of income paid in taxes. For Household B, it's even worse. Their top tax rate, which is now just their overall tax rate jumps by 10 points and the percentage of income paid in taxes more than doubles along with the actual tax dollars paid.
It's not a pretty picture.
Clark - your analogy fails to take into account tax credits. I agree that perhaps the threshold may need to be lowered and 10% is something that may need to be raised. Either way, we need to determine the amount of tax credits given too.
ReplyDeleteAs I said earlier I have only the data on tax revenue and Gross data for Minnesota. I have asked for Federal data but haven't been able to get either Senator or my State Representative to respond.
"If we don't then we run into the same trouble we have now - people paying less then their effective tax rate."
ReplyDelete*Sigh*
Viper, how can someone pay less than their effective tax rate? By definition, their effective tax rate is WHAT THEY PAID. Effective means that it is truly what their tax rate was.
Ex - I make 100k and have a 25% tax bracket. My tax rate is 25%. However, I have deductions that reduce my tax liability to 18%. My effective tax rate is 18%. How can you pay less than the effective rate?
"Either way, we need to determine the amount of tax credits given too."
I already addressed this. The difference between the mean household AGI and mean GI is ~$4000. If you include this money, and set the tax rate at 10% without deductions. the federal receipts on individual returns based upon 2008 stats would be roughly 458.4B vs the 1.25T collected. That's a reduction of 61%. You would have to cut more than entitlements to cut that much from the federal budget.
I'm not saying this isn't worth considering, but I guarantee neither party has the political will for this.
Truman - your 1.25T is gross receipts. What is the real net receipts? How much of that 1.25T is paid back in the form of a tax return? That is another sliver of data I have not gotten from Minnesota or the Federal Government but am still trying.
ReplyDelete"Truman - your 1.25T is gross receipts. What is the real net receipts?"
ReplyDeleteNo, it's not. That is net Federal Tax Revenue per the IRS statistics. That means that citizens of the US paid 1.25T in taxes during FY2008. That means, that based upon the AGI, the individual tax liability was 1.25T. If the person received a refund, then it is not a receipt, by definition, and is not included in this amount.
This number rolls into the total tax receipts amounts to get a total net receipts which is what is used by the CBO to calculate whether we have a deficit/surplus for the year.
It doesn't get any more clear than that.
Viper, it's not an analogy, it's an example. And in my example I have been working through the numbers with the idea that the household income of A, B and C is their adjusted gross income or taxable income.
ReplyDeleteI know you won't like this because it counters your convenient excuse that it fails to take into account tax credits.
Finally, please educate yourself on the difference between a tax credit and a tax deduction. They're not the same thing at all. Not even close. And without getting into too much detail, do you take any deductions or credits from your income when filing your taxes? If so, why?
"I know you won't like this because it counters your convenient excuse that it fails to take into account tax credits."
ReplyDeleteClark, I've already proven that his AGI analysis is wrong because the difference between AGI and GI is ~4k which is not material to the discussion.
I do think that the discussion has merit and Viper's points are valid regarding changing the tax system, but it won't ever happen. The reason is simply - political will to kill most entitlements does not exist.
People may be for smaller government, but only when talking at the macro level. Once you tell them they must sacrifice THEIR entitlements and not some nebulous big government spending that they don't understand, that will dies quickly.
I guess what I'm saying is that it's easy to talk small government, but the second you ask people to sacrifice, they become the selfish humans that we all are naturally.
Truman, I couldn't agree more. Not sure how long you've been reading this blog, but you touch on something that I've noticed for quite some time. Viper's ideas, which may or may not have merit, are, in my view, reflective of a selective will for change. If it benefits him or doesn't harm him, then he's all for it no matter what the cost or harm to others. But if it doesn't benefit him or harms him, then whatever the subject, it must be stopped. This isn't all that revolutionary (self-interest). What is amazing though is that he often comes off as Nero fiddling while Rome burns. His is an ideology, in my view, that is extreme. Is it just intended to spur discussion? Perhaps. But too often that is a convenient excuse. For me, the interesting discussions are those that focus on the middle, on those grey areas, where but for a small but important difference, there would be consensus or agreement. That's just me.
ReplyDelete"If it benefits him or doesn't harm him, then he's all for it no matter what the cost or harm to others."
ReplyDeleteTo a degree I cannot fault Viper in this regard. Like all americans, he typifies the desire for a strong independence from control. It's a trait that makes us great in many regards, in my opinion, and should be considered admirable. To quote Jefferson (my favorite founding father for his wisdom), "too many parasites living on the labor of the industrious" is not healthy and we should want to keep what we produce through our hard work.
However, it must be tempered by the idea that we are part of something larger than ourselves. I think that while Viper's intent is always good, this is sometimes lost in the minutia of the details.
It's easy to call for massive cuts to government spending when you don't rely on it to feed your kids due to layoffs or handicaps.
Hard choices come when we must temper the greater good vs. the personal interest. I think, sadly, that this country is facing a dilemma today not because government has suddenly become massive and cumbersome (it's been that way for decades) but because the bill to pay for it is coming due and many don't want to sacrifice for what they have benefited from for 50 years.
"His is an ideology, in my view, that is extreme."
I think Viper's views are less extreme than they appear at first blush. I think he likes the attention that his sensationalization causes. :)
"For me, the interesting discussions are those that focus on the middle, on those grey areas, where but for a small but important difference, there would be consensus or agreement."
I tend to agree, as Jefferson wrote in his journals, the heated debates of the first Constitutional Congress had the outcome of compromise. And in his eyes, compromise was the strength of our political structure that they had built.
Sadly, compromise is a dirty word in politics today - it symbolizes weakness, ideological impurity and vulnerability. This can lead to nothing but gridlock and chaos.
It's really depressing to watch to be honest mainly because the level of ignorance in this country parading as fact is staggering. The NYC mosque debate is proof of this.
Clark & Truman
ReplyDeleteLet me clarify something. I do write on issues that interest me and bother me more than issues that I have little interest in. I have asked and did write on a topic put forth by one of the commentators from the point of view wanted as well. I believe I did it very well.
Now, my attempt is to start the conversation with the hope that others participate to find that gray area. I will admit I do play devils advocate a lot to ensure other viewpoints are raised. My hope is that we are able to get to the middle but as I asked prior does that me we always have to left of middle before it is seen as finding middle ground?
Is Emmer now anti business because he also thinks the JOBZ program doesn't work and should be scrapped?
ReplyDeleteAnonymous - JOBZ program really only shifts jobs by giving rural areas tax free business environments. Living in Hamburg and opening a business in Norwood Young America, I have discovered that JOBZ has created challenges to the area in attracting new business since they can go just 5 miles down the road and apply for JOBZ. I think we need a comprehensive business plan for the state and eliminating the current JOBZ. Now, the new plan may incorporate some of JOBZ elements but I don't see the elimination as anti-business as it pits cities against each other when trying to attract industry.
ReplyDeleteBut you criticized Dayton for eliminating it asking: "In either case it increases taxes on businesses. How is either of these Pro-business? "
ReplyDeleteI guess I'm looking for consistency.