Here is a note from my daughter that was waiting for me when I got home:
In case it is hard to read:
“Well dad, I love you. Just remember that God made you special, and he loves you very much! I love you! Love, Cambria.”
Should the Rich Pay Even More Taxes?
In my last entry, I examined and explained the difference between marginal and effective tax rates. In the midst of the current economic turmoil in the US, and the constant cry from the so-called “99%” I frequently hear that the rich are not paying enough in taxes, and that it’s time they paid their fair share. In learning about the US income tax system and how it works, I ran across several sources of information covering historical tax rates and historical taxes paid. After looking through some of the data and using them to generate some graphs, I’ve come up with a few visual aids to help drive home the following point: The wealthiest Americans ARE paying their fair share, and in the last 30 years the tax burden for all BUT the wealthiest has consistently dropped, while the tax burden for the wealthiest has consistently risen.
Most of the data I used to generate the following graphs comes from the Congressional Budget Office, with supplemental information derived from census data available at census.gov. Before I get into the graphs, I need to define a few terms that folks unfamiliar with statistics may not understand:
Quintile: A quintile is 1/5th of the population of what you are measuring. When I talk about the “lowest quintile” or “highest quintile” I’m referring to the lowest or highest 20% of the population measured.
Deficit: This is another word for shortage, or spending more than you earn.
As I looked at the data from the Congressional Budget Office, I became very curious where the breakdowns were for each of the quintiles of earners in the US. So I headed over to the census bureau where I learned the division of each quartile is as follows:
- First Quintile: Earns up to $20,000
- Second Quintile: Earns up to $40,000
- Third Quintile: Earns up to $65,000
- Fourth Quintile: Earns up to $105,000
- Fifth Quintile: Anyone who earns more
Now, on to the graphs: Up first, a graph of the effective tax rates on the highest and lowest quintile over time. This graph spans from 1979 through 2007 (the newest data available) and clearly shows that while taxes on the top 20% of earners in America has gone up, taxes on the lowest 20% of Americans has declined. The rates on the top 20% have been between 20% and 30%, while the rates on the bottom 20% have moved between 12% and 4%. Also keep in mind that this chart reflects actual taxes paid by these quintiles – after deductions, credits, accountants trying to hide stuff, etc. These are the percentages actually paid in these years.
So, to my friends who insist that the rich are paying less taxes, this is exhibit A. To those of you saying “yeah, well the rates may have gone up, but those rich greedy types have found ways to avoid paying more and more!” – well, you guys can check out the next chart.
This is a chart of all 5 quintiles of tax payers over the same time period as the previous chart, showing how much of the total percentage of taxes each one paid. In other words, if the US only collected $100 in taxes total, here is who would have to pay how much of the $100.
Notice here again that the top quintile of tax payers has had to pay more and more and more (up from just over 50% of all taxes collected to 70%) while the other quintiles pay less and less? So, for 2007 (the last year in the chart) the top 20% of earners paid for 70% of the tax bill to the government, while the other 80% of the US population only paid about 30% of the taxes.
Here is one last graph: Moving away from quintiles for a moment, this one shows the percentage of all taxes paid by the top 10% of all earners in the US over the same time period:
So, in 2007 the top 10% of earners paid 55% of ALL the taxes collected in the US. The other 90% of the population only accounts for 45% of taxes paid. If the trends in this graph continue, the highest incomes will continue to pay more and more of the taxes to fund a burgeoning government filled with more and more social programs and benefits for the lower-income earners.
The liberals among you will scream: “Yeah, but they’re RICH! It doesn’t matter to them at all if they have to pay more in taxes – they can afford it! In fact, they need to pay EVEN MORE, and I should have to pay EVEN LESS!” I just can’t understand this mentality… Keep in mind that the above numbers all focus on income, not wealth. By taxing the highest income earners more and more, the obvious effect is that people will be less motivated to earn more – because they just have to pay more of their earnings in taxes.
The real problem is not that we are not collecting enough in taxes from the rich, it is that the government is spending WAY more than they are taking in. Even if we raised the taxes significantly on the rich, we would not be able to overcome the huge spending deficit that the government has set up.
The rich have been paying their fair share of taxes for years, and have seen that share of tax burden increase over time. It is time to vote in some fiscal conservatives who know how to set and stick to a realistic budget, and who are not afraid to ask some of the rest of us to pay our fair share as well.
Today I joined in a discussion on Facebook that was prompted by the following video:
Clearly this video is about the destructive effects of socialism on a personal drive to succeed. The Facebook discussion quickly devolved into the liberal folks screaming about how the rich need to pay their fair share of taxes, with the conservatives pointing out how they already are. An interesting discussion on the US Federal tax system ensued, and I learned a few things I thought would be interesting to share.
Marginal vs. Effective Tax Rates
I’m a self-proclaimed conservative nutjob, and I pay some attention to various media outlets with a conservative approach to politics. Something I’ve heard frequently regarding tax rates is that the tax rate on the top 1% and higher of earners in the country has been fantastically high historically – I’d heard figures of 75% or more. While this is factually accurate, this percentage has only been on the highest marginal rates. So, what is a marginal tax rate? I won’t claim to be an expert (I misunderstood this myself until today when I read up on the subject) but here is a simple analogy illustrating what’s going on:
I go to the store to buy 10 apples. Due to mystical pricing madness of the supermarket chain, they have decided that the first 3 apples I buy will only cost $0.10 each. The next 2 will each cost $0.22 each, the next 3 will jump in price to $0.45 each, and the last 2 will each cost $0.75. My total purchase price will wind up being $3.59 (ignoring sales tax for a moment), or an average of just under $0.36 per apple. The highest marginal cost of my apples were the last 2 that I bought at $0.75 each. The effective cost of each apple after the purchase is $0.36.
What the heck does this have to do with our tax system? The tax bracketing system in the US is set up so that the first $$ that you earn is taxed at one rate, then once you earn your way into the next higher tax bracket, the additional $$ you earn is taxed at a higher rate. This means that the dollars that you earn are not taxed evenly – some dollars are taxed higher than others. I suspect that most Americans misunderstand this and assume that once their income reaches into the next higher tax bracket, ALL their income is taxed at the higher rate. This is simply not true.
What is true is that it is impossible to determine an effective tax rate on any single class of earners or tax bracket, because it all depends on just how many dollars you have taxed at the different rates. 2 people in the same marginal tax rate will have a different effective tax rate because they didn’t earn exactly the same amount of money. (I’m completely ignoring deductions – they just further complicate things.) All the discussion and angst about tax rate changes is mostly irrelevant, because not only are the rates changed frequently, so are the brackets. These changes are made in an attempt to maximize total revenue into the federal coffers, and is also part of the reason why with lower tax rates and clever shifting of the boundaries of the brackets the government is able to realize higher revenues.
The IRS releases reports detailing the effective tax rates of all taxpayers broken down by various metrics. I have looked at these figures a bit, and have found that not only are the highest wage earners paying nearly all the taxes, over the last 30 years they are shouldering a higher and higher percent of the total tax burden. Don’t believe me? Stay tuned for some pretty graphs in my next post….
Crunchy Snow
Headed up past Idaho City to the Whoop Em Up snowmobile and recreation area with Jeff today – had a great time, and managed to find our way all the way up to Jackson Peak. This peak houses an observation post and has an incredible view. The only problem with getting there was the quarter mile hike we had to do nearly straight uphill at over 8000 feet of altitude. Still trying to catch my breath.
Here’s a shot from Jackson’s Peak: (many more shots in the gallery)
Christmas List 2011
Here’s some stuff I’d love to find under the tree this year:
- Low cut athletic socks
- Assassin Delta Wing Plane
- Corsair
- XActo Knife
- Foam Safe Glue
- Epoxy Glue
- Battery Charger
- Power Supply
- Big Batteries (2)
- Small Batteries (3)
- Wing Camera
Holiday Hats 2011
This Christmas, to help our children learn about charity and helping those around us, Christine came up with a fantastic plan to make hats out of fleece. These hats are VERY simple to make – easy enough that our 4 year old has been every bit as involved as everyone else. All that is needed to make a few hats is a pair of fleece pants (can be found at a local thrift store for a buck or 2) and some scissors. Just cut a section of the pants leg off, cut some slits in one end, gather the end with the slits and then tie a small piece of fleece cut from elsewhere on the pants around the top of the hat. The process is actually simpler than it sounds… Erica counted tonight, and we are up past 45 hats now!
Here are a few pictures of the process with our kids: (Check out all the shots on our gallery here)
UPDATE: Just one day after the announcement that the federal government was imposing a special tax on live Christmas trees, they’ve changed their mind. Quoting Fox news:
White House spokesman Matt Lehrich told Fox News Wednesday afternoon that the administration is putting a stop to the proposal.
“I can tell you unequivocally that the Obama administration is not taxing Christmas trees. What’s being talked about here is an industry group deciding to impose fees on itself to fund a promotional campaign, similar to how the dairy producers have created the ‘Got Milk?’ campaign,” he said. “That said, USDA is going to delay implementation and revisit this action.”
What follows is my original commentary:
Well, the winter holiday season is nearly upon us: all the retail giants have smacked their store floors with the Christmas stick, the weather is turning colder, most of the trees have lost their leaves, and the federal government is sticking its nose where it doesn’t belong… again.
Yesterday the US Agricultural Department announced that it was imposing a new tax on the sale of live Christmas trees. Why this new tax, you may ask? Well, it is going to be used to fund the “Christmas Tree Promotion Board”, which is a collection of growers and sellers of live Christmas trees in the US. This board has existed for a while, but has had problems raising funds internally to pay for their activities, and have seen a sharp decline in sales revenue due to competition from artificial tree manufacturers.
Let me restate what is going on here with a similar example that resonates more with me… Doughnuts. Let’s say all the companies in the US that make doughnuts are feeling the pressure from healthier muffin makers. The doughnut makers want to increase sales, but their product is suffering in the marketplace. So they all form a committee with members from each company to come up with ideas of how to boost sales. They all universally agree that the way to sell more doughnuts is to advertise more, but they also agree that nobody wants to actually pay for advertising. So they lobby the government to impose a small tax on their doughnuts. This tax is then used to pay for advertising to sell more doughnuts.
How in the world does this seem like a good idea to anyone? When my business wants to purchase advertising, my business PAYS for it – and that’s the way it SHOULD be. When my business sees healthy competition, I must innovate and become more competitive, not run to the government crying for more money. It is sickening to me to see an entire industry stuck with an entitlement mentality.
The federal government has NO business interfering with a specific industry in this manner. If live Christmas tree growers want to promote their industry, they should do what everyone else does: pay for their own promotion and growth and innovation. Involving the federal government in this manner only serves to further prove that entitlements are horrifyingly out of control, the federal government has grown WAY too large, and the result are more problems than solutions.
I hope you’ll join me this year in proudly displaying an artificial Christmas tree.
Oh, and Merry Christmas!
Cruise to Ensenada
This year for our anniversary we joined Christine’s family on a cruise from Los Angeles to Ensenada, MX. This was our first cruise, and it was a blast!
Check out the photo album to see such amazing sights as shuffleboard, Mexican grocery stores, and me in a wetsuit:
Fall 2011
Well, there is no denying it: When I wake up, the sun has not yet risen. When I get home from work, it has nearly set. The air has turned crisp, the trees have gone all chameleon with color, and we’ve started to have a lot of rain.
Fall is here.
Rather than try to wax eloquent about the changing of the seasons and how this could offer an insight into our own lives using a clumsily put together analogy, I just took some pictures:
How To Make Your Own Manger
The weather is turning colder, and Christmas will be here before you know it. This year, you can add your own homemade manger to your decorations! Here’s how:
Here’s what my finished manger looks like:
Finished manger
Step one: Get some wood. The look and feel is totally up to you, but I went with some rougher and more beat up scraps I had laying around. Decide how wide you’d like to make your manger – everything will be cut to the same length. I chose 24″, which worked out well.
Box of sprinkler parts is optional.
24 Inches makes for a nice width.
Step two: Cut the wood, not your fingers. A table saw is best for this, but you can also use just about any kind of saw. I started with 2×4 lumber, and I wanted to use 1×2 lumber for this project, so I elected to just rip the 2×4′s lengthwise into 3 pieces. If you follow my pattern, you’ll need 11 pieces that are 24 inches long, so you’ll need to rip 4 2×4′s, and you’ll wind up with one extra piece. This can be used to make a shotgun, sword, or spear.
Cut wood, not fingers.
Step three: Make an X. Since I wanted to allow this thing to fold up for easier storage, I came up with a simple X design that would allow the entire manger to fold flat so I could easily slide it onto a shelf when not in use. Choose 4 of your favorite pieces you ripped in the previous step to use as the legs. Cut off a small 45 degree chunk at one end only of each piece. This will allow the bottom corners of the feet to sit flat on the ground when the manger is in use. After you’ve cut the feet, measure and mark the center of each piece, then drill a hole straight through all 4. Use some washers, a bolt, and butterfly nut to assemble the legs. Note: you’ll want to start paying attention to which is the “inner” leg and which is the “outer” leg, as you’ll need to assemble the X pieces such that the 45 degree cuts at the bottom sit flat on the floor. See the pictures below to see what I mean.
Mark the centers.
Drill all the way through.
Leg assembly hardware
Assembled leg.
Inner view of leg assembly.
Step four: Take the legs apart. Yup, I just had you assemble the legs to make sure they would fit well together, and that they will fold flat and back into an X easily. Take them apart so that you can more easily attach the cross pieces of the manger. The most important part of laying out the cross pieces is to make sure that the legs are square, and that the pieces are all lined up and spaced evenly. To do this, I used a large carpenter’s square to lay out one leg from each side, along with some smaller spacer pieces I cut to make sure they were square. Start by placing the outer leg of one X and the inner leg of the other X. Once they are square, then place the inner leg of the first X and the outer leg of the other.
Make sure stuff is square.
Step five: lay out and attach cross pieces. Now that your legs are all ready to go, grab all your cross pieces and lay them out. You’ll want 4 up one side, and 3 up the other. Space them so that the 4th piece on the first side sits perfectly at the bottom of the V that is formed as the top part of the X the legs make when it is set up. Look back at the picture above of the finished manger – see how both sides have 3 cross pieces, with a 4th one right at the bottom of the V? That 4th one will be attached to one side or the other – which one does not make a difference, just make sure you to it the same on both sets of legs. To space the cross pieces evenly, I cut a small piece of 2×4 to the right size to set the gap in between each piece, as well as the amount of overhang I wanted to allow on each side. Once you have all the pieces laid out, get out your nail gun (I used a brad nailer) and attach the cross pieces to the legs. Note: Remember that these legs will fold, so you’ll attach 4 pieces to the outer legs on both X, and 3 pieces to the inner legs on the other. If you attach them to both legs, the manger will never fold. 
Lay out 4 pieces on the "outer" legs of the X, and 3 on the "inner". I've got 1 extra on my "inner" side in this shot - it will be discarded after I lay out the 3.
Use some spacers to set up the gaps and overhang as you lay out the cross pieces.
Step six: re-install the bolt and nut in both sets of legs and fold up to form completed manger. Tighten nut to have manger stay in an X. I found that this requires quite a lot of tension – I used a pair of pliers to get it very tight so it would not easily fold flat when set up. Now all you need is a a few towels and bathrobes, some kids, and someone willing to pretend to be a donkey.
Finished Manger
Finished Manger
Finished Manger
Enjoy your manger, and Merry Christmas!
