Thursday, August 25, 2011

Four More Trillion | Not Change

- What? Obama Borrowed $4 Trillion in 2 1/2 Years? -

By: Larry Walker, Jr. –

It was back on July 3, 2008 when Barack Obama exclaimed, “The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents - #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back -- $30,000 for every man, woman and child. That's irresponsible. It's unpatriotic.”

Now, just two and a half years into his one-term proposition, Barack Obama has added $4 trillion to the national debt by his lonesome. So what does that make him? Today we have a national debt of $14.6 trillion that we are going to have to pay back -- that’s $46,935 for every man, woman and child, and $130,786 for every U.S. taxpayer. It may be stated that Obama’s record on the national debt is 320 times more irresponsible, and 320 times more unpatriotic, no? But let’s just call it, “Not Change”. I know, I know, I can “go straight to Hell”, right Maxine Waters?

“You hypocrite, first take the plank out of your own eye, and then you will see clearly to remove the speck from your brother's eye.” - Matthew 7:5

From Point of No Return

So what’s the plan, Stan? More ‘temporary’ shovel ready jobs? Overthrow another Libya? Form a government-run infrastructure bank (LOL)? Add another 99-weeks to unemployment benefits? Raise taxes on $250,000-aires? Form another debt commission? Raise the debt ceiling, raise the debt ceiling, raise the debt ceiling? Create a super-committee? Build a bullet train to nowhere? Tighten the noose around Gadaffi? Fix health care again? Another temporary Social Security tax cut? Extend the 100% bonus depreciation write-off on corporate jets and SUVs? Blame the Tea Party and Republicans? Give another speech? Take another bus tour to nowhere? Play another four-year round of golf?

Nah! I don’t think so. Looks like a one-term proposition to me, if that. Now it’s Obama vs. Obama. A kind of lose-lose hypothesis. Heck, this guy couldn’t even beat himself. We might as well bring Bush back. Or maybe we’d be better off without a President at all. How about a “none of the above” bubble on the next ballot? I’d rather have no President at all than four more years of misery. Hey Obama, why don’t you just do us all a favor by resigning right now?

It’s time for serious solutions. Give me something to die for. Give me a candidate I can stake my name and reputation on. Dazzle me with common sense. Show me how it’s really supposed to work. Rock my free-market world. Naturally, we independent small business types will be placing principles above personalities, so you best watch what you say, and do.

"A bill will be presented to the Congress for action next year. It will include an across-the-board, top-to-bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand ... The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy." - John F. Kennedy, Aug. 13, 1962, radio and television report on the state of the national economy.

Related:

Read more: John F. Kennedy on taxes

What Austerity? - Federal spending will hit a new record this year.

Just What We Need, A Government Bank - Outrage

Conn Carroll: Infrastructure bank is just another stimulus boondoggle

Obama’s Failed Jobs Subsidy | 99 Weeks

Photo via: http://ibloga.blogspot.com/2009/02/new-one-trillion-dollar-bill.html

Monday, August 22, 2011

A Maxine Waters Sandwich

- By: Larry Walker, Jr. -

At a community summit in Inglewood, California on Saturday, Democratic Congresswoman Maxine Waters stated, “This is a tough game. You can’t be intimidated. You can’t be frightened. And as far as I’m concerned, the ‘tea party’ can go straight to Hell.” And according to the video (here), she rambled on, “And, and I intend to help them get there.”

So according to Democratic Representative Maxine Waters, if your son is a Tea Party sympathizer, he can go to Hell. You hear that Mom? If your father, mother, son, daughter, sister or brother agrees with the Tea Party platform, they can go to Hell. If your neighbors are Tea Party supporters, they can go straight to Hell. If your boss is a Tea Partier, he or she can go to Hell. If some of your employees happen to be Tea Party members, tell them to go to Hell. If your accountant or financial advisor is of the Tea Party persuasion, tell them to go to Hell. And if some of your customers are Tea Party types, well they can just go straight to Hell as well.

If we are to take Rep. Waters for a serious, grown-up, representative of the United States, we should probably start screening the political affiliations of all of our family members and everyone around us, and anyone who is remotely associated with the Tea Party should be sent straight to Hell. Better yet, we should probably just send that list to Maxine Waters so that she can “help them get there”. I imagine she has some sort of connections.

But of course, since I am affiliated with the Tea Party, in spirit and in truth, shouldn’t we treat all Democrats in the same manner? I think not. I love my family, and my neighbors as myself, no matter their political affiliations. Hey Maxine, why don’t you go to Hell? And make me a sandwich on your way down.

“For in the same way you judge others, you will be judged, and with the measure you use, it will be measured to you.” ~Matthew 7:2

Sunday, August 14, 2011

Black Employment | Back to the 1970s

- Halfway to Nowhere

- Larry Walker, Jr. -

One of the figures that stood out in the July 2011 Employment Situation Report was that Black labor force participation had declined to 60.4%, or to the same level attained in March of 1973, from a rate of 63.2% in January of 2009. The rate has fluctuated between a record low of 58.5% during 1975, to a record high of 66.4% in 1999. It stood at 63.4% in December of 2007, the first month of the Great Recession, and clocked in at 62.6% when the recession ended in June of 2009. In fact, the rate hasn’t dropped below 62.0% since May of 1984. But since February of 2009, the Black labor force participation rate has declined by 2.8 percentage points, and most of that decline, 1.7 points to be precise, has occurred since the beginning of 2011. So why did Black labor force participation suddenly plummet during Obama’s 3rd year in office, over two years after the recession ended?

Black labor force participation rate – The labor force participation rate measures the labor force as a percent of the civilian non-institutional population.

From Black Employment - July 2011

Why hasn’t a Black White House resident correlated with improvement in the lives of Black and African American people, or anyone else for that matter? It's one thing to be giddy that a Black man made it into the White House, but entirely another when you take a look around the community. The fact that the Black labor force participation rate has fallen back to 1970s levels, and exclusively on Obama’s watch, either means that his policies aren’t working; or that they are, but just in reverse.

For example, does the act of extending unemployment benefits to an historic 99-weeks mesh with increasing labor force participation? Is the act of handing out record amounts in government food stamps somehow in lock-step with prosperity? Does legislation providing a $50,000, per unemployed household, government subsidy to cover mortgage payments for up to two years help get folks back to work? Will Obama's policies of doling out record amounts of unemployment, food stamps, and $50,000 per household mortgage subsidies, concurrently, lead us out of the ditch, or over a cliff? When ‘shovel ready’ turned out not be so shovel ready, it appears that this was Obama’s Plan B.

The Black employment-population ratio is also at 1970s levels; while the Black unemployment rate, although not the worst ever recorded, has averaged 15.6% since February of 2009.

Black employment-population ratio (Current Population Survey) – The proportion of the civilian non-institutional population aged 16 years and over that is employed.

The Black employment-population ratio has fluctuated between a record low of 48.8% from December of 1982 through January of 1983, to a record high of 61.4% in April of 2000. It stood at 57.7% in December of 2007, the first month of the Great Recession, was 55.2% in January of 2009, and clocked in at 53.3% when the recession ended in June of 2009. It has since declined to 50.8% as of July of 2011, a decline of 4.4 percentage points since Obama’s inauguration.

From Black Employment - July 2011

Black unemployment rate – The unemployment rate represents the number unemployed as a percent of the labor force.

The Black unemployment rate has fluctuated between a record low of 7.0% in April of 2000, to a record high of 21.1% in January of 1983. It stood at 9.0% in December of 2007, the first month of the Great Recession, was 12.7% in January of 2009, and clocked in at 14.9% when the recession ended in June of 2009. It has risen to 15.9% as of July of 2011, an increase of 3.2 percentage points since Obama’s inauguration.

From Black Employment - July 2011

At a fundraiser in Chicago on August 3, 2010, Barack Obama remarked, “…But the thing that we all ought to remember is that as much as good as we have done, precisely because the challenges were so daunting, precisely because we were inheriting so many challenges, that we’re not even halfway there yet. When I said ‘change we can believe in’ I didn‘t say ’change we can believe in tomorrow.’ Not change we can believe in next week.”

Well, it’s been about two and a half years already, so if they’re not even halfway “there” yet, does that mean it will take another 3, 4, 5, or 40 years? And exactly what does Obama mean by, “we’re” and “there”? Who is we, and where is there? It looks to me like our nation is around three-fourths of the way to declaring bankruptcy; the economy is maybe four-fifths of the way towards a depression, and the labor force statistics for Black and African Americans have receded to levels not seen since the 1970s and early 1980s.

So if I’m reading this correctly, as long as Obama has the bully pulpit, change will kick-in after my girls graduate from college, but not right now when it’s needed? Just wait a few more years, after my twin granddaughter’s start pre-school, but not now, two month’s before their birth, when my son needs it, eh? Heck, it may take another 40 years just to fill in the trench Obama has dug. I guess since ‘shovel ready’ wasn’t as shovel ready as he thought, and since “we’re not even halfway there”, unemployment benefits will have to be extended for another 99 weeks, while those who are able to endure carry the water. Heck, we might as well extend unemployment benefits for the rest of Obama’s term, since according to most of today's Democratic Party, unemployment compensation and food stamps add more to the economy than the private sector anyway?

Obama has turned this economy around alright -- back to the 1970s. Now he wants another four years, after he campaigns his way through the remainder of this term? Thanks, but no thanks. Every policy he’s put on the table has failed. The fact that he lost the USA’s triple-A credit rating, through devil-may-care spending, ought to say it all. What would the USA’s credit rate be after another term, since he’s only halfway there, BBB? Four more years to bobble his head from one teleprompter to the other, lecturing us on bugged out Socialist ideals from decades past, yeah right! If his plans don’t work in the real world, it may be that they are simply outdated. I say it’s time for Conservatives to take the horns of this democracy, and make a quick U-turn.

Halfway to nowhere – Heck, Obama’s policies might be succeeding beyond our wildest dreams, but we just can’t see it. Maybe where we get confused is when we open our eyes and look around. After all, he never said it was change we would be able to see, or change that would actually occur. He merely said it would be something intangible, an idea that we could believe in. In other words, a fairy tale, a chimera of the way we wish things were, but know they could never be. A world where electricity is generated without power plants, where heating oil rains down like manna from heaven, and where a big government hands us everything we need. But when we keep it in the day, and open our eyes, what do we see? - An incompetent, partisan, rascal, spouting half-truths, and railing away at his enemy, which turns out to be at least half of America.

"The best social program is a good job." ~Bill Clinton

"I do not believe we can repair the basic fabric of society until people who are willing to work have work. Work organizes life. It gives structure and discipline to life." ~Bill Clinton

“Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and always will solve the problems of the human race.” ~Calvin Coolidge

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Definitions:

  • Labor force (Current Population Survey) - The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary.

  • Civilian non-institutional population (Current Population Survey) - Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

  • Employed persons (Current Population Survey) - Persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.

  • Unemployed persons (Current Population Survey) - Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

  • Not in the labor force (Current Population Survey) - Includes persons aged 16 years and older in the civilian non-institutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching. (See Marginally Attached Workers.)

  • Marginally Attached Workers (Current Population Survey) - Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached. (See Discouraged Workers.)

  • Discouraged Workers (Current Population Survey) - Persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify.

References:

Data Tables

http://www.bls.gov/bls/glossary.htm

http://stats.bls.gov/news.release/empsit.t02.htm

http://stats.bls.gov/webapps/legacy/cpsatab2.htm

Saturday, August 13, 2011

Guess You Can’t | Super Committee 2.0

~ Too Big, Messy, Tough and Democratic for Obama

- Larry Walker, Jr. -

When that year was over, they came to him the following year and said, "We cannot hide from our lord the fact that since our money is gone and our livestock belongs to you, there is nothing left for our lord except our bodies and our land. Buy us and our land in exchange for food, and we with our land will be in bondage…” ~Genesis 47:18-19

At a fundraiser in Chicago on August 3, 2010, Barack Obama said, “It’s been a long, tough journey. But we have made some incredible strides together. Yes, we have. But the thing that we all ought to remember is that as much as good as we have done, precisely because the challenges were so daunting, precisely because we were inheriting so many challenges, that we’re not even halfway there yet. When I said ‘change we can believe in’ I didn‘t say ’change we can believe in tomorrow.’ Not change we can believe in next week. We knew this was going to take time because we’ve got this big, messy, tough democracy.”

We have a big, messy, tough democracy? So is Obama advocating an alternative form of government? Would change come quicker if we had a dictatorship, or a super-committee? If I understand Obama correctly, what he is saying is that, “a government by the people; a form of government in which the supreme power is vested in the people and exercised directly by them or by their elected agents under a free electoral system”, is too big, too messy, and too tough for him. Well, I have one suggestion for you: ‘Quit’! Go back home, and use your community organizing (a.k.a. destabilizing) tools to try to fix what you got wrong in Chicago. This will relieve you of a couple of hundred thousand dollars per year that you didn’t need anyway, while giving us a chance to clean up the damage you have done to our nation in such a short time span.

A democracy can also be described as a state of society characterized by formal equality of rights and privileges. The way it’s supposed to work is that whether majority or minority ideas are put on the table, they are given equal respect. One side calling the ideas of the other evil, terroristic, or selfish does not a democracy make, especially when such ideas may be more plausible than its own. Is killing the leader of Libya and his supporters democratic? Does the execution of one political party leader promote equality of rights and privileges for all?

“For in the same way you judge others, you will be judged, and with the measure you use, it will be measured to you.” ~Matthew 7:2

In the United States, one side believes that raising taxes on those who are more prosperous will solve all of society’s problems. They call this, shared sacrifice. But when others point out that the process will only raise $70 billion per year against a budget deficit of $1.2 trillion, thus leaving a $1.13 trillion per year gap, they are called “terrorists”, and blamed when the nation’s credit rating is slashed. So what about the other $1.13 trillion per year? The compromise: ‘We will form a new democracy, comprised of 12 politicians, six from each major political party, and let them decide’. Is this how democracy works? What happened to the fundamental right of ‘no taxation without representation’?

One side believes that if more tax revenues are needed, then taxes ought to be raised on the 5% who already carry water for the other 95%. But another school of thought believes that if more taxes are needed, society should encourage the creation of more taxpayers. When one side points out that 51% of the labor force pays FICA taxes, but doesn’t pay any income taxes, while the other 49% pay both, they are called evildoers, haters of the poor, and accused of being against the concept of “shared sacrifice”. What gives?

“A man planted a vineyard. He put a wall around it, dug a pit for the winepress and built a watchtower. Then he rented the vineyard to some farmers and went away on a journey. At harvest time he sent a servant to the tenants to collect from them some of the fruit of the vineyard. But they seized him, beat him and sent him away empty-handed. Then he sent another servant to them; they struck this man on the head and treated him shamefully. He sent still another, and that one they killed. He sent many others; some of them they beat, others they killed. He had one left to send, a son, whom he loved. He sent him last of all, saying, ‘They will respect my son.’ But the tenants said to one another, ‘This is the heir. Come, let’s kill him, and the inheritance will be ours.’ So they took him and killed him, and threw him out of the vineyard. What then will the owner of the vineyard do?” ~Mark 12:1-9

While one side devises to kill capitalists, who are also citizens, and distribute their property to the masses, the other simply asks, “Do the 51% who don’t pay personal income taxes benefit from a national defense? Do they drive on federally funded roads and bridges? Have they not benefited from public education, and other federal programs?” We have a government that dishes out up to $8,000 per year in income tax refunds to families who pay no personal income taxes, taking it from those who do, and when the families who pay question the logic, they are called selfish. But is it selfish to ask why the one who has sacrificed time and effort to plant, build, and employ others must be brought down, while those who have not are lifted up? Shall the life’s work of the few be stolen and distributed to the masses in the name of good? What will the owner of the vineyard do?

“For if the willingness is there, the gift is acceptable according to what one has, not according to what he does not have.” ~2 Corinthians 8:12

Everyone who owns real property in my community pays real estate taxes, a form of shared sacrifice, to help fund our common welfare. The tax is based on the value of each property. Even senior citizens, widows, veterans, and those with disabilities pay, although at lower rates. Homesteaders receive a discount, while landlords pay the most, but no one is exempt. Even renters pay real estate tax, which is embedded in the rent. But when it comes to federal income taxes, 51% are given a pass, while a minority is robbed. One side believes that “shared sacrifice” means, “Everyone should pay something”; while the other believes that, “the most fortunate should pay it all”. So who’s right? If all who own or use real property must pay real estate taxes, shouldn’t all American citizens and residents who have income pay some measure of the income tax?

There is one change you can believe in, and it will be here in November of 2012. You can believe that the haters of democracy, those who continually bash the most noble ideals which made this nation great, who instigate racial, class, and party division, who seek to buy their jobs through political favors, who call their neighbors terrorists, and selfish evildoers, who destabilize other nations, killing women and children in the process; it is they and their leader in the White House who will be sent packing. That’s how democracy works, that’s what’s coming, and you can bank on it.

Joseph said to the people, “Now that I have bought you and your land today for Pharaoh, here is seed for you so you can plant the ground. But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children.” ~Genesis 47:23-24

Saturday, August 6, 2011

Obama's 1950s Tax Fallacy

- Is the FICA tax a tax?

- By: Larry Walker, Jr. -

During a press conference on June 29, 2011, Barack Obama said, "The revenue we're talking about isn't coming out of the pockets of middle-class families that are struggling -- it's coming out of folks who are doing extraordinarily well and who are enjoying the lowest tax rates since before I was born. If you're a -- if you are a wealthy CEO or a … hedge fund manager in America right now, your taxes are lower than they have ever been. They're lower than they've been since the 1950s."

Does Obama really want to go there? Why stop at the 1950s? Why not go all the way back to 1913, or 1926, when top marginal tax rates were only 7.0% and 25.0%, respectively? And if top marginal tax rates are lower today than they've been since the 1950s, are they not also lower than they’ve been since 1964? For what it’s worth, I know that within my lifetime, top marginal tax rates are higher today than they were in the late 1980s, and lower than they were for most of the 1990s, but as for the 1950s, why should I care? That was before my time as well.

If I understand Obama correctly, what he’s saying is that if you were a wealthy CEO or a hedge fund manager in the 1950s, your taxes are lower today, than they were back then. But, if you were a wealthy CEO or a hedge fund manager in the 1950s, and are still breathing, you’re probably well into your 80s and could care less, like me. Enjoy forking over the paltry 35% of your earnings for your remaining years, and don’t forget the Social Security, Medicare, and State taxes. I mean, if anyone deserves a break, it’s our elders.

Now, I wasn’t born until 1960, and didn’t start working consistently until the 1980s, and I think my Mom was only 12 in 1950, so is anyone around today who can relate? The truth is that for anyone to have entered the workforce, at say the age of 18, in 1950, would make them at least 79 years old today. And anyone who entered the workforce at the end of that decade, in 1959, would be at least 70. So in order to have been in the prime earning years back then, ages 30 to 50, would make one well beyond 80 years of age today. For example, Alfred Winslow Jones (9 September 1900 – 2 June 1989), who formed the first hedge fund in 1949, would have been 111 years old by now. And, since the average age of a CEO in the United States, today, is just 56, most wouldn’t even have been born until the mid-1950s. The fact that there aren’t any CEOs or hedge fund managers around today, who were in those positions in the 1950s, leads anyone paying attention to think that Obama is out of touch with reality. And that’s putting it kindly.

The table below compares what 1950s tax rates looked like back then, against what they would look like in 2010 dollars. [Note: Tax rates were the same throughout the 1950s, and the brackets for Single and Married Filing Separate taxpayers were exactly one-half of the amounts in the following 1955 Married Filing Joint schedule.]

From 1950s Tax Fallacy

Winning The ‘50s - At least in the 1950s, everyone had skin in the game. If you had taxable income of under $32,352, in 2010 dollars, your marginal tax rate would have been 20%. If you had taxable income of $250,000, in today’s dollars, your marginal tax rate would have been 47%. And if you had taxable income of over $1,000,000, in 2010 dollars, your marginal rate would have been between 78% and 91%. So is this what Obama wants? If so, he should change his slogan from “Winning the Future” to “Winning the ‘50s”, or something.

Nobody really knows what Obama is bloviating about, but just for the heck of it, let’s analyze whether the amount of personal tax revenues collected, as a percentage of GDP, was any higher in the 1950s than it is today. The chart below was derived from statistics published by the U.S. Bureau of Economic Analysis. According to the data, personal taxes, as a percentage of GDP, averaged 7.6% in the 1950s, and 7.5% between 2001 and 2010. So in that sense, Americans are paying a whopping 1.3% less in personal taxes than our grandparents, and great-grandparents paid back in the 1950s. I included federal government spending just out of curiosity. It turns out that government spending as a percentage of GDP, while only averaging 16.4% in the 1950s, has averaged 21.3% since 2001. So it appears that the percentage decline of 1.3% in personal taxes, which we are all enjoying today, is miniscule, compared to the unsustainable 29.8% spike in federal government spending. Perhaps Obama should have picked a different decade.

From 1950s Tax Fallacy

Although it may be true that in the single year of 2010, personal taxes declined to 6.2% of GDP, versus the 7.6% average of the 1950s, or by -18.4%; at the same time, government spending has skyrocketed to 25.5% of GDP, versus 16.4% in the 1950s, or by +55.5%. So in 2010, personal taxes declined by -18.4%, while federal spending increased by +55.5%, compared to 1950s averages. So what’s wrong with this picture? Should we just adopt the 1950s tax brackets and then jack the rates up by 73.9%?

Back to the point of Obama’s tirade: Although in terms of tax brackets, it would appear on the surface that we are paying lower taxes today, than our ancestors who worked in the 1950s, there is one additional item to consider. Without getting into all the other taxes we pay today, which either were not around or at least not as burdensome in the 1950s (i.e. federal fuel taxes, airline ticket taxes, state and local taxes, and such), FICA payroll taxes were much lower in the 1950s compared to today.

Is the FICA tax a tax?

We know that the Federal Insurance Contributions Act (FICA) is codified at Title 26, Subtitle C, Chapter 21 of the United States Code. And that the FICA tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare —federal programs that provide benefits for retirees, the disabled, and children of deceased workers, etc… And we know that the amount that one pays in payroll taxes throughout one's working career is indirectly tied to the social security benefits annuity that one receives as a retiree. Yet while some folks claim that the payroll tax is not a tax because its collection is tied to a benefit, the United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security. Add to that the fact that the Trust Funds have been looted, and it is clear that the FICA tax is really just a tax. My basic rule of thumb is that, if it comes out of my paycheck, and goes to the federal government, it’s a tax.

In 1950, the Old-Age, Survivors, and Disability Insurance (OASDI) tax rate levied on both employees and employers was just 1.5% of the first $3,000 in wages ($3,000 in 1950 was equivalent to $27,451 in 2010). And by 1959, the rate had increased to 2.5% of the first $4,800 in wages ($35,866.96 in 2010 dollars). There wasn't any Medicare tax in the 1950s, as it was not implemented until 1966. Historical FICA tax rates are shown below.

From 1950s Tax Fallacy

As most of us working today are aware, beginning in 1990, the OASDI tax rate was increased to 6.2% of the first $51,300 in earnings, and the wage base has increased each year since by increases in the national average wage index. Also beginning in 1990, Medicare taxes were assessed at the rate of 1.45% of the first $51,300 in wages, and the wage base was stepped up to $125,000 in 1991, $130,200 in 1992, $135,000 in 1993, and has been levied without earnings limitations since 1994. Most of today’s workforce is also aware that since 2009, the OASDI rate of 6.2% has applied to the first $108,600 in wages, while the Medicare tax of 1.45% has been levied without limit (see chart below). By the way, Medicare taxes are scheduled to increase in 2013, for those who are not paying their “fair share” today.

From 1950s Tax Fallacy

So if we add social insurance taxes, since they are a tax, to personal income taxes, and compare the total amount of taxes paid in the 1950s to the present, are taxes still lower today? Well, per the chart below, the average amount of combined social insurance and personal taxes paid in the 1950s was 9.7% of GDP, versus an average of 14.3% for the decade ending in 2010. So it turns out that the total amount of taxes the federal government collects from us today are 47.4% more than in the 1950s. This might explain why many of us feel as though we are taxed enough already. But how would we know without first checking the facts? What is clear, without question, is that taxes are a heck of a lot lower today, than they were when they reached a record 17% of GDP in the year 2000. Also of note is the fact that government spending only represented 18.8% of GDP in the year 2000, or about the same as it was in 1969, versus a disgraceful 25.5% in 2010.

From 1950s Tax Fallacy

The Point: The fact that we are paying 6.2% in Social Security taxes on the first $108,600 of earnings today, whereas the rate was only 2.5% of the first $4,800 in 1959; and that we are paying an additional 1.45% in Medicare taxes on an unlimited amount of earnings today, whereas the tax did not exist in the 1950s; means that the amount of taxes paid by individuals, as a percentage of GDP, is much greater today than it was for those living and working in the 1950s. In fact, the total amount of taxes Americans pay today is at least 47.4% greater than it was in the 1950s. It’s also interesting to note that the amount of taxes paid in 2010 was exactly the same, as a percentage of GDP, as paid by those who lived and worked in 1970 (see the chart above, data here). So what’s the bottom line?

The bottom line: If Obama wants to go back to the 1950s, let’s go. But it’s not going to work unless government spending follows suit. So cut government spending from 25.5% of GDP, back down to 16.4%, and you’ve got a deal. But I'm afraid that short of passing the Monetary Reform Act, the next step forward is another shellacking. But that’s a given. America lacks leadership. Either you’re hot, lukewarm or cold, but attempting to divert attention away from the real problem, excessive government spending, towards some make-believe injustice since the 1950s, is so far from the mark that it’s almost incomprehensible. As I see it, there are two problems with Obama’s sound bite. First of all, 51% of the current American workforce doesn't pay any income taxes at all (i.e. not paying their fair share). Secondly, the injustice du jour lies not in the amount of taxes being collected, but rather in the amount of money the federal government is squandering. It would appear that with Obama, all roads lead to Athens, or is it Rome?

"It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus." ~John F. Kennedy, Nov. 20, 1962, president's news conference

References:

Data Tables

http://www.bea.gov/national/nipaweb/SelectTable.asp#S2

http://www.ssa.gov/OACT/ProgData/taxRates.html

http://findarticles.com/p/articles/mi_m2893/is_4_26/ai_n25340358/

http://www.taxfoundation.org/publications/show/151.html

http://www.dollartimes.com/calculators/inflation.htm

Related:

Keeping It Real: Obama's $250,000 Fallacy

Tax Reform 201: The Optimal Tax Rate

Obsolete Government Programs, Part 1 | FICA

Social Security: A Breach of Trust

The Social Security Bust Fund