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Opinions are fun. My friends tell me I am someone with lots of opinions and that's fine since I don't get mad at others when they disagree with me. In this same spirit I am interested in hearing yours views as long as you are able to share your views without boiling over. I look forward to hearing from you. I tend to write in the form of short essays most of the time, but contributions do not need to be in this same format or size. Some of the content here will date itself pretty quickly, other content may be virtually timeless, this is for the reader to judge.
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Makers, Takers and a Little Truth
Posted at: Sep/28/2012 : Posted by: mel
Related Category: Behavior, Economics, Perspectives,
It all began just a few days ago. With the Obama/Romney Presidential race of 2012 in its final 60 days it is still pretty much a dead heat. It is unfortunate, but neither candidate has offered anything positive that you would want to follow. Instead, it has been a campaign of negatives and attacks forcing voters to decide who they dislike the least. It is also an era where there are no secrets because everyone carries a cellphone that has the technology to discretely capture any conversation and quickly broadcast it to the world. Republican Presidential candidate Mitt Romney recently got burned saying something “off camera” that exemplifies truth, fiction and maybe more than a little short-sightedness about America along with his view of Americans. For the sake of full disclosure, I should first share the full text of what Mitt Romney said to a group of potential campaign donors as reported on numerous new websites. “There are 47% of the people who will vote for the President (Barack Obama) no matter what. All right, there are 47% who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That, that’s an entitlement, and the government should give it to them. And they will vote for this president no matter what. These are people who pay no income tax. . . . 47% of Americans pay no income tax. So our message of low taxes doesn’t connect.” There is a lot of room to interpret these words. If your favorite media pundits are liberal, then it is clear that Mitt Romney is out of touch with “Main Street” America and is writing off a large block of our population as people who will not relate to him because they are dependent on entitlements. If you listen to the conservatives’, this is the harsh truth that no one until now has been willing to say despite what they truly believe. In this vein the conservatives suggest that the 53% are weary of contributing what they feel is more than their fair share to supporting the 47% dependent on those entitlements. As columnist David Brooks put it, “it’s the makers versus the moochers.” I’m not sure there is value to this argument, but I’m going to do a quick review of a couple of other countries. In India, only 2.8% of their population makes enough money to hit the threshold for paying taxes. That means that 97.2% of the Indian population doesn’t file an income tax return. In China, according to the state-run Xinhua newspaper, only 24 million of their 1.34 billion made the cut this year to pay income taxes. By my math, that means that 98.3% of Chinese don’t pay taxes! Between India and China that’s a roughly a third of all humanity. Actually, these numbers aren’t a good comparison to the United States. In the U.S. we report taxes by household while in most other countries taxes are reported for individuals. Nevertheless, the truth is that across most of Africa, South America and Asia, paying taxes is the unusual condition. In truth, I am very proud of my country and believe in a concept called “American Exceptionalism.” By extension, I don’t believe it is fair to compare America to other countries. Romney’s argument appears to be about tax payers versus non-tax papers. If his numbers are right, and it is all about taxes, he should win handily with that 53% on his side. I consider myself a fiscal conservative, but find his 47% number a gross over simplification of something much more complicated. Receiving public assistance is much more complicated and runs the spectrum from food stamps (now called Supplemental Nutrition Assistance Program: SNAP) to farm subsidies and mortgage tax breaks. • I make mortgage payments which are reduced by the benefit of a mortgage tax deduction. • I put gasoline in my car every week at a current price of roughly $4/gallon. The European price is nearly twice that and the international average is more than $5.10/gallon. I suspect the American price would be closer to the international price without large federal tax breaks to oil companies for the cost of exploration. • Many of the groceries my family eats are provided with the assistance of Federal Crop Insurance and other farm subsidies. • Like most people with an undergraduate college degree, it was subsidized by the state legislator substantially reducing the tuition cost. That is not the loans or grants I could have gotten, just the basis tuition price for an in-state resident. • There are also roads, schools and parks that my family and I take advantage of all the time that have been paid for and maintained with public money. This list could go on and on…….. Does my participation as someone who benefits from these programs categorize me as a maker or a taker? I suspect Mitt Romney’s focus was more on direct entitlement programs, even here I believe he over generalized. • There are roughly 48 million Americans currently receiving Social Security Benefits. More than 33 million of these are people who have spent years paying into the system and are now drawing benefits they were merely promised. The remaining groups include those drawing death benefits and disability benefits. • There are nearly 17 million Americans currently receiving unemployment benefits, these are payments they and their employer invested in and are only available for approximately 6 months. • Many Americans receive Medicare and Medicaid payments, but the numbers can be deceiving since more than half are retirees who have spent years paying taxes with the expectation that this would be there for them upon retirement. • 46 million Americans receive food stamps (SNAP) as assistance for their low income households. It appears that Romney’s view is more a blend of entitlement programs and the paying or not paying of income tax. Here is where I can rationalize his numbers, but I don’t believe in his conclusions. The Congressional Budget Office’s own report shows that only about 17% of households did not pay any Federal income tax last year. That’s a lot less than the candidate’s reported 47%. The other approximately 30% is people whose income is so low that they did not owe any “income tax” against their modest earnings. Here’s how it breaks down: • 28.8% of Americans last years had jobs and paid Social Security and Medicare taxes through payroll withholdings, but their pay was so low they did not owe any income taxes. • 10.3% are Elderly Americans who are living on modest pensions and drawing from their accumulated Social Security benefits. • 7.9% are Non-elderly drawing on food stamps, government subsidized medical and other programs for a subsistence based existence. This list gets me to Mitt Romney’s purported 47%, but it is still not a very realistic picture. With taxes on everything from gasoline, to property, to retail goods (sales tax), there is actually no one who is able to escape the proverbial tax man. Living in America is an expensive proposition. Roads, sewers, drinking water, schools, police, fire, national security, even the guy who picks up trash in the local park; all this cost money and all this is on the list of things we expect as Americans. I can still find plenty to be frustrated about. With a tax code that is many thousands of pages in length, the advantage goes to those with the lawyers capable of reading and writing all the fine print. The richest Americans pay a modest 15% on their income earned as dividends off existing wealth. The poorest of Americans receive various benefits sufficient to sustain their basic subsistence. In the middle is everyone else who must carry the burden that results from our tax code. Of course, there is also the concept of the Earned Income Credit (EIC), which effectively pays people when their income is at a low enough level; this makes no sense to me. Then again, maybe it is not such a burden. Living in American is an opportunity to be part of a special society and it cost money to keep all the parts and pieces polished and moving smoothly. Mr. Romney’s assertion that 47% of Americans are lost to his campaign is flawed on many levels. He presumes that we are all “going to vote our wallets.” Americans have a long history of being much more idealistic than this narrow view. There is no doubt that there is a percentage of Americans who are dependent on entitlements. I also suspect that he is right that these voters will vote for whoever is going to protect their entitlements, but that number is much smaller than 47%. He also has narrowly categorizes us into those who pay income tax and those who don’t. Clearly, most Americans are paying taxes, even if their income level is low enough that “income tax” is not being withheld. Whether income tax is withheld or not, virtually every other product or service we purchase has a tax associated with it that we can’t escape. If our system is flawed, it comes from the myriad of loopholes and deductions imbedded into our tax code that allow some people to appear superior to others and leverage the system. I have great respect for those who have accumulated wealth through innovation, creativity, hard work and risk taking. Most of us are employed thanks to the efforts of these special few. Using the results of the tax code to divide America into some narrow view of tax payers and non-tax payers is short-sighted and wrong. Nevertheless, it was political speak while cajoling a potential donor so I shouldn’t be surprised. The real question that Mitt Romney’s 47% comment asks is; are you a maker or a taker? In truth, between tax breaks for the wealthiest among us, social benefits for the poorest, and tax deductions for those in the middle…it may be more accurate to say we are all moochers.
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