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The Tired Donkey

Cocktails, Apple conundrums, taxes and other assorted stuff

Tired Donkey

The Tired Donkey

Sitting Donkey
The Tired Donkey blogs about cocktails, ways to get the most out of your Mac at home, work, college . . . wherever. He used to write about the unending abuse suffered by the 51% of Americans who actually pay the federal income tax. But this became too depressing, and, frankly, no one wanted to read it.

Nevertheless, if you came here looking for the Tired Donkey's brilliant analysis of our dim-witted tax system, you can still find his earlier posts. Just check the archives or the
Site Map.

Note: The Tired Donkey is not advertiser supported, and he gets no benefit from any product mentioned on his site.

The Tired Donkey

Archives

Tax Stat Analysis

Rethinking Our Tax System




donkey-1
Despite his great wisdom on the matter, the Tired Donkey swore off writing about taxes long ago because (1) of the thousands of visitors his blog gets every month, about two of them look at his tax-related posts, and (2) writing about our tax system became so depressing that the Tired Donkey nearly expired. Unfortunately, the recent brouhaha over the debt ceiling and a run of staggering stupidity at the New York Times is forcing the Tired Donkey to come out of tax retirement. So here we go. The Tired Donkey will try to make it brief.

On the day after the announcement of the debt ceiling deal, the New York Times’ editorial page, under the headline “
To Escape Chaos, a Terrible Deal,” opined that the Democrats “held out for a few basic principles.” Among these, the paper observed, was the principle that there “must be new tax revenues in the mix so that the wealthy bear a share of the burden . . .” Hmmm. A share of the burden? Let’s check that out.
Read More . . .
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The Tired Donkey Returns!

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The Tired Donkey apologizes to his loyal readers for his long absence; he was on vacation experiencing extraordinary natural beauty and sad reminders of how small men can be even in the service of great causes.

Despite his wonderful vacation, the Tired Donkey returns to his burden with a heavy heart as he appears to be failing miserably at his appointed task. No sooner had the Tired Donkey re-installed himself at his desk, than he got an email from one of his donkey friends which said, “WARNING: THIS WILL DRIVE YOU CRAZY.” Sadly, the Tired Donkey’s friend was correct for the email contained a
link to a story with this headline: “More Say Low-Income American Paying Fair Share of Taxes.” Good heavens!

The short story is this: in 2008, 32% of our population thought that low-income American’s paid their fair share, but today that number is 41%. But it gets worse: a full 39% of the population believes that lower-income Americans
are paying too much. Now, the Tired Donkey is no mathematician, but he is willing to go out on a limb and say that $0 paid in federal income taxes is not “too much” for anyone.

Digging deeper into the numbers, however, the Tired Donkey finds reasons for hope. When the Tired Donkey combines the percentage of Americans from 2008 and 2009 who think low-income citizens pay their fair share or too much, he finds that 83% land in these categories in 2008, but only 80% land in these categories in 2009. This means that the overall percentage of ill-educated muttonheads decreased by a full 3%
in a single year! Good news, indeed. And what happened to this 3%? Well, you can see for yourself in the chart. They moved into the “paying too little” category. The Tired Donkey takes it all back: he is feeling jubilant! And Gallop Poll people? The Tired Donkey thinks you blew it on the headline. You should have flogged this piece with the following: “Fewer Americans Are Idiots This Year Than Last.” That is real news.
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George W. Bush: Donkey Enemy

Freeloader with Bush Money
The Tired Donkey knows that most of his readers consider themselves to be conservatives, whatever that term might mean today. The Tired Donkey himself—as he has pointed out elsewhere—is a Libertarian and loathes the Democrats and Republicans with equal vigor. The Tired Donkey is not happy about this. He would like to have one of the major parties put forward a presidential candidate he could vote for. But that hasn’t happened since the Cold War ended. This is not because the Tired Donkey is picky, it is because he simply will not cast a vote for a Myrmidon Donkey, a term that includes virtually every Democrat and Republican who runs for national office. And George W. Bush was among the worst. The Tired Donkey does not say this to anger his readers. He values his readers. But he wants them to be armed with the truth. So let’s take a look at the truth.

A good measure of progressivity takes the tax share of a given income group and divides that by the same group’s income share (see
here for a more complete explanation). Using this system, a flat tax would arrive a ratio of 1 for any given income group because that group’s income share would exactly equal its tax share. For instance, a group that earned 15% of all income would pay 15% of all taxes. Ratio’s of less than 1 for an income group indicate that they pay less in taxes than their income share; ratios of greater than 1 indicate the group pays a higher percentage of taxes than their income share. Examining the first five years of the Bush administration using this measure, the ratio got worse for every group earning more than $200,000 and better for every group earning less. And these numbers do not even take into account the redistributionist zeal of the Bush administration as evidenced by the Medicare Part D horror. Donkey friend? Not hardly.

Donkey Carcass
But, you may validly ask the Tired Donkey, the Bush administration cut our taxes; what about that? Please. The Tired Donkey is no fool. Despite what you may believe, the numbers here speak for themselves: in inflation-adjusted dollars, the federal government collected more taxes from us in 2007 than any government has ever collected from its people in the history of the world. As the Cato Institute concludes in its brief explication of this fact, “George W. Bush will go down in history as the biggest taxer and the biggest spender ever.” The Tired Donkey urges you to consider this next time you find yourself tempted to believe that one of the major parties has any conception of fairness. They don’t. In fact, as a lion is to a gazelle, so is a federal politician to a donkey; their DNA compels them to attack and then feed until there is nothing left but a stripped carcass.
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Freeloading: What a Deal!

Freeloaders with Money
The Tired Donkey is disgusted. Unfortunately, he feels this way a lot. Over the weekend he read a paper by Andrew Chamberlain and Gerald Prante which you can find here. This paper does a very careful comparison between the amount of money the government takes from people and the amount of services they get back from the government in return. It is enlightening. In a bad way.

First, the Tired Donkey wants to point out that the statistics he sets out below (from 2004—things have only gotten worse since then) take into account
all government taxes and spending, both federal and state. The mind-numbing differences between what people pay and what people get, however, are caused primarily by federal taxes and spending alone. This is so for two reasons: (1) state taxes are much less progressive in general than federal taxes, and (2) donkeys use a lot more state services and therefore get more value out of them (roads are disproportionately used by donkeys because donkey’s need more cars to carry their loads; donkeys educate their children and so use a disproportionate share of public education funds).

Now, before the Tired Donkey reveals the statistics, he wishes to make one other point: these statistics are from the era of the Bush administration which was treated by many donkeys as if it were a friendly administration. Take it from the Tired Donkey, the Bush administration was no friend to the donkeys. In fact, the Bush adminstration was the biggest donkey enemy in the history of American government as the Tired Donkey will reveal tomorrow. They just hid their perfidy behind donkey rhetoric, and the Tired Donkey bets many of you fell for it. Wake up! The government—whether in the hands of irresponsible Republicans or the hand of irresponsible Democrats—has an interest in one thing: getting votes. And this means they must court the Freeloaders. And how do they do this? By increasing the load on the most productive donkeys, of course. All of them—Republican and Democrat alike—are
Myrmidon Donkeys. So let’s see how bad it is:

In 2004, the top 20% of households got $0.41 for every dollar they paid in taxes. The bottom 20%? Well, they got a much better deal: they got $8.21 from the government for every dollar they put in. No wonder this donkey is tired.
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Lingusitic Shenanigans

Geithner Reaches for Donkey Money
The Tired Donkey is interested in language, and he must wrestle with it often in his day-job. He is forced to spend a few days every so often in Washington talking to Myrmidon Donkeys and—as is more often the case—their just-out-of-college aides. In this environment, the side that seizes the linguistic high ground is usually the side that wins the day, so the Tired Donkey spends a lot of time considering what to call things. Unfortunately for all of us, the Freeloaders—working through their Myrmidons Donkeys on Capitol Hill—carried the day on tax language decades ago, but that does not mean we should not be sensitive to its ever-present distortions. The Tired Donkey will now dispense some wisdom on this subject.

In an
article earlier this week in the New York Times, Jackie Calmes and Carl Hulse discuss Democratic opposition to various provisions of the Obama budget proposal. They highlight the opposition of creepy-looking Senator Max Baucus (D-MT) and Representative Charlie Rangel (D-NY) to the president’s proposal to limit tax deductions for the wealthiest 1.2% of donkeys; Myrmidon Donkeys Baucus and Rangel cite a potential drop in charitable giving as their reason. The Tired Donkey is skeptical about this “reason” and finds it more likely that these Myrmidon Donkeys enjoy the patronage of some rich Steadfast Donkeys who don’t want to pay more taxes, but he will have to explore this suspicion in more detail on a later date since his purpose today is to discuss the language of taxation.

Reading on, the Tired Donkey came across this curious sentence regarding the strange Myrmidon Donkey opposition to more taxes on rich donkeys:

The next day, however, Mr. Geithner* staunchly defended the proposed limit, telling the House Budget Committee it would affect few taxpayers and still let them take deductions at the same level as in the Reagan years: a 28 percent rate, nearly twice what most taxpayers can claim.

What, you may ask, is wrong with this sentence? The Tired Donkey will tell you. It implies that under the proposal, rich donkeys will be getting a real bargain. “Good heavens! Deductions at twice the rate most taxpayers can claim. What a deal!” Wrong. The Tired Donkey is tempted to use a prison sex metaphor here, but he will refrain because he is aware that he has some younger readers. Instead, he will give it to you straight, just like the tax code does: in 2006—the latest data the Tired Donkey can find (
here)—the rich donkeys Myrmidon Donkey Geithner is referring to paid 39.89% of all income taxes collected by the federal government. Yes, you read that right: 39.89%. The highest marginal tax rate is what applies to the vast majority of these payments, and that rate was 35% in 2006. Myrmidon Donkey Geithner may consider it a deal to pay taxes at a 35% rate and only get deductions at a 28% rate, but the Tired Donkey has a different term for it. He calls it getting the shaft.

*Tired Donkey Note: Mr. Geithner is Secretary of the Treasury and a
tax cheat of some renown; he may very well be the Queen of the Myrmidon Donkeys.
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The Tired Donkey Urges You: Get Married and Move Away from Mississippi

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The Tired Donkey endorses The Tax Foundation, “a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937.” Although the foundation is staffed by economists, it is not dismal at all, a fact that may be surprising to you but was not at all surprising to the Tired Donkey. You see, the Tired Donkey’s father was an economist, and the Tired Donkey has a soft spot in his heart for their science. He recognizes that he may be alone in this. But the Tired Donkey digresses; he does have a point to make today and will now proceed with making it.

In a blog post several years ago, the president of the Tax Foundation,
Scott A. Hodge, provided us with a wealth of information regarding “non-payers.” In case this term confuses any of the Tired Donkey’s readers, “non-payers” is a word that non-partisan, non-profit organizations use to refer to Freeloaders. Among the many facts in the article are the following (which do not take into account the 15 million households and individuals who file no tax returns at all):

--65.7% of all
head-of-household filers are Freeloaders;
--33.1% of all
single filers are Freeloaders (and they make up 42.2% of all filers);
--21.5% and 21.6% respectively of
married-filing-jointly and married-filing-separately filers are Freeloaders.
--43% of all filers from Mississippi are Freeloaders.

These facts, the Tired Donkey submits, speak for themselves. Please: get married and
move away from Mississippi.
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Magical Bearded Gnome Declares Reaganomics Dead

Reisch with Chuck Mod
Robert Reich, Magical Bearded Gnome and former Clinton Administration Secretary of Labor, declared on the Marketplace Morning Report today that Reaganomics is dead. It has, apparently, been supplanted by Obamanomics. Magical Bearded Gnome Reich is crafty with his use of statistics, but the Tired Donkey urges you not to be fooled. Magical Bearded Gnome Reich uses two faulty assertions as his central thesis: (1) that the Reagan tax cuts of 1987 began a period of relative wealth transfer to the already-wealthy at the expense of the poor and middle class, and (2) that deregulation is bad. The Tired Donkey disagrees with both, and he will now explain why; what he is about to tell you will make some of you mad. Too bad.

President Reagan’s policies which both flattened the tax code and championed deregulation were proper and ushered in a long era of prosperity. Unfortunately, the people who championed Reagan’s ideas after he was gone were idiots, and
—as idiots often do—they carried things too far. There was too much regulation in the 1970s. The Tired Donkey can’t even locate a Stockholm Donkey who argues otherwise. The problem came later when dim-witted Republicans began arguing that constant deregulation is a good thing, an idea so dumb that only people running for elective office could champion it. Allow the Tired Donkey to state the obvious for a moment: too much regulation is bad and so is too little. That is a piece of why we are in the mess we are in right now. But there is another piece to this puzzle, and the Tired Donkey will now return to the tax question.

You may find yourself asking, “Tired Donkey, if Magical Bearded Gnome Reich is wrong, what did cause the wealth transfer and the terrible economic state we are in right now?” Here is the answer:
changes in the treatment of capital gains. As you can see at the link, in 1997—during the Clinton administration—the capital gains tax rate changed dramatically. Prior to 1997, capital gains were taxed as about the same rate as other income; after 1997—particularly for donkeys who made enough that most of their income was taxed at the highest marginal rate—the gap between long term capital gains taxes and the highest marginal tax rate was as high at 19.6%.

Now donkeys are not idiots, at least not most of them. So what did they do? They began shifting all the income-making activity they could into the stock market. And they were willing to take big risks to do it because a 19.6% tax gap can cover a lot of risk. This activity led to (1) the wealthiest of donkeys being taxed at rates much lower than the less well-healed donkeys; (2) the incredible stock runs of the past ten years; and (3) the long-term trend of the rich donkeys getting richer (which—were it not caused by stupid tax polices that messed up the country—would be fine with the Tired Donkey). And so—at the risk of alienating his readers—the Tired Donkey will once again state the obvious:
a tax incentive to take obscene risks in the stock market combined with deregulatory zeal beyond all reason will lead to disaster. So here we are. And here is what is going to make you mad: the Tired Donkey declares that capital gains taxes need to be raised at the same time as the Freeloaders begin contributing to this country again. Don’t like it? Send the Tired Donkey an email; there’s a link at the bottom of the page.
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The Tired Donkey

Sitting Donkey
The Tired Donkey blogs about cocktails, ways to get the most out of your Mac at home, work, college . . . wherever. He used to write about the unending abuse suffered by the 51% of Americans who actually pay the federal income tax. But this became too depressing, and, frankly, no one wanted to read it.

Nevertheless, if you came here looking for the Tired Donkey's brilliant analysis of our dim-witted tax system, you can still find his earlier posts. Just check the archives or the
Site Map.

Note: The Tired Donkey is not advertiser supported, and he gets no benefit from any product mentioned on his site.

The Tired Donkey

Archives