Wisconsin's REAL cheese

OK so in case you've been living in your car like lots of foreclosed former-homeowners, you've heard something about some stuff going on in Wisconsin. You've probably also heard about how it's all because of those greedy, shiftless state workers and those manipulative, duty-shirking Democrats all cohooting to try to bring the state to its knees. (to what end, we're not really sure, but that's not really important - all that really matters is that Glenn Beck can draw a chalk line from a librarian in Wisconsin to the Muslim Brotherhood in Egypt so they must be really bad)
So - here's what I see.  There are two really big, histrionic charges hurled routinely at the left from the right.  First, that lefties are all about enabling the lazy and unwilling to take personal responsibility for the consequences of their actions. And second, that the left aims to bring democracy crashing down and replace it with a socialist nightmare where everyone has to share the same pool of government-told-ya stuff. All backed up with "fiscal responsibility" banners.
Let's now look very briefly at the bottom line of the dispute in Wisconsin.  Leaving aside the fact that none of the arguments are legitimate because the "budget crisis" was caused in large part by Governor Walker and the GOP granting huge tax breaks to corporations and the wealthy and that the actual goal is just elimination of collective bargaining, it comes down to one major rallying cry: the state is "broke" (see the post called "Government is NOT a Business") and can't afford its pension plan or benefits for workers. 

Putting those two together, we get this -
1) the right is the side of personal responsibility, the left wants no consequences for anyone's actions.  Well folks, the pension fund is a little short because the government of the state failed to fulfill its obligations to invest and protect the money that was put in the fund by the employees by way of deferred compensation. This means that part of the 'salary' of every state worker was $X that would be paid later - that's how WI pension works. So the state dropped the ball and borrowed money from the pension funds, and now that they're busy cutting everything and everyone in sight, state workers are choosing to retire rather than get screwed by this short-sighted blame-mongering. So suddenly what we're seeing is that the workers didn't fail - the state government did.  The consequence of that should be the political fallout of having to raise taxes (at least on the wealthy) to pay for THEIR OWN mistakes. So what is the GOP doing in the face of facing personal responsibility? Shifting blame to the people who've worked for the government for 30+ years instead of 2.  Klassy folks. Way to stay on message.
and
2) the right is the defender of democracy, where everyone succeeds or fails on their own, the left is the side of pooled resources and socialism and everyone having to depend on the government for everything.  And yet, again, because of government mismanagement, the GOP is fighting tooth and nail to hang the workers out to dry, demanding that they balance the budget for everyone else by surrendering their rights to negotiate in the marketplace in order to pass on the aforementioned tax cuts to the rich.  And, well, to everyone, since apparently the entire future of all of Wisconsin hangs in the balance, depending on state workers to sacrifice for the benefit of everyone else. Wait - if I knew how to make a head-shaking emoticon, I would put one here.  So..... the workers who bargained for their free-market compensation should graciously take a dive so that you can give more money to someone else, but it's the LEFT that's all about socialism?  These people work for their money, bargain for their benefits, and yet are being villainized for not putting more money into someone else's pocket? Once again - way to stay on message.

Hardly revolutionary news, but the GOP are lying to America's face and they aren't even really bothering to try to do it well anymore. Kind of like the guy who comes home with a hooker and says he's completely faithful.  What actually concerns me is how many Americans are saying "well OK then, your sister can stay a few weeks, just til she gets on her feet."

GOP Tax Policy and Other Fairy Tales

OK so I know this is a little out of date now, but the point remains worth making.

Let’s talk about the Republican economic hypocrisy. This could be a long litany of the many examples of this (increasing the deficit during every administration since Eisenhower, and by exponentially more than the only 4 Dems to increase it at all since Wilson (in 1913) comes to mind), but no, I just want to mention the recent “taxes kill jobs” obsession that pervades despite all the evidence to the contrary. The tagline of the 2010 election was “jobs jobs jobs” and the causal “tax reduction” cry.  The story goes like this: business aren’t hiring because of “tax uncertainty” so the economy remains sluggish and all those multinational corporations are sitting on obscene piles of cash because they’re just terrified that they might have to face a tax increase – ANY tax increase.

            Let’s start with that statement just by itself and take a whiz-bang tour through federal taxation.[1]

1.      The “tax rate” is actually the marginal tax rate. It’s not the rate that a payor actually pays, it’s the rate applied only to the income in that bracket. So if your marginal tax rate is 20% (I’m making up numbers) because you made $100,001 last year and the 20% tax rate is for the “$100,000 - $150,000” bracket, then you pay 20% tax on that $1. Not on $100,001 -- on $1. Below that you pay exactly what everyone else does on that money. Thusly:

a.       $0 - $20k               5%

b.      $20,001 - $50k      10%

c.       $50,001 - $100k    15%

So if you made $100,001, your taxes will be:

      20,000*5%=1000

      30,000*10%=3000

      50,000*15%=7500

      1*20%=0.20

Total: $11,500.20  (or 11 ½% of your taxable income)

(This is the basic model of how income tax works. Corporate taxes are understandably much more complex, but let’s start there)

Which is the next point. This is NOT “I made $100,001 last year so I pay tax on that.” No you don’t. No one does, and they shouldn’t.  Because when you do your taxes, you take either a standard deduction or itemized deductions.  And the truth is that the higher your tax bracket, the greater percentage of your income is deductions, owing partly to the things that you may be doing with your money (charity, employees, health care, etc.) and partly to the fact that the wealthy generally have lawyers, accountants, and/or tax advisors who are skilled at shuffling income to reduce taxable income. So of that $100,001 you made last year, you may be reporting something like $75,000 in taxable income (again – making up numbers).  So not only are you NOT actually PAYING the 20% tax rate on your income, you’re not paying ANYTHING on a portion of that income to begin with. 

This is even more significant for corporations who, despite endless weeping and wailing and gnashing of teeth over the high corporate tax rates, almost never pay those rates on anything, and often pay nothing at all due to the multitude of loopholes and deductions available.

            Which brings me back to my initial point.  The GOP spent vast sums of corporate money in 2010 to convince people that companies weren’t hiring because the Bush tax cut issue was unsettled. Let’s put aside the absurdity of that for a moment (companies hire who they need to do what they need when they need it based on demand and economic outlook, not based on a largely fictional tax rate) and look at the reality of the landscape.  Lo and behold, the GOP may actually be right about this one. But not for the reasons they’ve been peddling.  Companies may have actually been delaying hiring decisions (in small part) pending the tax package outcome, but consider this: nearly[2] all of the costs of having employees are deductible.  So, in fact, the tax rate has little or no effect on hiring at all, since almost nothing a company pays to an employee (or for them) is taxable. But also consider the impact of a REDUCED tax rate on that same dynamic. The deduction you get for payments to employees is reduced, so the benefit of hiring a tax deduction is diminished.  So what the GOP says is “if they have to pay more taxes, they won’t pay employees” but what businesses are looking at (whether they admit it or not) is “if the tax rate goes UP, the benefit of the deduction is more, but if the GOP cuts the tax rate DOWN, then I won’t get as much of a benefit.”

            Now, let’s get into a little more advanced stuff. The capital gains rate, which was slashed under Bush and is on the table for an increase now. Villainized, of course, as stifling investment. Capital gains tax is paid on investment income like interest or increased value of assets you sold (subject to lots more exclusions, but that’s the idea).  Put them together, and the picture becomes: increase the tax (and thus decrease the incentive to buy assets hoping they will generate income) and increase the tax on taxable income (thus incentivizing deductions) and you’ve got a double-edged sword creating double-edged incentives to hire employees rather than sending money off-shore to foreign banks and investments. 

            So where does that leave us? Besides, of course, with a GOP that has shown absolutely zero interest in doing anything related to jobs or the economy two months into their reign.  It leaves us with the Citizens United decision granting unfettered influence over elections to companies who want to hang onto their cash, send jobs overseas, cut benefits to workers (and hire illegal immigrants for less than that – Smithfield Pork, I’m looking at you), and tell you that it’s all the fault of the people trying to stop these very behaviors by using the tax system to motivate positive behaviors. 

Which is, after all, what tax deductions are all about in the first place. They’re a way to encourage socially beneficial behavior without requiring it. So higher tax rates on imports, on American companies’ overseas operations, and closing loopholes that allow companies to earn billions in profits by taking advantage of American society while paying a fraction of the cost of maintaining that society have always been relevant and proper uses of the tax code.  Unfortunately the GOP has been manufacturing the Kool-Aid that some Democrats seem to be drinking.  And certainly it’s been sold to the public so forcefully that a significant number of Americans seem to be believing this plot.  (Remember? The one that says a 3% increase in the income tax rate kills babies jobs?

            I am reminded of the first tenant of film and TV: suspension of disbelief.  Convince your audience that it’s more fun or beneficial to just lose themselves in the story, and they will follow along with you as you introduce implausible decision points and have bored housewives suddenly become super-spies. I see a similar dynamic here using the economic fear that pervades our country right now. People are looking for a handle on incredibly complex and dynamic situations, and the GOP is right there with a simple, bumper-sticker-worthy answer; it’s the taxes, stupid!  In the frightfully effective strategy of Glenn Beck, they’ve concocted an “C-B = A (and don’t look at anything else” formula that, in isolation, appears to at least make sense.  Even if it’s only a tiny portion of the story and told backwards.

{In the interests of full disclosure, I’m not fully convinced that the tax cuts affected hiring at all either way, but I write this to inject a framework into the conversation and at least introduce the idea.  So please, by all means, disagree. But don’t do it just because of the aforementioned weeping and wailing and gnashing of teeth, do it because you considered the actuality of the policy and business motivations and other factors. Thank you, and good night.}

---

[1] I wish to thank BoJack (if you need to know, you know) for teaching me everything I know about tax.  Which may amount to 1/10 of 1% of what there is to know, but considering I knew absolutely nothing before, I owe my knowledge to him.  However, he is not to blame for what I’ve done with that knowledge. All of the facts about operative tax policy are to his credit, but he is not to blame for my opinions about how to use that policy.  Kthxbai.

[2] I say “nearly” and “almost” just to hedge bets and allow a margin of error.  I think payroll taxes paid on employees are not deductible, but I’m not certain about that, and even so, they amount to something like 4% of a portion of salary and are not at issue in the Bush tax package. (BoJack: if you read this, could you clarify the deduction issue?)

Tea Party Feudalism (11/16/10)

            I think it needs to be said that the Tea Party is not only badly out of touch with the reality of America and its own preferred candidates, but they are also desperately deluded about the reality of their own positions.  If Tea partiers spent a fraction of the time considering the policies they advocate as they do on their costumes, some might see that they are not only supporting jaw-droppingly unqualified candidates, but also some very un-American policies.

            The Tea Party is not advocating a return to “traditional American values” in the Disney-fied sense of the oil paintings and great orations related to us in 6th grade history class (if, indeed, they still teach history). They are advocating a return to feudal England where the Haves have everything and the Have Nots die in the street crying “God Save the Queen.”  The real difference? Miniscule and diminishing.  American feudalism is rooted in an increasingly unbalanced “free market” where the brochure says anyone with gumption can succeed and hoard resources unto themselves and their heirs.  The English system, on the other hand, relied solely on family inheritance and ownership of money-making capacity. But the outcome is the same.

            The semi-secret catch in the free market myth is something felt more acutely by minorities, but increasingly by the middle class: generational wealth tips the scales.  Sure, there are the occasional fairy tales of The Guy Who Made It with little more than a dream and some ambition, but these are rare enough to be made into movies (The Pursuit of Happyness, for example). Outside these exceptions – which provide a pointing-place for the Haves as proof that the system works (and therefore that they are better than you) – most Americans are slipping further and further behind.  Meanwhile, the Haves continue to gain, hoarding power at levels that make it possible to build their own advantages into the systems that are then sold to us as a “free market,” disguising the fact that it is rigged to accelerate the funneling of resources right back to the people who made the rules because they had the money.  

            Meanwhile the rest of America is losing resources to those upper echelons, creating a situation where people in the middle class are losing their homes, losing their savings, and being forced to sell anything of value just to stay afloat. This leaves less (if anything) remaining for heirs to inherit, reducing their position and resource pool – and thus reducing the resource pool of their own heirs.  This increasing disparity in generational wealth has been studied as a factor in racial equalization, but it now affects Americans across the board in record numbers.  And there’s no end in sight, as Republicans continue to amplify the American myth and accelerate the redistribution of wealth upwards via protective policies. Not the Land of Opportunity we like to write songs about and give seminars about in other countries.

            Enter the Tea Party. Interestingly enough, made up almost exclusively of Have Nots who are convinced they have made it, and funded by Haves who feed off the ignorance of these self-satisfied minions and continue to tell them that they have made it! They’re American success stories! Why? Not really sure – most of them are unemployed or retired, so the measure of “making it” is a little fuzzy, but hey ... it sounds nice.

            Dressing up in costumes and crying for a return to the age of slavery, oppression of women, wanton pollution, industrialist robber barons, and 16 hour/52 week work lives, Tea Partiers merrily avoid any element of history they didn’t see in the theme park of Colonial Williamsburg, where the actors playing colonists are protected by labor laws, minimum wage, lead-free paint, and health insurance. Y’know, for a society that likes to say “those who don’t learn their history are bound to repeat it,” we’re sure doing a lot more repeating than learning.

            When it comes to the American Dream, we have flirted with it at times (maybe best during the post-war era), but we clearly haven’t gotten it right yet. It may turn out that “live and let live” is anathema to human nature if the let-ees are too different from the let-ors.  Democracy and the great Melting Pot may fade away into an interesting blip on the EKG of political history.  But I’m not ready to throw in the towel just yet. 

            We may be a young country, but we are a deliberate country.  We didn’t slip into ourselves over centuries of war and takeovers and turnovers and coups; we invaded, we settled, we rebelled, and we designed ourselves a government. Maybe not from whole cloth, but certainly from the better scraps.  Like children are shaped by their parents but destined to shuffle loose, America was informed by her mother (England – for those who slept through history) but set out to forge her own path and drive her own destiny, taking the best and rejecting what didn’t fit our burgeoning self-image. 

            This is why it pains me to hear so many refusing to respect those principles that we developed or imported.  Like hippies who grew up to be conservatives like their parents, leaving the rebellious, free loving, revolutionary spirit behind like faded tie-dyes, we seem to be facing a tide of fear-driven regression from those idealized goals of our collective national youth: liberty and justice for all.  Not for just the white, the male, the moneyed and landed, the Christian, or the heterosexual. ALL. Everyone. All of us. “One nation, indivisible.” 

            Too many voices on the extreme right (Beck, Palin, Limbaugh, Gingrich) are preaching open, and sometimes violent, divisiveness.  With patronizing flattery and manufactured fear, they urge their followers to listen instead of think.  To take up arms instead of joining hands. To point fingers instead of finding solutions. And affirming that whatever unfounded, ignorant, hateful, fear-based opinion you’ve half-formed is the OBVIOUSLY correct/ patriotic/ reasonable/ intelligent/ whatever viewpoint (so don’t bother listening to those Lefty NoGoodNiks who want you to consider consequences or facts).

            I wonder – what would America be like if the founding fathers had embraced this ugly side of human nature, rather than designing a temperate, cooperative system?  I know, I know, they weren’t saints, the system wasn’t perfect, and we’ve made some terrible missteps along the way (Jim Crow comes to mind) and occasionally had some terrible outcomes, but isn’t that what growth is about? It’s not about popping from the womb with a PhD and a perfect soufflé in hand, it’s about falling down and getting back up. It’s about burning your hand on the stove and never touching it again.  It’s about learning from your mistakes and not repeating them.  Where did we lose sight of this? When did we, as a society, decide to throw history to the wind and head breakneck down the perilous and damaged road behind us instead of looking forward and thinking about what we could do better?

            So how about we try the real old-fashioned way of doing things. Let’s stop sniping and digging in our heels to get our way, and actually engage in the debate.  Bring the ideas, recognize that there will be intractable disagreements, and DO THE WORK! Wrestle with the conflict, discuss the differences, and take a legitimate vote. By all means – get worked up! Get mad, get irritated, but USE that to develop your views and ENGAGE in the process. Because that’s where we learn where the weaknesses and failings of our best-laid plans lie.  I will refer readers (reader?) back to my first post regarding social disconnectivity here. Since that’s really why I write these things; so I don’t have to repeat myself.

            Let’s consider what that flag that some people have gleefully wrapped themselves in really means. How this country actually came to be.  Et Mesdames et messieurs, it did not come on a silver platter of handholding and unicorns. It came in the sweltering humidity of a pre-air-conditioning Philadelphia summer. It came with hours and hours of arguing, debating, discussing, handwringing, and disappointment.  It came with a large dose of egos and apocalyptic predictions as well. And yet, the world did not end when someone’s idea got voted (or shouted) down. It has not ended in the 200 years since, despite innumerable other ideas being voted and shouted down.  And whoever you are, if your idea doesn’t make it, don’t be afraid – the world will not end then, either. Even though I admit, I see the harbingers of doom in the increasing valuation of thoughtlessness, selfishness, and intransigence.  And the disturbing number of candidates willing to run on “I’m not that smart and I have no experience, but I’m really, REALLY mad and really REALLY sure I’m right about everything!” platforms.  We used to respect educated, experienced professionals.  Now we call them “elitists” and “establishment” and villainize them for our own lack of understanding and unwillingness to learn.  I wouldn’t hire someone with no experience to build my house or run my business. Why would I hire them to steer my country?  I’m just sayin’.