Honesty and Ethics Ratings of Professions, 2008-2010

Here is an interesting chart from the Gallup Poll showing the public's perception of honesty and ethics by profession, and changes over three recent years.  It's worth nothing that Members of Congress are near the bottom, with car salespeople, both with very low ratings, even less than advertising practitioners, and in fact about half off what the people think of lawyers!  How can we have so very little trust in the people we elect?

Top economist Ken Rogoff warns of dangers in US debt fight

In this Q and A session, top economist Ken Rogoff tells it like it is.  My primary reason for posting this article is what he says about taxes, that they will have to rise, no way around it, but that the present income tax system must be overhauled, a flat tax instituted, with a high deductible for low income earners, and the scrapping of the "smoke and mirrors" that high wage earners use presently to avoid paying taxes. 

 

Top economist warns of dangers in US debt fight

(AP) – May 16, 2011

NEW YORK CITY (AP) — Kenneth Rogoff never intended to be a political actor. But since the financial crisis hit, politicians and pundits have evoked the Harvard economist's research when warning about the perils of borrowing too much.
Expect to hear his name even more between now and August 2. That's the deadline the Treasury Dept. has given Congress for raising the federal government's debt ceiling without risking a default.
Rogoff's research with fellow economist Carmen Reinhart found that recovering from a financial crisis often takes longer than anyone expects. Deep debts weigh on economic growth, making countries vulnerable to another blow. "It's like being a little more run down," he says. "It's easier to get sick."
Rogoff and Reinhart also revealed that when a country's debt surpasses 90 percent of its economy, the economy often turns sluggish. The U.S. is now at 96 percent.
These findings, written in the pair's 2009 best-seller, "This Time is Different: Eight Centuries of Financial Folly," have taken on a life of their own in political circles. When you hear Republican leaders like Rep. Paul Ryan say the U.S. needs to slash spending, they often quote Rogoff's work.
For his part, Rogoff doesn't believe the country's debt trouble can be solved quickly or through deep spending cuts. "You just can't do this overnight," he says. "If we tighten too fast, we would slam growth."
Rogoff, 58, served as the International Monetary Fund's chief economist for two years and as an adviser to John McCain's 2008 presidential campaign. In graduate school at the Massachusetts Institute of Technology, Rogoff befriended Ben Bernanke, the current chairman of the Federal Reserve.
In an interview with The Associated Press, Rogoff talked about the debt ceiling, mistakes made in the Fed's $600 billion stimulus effort and his obsession with chess. Here are edited excerpts:
Q: The U.S. hit the $14.3 trillion debt ceiling today, and now the Treasury is moving cash around to stave off default till August. What's that mean for markets?
A: I don't think it means anything immediately, but it doesn't seem like any way to run the government. I think they should raise the debt ceiling unconditionally, despite the fact that some reforms are desperately needed. When you're the world's biggest debtor there are repercussions when you take it to the brink and scare people (with the idea) that you just might consider a default.
Q: You're not in favor of the artificial cap, or debt ceiling, because it threatens creditors. But debt is still your biggest worry about the economy, yes?
A: The greatest concern at the moment is the huge debt overhang. All U.S. government debt, including state and local, is higher than at the end of World War II. But equally significantly, private debt (like mortgages and credit cards) is almost at its all-time high. If you combine the two, there's never been anything like it.
Q: What's the risk in the U.S. having so much debt? Other countries, like Japan, have larger debt burdens.
A: It doesn't automatically cause a crisis, but it certainly weighs on the recovery. Very roughly speaking, when a country has public debt over 90 percent of income, growth is about 1 percent lower for a very long time.
Q: A government can't increase spending as easily if it has too much debt, which you say makes a country vulnerable. How so?
A: That's the fundamental problem. You see it when a country loses tax revenues and needs to borrow money. They have wars and natural catastrophes and need to spend to pay for things, reconstruction, bridges. You don't want to be forced in the middle of a recession to raise tax rates (to pay for those things). That's a disaster.
Q: Politicians use your work to argue for deep spending cuts now to trim our debt. Do you agree?
A: If we tighten too fast, the economy will implode on itself. We didn't get here in two years, and we shouldn't try to get out of it in two years. But at the same time the idea that we can worry about the future later, that's false.

It's not just about cutting spending. The tax take probably needs to go up. We need to clean up the tax system.

Q: Where would you start?

A: I'm one of many economists who favor scrapping the current system entirely in favor of some form of a flat tax, with a very high deductible for low-income earners.

And you know what? The very wealthy would pay more. They pay less under the current system because there are these smoke and mirrors they can hide behind, all these deductions and all these ways of avoiding taxes.

Q: Your friend and former classmate Ben Bernanke has taken flak for the most recent quantitative easing program, known as QE 2. What do you make of the effort to keep prices from falling through pushing $600 billion into the economy?
A: I thought QE 2 was absolutely right when they did it. But the way quantitative easing works best is you announce a goal and then say you will do whatever it takes (to get there). If you don't have a blank check, it doesn't do much. Because of all the pushback from the Chinese, the Germans and Sarah Palin, they couldn't keep going. The Fed needed a free hand, and it doesn't have one.
A second problem was the Fed was not careful enough to tell the market clearly, "This is not going to solve all your problems." The biggest mistake they made was the suggestion that part of the way quantitative easing operates is through the stock market.
There are all these traders on Wall Street who said, "This means the Fed's got our back. The Fed is just determined to drive up the market."
Q: What's wrong with traders thinking that?
A: Well, the Fed doesn't have their back. The Fed cares about stable inflation. So the worry now is when these traders see that QE 2 is coming to an end, will they get really depressed and all their trades will unwind? That's the concern.
Q. At Bernanke's first press conference in April, he joked that playing chess with you was a "big mistake." Most people don't know you're an International Grandmaster. Did Bernanke ever ask for a rematch?
A:  No. I went cold turkey after leaving graduate school. I teach my children how to play (chess) but that's it. I'm completely addicted and need to guard myself from playing. I still think about chess all the time.
Q: Has your expertise in chess helped inform your work?
A: Chess teaches you to think about what the other person is thinking. Obviously, there are other ways besides chess to come to that. Chess is just a disciplined approach. At the IMF, we had crises in Argentina, Brazil, Turkey and Lebanon. And it helped to put myself in their position: "What are they thinking."

Copyright © 2011 The Associated Press. All rights reserved.

A "Crisis" Over Civics Knowledge

Three-quarters of high school seniors tested weren't able to show skills in the subject of civics.  So says a recent study by the US Department of Education, who administers the National Assessment of Education Progress test.

It occurred to me recently that our poor public education system is not rudimentary and inadequate just to raise new, uninformed consumers, but also to supply the military.  I'm going out on a limb hear noting that, the more educated one is, the less likely is going to fall for the military recruitment posters and shpiel.  I'm taking about grunts, the boots on the ground/deck people.  First, the more educated one is, the more options available to you for advancement, so the less attractive a tour is to you.  Second, you are just more likely to fall for their BS.  Public high school is the very beginning of the military-industrial complex at work. 

2,400 Wealthy Californians Pay No State Income Tax

Here is a story that will boil your blood.  Apparently it is too much to ask everyone to pull their share of the weight.

2,400 wealthy Californians pay no state income tax

That number has quadrupled over the past decade, report says

By Dean Calbreath

Originally published April 14, 2011 at 1:42 a.m., updated April 14, 2011 at 8:39 a.m.

As last-minute tax filers rush to the post office this weekend to mail their income taxes, they may take heart in the fact that the state's corporations are paying a little less in state and local taxes even though individuals are paying a little more.
This year, personal income taxes will represent 51.5 percent of all general fund revenues, compared to 42 percent as recently as 2003, according to estimates by the state Department of Finance.
Last year, California ranked 15th in the nation in terms of the size of its state taxes versus personal income. That's up six notches from the year before, when it ranked 21st.
One reason for that jump is that during the 2008-2009 budget crisis, Sacramento introduced temporary increases in the personal income tax, which expired in December, and sales tax and vehicle license fees, which are slated to expire in June.
But another reason is that individual income taxes are shouldering the burden for a decrease in corporate taxes, partly thanks to tax deals arranged in the budget crisis. Those deals will cost $1.5 billion in the upcoming fiscal year, $1.6 billion next year and $1.8 billion per year from 2013 to 2015.
So who's shouldering the burden for all this?
The study estimates that the lowest-paid 20 percent of Californians now pay 11 percent of their income on state income, property and sales taxes compared to 7.8 percent tax bill among the highest-paid 20 percent.
But in terms of income taxes alone, the biggest bills are going to people making $200,000 or more. Although they represent only 4 percent of the population, they make nearly 40 percent of the state's taxable income and as a result pay 61 percent of its income taxes.
But even though the official top tax rate in California is around 9.5 percent, or 10.5 percent if you make more than $1 million per year, few pay that rate. Statistics from the Franchise Tax Board show:

• 2,430 upper-income households paid no taxes and another 5,366 paid less than 1 percent in 2008, the most recent year for comprehensive data. Although that amounts to just 1 percent of the total, those numbers have risen sharply over the past decade. In 1997, only 579 people in the upper-income bracket paid zero taxes.
• Roughly half of the upper-income households paid state income taxes ranging from 3 to 7 percent.
• Only 4 percent paid above 9 percent.

During the 2008-2009 budget negotiations, tax changes were implemented requiring the poor to pay more in taxes by lowering the threshold for paying taxes and sharply reducing the tax credit for dependent children. In 2008, a family of four did not have to pay income taxes until their income was above $51,335. But in 2010, such a family has to pay taxes once their income hits $36,591.

The Bipartisan March to Madness, by David Stockman

 This is an excellent examination of the fix we are in and how we got there, by David Stockman, a former
Republican representative from Michigan, was the director of the Office of Management and Budget from 1981 to 1985.  Truth be told, we are on borrowed time, and should have addressed this march toward the cliff a long time ago.

"Washington’s feckless drift into class war is based on the illusion that we have endless time to put our fiscal house in order. This has instilled a terrible budgetary habit whereby politicians continuously duck concrete but politically painful near-term savings in favor of gimmicks like freezes, caps and block grants that push purely paper cuts into the distant, foggy future. Mr. Ryan’s plan gets to a balanced budget in the fiscal afterlife (i.e., the 2030s); the White House’s tactic of accumulating small-fry deficit cuts over the enormous span of 12 years amounts to the same dodge."

The Bipartisan March to Madness

System Failure: California’s Loophole- Ridden Commercial Property Tax

The link to "System Failure.." should be required reading for all elected officials in California, especially at the State level.  It's an excellent examination of the effects of Prop 13, more specifically it's failure due to loopholes.

From the summary:  
"As California faces a severe fiscal crisis at the state and local level, all aspects of our tax system, including the property tax, must be examined. This report provides an examination of the property tax system as it applies to commercial property, and provides significant new data which comes to two clear and related conclusions:

1. In virtually every county, commercial property is paying a far smaller share of the
property tax since Proposition 13 passed in 1978.

2. Commercial property is able to exploit huge loopholes in the law to avoid
reassessment upon a change in ownership as required by current state law.

The first part of the report, “Who Pays the Property Tax?” provides county-by-county data on the shifting property tax burden between residential and non-residential property since the passage of Prop. 13.....

The data is consistent throughout the state: in virtually every county in the state, the share of the property tax borne by residential property has increased since the passage of Proposition 13 in 1978, while the share of the property tax borne by non-residential property has decreased. Some examples: in Contra Costa County, the residential share of the property tax went from 48% to 73%. In Santa Clara County, the residential share went from 50% to 64%, despite massive industrial/commercial growth. In Los Angeles County, it went

from 53% to 69%. In Orange County, it went from 59% to 72%."

It's very interesting that, for some unexplained reason, there has been virtually no change in San Diego County.  Nevertheless, statewide there has been a significant shift in the burden of property taxes from corporations to individuals.  The basic premise of Prop 13 should definitely be preserved, at the same time the loopholes for commercial property desperately need to be closed.  See the link for the full report:
System Failure.....

Super Rich See Federal Taxes Drop Dramatically - What's Wrong With This Picture?!

It wouldn't take a rocket scientist or herculean effort to make our tax policy much more fair, just a real dose of logic and common sense. Unfortunately, neither are in great supply in Congress.  See my emphasis in large red type below.

 

Super rich see federal taxes drop dramatically

By STEPHEN OHLEMACHER, Associated Press

Sunday, April 17, 2011 at 2:24 a.m.

/ AP

WASHINGTON — .......And nearly half of U.S. households pay no income taxes at all.
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992.

Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.

The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? The nation's tax laws are packed with breaks for people at every income level. There are breaks for having children, paying a mortgage, going to college, and even for paying other taxes. Plus, the top rate on capital gains is only 15 percent.
There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.


.....The sheer volume of credits, deductions and exemptions has both Democrats and Republicans calling for tax laws to be overhauled. House Republicans want to eliminate breaks to pay for lower overall rates, reducing the top tax rate from 35 percent to 25 percent. Republicans oppose raising taxes, but they argue that a more efficient tax code would increase economic activity, generating additional tax revenue.
President Barack Obama said last week he wants to do away with tax breaks to lower the rates and to reduce government borrowing. Obama's proposal would result in $1 trillion in tax increases over the next 12 years. Neither proposal included many details, putting off hard choices about which tax breaks to eliminate.
In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.
Rep. John Tierney, D-Mass., has introduced a bill to eliminate about $60 billion in tax breaks, mostly for businesses. The bill would require a regular review of all tax breaks to see if they still serve their original purpose.
"Right how they don't even come into the conversation," Tierney said. "We need to get them into the conversation and have the information on which to make a good solid decision."
More than half of the nation's tax revenue came from the top 10 percent of earners in 2007. More than 44 percent came from the top 5 percent. Still, the wealthy have access to much more lucrative tax breaks than people with lower incomes.

Obama wants the wealthy to pay so "the amount of taxes you pay isn't determined by what kind of accountant you can afford."

Eric Schoenberg says to sign him up for paying higher taxes. Schoenberg, who inherited money and has a healthy portfolio from his days as an investment banker, has joined a group of other wealthy Americans called Responsible Wealth, which is project of the group, United for a Fair Economy. Their goal: Raise taxes on rich people like themselves.
Schoenberg, who now teaches a business class at Columbia University, said his income is usually "north of half a million a year." But 2009 was a bad year for investments, so his income dropped to a little over $200,000. His federal income tax bill was a little more than $2,000.

"I simply point out to people, `Do you think this is reasonable, that somebody in my circumstances should only be paying 1 percent of their income in tax?'" Schoenberg said.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said he has a solution for rich people who want to pay more in taxes: Write a check to the IRS. There's nothing stopping you.
"There's still time before the filing deadline for them to give Uncle Sam some more money," Hatch said.
Schoenberg said Hatch's suggestion misses the point.
"This voluntary idea clearly represents a mindset that basically pretends there's no such things as collective goods that we produce," Schoenberg said. "Are you going to let people volunteer to build the road system? Are you going to let them volunteer to pay for education?"
The law is packed with tax breaks that help narrow special interests. But many of the biggest tax breaks benefit millions of American families at just about every income level, making them difficult for politicians to touch.
The vast majority of those who escape federal income taxes have low and medium incomes, and most of them pay other taxes, including Social Security and Medicare taxes, property taxes and retail sales taxes.
The share of people paying no federal income tax has dropped slightly the past two years. It was 47 percent for 2009. The main difference for 2010 was the expiration of a tax break that exempted the first $2,400 of unemployment benefits from taxation, Williams said.
In 2009, nearly 35 million taxpayers got a tax break for paying interest on their home mortgages, and nearly 36 million taxpayers took the $1,000-per-child tax credit. About 41 million households reduced their federal income taxes by deducting state and local income and sales taxes from their taxable income.
About 36 million families cut their taxes by nearly $35 billion by deducting charitable donations, and 28 million taxpayers saved a total of $24 billion because their income from Social Security and railroad pensions was untaxed.
"As a matter of policy, there would be a lot of ways to save money and actually make these things work better," said Leonard Burman, a public affairs professor at Syracuse University. "As a matter of politics, it's really, really difficult."