My Tax Rate as an Individual and as an Employer

Bernie Sanders is proposing raising the highest bracket of the federal income tax from 37% to 52%.  This caused me to think once again about the taxes I pay.

I pay all of the usual personal taxes such as federal income tax, Social Security tax, Medicare tax, Maryland income tax, real estate taxes on my home, and the Maryland state sales tax.  In addition, I am a small business owner.  As a small business owner, I pay the following taxes:

Social Security (half for each employee)
Medicare (half for each employee)
Federal Unemployment
Maryland Unemployment
S Corporation Tax
Workman's Compensation Insurance (required by state)
Real Estate Property Tax
Personal Property Tax (laboratory equipment, supplies, computers, furniture, etc.)
Sales Tax

The sales taxes are too onerous to calculate, so I am going to leave those out of my calculation of the tax burden I carry as an individual and as an employer.  I did this calculation for the year 2018.

Leaving sales taxes out of the calculation for both the company and at home, the other taxes I paid equal 99.0% of my income.  Taking into account the sales taxes, that percentage goes well beyond 100%.

Now most of you are likely to argue that many of the taxes I paid are just a cost of doing business and it is not as though the various governments ganged up on me and took every penny I earned and more and left me to actually starve in the streets.  But it is true that if these governments did not tax me, my personal income could have been about 60% more than what it was.  Viewed from this perspective, I was likely only able to control the spending of about 35% of the income I could have had were it not for the many government taxes I pay both as an individual and as a small business owner.  I am one hell of a taxpayer.

Is it any wonder in the modern era that so few people choose to be employers and so many prefer to be employees.  This does not even consider the many risks involved in being an employer and a business owner.  It does not include the paperwork burdens.  It does not include the weight of the responsibility for your employees' welfare.  It does not include the cost of complying with the many regulations imposed by governments, many of which have little regard for a cost-benefit ratio that is rational.

Reducing the costs and the many other burdens that governments put on employers has a truly dramatic effect on encouraging entrepreneurs, who are under extremely heavy burdens at present.  The entrepreneurial spirit in America is being squelched.  Let it flourish and the growth rate in our economy will skyrocket.  Even small improvements in the growth rate have a tremendous impact on compounding the growth of the economy over the 40 year period that most people have yet to live.

Think about this when the Democrat Socialist Party politicians propose more taxes to partially cover the expenses of their many proposed new welfare programs.  Not only are they not going to allow entrepreneurship to grow the economy more, but they are actually determined to further squelch it, to smother it, to brutally murder it.  They simply view employers as the enemy, which is exactly what is to be expected of socialists.

More and more employers will go on strike -- they will shrug their shoulders and let all of these heavy burdens crash to the ground.  Atlas will shrug.  The many American employees will have far fewer jobs with far fewer people willing to bear the many burdens of being an employer.  The number of employers has fallen dramatically over our history as governments have grown.  This is not the only reason for this, but it has been an important reason for it.

CBO Cost Estimate for ObamaCare Implies Cost of $12,780 per Year per Person Insured

The Congressional Budget Office (CBO) is now estimating the 10-year cost of ObamaCare at $1.993 trillion.  This is $1.093 trillion more than Obama told us it would cost over ten years.  The CBO estimates that ObamaCare will provide health insurance coverage for about 25.5 million by 2025.  It is providing insurance now for about 7.5 million people.  If the growth in the number covered is linear over the next ten years then the average number covered per year is 16.5 million people.  Some of those people will be covered for 10 years, and some for 1 year.  So for $1.993 trillion, ObamaCare provides 156 million person years of coverage.  This comes to a cost per year of coverage of $12,780 per person, all at taxpayers expense.

Given that many of the people covered will be making large contributions to paying for their insurance themselves and given that $12,776 for a private insurance plan for one person should be a Cadillac health insurance plan, which ObamaCare plans are not, one has to wonder at the ability of government to waste our money in such titanic proportions.

And remember that some of the people forced onto ObamaCare plans could perfectly well afford to be self-insured, while others were perfectly happy with plans they completely paid for themselves until ObamaCare forced insurers to cancel the plans they could not keep.

Yes, ObamaCare is a massive train-wreck.  Most of us want to get off that train, but our brutal government is forcing us to stay on it.

Chuck Roger - Government-run, taxpayer-funded, anti-poverty programs do not work

Chuck Roger, in his Clear Thinking, The Blog, has an interesting post on the ineffectiveness of government anti-poverty programs.  He notes that government anti-poverty spending has increased by 89% in the last decade, 2000 to 2010.  Looking at the graph of anti-poverty spending as a percent of GDP, back in 1962 it was 0.5% of GDP, but is now 4.4% of GDP, which is almost a 9 times increase in the redistribution of income from taxpayers to welfare recipients in that time.  The average American is giving up $4800 a year to fund these anti-poverty programs.  The spending on food stamps has increased by a factor of three in the last 10 years. 

Despite all of this effort, the number of those in "poverty" had not changed much over the years.  Recently, due to the mostly government-induced and the government-prolonged recession, the number of people in poverty has increased.  Of course, most of the people in poverty under normal circumstances are the young who are students or in their first jobs.  Many still live with their parents.  Until we get rid of the young, we will always have similar numbers of people in "poverty" as we do now.  The need for anti-poverty programs is mostly a fraud.  The idea that government should and can effectively provide anti-poverty help is entirely a fraud.

Fanny Mae and Freddy Mac Steal Again

The gang that cannot shoot straight, has come galloping into Washington, D.C., and robbed the Treasury, the People's Bank once again.  Sheriff Obama and his hooligan crew of law enforcers carried the loot out to their horses for them and invited them to a good dinner.  They are still in town, living it up!  Why not?  In the past, Fanny Mae and Freddy Mac always provided the Democrats and Obama in particular with great campaign contributions.  The more money the sheriff lets them steal, the more money they give him to remain sheriff.

Fanny Mae has just asked for another $8.4 billion from the Treasury after First Quarter losses this year of $13.1 billion, including $1.5 billion in dividends paid to the government on its preferred stock.  The government took control of Fanny Mae, a government-sponsored corporation, in September 2008.  Fannie Mae ended the First Quarter with a net worth of -$8.4 billion dollars.  This government-run business lost $15.2 billion in the Fourth Quarter of 2009 and $23.2 billion in the First Quarter of 2009.

Just four days earlier, Freddie Mac asked for a $10.6 billion handout.  Its First Quarter loss was $8 billion.  Freddy Mac had previously received $50.7 billion in bailouts, while Fanny Mae had previously received $76.2 billion.  Fanny Mae had already been given $15.3 billion of taxpayer's money as recently as 31 March 2010.  In December 2009, the Obama administration removed a $400 billion cap on gifts to Fanny Mae and Freddy Mac and promised unlimited support in 2010.  The total taxpayer money given them since they were taken over by the government, including the current requests, is $145.6 billion.

In the First Quarter, Fanny Mae purchased or guaranteed about $191.4 billion in loans.  Its credit losses were $5.1 billion, which was up from $4.1 billion the previous quarter.  The number of loan defaults was up in the first quarter.  5.47% of Fanny Mae mortgages were delinquent in the First Quarter, which is up from 5.38% in the Fourth Quarter of 2009.  The single-family foreclosure rate was up from 1.03% in the previous quarter to 1.36%.

Obama and the Democrats have refused to include Fanny Mae and Freddy Mac in any financial industry reform bill effort, since they are using them to reduce home foreclosures with loan modifications and will not admit their guilt in weakening the entire financial system of the U.S.  In the First Quarter, Fanny Mae made 94,000 mortgage modifications, after making 42,000 in the Fourth Quarter of 2009.  Together, Fanny Mae and Freddy Mac own or guarantee almost 31 million home mortgages worth about $5.5 trillion.  This is more than 40% and close to half of all home mortgages.

It is common to say that the recession began in the United States and was caused by too much easy credit.  Republicans go on to say government-sponsored Fanny Mae and Freddy Mac caused the recession and Democrats say an unregulated Wall Street caused it.  In fact, it was triggered by the sharp increase in oil prices.  After May of 2004, the price of oil went up in real terms, dropped briefly in late 2006, and then spiked upward beginning in early 2007.  By July of 2007, production in Canada had dropped.   It dropped  in Italy in August 2007, in France in October 2007, and the Euro area as a whole in November 2007. Japan's production reached a peak in October 2007, though it had a one-month uptick in February 2008. The decline in the U.S. was in February 2008.  In January 2008, the OECD leading indicators were down from a year before by 4.1 points in Ireland, 2.8 points in Japan, 2.6 points in Korea, 2.3 points in Sweden, but only 0.8 point in the U.S. Stock prices are another leading indicator. Stock prices peaked in Japan and in the Euro area four months before they peaked in the U.S. and the U.K. in October 2007!  In the 4th quarter of 2008, real GDP was lower around the world than it had been 1 year before, but it had dropped by much less in the U.S. than almost anywhere else. The dollar value of imports into the U.S. did not fall until August 2008 and the consumer purchases did not fall in the U.S. until September 2008.  The U.S. was the last economic engine to sputter to a stop and it took the combination of the oil price spike, the recession already underway in the rest of the world, Fanny Mae's and Freddy Mac's vulnerability, and the Wall Street over-extension combined to put us into this severe recession.

While we cannot blame the entire recession on Fanny Mae and Freddy Mac, they were the most egregious weaknesses and the most easily avoided ones in the U.S. economy.  They were following a foolish policy of easy credit for people who could not make their loan payments under almost any condition of strain and they with the easy credit Federal Reserve were the starting point for much of what went wrong in the private sector.  Government regulation of Freddy Mac and Fanny Mae did not keep them out of trouble and there is no reason to believe more federal regulation would have helped on Wall Street.  In fact, some of the problems on Wall Street turned out to be due to too much regulation and too cozy a relationship with the federal government.  The biggest backers of the unwise lending practices through the years were the Democrats.  Obama had contributed once he was in the Senate and he had worked on a lawsuit against Citibank himself to force them to lower their lending standards before that.  Meanwhile, President Bush had warned a number of times that the easy credit policies of Fanny Mae and Freddy Mac were a major risk for the economy.  McCain also joined in with warnings.  These were all ignored by Congress, which in 2007 and 2008 was controlled by the Democrats.

Fanny Mae and Freddy Mac could not be more controlled by the federal government.  We have only to examine how badly run they are to see the looming disaster as the Democrats try to gain more regulatory control over the major financial institutions of America.  We will be turning investment company after bank after insurance company into the next Fanny Maes and Freddy Macs.  This is exactly what the Democrats want to do.  Imagine how easy it will be to extort money from these more regulated companies and how easy it will be to command many of them to self-destruct.  Even as Fannie Mae had collapsed, Obama and the Democrats had been able to milk it mightily for campaign contributions.  This is the fate of the entire financial industry, if they get their way.

An Update on the GM Loan Repayment

Ed Whitacre, has been featured in a GM ad on TV lately in which he makes the claim that General Motors has repaid its loan "in full, with interest, five years ahead of schedule."  He did not mention that this repayment was only of $5.8 billion to the U.S. and Canadian governments and that the repayment was made with funds from a line of credit under TARP.  That sounds as though the Canadian government has been repaid with U.S. taxpayer money.  Senator Chuck Grassley (R, Iowa) thinks the early repayment was made in order to avoid a proposed tax on those with unpaid bailout loans.

The government investment in GM is still $50 billion.  GM was also taken off the hook for about $6 billion of losses in its share of the losses of GMAC due to its problems selling its subprime loans.  GM owned part of GMAC, which was bailed out by the taxpayers.  Meanwhile, GM is still losing money.  Its sales have been increasing though.

What is it about taking the taxpayer's money that turns so many people into deceptive and duplicitous scalawags?  No, this is not quite the right question.  The people attracted to the taxpayer's money are probably deceptive and duplicitous by nature in the first place and they gravitate to positions in which they can get their hands on that easy money.  To be sure, once they get their hands on that money, it generally does play a role in making their deceptive and duplicitous nature even more so.

Government Motors Paid Back the TARP Loan?

The CEO of Government Motors (the old General Motors) has been in a TV ad in which he is on the factory floor and claiming that GM has paid back the TARP money it owed the U.S. government in full 5 years early!  Did it really?

Given that it lost $3.4 billion just last quarter, what money could it possibly have used to make the payment of such a large sum of money that so many economists and businessmen have said they will probably never be able to repay the taxpayer?  It turns out that they were allowed to use taxpayer money that the government had put into an escrow account to back up GM to pay off the loan!  In fact, it actually only paid $7 billion on a particular loan even given that subterfuge.  GM still owes the government, the taxpayers really, more than $50 billion.  So where is the achievement that the GM CEO was crowing about?  They simply handed the government money with the right hand, while receiving money in their left hand, and all of that money was our money.

It gets worse.  The GM pension plan is underfunded by a mere $27 billion.  The taxpayers, who now own 70% of GM through the government, and share it with the totally irresponsible United Auto Workers Union, are now held hostage to pay this pension bill as well.  So, the taxpayer's total liability to Government Motors is already $77 billion or more.

Just as with most other Obama administration agencies, Government Motors is now using our taxpayer money to tell us lies.  Yes, they used our money in expensive TV ads to tell us this very misleading lie that they had paid us back IN FULL as the CEO kept emphasizing.  Well yes, that particular loan was paid in full.  But, that ad was crafted with the intention of misleading every taxpayer and every voter in America into thinking that GM no longer owed us our money back and that GM was now a sound, moneymaking company.

It perhaps did improve its position with the loan repayment.  It may have a lower interest rate on the second pot of our money.  Or, it may have fewer restrictions on executive compensation.  But, any company 20% owned by labor unions, 70% owned by government, and owing more than $77 billion is surely a walking ghost.  But this ghost is walking off with our money, while giving us attitude!