Federal Tax Redistribution And Voting Patterns – A Study in Hypocrisy?

January 3, 2012

I saw the picture below yesterday. (I apologize that I can’t find the link to the article, but I saw it on The Economist.  If I find it, I’ll link to it.) It shows the differential between federal taxes paid and federal spending within each state. The green shades represent more paid in federal taxes than the state received in federal spending. Shades of red represent states that received more in federal spending than their residents paid in federal taxes.  That by itself makes it an interesting graphic. I have enhanced the chart by overlaying it with the 2008 election results.  States shown with a “O” went for Obama; those without designation went for McCain.

The Givers in Green, the Takers in Red

What you notice is that most of the states shaded in green (the “Givers”) went for Obama.  Voters in states that pay more into the federal government than they receive voted for a guy that some caricature (then and now) as a “socialist” and “redistributionist”–their words not mine. Said another way, those people who already have wealth redistributed away from them and toward those in other states voted against a guy that professed to want to reduce the size of the federal government and cut their tax bills.  Of the 22 green states, only four (Texas, Nebraska, Arkansas, and Georgia) voted for McCain, the professed tax-cutter and government-shrinker.

On the other side of the ledger are those states that are the Takers; those that get more from the federal government than they send in. These guys are already not paying their own way and benefit from the largess of the federal government.  There are 28 states than get more than they give. Of those, 18 of them voted for the Republican nominee.

Is this not biting the hand that feeds? If those states want the government to be smaller, I can think of 18 places to reduce the federal budget. But until you start paying your own way, don’t you owe it to those that are paying the bills to at least shut up?  This is like having your teenager tell you that the family wastes too much money dining out but then asks for money to go out for pizza with his friends.

As with many things, ’twas ever thus.

Virginia’s Other Questions

December 3, 2011

On September, 21, 1897, the New York Sun newspaper ran what has become the most reprinted editorial of all time (reprinted below). It was in response to a letter written by eight year old Virginia O’Hanlon of Manhattan. She was looking for reassurance that Santa Claus existed and she turned to the Sun for that reassurance. (Can you imagine someone one hundred fifteen years later in our times turning to their local paper for reassurance on anything? Well, they could turn to The Local Paper!)

The story can now be told of what happened to little Virginia after she got her answer from the Sun.

Virginia had a wonderful Christmas that year, but as winter turned to spring she began to wonder about different things. A string of letters to the Sun and other publications followed over the course of the  years that followed, inquiring about other characters of lore, myth and fantasy. Characters she’d heard about but hadn’t seen in real life.  Characters like the Easter Bunny, the Tooth Fairy, Superman, Republicans willing to raise taxes, Televangelists not looking for money or self-aggrandizement, flamboyant accountants, and Baby Boomers willing to admit that the Beatles may not  in fact be the greatest thing since the invention of perforated toilet tissue.

As Virginia grew older, she realized that she’d been hoodwinked by the Sun and others to whom she’d turned for succor. It was inevitable that she became cynical and curmudgeonly. Instead of focusing on things that perhaps never were, she turned her attention to those things were once accepted as facts but had for various reasons had come into question as perhaps myths. Things like evolution, the willingness of college presidents to control their athletic programs, the ability for people to see a crime being committed, stop it and report it to the police, Hollywood’s ability to produce original material that isn’t based on washed-up television shows and that the United States Congress was actually the “World’s Greatest Deliberative Body”. She wondered whether the quarterback was in fact a football player or some porcelain doll, only to be looked at and admired from a distance. She looked for guidance on the ability of people to mow their own lawns and rake their own leaves, whether there was actually anything that government didn’t have an interest in trying to fix for us, and whether it was really possible that something bad could happen without it being someone else’s fault and actionable in court. No matter where she turned, no one had any answers. Just head shaking and shoulder shrugging.

So many questions, so few answers.

She considered whether there was ever a scorned or harassed woman who didn’t call Gloria Allred (or take Gloria’s call).  She tossed around the old notion that there actually isn’t news being created twenty-four hours a day and there used to be a time when people were left alone to actually do their jobs without being bombarded by the littlest thing turned into the “crisis of the moment.” Not paying the debts you signed up to incur used to be a bad thing, she was almost sure of it, but now the evidence was inconclusive and no one could tell her how that happened or why. She wondered if sportscasters were actually paid by the number of times they said the words “Brett Farve” [sic].  Acting like an idiot used to get you scorn; now it gets you a television contract and a book deal despite the fact that you can neither act, read or write.Virginia wondered how that happened. These were questions no newspaper could answer.

She couldn’t find anyone to help her with her recollection that candidates seeking to be President of the United States were once among the brightest and best people this country had to offer and not a band of deliberately ignorant, skirt-chasing boobs.

Finding no one to answer her more complicated adult questions about what to believe and what to believe in, she dreamt of those innocent days when thinking about the existence of Santa was as complicated as it got.

Yes, Virginia there is a Santa Claus, but even he would have trouble fixing what we’ve done to ourselves.

. . . . .

“DEAR EDITOR: I am 8 years old.
“Some of my little friends say there is no Santa Claus.
“Papa says, ‘If you see it in THE SUN it’s so.’
“Please tell me the truth; is there a Santa Claus?


VIRGINIA, your little friends are wrong. They have been affected by the skepticism of a skeptical age. They do not believe except [what] they see. They think that nothing can be which is not comprehensible by their little minds. All minds, Virginia, whether they be men’s or children’s, are little. In this great universe of ours man is a mere insect, an ant, in his intellect, as compared with the boundless world about him, as measured by the intelligence capable of grasping the whole of truth and knowledge.

Yes, VIRGINIA, there is a Santa Claus. He exists as certainly as love and generosity and devotion exist, and you know that they abound and give to your life its highest beauty and joy. Alas! how dreary would be the world if there were no Santa Claus. It would be as dreary as if there were no VIRGINIAS. There would be no childlike faith then, no poetry, no romance to make tolerable this existence. We should have no enjoyment, except in sense and sight. The eternal light with which childhood fills the world would be extinguished.

Not believe in Santa Claus! You might as well not believe in fairies! You might get your papa to hire men to watch in all the chimneys on Christmas Eve to catch Santa Claus, but even if they did not see Santa Claus coming down, what would that prove? Nobody sees Santa Claus, but that is no sign that there is no Santa Claus. The most real things in the world are those that neither children nor men can see. Did you ever see fairies dancing on the lawn? Of course not, but that’s no proof that they are not there. Nobody can conceive or imagine all the wonders there are unseen and unseeable in the world.

You may tear apart the baby’s rattle and see what makes the noise inside, but there is a veil covering the unseen world which not the strongest man, nor even the united strength of all the strongest men that ever lived, could tear apart. Only faith, fancy, poetry, love, romance, can push aside that curtain and view and picture the supernal beauty and glory beyond. Is it all real? Ah, VIRGINIA, in all this world there is nothing else real and abiding.

No Santa Claus! Thank God! he lives, and he lives forever. A thousand years from now, Virginia, nay, ten times ten thousand years from now, he will continue to make glad the heart of childhood.

Taxing The Rich; Two Views

October 24, 2011

Below are two letters to the editors of The Economist, reproduced in full from the 8 October 2011 issue.  While each comes at the tax question from different sides, I agree with both Sweeney and Shayer.  The ‘rich” have the lobbyists to make the tax code dance to their tune.  This is why the mortgage interest deduction will always be with us, among other giveaways to the middle and upper classes.

At the same time, it’s always been curious to me how charges of “class warfare” are always trump and unidirectional. It is always talk of increasing taxes that lead to this charge, rarely or never talk of increasing the burdens on those with lower incomes.  Is our denial of class differences that deep?  Yeah, we’re a “classless society” all right.  Any look at an income differential chart will show you otherwise.  Any discussion of where (or if) randomly selected kids are able to go to college will bear witness to the giant schism between the classes in America.   Being shocked, SHOCKED! at the use of “class warfare” simply works in the favor of the favored class.  It’s not a discussion people are comfortable having. Admitting to having classes, let alone having those classes “at war” is not what we aspire to, even though it’s very much where we are.

Read and ponder.


Taxing the rich

SIR – I believe I am classed as one of the wealthy in America, so I took a great interest in your leader on how to get the well-heeled to pay more tax (“Hunting the rich”, September 24th). You advocated a tax system that would make the top rates more equal on wages and capital, eliminate virtually all deductions and get rid of corporate taxes. This, you said, would allow for a much lower top rate of income tax and would actually reap more tax revenues from the rich. You appear to be arguing that I, as one of the rich, would prefer to see lower income-tax rates, and for this “benefit” would be willing to pay more money. What are you smoking?

I do not give a damn about tax rates. My entrepreneurial instincts are in no way discouraged by high marginal rates. But I do care about how much money I have to pay. I like my deductions, all perfectly legal, around which I have structured my life.

Yes, the tax system is unfair. The array of consumption and payroll taxes are regressive and result in the less well-off paying a higher proportion of their total income in taxes. And this will continue as long as we, the rich, can persuade the politicians who write tax laws, and who are also part of the monied class, to structure the tax system to indulge us.

What is there not to like?

Anthony Sweeney
Darien, Connecticut

SIR – Why is it called “class warfare” to advocate raising taxes on the rich, but not when it comes to cutting benefits to the poor?

David Shayer
Palo Alto, California

(Not So) Random Thoughts on the Debt Ceiling and the State of the Crisis

July 14, 2011

  • This is a crisis. A worldwide crisis.
  • Markets love testing the will of central bankers and giving them a number on how much they’re willing to spend to bail out Greece (or Spain or Italy) will only act as a challenge.
  • The only reason U.S. financial markets aren’t more tumultuous as the debt ceiling nonsense plays out is that their more worried about Europe blowing apart.  Not the Europe blowing up is a bigger deal than the U.S. defaulting, but it’s more immediate.  There’s, what? two whole weeks before they have to worry about a U.S. default.  Eons in trading time.
  • I think some in Congress (mostly Republicans) think that they can “fix” missing the deadline by simply passing something after the fact that raises the limit and returns the situation to the status quo ante.  That’s wrong.  Once we cross the Rubicon of default and (presumably) get downgraded, there’s no turning back.  Once a borrower indicates a willingness to consider not paying its debts, that borrower gets treated differently in the credit markets.  You can’t unring the bell. [That sound you hear is my favorite writer, George Orwell, hater of idiom, spinning in his grave at my use of two, no three! in one little bullet point. –ed.]
  • I stink at poker, but somehow I think that I’d like to play poker against President Obama.  Less so Senator Mitch McConnell.
  • Trying to negotiate with Rep. Eric Cantor (R-Petulant) reminds me of those discussions we had with our kids when they were twelve.
  • Being a big believer in the Law of Unintended Consequences, I continue to be very worried about this situation, and that fear grows with every passing day.
  • The combination of the Europe situation and our own a) immediate problems with potential default and b) our long-term structural deficits leave me fearful that we’re in for an extended period of austerity, slow- to no-growth, increasing distress among the populace and general trouble.
  • What’s happening in Europe is the sort of thing that used to start wars.
  • So if you think Europe is a bad place to invest and the U.S. is about to default, where are you going to put your money?  Corporate bonds?  (Communist) China?
  • The sinking, awful feeling I have is that this all is going to get much worse before it gets any better.

The looming (and necessary) tax increase

March 15, 2010

From today’s NYTimes comes another in their series of articles on water.  Today’s piece discusses the crumbling infrastructure in Washington, D.C.  The destruction of this system and others like it all over the country is the legacy of our misspent prosperity and our legislators’ inability to tackle even the (seemingly) simplest of problems that face us.

Today, a significant water line bursts on average every two minutes somewhere in the country, according to a New York Times analysis of Environmental Protection Agency data. In Washington alone there is a pipe break every day, on average, and this weekend’s intense rains overwhelmed the city’s system, causing untreated sewage to flow into the Potomac and Anacostia Rivers.

State and federal studies indicate that thousands of water and sewer systems may be too old to function properly.

For decades, these systems — some built around the time of the Civil War — have been ignored by politicians and residents accustomed to paying almost nothing for water delivery and sewage removal. And so each year, hundreds of thousands of ruptures damage streets and homes and cause dangerous pollutants to seep into drinking water supplies.

This is what we will leave our children: a broken-down system incapable of delivering the water we need to survive because no one wants to pay for it.  The unrealistic expectations of the masses with respect to their desire for low tax bills are sure to turn into outrage (or worse) when the taps run dry.   It’s our own fault.

The looming tax increase

March 1, 2010

The closer you look, the smaller it gets

This has nothing to do with Democrats or Republicans or who is president.

Today’s Wall Street Journal shows that the effect of the financial crisis on states and municipalities (and taxpayers) is only starting to be felt. As state pension funds cut investment return forecasts (to reduce the need to take excess portfolio risks), the difference must be made up by taxpayers.

At Calpers, about 75% of payouts come from the pension fund’s investments, with the remaining 25% tied to contributions from California governments and employees. According to Pew, a hypothetical $100 billion pension fund that achieved a 7.75% return rate for 10 years would have about $211 billion. With a 6% rate, the same fund would grow to $179 billion—a difference of $32 billion.

That $32 billion will come on the backs of California taxpayers.

Note to IL residents: If Calpers is cutting from 7.75% to as low as 6%, consider that IL is still at 8.6% on an $8.7 billion asset pool.  If IL cut to 6%, that’s about a $4bn addition to an existing $45bn unfunded pension liability gap.

We’ve made promises to workers that we can’t afford to keep.  The Pew Center on the States reports that the total gap is about $1 trillion ($1,000,000,000,000).  Those promises were made to people that are critical to our survival,both literally and figuratively (e.g., firemen, policemen, teachers), who are relatively low on the pay scale and who aren’t eligible for social security.  It’s not as simple as cutting the payouts to the recipients.  The whole social contract needs to be rethought.

As being known as something of a cynic, I was disappointed in myself that I was continue to be surprised and disappointed by the lack of vision and the unwillingness of our elected officials to tackle the tough problems we face, preferring instead to focus on those less difficult issues that will offend no one and help keep them in office.  In the meantime, the problems created from when we were seemingly awash in money and nothing bad would ever happen to us, continue to get worse and the hole gets deeper.

The first rule of being in a hole is “stop digging”.  As a nation, our elected officials always seem to have shovels in their hands. (And that’s not a crack at the very necessary stimulus plan.)

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