October, 2014, Part 7 Political Class Insanity: Rich But Ineffective Politicians, The Transparent Administration That Isn't, Hawaii Going Bankrupt and More

It is the beginning of another month which means it is time to check in with the American political class to see what insanity they have wrought over the past month or so. It is always amazing to follow the exploits, quotes, and actions of our politicians and the government entities they operate to see how often idiocy, incompetence, and heartbreak are almost always the output from their actions.

We started dong these updates several years ago, usually taking one or two days every month to get all of their insanity covered. Unfortunately, over time, the insanity has seemed to accelerate almost exponentially, causing us to now have to take six or seven posts each month to get it all in. This month will be no different. As our foreign policy implodes, the economy stagnates, and the midtem elections approach, the insanity levels are intensifying daily.

To check out past instances of political class insanity in this post, simply go to the first week of each month and check out the posts that begin, “Political class Insanity.” This is the seventh entry in this series for this month, with the first six posts appearing over the past few days.

For the latest insanity, read on:

1) Fiscal and economic insanity is not restricted to Washington. Many times we have discussed the financial abyss in front of states like California and cities like Chicago. We can now add the state of Hawaii to that list of poorly run state governments.

Senate Minority Leader Sam Slom recently warned his fellow Hawaiian lawmakers he has serious concerns about the state’s economic future because of the following financial numbers and realities:

• “Hawaii is set to go bust in 2016 unless the new governor and the state legislature make some serious cuts,” Slom said.
• Since he claims that Hawaii is already one of the highest taxing states in the union already, raising taxes even more will have the least desirable financial benefits to the state and its residents.
• He cites work done by the state Council on Revenues, an appointed Hawaiian entity that forecasts economic trends in Hawaii from which lawmakers create their budget, which predicts that the state will have $76 million less revenue than anticipated to work with in 2014 and $188 million less in 2015. 
• That is a $264 million deficit in just one two-year budget cycle.
• Even though the governor has told state government departments to cut their budgets by 10% over the next two years, those reductions, if they occur, will reduce government spending by only $14 million within the overall state budget of $6 billion.
• This will force the state to go into an emergency reserve budget to cover the shortfall, but which does not resolve the long term budget and spending crisis.

Looks like Detroit and Stockton, California and other government entities that have spent themselves into insolvency will soon have another member of their dubious club, the state of Hawaii.

2) In the recent past we discussed the good news that the state of California was moving to enact legislation that would limit the amount of spying law enforcement could do in California via drone operations. Their effort would have made it illegal to use drones to spy on California citizens without first showing probable cause and obtaining a search warrant from a judge. This is great news from a freedom and liberty perspective since it would have respected the privacy of innocent citizens while preserving all of our rights under the Fourth Amendment.

Good news accept for the fact that for some daft reason, Jerry brown, the governor of California, vetoed the bill, at least temporarily preserving the right of the government and law enforcement to spy on you in the state as it sees fit, without judicial oversight. He did this even though the legislation left plenty of flexibility for exceptions that don’t entail secret, uncontrolled drone use such as disaster assessment, traffic accidents, “hot pursuit” situations involving threats to public safety, and wildfire surveillance.

Many observers n this area reacted appropriately by criticizing the veto action: 

• Slate’s Margot E. Kaminski: “A warrant requirement does not prevent law enforcement from using drones, which are cheap and useful technology; it checks the scope of drone surveillance by involving legal standards and a judge. California’s drone bill is not draconian. It includes exceptions for emergency situations, search-and-rescue efforts, traffic first responders, and inspection of wildfires. It allows other public agencies to use drones for other purposes — just not law enforcement.”
• California Assemblyman Jeff Gorell, a Republican from Camarillo and the bill’s sponsor, said that Brown had sided with the wrong side in the area of electronic privacy law: “We’re increasingly living in a surveillance society as the government uses new technology to track and watch the activities of Americans. It’s disappointing that the governor decided to side with law enforcement in this case over the privacy interests of California.” 

Brown apparently is also in the minority vs. other governors according to Ars Technica. Ten other states already deny police the authority to conduct warrantless drone surveillance: Florida, Idaho, Illinois, Indiana, Iowa, Montana, Oregon, Tennessee, Utah and Wisconsin. Just when you think the political class will actually do something right, they screw it up again.

3) According to an article in the September 19, 2014 issue of The Week magazine by Carolyn O’Hara:

• For the first time ever, more than 50% of the members of Congress are millionaires.
• Former House Majority Leader Eric Cantor recently left Congress, where he was earning about $175,000 a year, to take a job with a wall Street lobbying firm where he will make over $3 million a year.
• The Clintons are now worth far more than $100 million as a couple. Heck, their daughter is worth over $7 million.
• Five of the nine Supreme Court justices are millionaires.
• The President of the United States is a millionaire many times over.

Ask yourself this: do you really think that these millionaires, and a few instances have any idea what it is like living in America today and what the daily struggles are of feeding a family, educating a family, keeping a family safe, etc.? Do really think they have our best interests in place when economically and wealth wise they are so far different than us? 

I think not but that is just me ….and the fact that over the past five decades these wealthy and getting wealthier Washington types of been unable or unwilling to resolve a single major issue facing this country.

4) One of the biggest lies and deceptions of the Obama administration was that it was going to be the most “transparent’ Presidential administration of all time. Well, it did not take long for that promise to go poof in so man ways:

• Freedom of Information Act requests were routinely ignored, partially filled, illegally delayed beyond the time frames prescribed by law, or redacted so much as to be useless.
• The administration tried to illegally charge those who submitted Freedom of Information Act requests in order to have their request fulfilled, often at exorbitant rates.
• Journalists were tailed, bugged, or had their computers hacked.
• Administration members failed to produce documents requested by Congress, either by ignoring them or claiming executive privilege, such as in the Fast and Furious Congressional investigation.
• The administration oversaw the intentional destruction of documents, hard drives, back up copies, etc. in order to avoid fulfilling Congressional investigation request, such as in the IRS targeting of innocent Americans and EPA actions.

As you can see, this insanity shows that the Obama administration could not be any further away from being a “transparent’ administration. This reality was recently succinctly and easily summarized by recent writing by the Associated Press’ Washington bureau chief, Sally Buzzbee, who became the latest journalist to criticize the Obama administration for failing to live up to its promise of transparency” “Bush was not fantastic. The [Obama] administration is significantly worse than previous administrations.”

To prove her point, Buzbee described eight ways the Obama administration is restricting access to information at a recent joint meeting of the American Society of News Editors, the Associated Press Media Editors and the Associated Press Photo Managers, as recently outlined in a Heritage Foundation summary:

A) Journalists Can’t See the Fight Against Islamic Militants: Buzbee contends Americans are being kept in the dark about recent military action, noting that journalists aren’t allowed to take photos or record video of bombers when they take off. This is unlike the Bush administration which embedded journalists right with our fighting forces.

B) Journalists Often Are Barred From Obama’s Meetings With World Leaders: Buzbee says previous administrations advocated for journalists to be present during the president’s meetings with world leaders when he is abroad. This change, she says, sends the wrong message to the rest of the world.

C) Access to Upcoming 9/11 Trial Is Restricted: Journalists do not have access to court filings in real time, Buzbee says, and even access to nonclassified information about the trial has been blocked or delayed.

D) Coverage of Guantanamo Is ‘Virtually Nonexistent’: Information normally released by the previous administration is now nearly impossible to come by. “The military won’t release the number of prisoners on hunger strike or the number of assaults on guards,” Buzbee says.

E) Sources Are Being Intimidated: Sources have told Associated Press reporters they could be fired for talking to the media. Buzbee called the intimidation tactics “chilling,” adding: “Government press officials say their orders are to squelch anything controversial or that makes the administration look bad.”

F) The Freedom of Information Act Is ‘Under Siege’: FOIA requests have become so expensive and delayed that many organizations are forced to sue federal agencies to get a response at all.

G) The White House Uses FOIA Requests to Monitor What News Organizations Will Cover: Political appointees use FOIA requests as a “tip service” to gain insight into upcoming stories, Buzbee says. At the agency overseeing Obamacare, political appointees have been put in charge of FOIA requests.

H) State and Local Governments Release Less Information: The Obama administration has tried to dictate to state and local governments what they can and cannot reveal, particularly when it comes to surveillance programs.

Another promise, an other lie, another hit to freedom and liberty from a seasoned journalist.

5) And finally for today, what or who do we really think has a chance it eliminating all of the insanity we have been discussing over the past week or so and actually put the country on the right track? If you believe the results of a Gallup poll from this past July, that is a very difficult challenge for the country. According to the poll results, only 30% of those surveyed had any confidence in the Supreme Court, only 29% had confidence in the Presidency, and a dismal 7% had any confidence in Congress. 

All the more reason to impose term limits on all Washington politicians and court appointees. If we got rid of everyone in Washington in all three branches of government, how much worse could it get than these Gallup results? You can help move that effort along at the following site:

www.howmuchworsecoudlitget.com

To do anything else or to live with the status quo is a true definition of insanity.

Seven days into this political class insanity view and we are still not done, more idiocy and such tomorrow.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

www.loathemygovernment.com

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

Term Limits Now: http://www.howmuchworsecoulditget.com
http://www.reason.com
http://www.cato.org
http://www.robertringer.com/
http://www.youtube.com/watch?v=08j0sYUOb5w

A Graphical View Why Taxing The Rich More Without Reducing Spending Is Still Senseless

Without going into the details of what we have covered dozens of times in this blog, it is safe to say that the Federal government easily wastes away over $500 billion a year in taxpayer wealth due to inefficiencies and criminal fraud in just a half dozen government programs including Social Security, Medicare, Medicaid, tax evasion, unemployment benefits, and food stamps. If we were to detail out inefficiencies, waste, and government fraud in the rest of the Federal government every year, I am quite confident we could easily find hundreds of billions of dollars more waste.

That is why it has always been our position that no American, rich or poor, should have his or her taxes raised until the politicians in Washington learn how to manage the taxes they already receive in a more responsible manner. It is senseless to give these people more of our wealth when they have shown no ability to spend it responsibly. That is why no matter how "fair" or 'unfair" our tax process is today, nobody should pay more when hundreds of billions of dollars are wasted every year.

Which gets us to our post today. I would bet that if you asked 100 people on the street to estimate the number of millionaire owners in America every year, i.e. how many Americans earn a million dollars every year, I would bet that at least 95% of them grossly overestimate the reality of that question.

To illustrate, let's check out a few graphs of actual IRS summarized tax information from the official IRS website from the tax year for 2009. This appears to be the latest year of tax information available online to the public but I doubt if the graphs and the conclusions would change much once the 2010 and 2011 tax data becomes available.

The first graph contains a simple bar chart which shows the percentage of tax returns filed in 2009 by Adjusted Gross Income bands (double click on the picture for a larger view):

The second graph contains a simple bar chart which shows the percentage of the nation's taxes paid in 2009 by Adjusted Gross Income bands:

This third graph puts the data from the previous two charts on the same graph:

Let's look at the numbers behind the graphs:

• In the first graph there looks like there are no taxpayers in the country that earn over a million dollars a year. And that is almost correct. In 2009, of the more than 140 million personal tax returns filed, only about 237,000 of them had earners that were over a million dollars for the year, as measured by the Adjusted Gross Income line.
• This paltry number comes out to only .17% of all earners that year. That is why the graph looks so emply on the right, there are just not that many Americans who earn over a million dollars a year.
• If you consider those "rich people" earning over $200,000 a year, as the President considers them to be, then you will find that there were only about 3.9 million tax returns showing earnings over $200,000 in 2009, or only about 2.8% of all returns.
• If you look at the super high earners, those Americans whose tax returns showed they earned over $5 million in 2009, you find that there were only 22,600 or so out of over 140 million, accounting for .00017% of all taxpayers that year.
• This last point is another reason why the right side of that graph looks so flat, there just aren't that many Americans in the country that earn millions of dollars a year.
• The second graph is almost a mirror reflection of the first. It is the left side of this graph that is almost not even there since the number of tax dollars paid by the people in the lower AGI bands is almost non-existent vs. the percentage of overall taxes paid by the higher band AGIs.
• For example, while 66% of the people who filed tax returns in 2009 earned less than $50,000, this group only paid about 7% of all the taxes paid that year while those earning over $200,000 comprised only 2.8% of all filers but paid over 50% of all the taxes collected.
• The third graph puts the previous two together on the same chart where we see that the very few people earning over $200,000 a year pay a very high percentage of all of the taxes.
• Now, I am not judging what is the "fair" amount of taxes each person should pay. But consider this: if we made those Americans earning over $1 million a year to pay an income tax rate of 100%, i.e. the government would confiscate ALL of the earnings of every millionaire earner, and spread that confiscated money over the rest of the 140 million personal tax returns, each one of those other tax filers would receive a total of about $4,900. Not a bad haul.
• But that haul would only last for a year or so. If the governemnt actually did confiscate 100% of those millionaire dollar earners, you can be sure that those millionaire dollar earners would not be out the next year working hard to duplicate their earnings only to lose it all. Thus, while those other 140 million or so tax filers would get a one year windfall of $4,900 on this 100% confiscation scheme, that is really fool's gold. In subsequent years they would have to pay much more in taxes to cover the shortfall from the current million dollar earners giving up.
• Lets' be more realsitic and assume that the million dollar earners had just another 10% of their earnings confiscated by the Federal government and given out to the other tax filers.
• This 10% surtax would bring about $490 for each of the other tax filers. This $490 comes out to only $1.34 a day, hardly enough to make anyone rich.

Of course, these are best case scenarios. They assume that the confiscation numbers, either 100% or 10%, actually and miraculously got back to the other tax filers. You and I both know that the Washington political class would take those additional taxes and waste it somehow, somewhere, probably on a political crony or campaign donor or criminal fraud.

The bottom line of all these graphs and numbers is that there are just not enough "high earners" in this country to hit up for more taxes and solve all, or even some, of our financial problems. The problem is too much government spending and waste, not too little in taxation.

Consider this: if the government did indeed confiscate EVERY dollar of EVERY millionaire dollar tax filer in 2009, that confiscation would cover less than 49% of that year's Federal government's deficit spending. So taking EVERY dollar does not do the trick, taking less than that, say 10%, would do even less of a trick.

An old saying goes as follows: "Economies cannot tax themselves to prosperity." It has never been done in the history of man. Why this President thinks he can do it is beyond me. There are just not enough millionaire earners to go around, only .17% . However, there is enough wasteful spending to go around, all of which needs to be stopped.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Simple Math, Simpler (And More Depressing) Politicans - Attack Parrots, Flaming Water Skis And More

In last Friday's post we did some simple math calculations to show a path to energy independence and clean energy sources. In past posts, we have used some simple math to show the idiocy of Obama Care. We have used simple math to illustrate the fatal path we are on relative to deficit spending and $15 TRILLION worth of debt. Math can make the complicated simple, the unclear focused, the lies and other misperceptions proven false and unveil the inadequacy that is our political class.


Today, let's use math and statistics just to show how silly and/or how incompetent our political class has become and why the members of the political class need to be replaced as soon as possible. If we do not replace them, the math will continue to not add up. We'll review some current statistics and math to try and figure out how did we allow our politicians to get us in so many silly and depressing places today:


1) President Obama is back on his "tax the rich" kick again, this time again using Warren Buffet as a prop and trying to get Americans to believe that increasing taxes on Americans making over a million dollars a year is a great and critical step to take. Various estimates exist on how much this will increase Federal tax revenue but the most consistent estimate I have seen is about $47 billion over ten years or about $4.7 billion a year.


Rather than worry about the TRILLIONs and TRILLIONs of dollars Mr. Obama has added to our nation's national debt, he refuses to acknowledge this disaster and engages full time in the relatively petty amount of $4.7 billion a year, only because it might get him some election year talking points.

How petty is $4.7 billion a year? Let's do some simple math:

• If you were to somehow directly redistribute that $4.7 billion back to all of the non-millionaire citizens in this country, each of us would get about $.04 a day.
• Last month's deficit spending estimate incurred by the Federal government was about $198,000,000,000 (yes, in one month the Feds overspent their revenue stream by just under $200 billion.) If you assume the additional Buffet tax on millionaires would be spread out equally over each of the twelve months, then the additional millionaire tax money would have covered about .2% of last month's Federal deficit.
• As we discussed above, ten years worth of incremental millionaire taxes would generate about $47 billion for the Federal government. Those tax dollars would be able to pay off about .31% of our CURRENT national debt (in fact, it would be even less since this administration would continue to have us on an ever enlarging national debt increase in the ten years it would take to gather the incremental $47 billion).

Simple math, simpler politicians who cannot even see that this election year ploy is ridiculously stupid. It will never find its way back to other Americans (i.e. we will never see that $.04 a day), it will not significantly reduce any measure of deficit spending and our national debt, and it distracts the politicians running for office and Americans who need to vote from the real issues and financial disaster confronting all of us.

2) If Obama really wants more money, he does not have to increase taxes on any American, rich or poor. According to an article in the March, 2012 issue of AARP magazine, the IRS fails to collect about $385 billion a year in taxes from individuals and businesses that they are legally required to pay. The Federal government's failure to collect this tax liability makes honest taxpayers pay more and further increases the country's national debt.

Let's do some simple math:

• If this legally owed, but uncollected, $385 billion a year could be collected, it could theoretically reduce the every American household's tax liability by over $3,300 a year.
• This extra $385 billion a year is about 82 times larger than what Obama's shallow and politically motivated millionaire tax idea would bring into the Federal government.
• Over ten years, collecting that missing $385 billion a year would generate about $3.85 TRILLION. This is about 26% of our current national debt vs. a measly .31% of the current debt that Obama's new millionaire tax is worth.Simple math, simpler politicians.

The laws and tax code are already on the books to generate far more than a new law and new part of the tax code that is unlikely to ever get passed into law, it is only an election year ploy.

 3) Here is some depressing math and statistics from the March 2, 2012 issue of The Week magazine, reporting on a Chicago Tribune source: since 1976, 1,531 public officials from the Chicago area have been convicted of corruption. This simple math works out to the following, depressing conclusions

• On average, more than one Chicago public official was convicted every week for 27 years in the Chicago area for corruption.
• These are CONVICTIONS, not arrests, no indictments, not plea bargains, CONVICTIONS.
• This conviction rate was only in the Chicago area, it did not include the entire state of Illinois or any other sub part of Illinois, just the Chicago area.

This number does obviously not include those corrupt public officials that got away with their crimes and corruption.Very depressing but a simple math explanation of why our government at all levels, is ineffective, inefficient, and a disgrace: those that are in office are ineffective and inefficient because they are looking out for only their self interest which makes them a disgrace relative to being a public servant.

 4) An insight saying that I always remember (source unknown) when discussing government, politicians, and math goes as follows: "The Lord's Prayer is 66 words, the Gettysburg Address is 286 words, there are 1,322 words in the Declaration of Independence, but government regulations on the sale of cabbage total 26,911 words."

Maybe we have a $15 TRILLION national debt because the government bureaucracy has gotten so large and cumbersome that we actually hire someone, somewhere to write down 26,911 words on cabbage.

5) But apparently no one in the political class sees this as a problem because according to another article in the March 2, 2012 issue of The Week magazine, in 2013 the number of Federally mandated categories of illness and injuries for which hospitals may claim reimbursement will soar from 18,000 different types of illnesses and injuries to 140,000. Outrageous numbers, probably courtesy of Obama Care. Again, someone, somewhere in the wasteful bureaucracy had to come up with, write down, get approval of, and print up not only 18,000 types of claims but 122,000 new ones.

But the math insanity does not stop at 122,000 because included in those 122,000 new categories are:

• Nine categories of injuries and illnesses that were caused by parrots.
• Three categories of injuries and illnesses that were caused by flaming water skis.

Simple math, and simpler politicians that allow this type of nonsense to go on and on and on. Attack parrots and flaming water skis, insanity.

6) Here is some simple math that should hit everyone. According to a Bloomberg blurb printed in the March 30, 2012 issue of The Week magazine, for every penny increase to the cost of a gallon of gas, about $1 billion of consumer spending on other goods and services in the economy vanishes. More simple math:

• When Obama took office in early 2009, the average price for a gallon of regular gas was about $1.86.
• Today in the greater Tampa area, the average price of a gallon of gas is about $3.90, an increase of $2.04 in only 27 months.
• Thus, if you believe Bloomberg, the continued lack of an energy plan for the country has removed $204 billion out of the economy and into the coffers of foreign oil exporters and oil companies.
• This gas increase takes about $1,775 out of every average American household's budget, money that could have helped the economy recover and grow.

Simple math, and simpler politicians that cannot come together with a coherent energy program, to the detriment of every American household and the American economy.

7) The April 6, 2012 issue of The Week magazine had some very distressing math relative to one of the most tyrannical humans of the last century. When you think of Joseph Stalin, you do not think of anything good. The head of the former Soviet Union, Stalin was responsible for the killing of millions of political enemies and ordinary citizens. He imprisoned millions of people for little or no reason in inhumane conditions.

With this perspective, The Week reported the statistic that the U.S. now has more than 6 million people in jail or in prison. This is a higher number than the Soviet Union imprisoned in gulag prisons during Stalin's reign.

That is some truly frightening math. We are no better than Stalin. I would bet that the vast majority of those imprisoned are for drug-related offenses, a testimony to the continuing failure of the political class to come up with an effective and compassionate drug strategy.

Simple math, simpler politicians with no imagination when it comes to the drug wars.

Isn't math fun? By using math we can see how we are all misserved by just about every American politician when you look at their track record of numbers.

Many of them are in jail.

Many of them have put untold millions of undeserving Americans in jail due to their failed war on drugs.

They hire and pay people to write extensive cabbage regulations and to dream up thousands of thousands low potential injury scenarios involving flaming water skis and parrots.

They fail to collect hundreds of billions of dollars a year in taxes while wanting to impose new taxes in the face of their tax collection incompetency.

An old sports saying goes as follows: "You are only as good as your record." The above numbers of our political class's performance are not very good at all. Thus, their record is not very good at all. For that, they need to be removed from their positions and replaced with new players, just like any losing sports team would do. Unlike politicians, the numbers and the math do not lie, they are what they are.


"We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

Why Overtaxing The Rich (In New Jersey) Is Often A Stupid Idea - Third In A Continuing Series

This is a third in a continuing series of posts where we discuss why it is often a stupid idea to unfairly overtax the rich. Standard disclaimers: first, my family is no where close to being considered  "rich." We pay our Federal income taxes at the 15% tax bracket level. We live in a typical middle class, 2,000 square foot suburban home. I drive a seven year old vehicle and my wife drives a five year old vehicle. Thus, we do not have a direct stake in how much the rich are taxed.

Second disclaimer: the words "overtaxing" and "rich" are very subjective terms and concepts. Thus, the purpose of these posts is not to convince anyone what rich or unfair or overtaxing should be but to illustrate what can happen when taxes are increased on those high earners in our society. Wanting to tax the rich more is everyone's right but the reality of what happens when taxes are raised is what everyone should be aware of.

Today's post is centered around my old home state of New Jersey. Visiting the state this week caused me to see a number of billboards that were sponsored by a group sarcastically calling itself "Millionaires For Christie." Chris Christie is the current governor of New Jersey. The billboards and associated website were trying to raise the issue that as a result of Christie refusing to increase the state income tax on New Jersey millionaires, others in the state were suffering.

The associated website goes through some of the budget cuts that were made under Christie's watch, all of which seemed to be associated with education programs. This turned out not to be surprise once you paged down to the bottom of the website's page and saw that the primary New Jersey teachers' union was operating the site. The Governor and the union leadership have had a number of public confrontations since the governor was elected. Thus, I started to understand where the sarcasm and Millionaires for Christie effort was coming from, his main political opponent.

Before going through some of the items on the website, let's look at some independent sources of analysis and data to understand where New Jersey is currently sitting from an economic perspective:

- When Christie came into office, New Jersey faced a $10.5 billion budget shortfall, according to http://www.nj.com/ in a July 7, 2010 article.

- According to the Center On Budget and Policy Priorities, an organization that appears to be an expert on state government budgets and economics, the state will again face a budget deficit in excess of $10 billion in fiscal year 2012.

- This 2012 fiscal shortfall places New Jersey's deficit as the third worst state budget from a total dollar deficit ($10.5 billion) and the second worst state from a percentage basis (37.4%).

- A November, 2010 article from Kiplinger ranked New Jersey as the third worst state to retire in from a taxation perspective.

- A recent Forbes article placed New Jersey as the fifth most taxed state in the union.

- A detailed state-by-state analysis by the Tax Foundation in 2008 found that New Jersey had the worst state and local tax burden in the country, 11.8%. Knowing what I know about New Jersey, it is doubtful that this position has changed radically over the past few years.

- A recent article from Reason magazine quoted an expert source which calculated that the New Jersey public employee pension fund would run out of money in about seven years, requiring all of the pension outlays to then be paid out of current year state tax dollars.

Thus, it really cannot be argued that New Jersey is in bad fiscal shape even though it is one of the highest taxing state governments by anyone's measure or criteria.

Now, back  to the Millionaires For Christie effort. According to their website, if Christie had approved an additional tax for millionaires in the state, the state government would have annually received an additional $637 million. However, there are a few problems with this assertion:

- Even if the state received the additional $637 million, according to independent budget estimates from neutral parties, this would leave the state short about $9.9 billion or 94% of its needed revenue. Isn't the bigger problem still on the table even if the additional money is received? Shouldn't that be the focus, how to wipe out the inherent, structural fiscal problem that results in billions and billions of budget shortfall every year rather than only 6% of the shortfall?

- Even if the state received the additional $637 million in the first year, if no action was taken to correct the underlying cost structure problem, what happens when the "Maryland effect" kicks in a few years later.

You recall in a previous post in this series we documented what happened when the state of Maryland instituted a millionaire's tax. The number of millionaires filing state income taxes dropped by 30% very quickly and the state expectation of receiving an additional $106 million turned into a $267 million deficit relative to tax receipts from millionaire's. If that was to happen in New Jersey, which is more than likely, then the rest of New Jersey taxpayers, the non-millionaires, would end up paying the freight since the state government and political class never fixed the underlying cost structure.

- The website lists how much money was cut from various programs. However, it does not say what percentage of the total program costs that represents. For example, if a program costs $2m to operate and $1 million is cut, that is significant. However, if the program costs $100 million to run and $1 million is cut, that is not significant.

Thus, by not showing both the absolute and the relative size of the cuts, the website leaves the impression that everything is a crisis where that may not be the case to suspicious people like myself. If all of these cuts are relatively small on a percentage basis, their cause will lose my sympathies, given the overall disaster that the total state budget is in.

- Christie's cuts in trying to get spending in line with revenue fell heavily on everyone and every program in the state including education. But since education is one of the biggest budget lines, there was no way that education funding could not be affected.

That is a fact that seems to be lost on the Millionaires for Christie effort and backers. All of the examples they cite are relative to education and the interests of the teachers' union. They provide no constructive input on how else to get state budget costs under control, it is nothing more than a rant about their interests getting cut.

Given the overwhelming evidence that New Jersey is on the edge of a fiscal collapse, it would have been more constructive and credible to come to the table with a plan that could solve the education problem and the budget problem as opposed to ranting about "Christie's Cuts."

- The group and website act as if Christie is personally holding back funds and is just a bastard. The fact of the numbers is that the state does not have the revenue, Christie cut in order to fulfill the state constitution requirement of a balanced budget. To infer these are
Christie's personal cuts is a juvenile way to approach a problem and reality.

Should millionaires be taxed more in New Jersey? I do not know, that is a subjective opinion. That is up to the residents of New Jersey to determine. But understand that if they do raise the taxes on millionaires without fixing the underlying cost structure, in a few years they are likely to have much less revenue from millionaires, ever higher state government costs, and the need to raise taxes on everyone, not just millionaires. That is the likely long term reality. The root cause of the problem is out of control state spending, not Christie personally making budget cuts.

And higher taxes on everyone to meet today's out of control state government expenses will eventually bump into the reality of raising taxes still more in about seven years to pay for state pension shortfalls. All of these events will eventually cement New Jersey's reputation as the most taxed state in the union.

And that is why I am no longer a New Jersey resident. I grew up in New Jersey and after graduating from an out-of-state college, returned to New Jersey. My wife also grew up in New Jersey and together we worked almost a combined fifty years in New Jersey jobs. I started a successful small business in New Jersey. We have a ton of friends and family in New Jersey. We enjoyed the Jersey shore, the Jersey mountains, and just about every other aspect of life in New Jersey.

However, we left in 2005 and moved to Florida for the simple reason of a New Jersey political class that did not have any fiscal sanity or clue, both Democrats and Republicans. What have we gained by moving to Florida:

- In 2005, the year we left New Jersey, we paid over $12,000 a year in property taxes. We did not have any municipal services and were served by the state police and a volunteer fire company. I cannot imagine how much our property taxes would be today, six years later, in that typical suburban New Jersey house.

- In 2011, we will pay under $4,000 a year in Florida property taxes. Thus, at a bare minimum, we are saving $8,000 a year vs. New Jersey or about $670 a month, in property taxes.

- Our Florida property taxes have gone down every year since we moved here and they are capped at no more than a 3% increase a year.

- We pay absolutely no state income taxes in Florida.

- Florida was not listed in the Reason magazine as having a looming state pension problem like New Jersey has.

- We still see a lot of New Jersey friends and family as the escape New Jersey winters for the warmth of Florida.

- Some New Jersey teachers might claim that Florida schools are not as good as New Jersey schools and that is why taxes are so much higher in New Jersey, the taxes pay for a higher quality education. Why that may have historically been the case, Florida has been working hard over the past decade to improve their schools' quality. In fact, according to the latest Newsweek annual analysis of the nation's high schools, eighteen of the top 100 schools are currently in Florida, only one is in New Jersey, deflating the whole argument that New Jersey pays more taxes for a better level of education.

Thus, there were plenty of reasons for us to stay in New Jersey but the state government, the state political class, and the state tax burden made that impossible. I believe we were net contributors to the state of New Jersey. We never collected unemployment, we never went on welfare, we paid our taxes on time, we volunteered in our community, we used our disposable income to frequent New Jersey restaurants, movie theaters, and other businesses.

However, I would bet that we are not alone in the decision we made to leave, that individuals, families and businesses have reached the same conclusion or will soon reach that same conclusion. Raising taxes on millionaires in New Jersey is certainly a budget option. So is the nasty downstream implications if the state's political class does not fix the underlying root causes of excessive spending since those root causes will not go away but the millionaires might.



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