Michael E. Newton's Blog, page 16

Taxes paid keeps rising, despite the media's claims to the opposite

Headline: "Tax bills in 2009 at lowest level since 1950"

The reality according to the very same article:

"Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8.% of income before rising slightly in the first three months of 2010."

Notice that this is only talking about income taxes. As if income taxes are the only means of collecting taxes. In fact, look at what has been happening in Arizona. The legislature has been dropping income tax rates here, but at the same time they and the people through ballot initiatives have been raising the sales tax rate. Looking at only income taxes is looking at about a third of the total.

I decided to collect the data from http://www.usgovernmentspending.com/ and http://www.usgovernmentrevenue.com and create some simple charts.

Yes, taxes paid have declined recently and hit their lowest level as a percentage of GDP since 1959 (not 1950). However, as you can see, tax revenue is 2010 was back up to the same level as 1971 and 2011′s are expected to be the same as 1973′s. In fact, 2011′s tax revenue is expected to be just a point less than that of 2003′s. Big deal! Yet, look at that outstanding increase in taxes between 1910 and 2000.

But that only tells part of the story. As government's share of GDP grows, the shrinking private sector has to pay for all that new government. So let's look at taxes as a percentage of the private economy:

The decline in taxes is now much less pronounced. Taxes paid as a percentage of the private economy hovers around 50%. Looking at taxes against the private is much better because it is the private economy tax actually produces. Let's look at it another way. If taxes were 60% of GDP but 100% of GDP, everybody in the private economy would stop working and government would get no revenue and would be forced to close down. So the private economy is the determining factor in tax revenues, not the total economy.

So the average person working in the private sector as an employer or employees pays, on average, a tax rate of 50%. This includes income taxes, sales taxes, property taxes, vehicle registration taxes, social security and Medicare taxes, corporate taxes, capital gains taxes, etc. FIFTY PERCENT!

And people have the nerve to complain that tax rates and tax revenues are falling.

Taxes need to fall much further. A decline to the 100-year average of 25% of GDP and 36% of private sector GDP would be a good start. In other words, to return to the average would mean a tax cut of $750 billion to $1300 billion. But with huge deficits, spending would have to decline by two to three trillion. But given the immense growth in government over the last 100 years, spending cuts like that would simply return us to the 100-year average.

Remember, USA today compared 2009 income tax revenue to the 50-year average. I am simply following their lead, but looking at all taxes and looking at a 100-year average.

Coming this summer! Angry Mobs and Founding Fathers: The Fight for Control of the American Revolution

Introducing to you my newest book, coming out this summer:

Angry Mobs and Founding Fathers:

The Fight for Control of the American Revolution

Angry mobs launched the American Revolution when they protested against British acts of tyranny. These rebels threatened, harassed, and chased away British officials and Loyalists. The Founding Fathers agreed with the goals of these Patriots, but not with their methods. Fearing anarchy, the Founders channeled the passions of the mobs toward independence. Working together, the angry mobs and Founding Fathers defeated the mighty British army and won independence, but the new nation that emerged was anarchic and chaotic, much like the angry mobs themselves. Meeting behind closed doors, the Founding Fathers conspired to depose the Confederation government, wrote a new constitution, and created the world's most successful republic. Angry Mobs and Founding Fathers tells the little-known story of how these two groups fought for control of the American Revolution.

* Details subject to change prior to publication.

The popping of the Chinese bubble?

With all the talk of inflation, China is experiencing a deflation problem. Marketwatch reports:

China is urging major supermarkets to boost vegetable sales and encouraging farmers to bypass middlemen and market produce directly, in a bid to curb a steep slide in prices that is hurting farmers' incomes, the Ministry of Commerce said in a statement.

Twelve major supermarkets, including Wumart Stores Inc., have agreed to boost sales, the ministry said. The China Daily newspaper said Thursday Wal-Mart Stores Inc. and Carrefour SA are also involved in the effort.

The ministry has also set up a "work group" to maintain prices at a "reasonable" level.

Its statement Wednesday underscores the difficulties the government faces in controlling volatile prices. The impact of an official push last year to raise vegetable output appears to be unraveling now, amid overproduction and clogged distribution lines.

Vegetable prices have fallen 21% in a month and 5.9% from a week ago, the ministry said.

The sharpest declines were seen in green pepper, which fell 20.9% from a week ago, and cabbage, chili pepper and lettuce, which fell 12%, 8.9% and 8.1% respectively.

In contrast, grain, pork, beef, metals and rubber all continued to post small increases of between 0.2% and 1.7% from a week ago.

Last year, the Ministry of Agriculture pushed farmers to raise vegetable acreage by 7% and production by 7.5%, following almost three years of little to no growth in the sector.

The directive was part of wider efforts, including price caps on cooking oil and flour, to curb a surge in food prices.

Worldwide commodity inflation has been driven, in part, by demand from China. Are these price corrections the first sign that the Chinese bubble has popped and that inflation will turn to deflation as Chinese demand evaporates?

Sovereign debt crisis hits record levels. Preview of United States?

A quick look at the charts shows the sovereign debt crisis has hit record levels along with European interest rates:

Greece 10-year yield:

Ireland 10-year yield:

Portugal 10-year yield:

With 10-year interest rates up at 14.9, 10.5, and 9.5 percent (and two-year rates even higher in many cases), it is hard to see how these countries can afford to pay these rates. If the United States were paying a 10% interest rate with debt about 90 percent of GDP, 9 percent of GDP and about a third of federal spending would go just to paying interest on the debt. In Greece, where debt is about 130 percent of GDP, the government is spending about 19.4 percent of GDP on interest. This is clearly unsustainable, which is why everybody expects these countries to "restructure" their debts, a euphemism for defaulting and paying back less than they owe. This expectation is a self-fulfilling prophecy because it pushes rates even higher.

With the situation in the United States only marginally better, how long before rates rise here and the U.S. defaults? Best to cut spending now, when we have a choice, than later when interest rates rise and the government has to divert spending to interest payments.

New website. To announce new book on May 2.

Been very busy over here at ThePathToTyranny working on my new website. MichaelENewton.com is now up and running and ready for expansion. I will still be blogging here at thepathtotyranny.wordpress.com, so no need to change your bookmarks of subscription if you follow me here.

On that note, I will be announcing my new book on Monday May 2 at noon Eastern time (plus or minus a few minutes). As I've mentioned many times, this new book will be about the competing ideologies of the American Revolution. God willing, the book will be out this July (or maybe early August).

So watch your email, facebook, twitter, or my new website on May 2 for details on my upcoming book.

Obama's Plan for Automatic Tax Increases (via Conservatives on Fire)

Must read information from Conservatives on Fire. We can't let the neo-liberals continue their tax and spend policies.

Did you know that Obama had a plan to increase taxes automatically? I didn't know about Obama's plan. Apparently the MSM doesn't know or doesn't care. Worst of all, it would seem that our Republican's in Washington are also unaware of Obama's plan and that makes me FURIOUS! Yesterday I received an E-mail from my friend Pat Slattery of The Free Market Project. Here is how Pat's message began: We've got the bastard now!  James Howe pointed Obama's … Read More

via Conservatives on Fire

Obama's speech proves that Fox News has won!

The great James Taranto debates with himself about what word Obama and the Democrats will use to push their budget, which will include tax increases. Taranto writes:

The Washington Post reports that Obama will give a speech tomorrow at George Washington University "promoting a bipartisan approach pioneered by an independent presidential commission" whose recommendations he had ignored until now…

….Our guess is that the mantra will be "balance" rather than "fairness"…

…Whereas "fairness" is a readily identifiable code word for socialism, "balance"–as in "a balanced budget"–connotes living within one's means.

If Obama and the Democrats have to choose between fair and balanced, clearly Fox News' fair and balanced motto has already won.

Windfall profit tax on ex-government officials

For the second time in three days, Glenn Reynolds of Instapundit mentioned the idea of a "50% surtax on the earnings of former government officials."

On April 10, 2011:

SO OBAMA'S PEOPLE ARE TALKING TAX INCREASES AGAIN. Here's my proposal: A 50% surtax on anything earned within five years after leaving the federal government, above whatever the federal salary was. Leave a $150K job at the White House, take a $1M job with Goldman, Sachs, pay a $425K surtax. Some House Republican should add this to a bill and watch the Dems react.

Then on April 12, 2011:

FORGET JOHN GALT, WHO IS PETER ORSZAG? Peter Suderman writes: "Here's my answer to the question: He's a pretty-boy pencil pusher whose business, as the top budget brainiac in the administration, was to mislead the public about the budget. . . . Ultimately, it doesn't really matter what Orzag is doing for Citibank. His primarily job duties are intangible. Mostly it seems he's there to cast his sexy geek-boy light on the institution and serve as a conduit to Washington's power centers."

Seems like another good argument for my 50% surtax on the earnings of former government officials. After all, at least half of Orszag's value to Citibank comes from his prior government service. Why shouldn't the taxpayers claw some of that back? Shared sacrifice, dude. . . .

While I almost always oppose taxes, I might be able to get behind this one. However, I don't like the idea of a surtax. I think it should be called a windfall profit tax.

Mother Earth to get rights. Can I file a lawsuit against her?

The United Nations has a plan to give Mother Earth the same rights as people:

Bolivia will this month table a draft United Nations treaty giving "Mother Earth" the same rights as humans — having just passed a domestic law that does the same for bugs, trees and all other natural things in the South American country…

…It also establishes a Ministry of Mother Earth, and provides the planet with an ombudsman whose job is to hear nature's complaints as voiced by activist and other groups, including the state.

Presumably, these "activist and other groups" will sue corporations and individuals to stop Earth-harming activity and also sue for damages. So, can we sue these same groups for damages Mother Earth does to us (earthquakes, hurricanes, tornadoes, etc.)?

American vs. Chinese poor

China is boosting their determination of poverty to an annual income of $229.30. In the United States, the poverty level is $10,890.

So a poor person in the U.S. makes nearly 50 times as much money as a poor person in China. Additionally, American poor get all sorts of free services (subsidized public transportation, welfare, libraries, food stamps, etc.) from the government that the Chinese poor do not receive.

In fact, China's per capita GDP is just $4,382. An American living in poverty has higher income than the average person in China.