December 14th, 2009 :: Permalink

Aloha ~
The insanity continues ... not enough money for our schools and Keiki; now insufficient funds for our democracy.

Why? Why? Why? In 1979 combined income of our MOST RICH, the TOP 20%, was 45.4 percent of the total. By 2005 combined income of our MOST RICH, the TOP 20%, had exploded to dominate 55.1 percent of the pie - and federal, state and local taxes dropped dramatically on this extremely fortunate group (source).

As a result our schools, roads and bridges are crumbling and closing. Middle class families are collapsing and Hawai'i is ridiculed for our inability to self-govern.

Last week Rep. Abercrombie was criticized for his efforts to secure an important earmark for biofuel research in Hawai'i. Many questioned his ethics claiming he should have done a better job disclosing relationships.

This past weekend Rep. Abercrombie announced he will resign his position in Congress - saying he is uncomfortable taking money from Hawai'i's taxpayers while he works full time to become the state's next governor.

Republicans and other leading figures criticize Neil for taking the high and ethical road.

Republican Lt. Gov. Aiona will likely not take this ethical path. He has no problem stealing money from local taxpayers while he works to land another job. We don't have enough money for teachers or elections yet Aiona drains money from public coffers and uses it for unintended purposes.

Yet we again criticize Mr. Abercrombie! Insane ...

As I watch Hawai'i descend further into chaos I am more impressed each day by Colorado. CNN reports today (source) that the state is putting its trust in American capitalism to help meet their needs of the 21st century. As babyboomers continue to age, retire and suffer nature's plight of old age, Coloradans opens their minds to an important source of revenue. Hawai'i remains stuck in reverse. Good luck to all ...

A*L*O*H*A

FOLLOW UP
Aloha Hawaiino ~
Mahalo for your thoughts and thank you for the compliments. I'm a smart guy but clearly not as bright as you nor as gifted as those who regularly blog here - yet I can do basic math. Our national debt approaches $12.4 TRILLION. Our state appears short some $1.5 BILLION and 30-40 states are in fiscal crisis. We cannot keep school doors open, cannot afford elections, and put the cost of our two wars, lavish tax cuts and economic recovery on the national credit card for future generations to pay.

At the same time upcoming generations will be saddled with the largest social burden in history as babyboomers retire and demand Social Security and Medicare services. David Walker, former GAO chief, claims we have nearly $60 TRILLION in unfunded obligations - over 4.5 times our national annual GDP.

You say the MOST RICH have done their part yet middle class families are collapsing and make a solid case why they can't afford increases in their tax burden. Where do we get the money we need to fund our obligations? I'm open for ideas rather than political spin.

There are many ways to look at tax burden in our system. I showed without dispute that our MOST RICH collectively paid less tax by percent in 2005 (6.35%) than in 1979 (6.61%) source.

I also pointed out honestly that America's MOST RICH paid more total taxes in 2005 than they did in 1979 - yet this is simply due to the fact they make so much more money today.

I noticed you ignored the pie charts showing Distribution of Income 1979-2005. How is it possible that the Top 20% garnered 45.4 percent of income in 1979 yet now gobble up 55.1 percent of the total today? Can't you see why the Remaining 80% feel so pinched? We're dividing up a lot less of the economic pie source.

You state taxes for the Bottom 20% decreased about 50 percent while taxes on the Top 20% decreased about 10 percent. This is an illusionary argument. Let's put real numbers to this:

A Bottom 20% individual makes $10,000. She used to pay 8.0 percent in taxes, reduced to 4.3 percent: $10,000 (taxes 1979 = $800) & (taxes 2005 = $430) difference is $370 or about $31 per month.

A Top 20% individual makes $1,000,000. He used to pay 27.5 percent, reduced to 25.5 percent: $1,000,000 (taxes 1979 = $275,00) & (taxes 2005 = $255,000) difference is $20,000 or about $1,700 per month.

You claim the poor are better off because they received a larger decrease in tax rate. Yet our impoverished woman lives on $798/month rather than $767/month while this fortunate man lives on $62,083/month rather than the pauper's salary of $60,417/month.

You claim this is PONO and thus stand by your Machiavellian distortion of Compassionate Conservatism. My heart bleeds for your suffering!

To struggling beginning workers an extra $31/month does not allow them to remain above water. You dismiss this reality claiming the percentage is better. This is why Americans are increasingly joining the ranks of the poor; why consumer credit cards have both exploded and are maxed out. Regular people cannot make ends meet. This is also why GW Bush appeared so callous in an Election 2004 town hall when complimenting a women working three jobs saying, That is uniquely America.

On the other hand, when considering our current deficits and social and military burdens, I argue none of us should be entitled to tax breaks. It is morally wrong to assign debt to the unborn. The fact we continue this practice demonstrates our personal and national character - or lack thereof. We have proven to the world we are an incredibly selfish society, which focuses on ME, ME, ME rather than living with KULEANA and acting responsibly.

I understand you do not like the title of my research, America's Wealthy Wage War Against the Middle Class, yet I'm just a messenger. This argument is being made by many experts far more enlightened than me. I'm quoting from one of America's most respected entrepreneurs and wealthy leaders, Warren Buffett. He knows that a collapsing middle class is destructive to our democracy. Mr. Buffett demands reform - thus he warns:

There's class warfare, all right, but it's my class, the rich class, that's making war and we're winning.

A*L*O*H*A

FOLLOW UP
Aloha Hawaiino ~
Mahalo for your discussion. Taxation is a complex and confusing issue and I believe you are confusing some of the statistics. They must be compared in context. We all recognize we are short of the funding we need to run a healthy democracy, as federal government debt approaches $12.4T and our state shortfall nears $1.5B.

I argue our MOST RICH are not paying enough and pointed out their overall tax rate is lower today. You initially cited my source of the CBO report , Table 1A, Total Effective Federal Tax Rate (TEFTR). The CBO lists five Quintiles along with the TOP 10%, Top 5% and Top 1%. TEFTR dropped for ALL eight groups.

Answering simply - the federal tax burden by percent is lower for All Americans from rich to poor.

Table 1B shows the Share of Total Federal Tax Liabilities (STFTL). I agree with you this has dropped for our most poor, Bottom 20%, (1976: 2.1%; 2005: 0.8%) - not only because their TEFTR decreased but because they had become poorer by 2005.

The STFTL for our most rich, Top 20%, increased (1976: 56.4%; 2005: 68.7%). Since their TEFTR dropped this dramatic increase in total share of tax liability must be related to a massive increase in wealth. As I said initially, they pay more in taxes because they make so much more.

Table 4C, After-Tax Income, supports this claim (I do not believe this data is adjusted for inflation).

Looking at our most poor, Bottom 20%, they averaged $10,800 (1976) and $11,100 (2005) in after-tax income. They took home an additional $12/yr over a 26-year period. As this increase was not adjusted for inflation they lost financial ground year after year.

The second Quintile, (1976: $22,700; 2005: $27,200), took home an extra $175/yr over the period or about 0.8 percent growth per year. Inflation generally averages some 3 percent per year. This group also lost ground over the period.

The middle Quintile, (1976: $32,700; 2005: $41,100), took home an extra $325/yr, slightly less than One percent per year. Thus this group lost ground as well.

The fourth Quintile, (1976: $45,100; 2005: $60,300), my group, took home an extra $585/yr or about 1.3 percent per year. Again this Quintile lost ground.

The highest Quintile, (1976: $83,400; 2005: $148,000), took home an extra $2,500/yr or about 3.0 percent per year and kept up with inflation.

Let's look at our MOST FORTUNATE:

Top 10%: (1976: $104,500; 2005: $209,200). After-Tax Income growth averages some $4,026/yr or about 3.9 percent.

Top 5%: (1976: $139,000; 2005: $314,800). After-Tax Income growth averages some $6,762/yr or about 4.9 percent.

Top 1%: (1976: $304,800; 2005: $951,800). After-Tax Income growth averages some $24,885/yr or about 8.2 percent.

Harold Meyerson, writes today about the decline of the American middle class.

America's production of goods no longer received the level of investment that had made it the engine of our economic growth from the mid-19th century through the 1970s.

America has put more money in the hands of our MOST RICH and they have reinvested much of it outside the U.S.

The change began at the outset of the Reagan years, when the percentage of corporate profits retained for new investment dropped sharply.

In the prosperity years of 1946 to 1979, dividends constituted 23 percent of profits. From 1980 to 2008, they constituted 46 percent.

The problem is that America's economic elites have thrived on the financialization and globalization of the economy that have caused the incomes of the vast majority of their fellow Americans to stagnate or decline.

A*L*O*H*A