Room for compromise on furloughs

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November 10th, 2009 :: Permalink

Aloha ~
When the only tool people have in their box is a hammer, the entire world looks like a nail ... We are in the midst of an extremely challenging time and historians will fill volumes about America's Great Recession. Maybe if people see what is happening to our labor market, they will understand why I am fighting for every job and every penny of compensation.

In response to David's post last Friday, I added graphs to my comments. Comparing the Percent of Job Losses in Post WWII Recessions current losses are the most serious and it's clear we have not yet hit bottom.

See for yourself at: scottgoold.org/wogs/nov09/blog_11.6.09.php

At best we will struggle for a minimum of 24 months to return to more acceptable labor conditions. Leading economists who access complete data believe it will take TEN years at the present rate.

Each job loss turns around and bites the rest of us on the butt. When one person loses a job (or has her salary slashed), she cannot buy from your business or contribute to tax rolls. We are truly an ohana at this time ... although I realize this concept seems Pollyannaish to most.

About $35 million has been sitting idly on our governor's desk. These funds would have allowed us to avoid furloughs this fall semester -- no chaos or confusion. There is additional money available yet we are too stubborn to seek a solution. We prefer to watch others suffer, blame teachers and state workers for society's ills, and demand reductions at a time when every cut hurts us all.

A*L*O*H*A

FOLLOW UP:
Aloha shaftalley ~
My apologies again for the series of errors in my example. This served only to confuse you.

Essentially I was attempting to demonstrate how recent tax modifications have trickled down to bite all of us. If our nation asked our most wealthy to sacrifice a TINY bit more, we could fully fund education and state government in a crisis.

I used blunt calculations in my initial example knowing these Financial Employees pay additional taxes, as we all do. I was simply trying to point out the raw injustice in current distributions of income.

Let's look a bit closer. These employees might have an average base salary around $150,000; bonuses add another $250K on average. We talking about $400,000 or so on average for an estimated 119,000 Financial Employees.

Under current tax roles they pay about 35 percent in federal taxes. This reduces their take home salary to something near $260,000. As I demonstrated, had our tax policy chipped another $840 from their compensation, we would not need Furlough days. Hawai'i's public education would be fully funded ...

I also argued that a reduction in take home pay to $259,000 from $260,000 would not influence their buying and spending behavior greatly.

On the other hand, had our tax policy chipped about $8,400 from each Financial Employee, Hawai'i would not suffer a state budget crisis at all. This would reduce average salaries to some $251,000 from $260,000.

Interestingly this increased pay reduction works out to about 2.25 percent. Their federal tax rate would be 37.25 percent rather than 35 percent. Under the Clinton tax code the top marginal rate was 39.6 percent. We are not asking something unreasonable here. [post Great Depression and WWII, the top marginal tax rate ranged 91-92 percent - while America witnessed it's greatest expansion in history]

Financial Employees would whine, "Atlas is shrugging ... making $400,000 isn't easy." True. They work long hard hours. Looking at the glass half empty they lose about $150,000 in federal taxes alone.

On the other hand, looking at the glass half full they take home FIVE TIMES the median household income of Americans.

When times are good we should applaud their hard work and respect their knowledge and service. Yet facing a crisis, particularly one caused by our Financial Industry, I shoulder no pains of guilt requesting their sacrifice.

David and others on this page offer no apology demanding teachers sacrifice 5-8 percent of their salary. These employees might make $50K on average. They lose about 25 percent in federal taxes - reducing take home pay to some $37,500. Due to shortfall cuts, average take home pay would range somewhere between $34,500 to $35,625.

This leaves teachers with less than $3,000 per month. I don't consider this a living wage for a college graduate professional. Such cuts transfer directly to less spending in the local market, which further hurts the private sector and Ma & Pa businesses.

This is not a healthy policy outcome ...

A*L*O*H*A