The Not-So-Fair Tax

When Mike Huckabee won the Republican Caucus in Iowa last week, a cheer went up from one particular fringe group: the Americans For Fair Taxation. They proclaimed that "The Fair Tax Wins In Iowa!" I've heard Huckabee mention the "Fair" Tax before, so I decided to investigate.

The "Fair" Tax would eliminate the payroll taxes that most Americans have deducted from their checks. Personal income tax and social security taxes would no longer be withheld. More interestingly, the "Fair" Tax would eliminate taxes such as the estate tax, gift tax, capital gains tax and all commercial real-estate transaction taxes. My assumption going in was that the "Fair" Tax was a scheme to shift the tax burden from the wealthy to the middle class and poor, and it appears that the primary goal is to create a system where wealthy people can accumulate wealth without paying taxes on it, and then pass it along to their heirs without them having to pay taxes on it.

I wanted to do a thorough evaluation of the "Fair" Tax, but there is so much to it that I'd have to dedicate all of my time to deciphering the reports that the Americans For Fair Taxation have paid to have produced. Instead, I chose one claim that struck me as particularly dubious and decided to look into it.

One of the things mentioned over and over in the literature is that the "Fair" Tax is progressive. They claim that they have worked in a way to make it less of a burden on poor people, as opposed to a standard flat tax, which would disproportionately target the lower income brackets. The way they fix it is to send everyone a check once a month, equal to the 1/12th of the "Fair" Tax payments on purchases up to the poverty level. A single person, for example, would get a check for about $196 per month. That way, nobody is paying taxes on life's necessities, or so they claim.

I wondered how it could be that a sales tax that would produce a 30% increase in the cost of all goods and services that people buy (excluding "used" items) could possibly be a larger burden on the wealthy. So I checked out one of the reports that the "Fair" Tax people paid for, titled "A Distributional Analysis of Adopting the FairTax." What I found was not very surprising at all.

"Oh, people can come up with statistics to prove anything, Kent. Forty percent of people know that." -Homer Simpson

From page 4 of the report:

We argue that current expenditure is a better measure of an individual’s well-being than current income. This is because current expenditure is more closely related to lifetime income than is current income and is less subject to temporary shocks. Current expenditure is also a better measure of wealth, since people may live off their savings while undergoing a temporary drop in income. Therefore, we conclude that the FairTax, with the prebate, is more progressive than the current tax law.

There, in a nutshell, is how the "Fair" Tax crowd can claim their plan is progressive. If you spend more money, your "well being" is greater than if you spend less money. (Would anyone other than the rich come up with that?) By their logic, if you take two people who each earn $50,000 per year, the one whose expenditures are $70,000 per year is twice as well off as the one whose expenditures are $35,000 per year. Magical conservathink. Spend yourself into debt to be better off.

On page 19 of the report, in section IV. Distribution on a per Capita Basis, there is an interesting finding:

As noted before, even people in the poorest income per capita deciles have relatively high levels of expenditure per capita. The introduction of the FairTax would not favor these people; they would gain little from the abolition of taxes on income (because their incomes are low), but would pay the FairTax (because their expenditures are substantial), as shown in column (M). This effect is attenuated when the dynamic expenditure-expanding effects of the FairTax are taken into account, but the poorest half of the population (as measured by income per capita) would be worse off due to the FairTax. A similar conclusion emerges from an examination of the pattern of income per capita, shown in columns (Q) through (V) in Table 9. [Emphasis Added.]

So the group's own report states flat out that when you look at the numbers on the basis of income rather than expenditures, the "Fair" Tax actually hurts the poorest half of the population. How is that progressive, again?

And then, to perhaps water down the bitter taste from the report's conclusion, they add:

Note the very low average income of those in the poorest income per capita decile – just $1,243 in 2001 – which is surely a poor measure of the well-being of this group of the population.

Because really, how could you judge someone's well-being by the fact that they live in abject poverty? As long as they're spending lots, then they're A-OK.

If A Caucus Voter Fell In The Woods...

What if you threw a party and nobody showed up?

Wyoming, in an effort to become relevant, decided to move their Republican caucus up ahead of everyone else (thus becoming the new Iowa, perhaps.) Unfortunately, they didn't count on Iowa's determination to remain Iowa, or New Hampshire's determination to remain New Hampshire. Both of those states moved their primaries up to compensate, leaving Wyoming sandwiched in between.

So what happens when you're a nobody who tries to sneak a seat at the popular kids' table? You tend to get ignored.

According to an AP story, "Mitt Romney, Fred Thompson, Duncan Hunter and Ron Paul have passed through [Wyoming] since September. Mike Huckabee, Rudy Giuliani and John McCain have not."

It's a bad sign when only one of the viable candidates passes through your state. In fact, the candidates seem to have headed to New Hampshire after last night's results were known and speeches were made. The conclusion to be drawn from this is that Wyoming simply isn't ready for Prime Time, no matter how early their caucus is held.

Another Lesson Not Learned

Pervez Musharraf, president of Pakistan, is a dictator. As Wikipedia says: "He came to power in 1999 by effecting a military coup d'état and has suspended the constitution of Pakistan twice." He may have removed his uniform, but he's still calling the shots, and last I checked he wasn't elected in any fair and open sort of way.

Nonetheless, the US has decided to call him an ally. Reluctantly, perhaps, but since he serves our short-term interests, he's called an ally just the same. Where have I seen this before? Oh yeah, Iraq. Surely, things will work out better this time, though.

Or not.

The assassination of opposition leader Benazir Bhutto has pitched Pakistan into a political freefall and raised fears that increasingly bitter divisions in the society are turning the country into another Iraq.

Shocked citizens blame the deepening turmoil on President Pervez Musharraf and his U.S.-backed crackdown on Islamic extremists. Overwhelmingly poor and more concerned with survival than anti-Western terrorism, most crave stability above all, and many believe things will only get better if Musharraf resigns.

"The government of Musharraf has created an Afghanistan and Iraq-like situation in our country," said Zaheer Ahmad, 47, who works at a private clinic in Multan. "I don't know who killed Benazir Bhutto. But I do know that it is the result of Musharraf's wrong and bad policies." [emphasis added]

So if Pakistan dissolves into chaos and Musharraf is "forced" to resume his military dictatorship and suspend the constitution again, will the US once again become the object of scorn for a new generation of extremists?

The real question is whether our government will ever stop backing dictators. It's deplorable behavior for a country that claims its mission is to "spread democracy."

The Governator Proves He Really Is A Republican

This just in:

Gov. Arnold Schwarzenegger and Assembly leader Fabian Nunez are touting their plan to reform health care in California

Reform healthcare. That's what they're saying. The governor and the Democrats in the state Senate. Reform, as in "make better" or "fix." While it is somewhat discouraging to see that the Democrats in California are using that term, what's really irritating is that the media has picked it up as well. The governor's plan is not reform. It will do nothing to fix the healthcare crisis.

The governor's plan has a couple flaws.

1) It does nothing to address the real problem with healthcare, which is that it costs too damn much. Arnold's plan is simply to use taxpayer money to help people pay for overpriced private insurance, partially "with fees on hospitals." How is that supposed to reduce costs?

2) It forces people to buy private insurance. Pumping more money into the broken system is not going to fix it. That would be like trying to fix the problem of lobbyist influence in DC by forcing everyone to hire a lobbyist, and then using tax dollars to "subsidize" the expense.

Basically, Arnold's plan is to funnel more money from the middle class into the pockets of the already wealthy CEOs of the bloated inefficient insurance industry. If there were any doubts that he's really a Republican, this should help to crush them. What's most surprising is that the Democrats are going along with him. Providing insurance for everyone is a laudable goal, but Arnold's plan is the wrong way to go about it.

Meanwhile, the California Nurses Association is urging senators to reject the Assembly bill in favor of a government-run, single-payer health care system.

When will people realize that's the only way to fix this problem?

Bush Chooses Big Business Over Kids' Health

When President Bush vetoed the SCHIP bill on Wednesday, he didn't do it because he's hostile toward poor children. I'm sure Bush has nothing against poor kids, so long as they pull themselves up by their bootstraps and make it on their own, like he did. He didn't even do it becuase he simply doesn't care about poor kids. He did it because he had to. Bush had to stand up for the one thing that he truly believes in: Undying loyalty to big business.

Bush vetoed the expansion of the SCHIP program because he is afraid of it. Or rather, his corporate backers and the goons that run the RNC are afraid of it. SCHIP is the Republican party's greatest nightmare for one simple reason. It works. The program provides health insurance to poor people, mostly kids, at a rate far lower than any private insurance company can (or is willing to.) A look at the numbers tells the story that causes Bush to wake up screaming in the late evening.

Currently, the SCHIP program spends $5.04 Billion per year to provide healthcare to 6 million poor people, mostly children of people who make too much money to qualify for Medicaid, but too little to afford private insurance. That means that the program spends $840 per year per person. That's $70 per month.

Wait, let me repeat that. SCHIP, a government healthcare program, provides insurance at the cost of $70 per month per person. That's less than I (a single person) pay for my employer-subsidized insurance.

Under the expanded SCHIP plan, the government would spend roughly $12.04 Billion per year to provide insurance for about 10 million people. Again, mostly children. That works out to $1,204 per person per year, or $100.33 per month.

George Bush said that he vetoed this bill because "it moves our country's health care system in the wrong direction." And he's right. This bill provides healthcare to poor children in a manner that is far more cost-effective than private insurance. As proof of his fealty to the industry, Bush's proposal, as presented in his State Of The Union Address last February was to give tax deductions to people who already have insurance. His plan has no cost benefit over SCHIP. As he said, "For Americans who now purchase health insurance on their own, this proposal would mean a substantial tax savings -- $4,500 for a family of four making $60,000 a year." That works out to $375 per month ($26 less than SCHIP). That $375 isn't providing the family with healthcare, though. It's helping them to pay for private insurance. (Only someone who has never had to buy insurance ever in his life would believe that $375 per month is going to cut it in the private insurance world.)

Ultimately, Bush's plan is simply to push more tax dollars into the pockets of the Insurance industry. (Or as he calls them, "his base.") In his veto statement, Bush said, "our Nation's goal should be to move children who have no health insurance to private coverage." At the same time, according to Marilyn Clement, "His proposed $15,000 income tax deduction for middle-class families would jeopardize both Medicare and Social Security..." And that's a never-ending goal of the Republican party.

So what is Bush really doing by vetoing the SCHIP expansion bill? He's trying to keep America from noticing that SCHIP is a federal insurance system that provides healthcare more cost-effectively than private insurance companies can. After all, that's not the sort of thing you want to become public knowledge when there's an election right around the corner.

Romney's Message To Atheists: Go To Hell

"Freedom requires religion just as religion requires freedom. ... Freedom and religion endure together, or perish alone."

So there you have it. According to Mitt Romney, if you do not believe in the God of the Bible, then you are leading the US on a path to destruction. I'm not sure which is more annoying: Romney's pandering to the evangelicals in a last-ditch effort to win in Iowa, or his utter ignorance of the religious beliefs of our nation's founders.

We should acknowledge the Creator as did the Founders – in ceremony and word. He should remain on our currency, in our pledge, in the teaching of our history, and during the holiday season, nativity scenes and menorahs should be welcome in our public places.

Putting the words "In God We Trust" on our money had nothing to do with the Founders. According to the US Treasury, "The motto IN GOD WE TRUST was placed on United States coins largely because of the increased religious sentiment existing during the Civil War." And, "IN GOD WE TRUST first appeared on the 1864 two-cent coin."

As for the pledge, religioustolerance.org says, "In 1954, during the McCarthy era and communism scare, Congress passed a bill, which was signed into law, to add the words 'under God.'" I'm going to go out on a limb and say that the Founders had nothing to do with that, either.

Of course, Romney's view of religion is predictably Christ-centric. He said, "I believe that every faith I have encountered draws its adherents closer to God." So either he hasn't encountered that many faiths, or he feels that all religions have the same god.

It seems to me that Romney's view on religion is rather single-minded. Tolerance of religion means tolerance of his religion. Freedom to worship means freedom to worship the god of the Bible. Our rights come from his god. Our laws come from his god. Our nation exists only because of his god. If you're a person of faith, you're obviously worshiping his god. If you're not a person of faith, then you're what's wrong with this country.

So, Romney's message to all Atheists: Go to hell. America doesn't need you.

(All quotes from Romney's speech were grabbed from WCVB in Boston.)

Credit Where Credit Is Due

I am not a friend to the Democratic party. I feel that they have abandoned many (or most) of the principles that democrats are supposed to stand for --standing up for our liberties being the most important. I felt that the Senate Democrats made a huge mistake when they made Harry Reid the majority leader. Dick Durbin, from Illinois, would have been a much better choice.

Nevertheless, I have to give Harry Reid (and the Democrats) some credit with regard to the National Intelligence Estimate on Iran that was released on Monday. There has been much talk about the information held in that estimate, and predictably, the Bush administration is spinning it to support their desire to march toward war. What seems to be glossed over in most accounts I've seen, is that this NIE, which I think everyone can agree reveals intelligence that is of vital importance, would not have been generated if not for the Democrats requesting it.

From Reid's statement (from the Senate Democrats' web site):

Democratic Committee leaders and I requested this assessment early last year so that the Administration could not rush this Congress and the country to another war based on flawed intelligence.

This underscores the importance of the Democrats taking back control of the Senate in the last election. If the Republicans had still been in the majority, there's no way they would have allowed the Democrats to request this NIE, and we'd all be counting down the days until Bush's World War III.

So to Harry Reid and the Senate Democrats, I have to say that despite how much I despise your lack of integrity and your inability to stand up to the Bush administration (until recently), you've done good. I think that all Americans (and indeed the entire world) should be thankful that you were able to inject at least one tiny glimmer of sanity into the madness of Bush's foreign policy.