Thursday, January 13, 2011

Who Likes Paying Ransom?

The recent tax bill was passed with an estimated cost of $858 Bn.  Some of that figure is from the actual costs -- either money to be paid out for a variety of things.   Some of that figure is from reductions in the revenue -- and taxes -- which would have been collected had the bill not been "negotiated," often referred to as "tax specialties."

Don't be mistaken.  MeanMesa is firmly on the side supporting passage of the bill.  However, that support doesn't include a "warm, fuzzy feeling" with respect to the amount of money the billionaires and their dancing puppets in the Senate were able to "charge" the country for the privilege of governing responsibly.

Believe it or not, MeanMesa has found it rather difficult to isolate many particularly credible numbers in the present tax model -- especially those which can distribute the amount of tax dollars coming from payments of specific marginal tax brackets.  Nonetheless, enough data has been retrieved to support a rough accounting.

If we wish to include the "estate tax" reductions included in the flurry of legislative compromise actions, we will have to add an additional $30 Bn in revenues lost from not collecting these taxes.  Because the estimated number of returns involved in this $30 Bn revenue loss is so small -- usually cited at fewer than 7,000 filings -- the number of beneficiaries of the policy has no statistical relevance to the main thread here.  With respect to the estate taxes, an additional complication arises from the fact that, while the revenue cost of the tax cuts is for a two year extension period, the term of the costs for the estate tax changes is spread over ten years.
The "mathematics" of the tax cuts -

Here we can size up the results, again, "roughly," by driving the numbers through some generally available demographic data.


2 year Tax cuts -- middle class ("middle" and "lower" classes) -- $127 Bn
2 year Tax cuts -- top 2% ("ruling" class) $61 Bn 

Total Americans filing tax returns = 135 Mn = 135,000,000
Percentage of Americans in "the top 2%" = of course, 2%

135,000,000 total X .02 =  the "population" of  the  "top 2%"  =  2,700,000
135,000,000 total X .98 =  the "population" of the other 98% = 132,300,000

making our rough estimate of actual tax reductions look something like this

$61 Bn   /     2,700,000 =  $22,600 average tax cut per tax payer
$127 Bn / 132,300,000 =        $960 average tax cut per tax payer


MeanMesa realizes that "rough accounting" can lead to misunderstandings, but the true scope of the extortion remains, somewhat, interesting.  Don't be confused.  Consider this to be no more than simply "the cost of doing business with the Republicans."  You know, nothing personal.


For any MeanMesa visitor wishing to explore the numbers a little further, 



However, now that we've trotted out some numbers, MeanMesa understands that the entire affair must also be placed into a more "personal" perspective.  Because the middle and lower class taxpayers are resting after a hard day's work, and because none of the billionaires in the "top 2%" we asked for an interview were at all interested, MeanMesa (MM) will have to fall back to the following fictional interviews with a middle class tax payer (MCTP) and a friendly billionaire ($FB$).

MeanMesa's Interview with a Middle Class Tax Payer

MM Thanks for taking the time to talk with me.  I'd like to ask you  a couple of questions about your feelings concerning the tax bill which has been negotiated in the lame duck session of the Congress.

MCTPSure, no problem.  I was glad to see that they were able to do something to keep the tax rates from increasing.  I'm having a pretty rough time right now, and higher taxes would have been a real pain.  Probably bad for the economy, too.

MMWere you aware of the extension of the giant tax breaks for the "top 25" highest paid Americans included in the package?  What are your thoughts about that?

MCTPWell, they've got to eat, too.  Plus, the rich people are the ones who create small businesses and jobs.  They need a tax break so they will have enough money to get the economy fixed.

MMWere you aware that the history of cutting taxes for the highest income brackets shows that it doesn't actually result in more job creation?
MCTPI'm not sure I understand that, but I know that the Congress wouldn't have extended their tax cuts if it didn't work.  We're lucky that the Republicans figured out some way to do that without raising the national debt, and I'm glad that everyone on both sides was patriotic enough to act together to recover the economy.  We all have to be willing to sacrifice to get out of this mess.

MM Uh, okay.  Thanks for taking the time to talk about it.

(image source)



MeanMesa's Interview with a Friendly Billionaire


MM I want to thank you for taking the time to talk with me.  I'm sorry that I'm late, but I had a bit of a delay trying to get through security at the main gate to your home here.

$FB$

MM Of course.  I am here to ask you how you are feeling about the extension of the tax cuts for folks in your bracket.  Have you been following the compromise negotiations?

$FB$ First of all, the people who pay taxes in my bracket are not "folks."  The "folks" are the ones who ram rodded the $127 Bn through.  All of us on my side wound up with almost nothing compared to that, something like $60 Bn or so.  Of course we were disappointed, but we've always been completely ready to sacrifice whatever it may take for the good of the country.  I always say "The business of America is business!"

MM Do you think that the $60 Bn tax cut extension going to your bracket will help create jobs and restore the economy?

$FB$Well, I suppose so, but not nearly as much as if the economic situation in this country were a little more "business friendly," if you know what I mean.  Unlike the lower classes who got a "$127 Bn payoff," those of us trying to make ends meet with our paltry little tax cut won't really have enough extra cash to hire people of invest in our businesses.

MM Actually, corporate business profits are up almost 30%.  They are higher now than they've ever been in the history of the country.  What would you mean by "friendlier" to business beyond than that?

$FB$ Sure, those are good profits, but a lot of that came from the  low interest  capital that got shoved down our throats with the TARP.  Who' wouldn't expect us to make money with all that extra cash?  The "unfriendly" part of this last legislation comes from the fact that it pays a lot of poor people not to work.  When those "folks" don't get a pay check, they can't borrow the money to buy all of my corporation's Chinese imports.  We had to instruct our Senators to go ahead and vote for the thing or no one would have gotten a tax cut.  It was like paying a ransom.

MM A lot of Americans consider the $60 Bn that your bracket got as little more than ransom.  Your corporate Senators wouldn't have voted for the extension of unemployment benefits if your $60 Bn hadn't been included.  What do you think about that sentiment?

$FB$Well, first of all, it costs a lot of money to keep those Senators ready to, uh, vote to, uh, rebuild American prosperity.  Beyond that, the White House was pushing us in a very unfriendly way.  Our plan for the economic collapse, although it was off to a good start, was not yet ready to procure all the assets we had in mind when we started.  There are some very big cash expenditures looming out ahead for us.

MMI'm not sure I understand.  What's blocking your "plan?"

$FB$Well, we wanted to reduce our costs here in the US.  Of course, we've moved everything we could -- our plants, warehouses, factories, even our call centers -- to far more advantageous places with low labor rates, governments who know how to do business with us and lots of incentives, but most of the people in my bracket would like to gradually move all that back here after conditions improve.

MMThat sounds like it would be good for the recovery.  I'd like to think that you would want to do that as soon as possible, and as far as waiting for better economic conditions here, wouldn't it be a case of the sooner the better?

$FB$ Not really.  Our economic collapse plan has already filled up our capital reserves with the TARP money quite nicely, but we have to wait for prices to fall  even more before we move on from here.  The price we will have to pay to acquire big target assets like hotels, railroads and utilities has to collapse just a little more before we go ahead and buy everything we want.   Haven't you ever played Monopoly? The $60 Bn tax cut was nothing more than a sort of "peace offering," the way I see it.

After we buy all the houses, factories and other businesses for a dime on the dollar, we plan to let the economy start to recover.  If the Congress doesn't cooperate, we'll just wreck it again, you know, wreck whatever is left after last time.  Sooner or later, they will give us what we deserve.

We don't like being extorted for unemployment benefits and health care and the like.  We've, uh, worked hard for our money, and the lower classes are just trying to bully us into giving it to them. If there are going to be tax cut extensions, most of them should come to us.

I'm late for tennis.  My house security will show you out.