On the Economy and Taxes

Great opinion piece at Wall Street Journal about the McCain and Obama economic plans - rings more true now following the issues with Freddie, Fannie, Lehman and perhaps now the Auto Industry as well.

http://online.wsj.com/article/SB1221...n_commentaries

Ranking states by domestic migration, per-capita income growth and employment growth, ALEC found that from 1996 through 2006, Texas, Florida and Arizona were the three most successful states. Illinois, Ohio and Michigan were the three least successful.

The rewards for success were huge. Texas gained 1.7 million net new jobs, Florida gained 1.4 million and Arizona gained 600,000. While the U.S. average job growth percentage was 9.9%, Texas, Florida and Arizona had job growth of 18.5%, 21.4% and 28.9%, respectively.

Remarkably, a third of all the jobs in the U.S. in the last 10 years were created in these three states. While the population of the three highest-performing states grew twice as fast as the national average, per-capita real income still grew by $6,563 or 21.4% in Texas, Florida and Arizona. That's a $26,252 increase for a typical family of four.

By comparison, Illinois gained only 122,000 jobs, Ohio lost 62,900 and Michigan lost 318,000. Population growth in Michigan, Ohio and Illinois was only 4.2%, a third the national average, and real income per capita rose by only $3,466, just 58% of the national average. Workers in the three least successful states had to contend with a quarter-million fewer jobs rather than taking their pick of the 3.7 million new jobs that were available in the three fastest-growing states.

In Michigan, the average family of four had to make ends meet without an extra $8,672 had their state matched the real income growth of the three most successful states. Families in Michigan, Ohio and Illinois struggled not because they didn't work hard enough, long enough or smart enough. They struggled because too many of their elected leaders represented special interests rather than their interests.

What explains this relative performance over the last 10 years? The simple answer is that governance, taxes and regulatory policy matter. The playing field among the tates was not flat. Business conditions were better in the successful states than in the lagging ones. Capital and labor gravitated to where the burdens were smaller and the opportunities greater.

The states have already tested the McCain and Obama programs, and the results are clear. We now face a national choice to determine if everything that has failed the families of Michigan, Ohio and Illinois will be imposed on a grander scale across the nation. In an appropriate twist of fate, Michigan and Ohio, the two states that have suffered the most from the policies that Mr. Obama proposes, have it within their power not only to reverse their own misfortunes but to spare the nation from a similar fate.

Good stuff and a great summary in my opinion.

This brings up some thoughts for me about the tax burden as this has become a major campaign issue as well.

According to IRS figures, the top 1% of wage earners paid 19% of all taxes in 1980 when Reagan came into office - they were being taxed at 70% - yes you read that right, 70%. For every hundred dollars they earned the government only let them keep $30.

Due to tax cuts and a resultant surge in incomes, the top 1% of income earners (AGI $365,000/yr) now pay 39% of ALL personal income taxes (up from 37% in 2000) - even though the rates have been cut in half from 1980.

The top 25% (AGI $62,000/yr and up) pay 86% of ALL personal income taxes (up from 84% in 2000).

The top 50% (AGI $31,000/yr and up) pay 97% of ALL personal income taxes.

The bottom 50% (AGI $30,000/yr and below) pay 3% of ALL personal income taxes - and 80% of that group (40% of ALL workers in US) actually have no tax burden, getting more back than was paid in over the course of a year.

Obama claims he wants to give tax cuts to '95%' of the workers in the country, but 40% already get more back than they pay in - that is not a tax cut, it is a transfer of wealth at the point of a gun (IRS).

Most definitions of the Middle Class suggest dual-earner households averaging about $100,000 per year in income, which is about $60,000 in AGI. That means the so-called Middle Class (~33 million families) really only accounts for about 15% of wage earners (occupying a space from the top 50% to the top 25% of wage earners), but their share of taxes paid (16%) pales in comparison to top 10% (11% of ALL taxes but only ~13 million families), the top 5% (20% of ALL taxes but only ~7 million families), or the top 1% (39% of ALL taxes but only 1.4 million families).

So the top 25% of wage earners in the US, 33 million families, pay 86% of the income tax burden, the remaining 100 million families pay 14%.

Put another way, the top 1%, 1.4 million families, pay 13 times as much in taxes as the 66 million families that make up the bottom 50% of wage earners.

Is THAT fair?

SO YOU TELL ME WHO IS NOT PAYING THEIR FAIR SHARE.

As a brief aside, the evil big-oil company Exxon-Mobile pays more in Corporate income taxes than the bottom 50% of all wage earners - one company pays as much in taxes as half the wage earners in the US. $30 billion dollars in 2007 and estimated to exceed $40 billion this year.

For every gallon of gas, Exxon sees a gross profit of about $.28, State governments take an average of $.29 and the Federal government takes $.184 (plus 35% of the profit that Exxon made, collected as income taxes).