Tax Rates in 2002 and 2012

With but three days to go until the Bush tax cuts sunset, it might be well to look at the change in taxes that would occur. For this purpose I am comparing marginal tax rates, and the incomes to which they apply, for 2002 and for 2012. Here they are:

Tax Rates in 2002
At least	But no more than	Tax Rate
0	12,000	10%
12,000	46,700	15%
46,700	112,850	27%
112,850	171,950	30%
171,950	307,050	35%
307,050	Sky's the limit	38.6%

Tax Rates in  2012
At least	But no more than	Tax Rate
0	17,400	10%
17,400	70,700	15%
70,700	142,700	25%
142,700	217,450	28%
217,450	388,350	33%
388,350	Sky's the limit	35%

These rates are for a married couple filing jointly. Please note that these structures are not comparable—even if we ignore the tax rates. The rates apply to differently sized increments of income. To illustrate this, let’s calculate the taxes due on an income of $69,677, which just happens to be the average household income in 2011.

Income of $69,677 Taxed at 2002 and 2012 Rates
2002 Rates Applied		2012 Rates Applied
Increment	Tax due	Increment	Tax due
12,000	1,200	17,400	1,740
34,700	5,205	52,277	7,842
22,977	6,204
69,677	12,609	69,677	9,582

Notice that in 2002, a portion of the total income was taxed at 27 percent, not so in 2012. In 2012 the maximum of the 15 percent increment was higher than  the $69,677. If 2002 tax rates come into effect next year, the tax bite on this income, a national average, increases by 31.5 percent, by $3,027 a year, and $252 per month.

Let me now look at a range of incomes. For this purpose I’ve selected the top or maximum earnings of the first four quintiles (fifth) of households, the lowest income of the fifth or top quintile, and then, for good measure, an income of $250,000 and one of $1 million. First the tabular results:

	Earnings	2002 Tax	2012 Tax	Difference
Top of lowest quintile	20,262	2,439	2,169	270
Top of Second quintile	38,520	5,178	4,908	270
Top of Third quintile	62,434	10,653	8,495	2,158
Top of Fourth quintile	101,582	21,223	18,073	3,150
Bottom of Fifth quintile	186,000	46,913	42,165	4,748
Earning $250,000	250,000	69,313	62,993	6,321
Earning $1 million	1,000,000	356,759	347,512	9,247

These results, graphed, bring home why it is that the political battles rage about the top layers—which are the last three groupings in the table and the chart. To be sure, $270 is a huge amount of money for a household earning a shade over $20,000. And a shade over $9,000 could not possibly bother a millionaire very much. But you get the picture:

Both in terminology and in likely effect, that phrase, Fiscal Cliff, is fear mongering. There is pain here, to be sure, but it is much more like slipping and falling on an icy sidewalk than a drop off a cliff. And, let us not forget, most millionaires do not get their income in earnings, taxable at these rates, but in capital gains, taxed at a much lower percent.

Taxes Through a GDP Lens: Revisited

I’m showing today an updated version of a graphic I showed on  December 21 of last year. Results for 2011 have been added to it, thus it is more up to date. Also shown on this graphic is the top marginal tax rate over the 1960-2011 period. A key point of the last posting (link) was that the tax rate appears to influence tax revenues and Social Security contributions not at all, but tax rates are certainly influenced by other events in the economy. I said:

Recessions, booms, and busts, however, do show an influence. Booms and busts? Well, the biggest rise in tax collections as percent of GDP came during the dot-com boom, the biggest drop in the dot-com bust. And the next up-then-down is the housing bubble.

The interesting things to note here is the up-turn of tax revenues from 2010 to 2011, signaling recovery—if not massive growth—and the down-turn in contributions to social security in the last year. That dip was caused by a law passed in 2010 but effective in 2011—lowering payroll taxes.

What with top tax rates having no visible effects on taxes, the hullabaloo about rates today are entirely off the mark. They represent political realities, not economic. The notion that raising rates will cause the economy to dive are belied by this chart. Taxes rose sharply from the 1988 to 1992 level. So that happened? Tax revenues went for the sky—for an entirely unrelated reason.

The data I am using comes from the BEA using the facility located here. Following links from there, I used Table 2.1 for Personal Income and Its Disposition and Table 1.1.5 for Gross Domestic Product.

BNSF Railway

You will find, on this site, many caustic remarks about advertising. But this is a season of reflection and of good cheer, hence I will bring you today my favorite television ad. It is shown almost every night on Public Television as the lead-in to the PBS Newshour. Herewith the ad:

Now I grew up with railways. When World War II broke out, I was on a train in Hungary, three years old. But because I was suffering from a stomach ache, I have actual memories of that event. News came at one of our stops and caused great excitement. The adults were swarming about in the passage-ways talking. And rails remained central to our life there. Our great migration, eventually ending in the United States, began by train in 1944, continued in 1951, featured an ocean voyage from Bremerhaven to New Orleans, and continued from New Orleans north to Kansas City by rail, the Southern Pacific; yes, it reached to New Orleans. Since then it has been absorbed by the Union Pacific.

Much later—as in after growing up, returning again to Europe, back from there after marriage and Army service—we’ve had a special relationship to BNSF. Brigitte and our two children (then), travelled the last of her leg of a train-voyage from Newark to Chicago to Kansas City on the Atchison, Topeka and Santa Fe. I remained behind another week to effect my discharge and then followed in a little VW we’d purchased in Europe. And later yet, our relationship to BNSF continued while we lived many years in Hopkins, Minnesota. This railway, which is the merger of the Burlington Northern and the Santa Fe, passed just north of a suburban enclave where we lived, in Bellgrove. It ran within hearing distance, but its sound had a kind of reassuring reminder that the world was vast. It was bound from Chicago, by way of Minneapolis, to Billings, Spokane, and eventually Seattle—or back the other way. The line was close enough so that I walked along it virtually daily with the most famed dog in our lives, Winston, a gigantic golden lab. Deer, rabbits, the occasional fox.

Rails are a perennial for us. May they survive the coming energy collapse. Meanwhile the BNSF spot (our last fond linkage) remains. The company’s ad is the only one we ever gladly watch. And as the brief image of the dispatcher in his high roost waves his greetings to an approaching train—so we, at least mentally, wave back to him. May your ways continue to earn ample and profitable traffic!

Tracking Mass Shootings

Almost two years ago, on January 9, 2011, I showed a chart on mass shootings in the United States for a century, by decades (link). My method for making that chart is explained there and incorporated by reference here; to say the least, it is a little rough. But having done it, I find that updating it now has become easier. The media have caught up and now list such things in easily countable ways. A good example is this article in the Washington Post counting shootings for 2012 (link). Using that source and others, I have now updated my chart and show it again.

The last time around the count of mass shootings for the second decade of the twenty-first century, which has a ways to go yet, was just two events. In the following two years, the first three years of this decade have already managed to exceed all the shootings that took place in the previous decade. As things now trend, the current decade will turn in another record.

Posts like this one can only show the cultural weather. What to do about it is the job of the individual. My own sense is that this phenomenon is, ultimately, the consequence of very broad social/cultural trends, the advance of decadence. In effect it is vastly greater than individuals, even when they organize. Therefore the outlawing of firearms—and a coinciding forcible collection and destruction of them—would probably only have a lessening effect—if such moves were even in the cards. If we look across the world, we see that there are many other ways to kill the innocent, already in active use by individuals, groups, and governments. One man’s semi-automatic is another’s IUD and yet another’s drone.

Population by Age Groups

The Wall Street Journal carries a story on its front page today titled “Consumer Spending Is Losing Its Vigor.” That got me thinking—because, what with the years piling up, well, so am I: losing my vigor. Which then, logically—because the active mind does not lose its vigor—I got to wondering about a subject usually labeled “the aging population.” I found some useful data on that subject in the 2012 Statistical Abstract (link, select Table 6). Using those data I am here showing some graphics about that “aging.”

This is a quite revealing chart, isn’t it? It shows the shares of total population by age groups in some detail by decades, drawn from the ten-year census of the population. Notice particularly those “humps,” let’s call them, of which the first was quite high—the biggest age group in each year. In 1980 it was formed by those aged 15 through 29, in 1990 25 through 39, in 2000 30 through 44, in 2010 40 through 54. Meanwhile, the 65 through 74 age group, which forms a peak of its own, has essentially remained unchanged. It was 7 percent of the population in 2010, peaked in 1990 at 7.3 percent, and was 6.9 percent in 1980. Peak is the appropriate word, although in this period, it remains a secondary peak. After that comes a steep drop down the, ah, Aging Cliff. No shortage of cliffs these days.

Consumer spending is losing its vigor? Well, it might be due to the population losing its vigor. As we approach that second peak and the cliff, the less incline are we to do the boys-toys or the girls-wardrobe thing. And the more of us are in that group…

In this second graphic, I’ve compressed the age groups more in order to show the pattern more clearly. In the aggregate, the 15-44 group, the darling of all advertisers, remains the largest—but notice that it is decreasing. Meanwhile the less vigorous age groups are all growing apace—not least the 85 and older.

Around our place we’ve long had a saying—the consequence of much trend-contemplation—that “Demography Rules!” Oh, if only Congress could make us younger by the 2013 Age Reversal and Rejuvenation Act. President Obama would surely sign it into law. But there are limits to everything—not least the power of Congress. If it had the moxy, we’d all be aged between 15 and 44.

Employment Update: November 2012

The November job numbers (Bureau of Labor Statistics, link) were disappointing. The net gain, officially, was 146,000 jobs. But the actual gain, since my last published report here, for October, was really only 81,000. That is because September and October numbers were revised—and this time downward—by 65,000. Sometimes we gain, sometimes we lose by these revisions. The graphic I show follows, with revised months shaded a light red, November’s number in red. But that last number may also be revised next month as we close out the year.

What appears to ail the economy just at the moment is nothing economic in the narrow sense: uncertainty. All breaths are being held—hard to do when you are shouting yourself hoarse about Black Friday. Sure enough, retail numbers are up around 53,000, but both construction and manufacturing lost jobs. What retail is all about at present is to get rid of its inventory, quickly, before we fall over the Fiscal Cliff or wake up, January 1st, breathing a little easier.

Yesterday’s discussion centered on the drop in the unemployment rate to 7.7 percent with that mixture of gladness and despond—because the drop of the rate was due in large measure to some 300,000 people giving up and thus removing themselves from the official labor force. I have commented on the dubious nature of that measure earlier (link).

Medicare Trust Fund Finances

Yesterday I showed data on Social Security income and expenditures. Today I am showing similar data for the Medicare Trust Funds. That is a plural because three programs are found within Medicare. Of these one is Hospital Insurance (HI), one is Supplemental Medical Insurance (SMI) which comes in two parts, B and D. Part B pays for doctors visits and outpatient care, Part D pays for pharmaceuticals.  In the following graphic, I show income and expenditure data for all three combined for 1990, 1995, and for 2000-2012. Data to 2010 are from  the Statistical Abstract (link); data for 2011 and 2012 are from Centers for Medicare and Medicaid, the federal agency (link).

Notable here—in contrast to the data for Social Security—is that the income stream matches the outflow in benefits much more closely. In the thirteen-year 2000-2012 period, income exceeded or matched expenditures in ten years, fell below expenditures in three. The other significant difference is that Social Security income consists entirely of earmarked tax revenues from the public and interest earnings, while the Medicare Trust Funds rely much more heavily on general revenues and other sources of income. The following tabulation makes that clear:

Medicare Trust Funds Income in 2011
	$ bil.	Percent
Payroll/Premiums	259.9	49.2
General Revenues	225.2	42.7
State Contributions	6.5	1.2
Interest	20.7	3.9
All other	15.7	3.0
Income	528.0	100.0
Expenditures	560.3	106.1

The reason why Medicare is of such interest to would-be budget-cutters is the large role that general revenues represent in Medicare. It is 42.7 percent but would have to be more like 46 percent for these trust funds to have broken even in 2011. If the GOP had wished to insist on making Medicare altogether self-supporting, it would have loaded the aging population with $257.5 billion in out-of-pocket expenditures. Not taking care of our elderly—unless they’re rich. Is that what Free Market dictates at the moment?

Now as for Medicaid, which is designed for the poor, that’s entirely funded from general revenues. If that is chopped away from the budget as well, we’ll be well on our way to recreating the glorious days of Dickensian England.

Social Security Income and Expenditures

Herewith a picture of the Social Security Trust Fund’s performance from 1987 through 2012, obtained from the Social Security Administration (link). I have aggregated quarterly results into annual in order to show a smoother curve.

This is the program that the GOP is absolutely intent on cutting. What the chart shows is that during the last quarter century (and before that as well), this program has paid for itself, indeed producing a surplus. The accumulated surplus alone, in this period, would pay for three years of SSA operations. Targeting this account, along with Medicare and Medicaid—while insisting on keeping the tax rates of the wealthy untouched, is a case of robbing little peter to pay Big Paul. And little peter has not even needed any public money—ever! Who pays that Income stream? The people—in their payroll taxes.

What more needs to be said? Nothing. But spitting on the ground in contempt is, clearly, indicated.

GOP Stance In Sum

Putting the current fiscal clash into the fewest possible words reveals the Republican Party’s selective stance toward Americans. It is a stiff-armed contempt to for the elderly and the weak—and a mighty fortress protecting wealth. Therefore the big clash is over raising the marginal tax rate for the rich—and determination to cut  the income and health benefit of the aged and the poor. Yes we should. We should let them secede.

Where is the __________!

What people often say is “rage.” Where is the rage! The context here, of course, is that something quite outlandish has happened, some shocking news has surfaced. But there is no visible reaction to it. The public is grooving instead on Christine Beatty, again, she who, like years ago, exchanged sexy e-mails on (Horror!) city-owned communications devices with the deposed, disgraced ex-Mayor of Detroit Kwame Kilpatrick. Or they groove on “Sports Sightings.” Or they groove on the “K-Pop Star among us.” Don’t ask. I haven’t figured it out yet either (link).

A more refined form of that question would be “Where is the Informed Voter?” Quite astonishingly shocking information appears almost daily, but it doesn’t even make it into the papers, never mind produce a rash of letters, never mind a march on Washington. And to that over-simplification—which is what “informed voter” really is—might be added, how wide-spread among informed voters is a sufficiently sensitive cultural and moral understanding necessary to weigh the mountains of facts out there. Herewith a couple of shocking charts from a source I cited two posts back, a Congressional Research Service report (link).

The first of these shows us what the top tax rates were back in now sighed-after decades when things were good—alongside the rather shockingly low tax rates on capital gains, the form of income the very rich use to amass their wealth. The second graphic shows the rather phenomenal rise in the share of total income of the super-rich 0.1 percent and of the stratospheric 0.01 percent of the population.

Did we see these graphics in our papers? No. They were crowded out by pop stars, sports, and Netanyahu.

The really meaningful questions? “What’s the point of a universal franchise?”— if the average voter, looking at such images, can’t even make them out, never mind discerning what they really mean. And “Why bother with democracy?” is another. When things get really bad enough, there are still pitchforks. We have one in the garage, but I wonder how many other people do.

The Other Cliff

We had occasion to listen to David J. Rothkopf in an interview he gave on C-SPAN yesterday. Rothkopf is an astute political and economic observer. He was on because a new book of his has just issued. It is entitled: Power, Inc.: The Epic Rivalry Between Big Business and Government — and the Reckoning that Lies Ahead. In a nutshell, he pictures different kinds of capitalism competing in the world today, differentiated by the degree to which they internalize the need to produce public well being (“happiness”). The various competing capitalisms use government as an agency more or less—and the likeliest to win the big race are those, according to Rothkopf, that seem to be aiming for the right balance. Government is essential in the mix; GDP growth is not a good or exclusive measure. An article he wrote for the New York Times (link) gives the flavor of his thought.

It was the sort of expansive, big picture, and comprehensive view of things one rarely hears. Brigitte and I were nodding in approval. Rothkopf reached way out in time, tracing his theme. Looking way forward is, of course, also part of any comprehensive view. The narrow view came up in a phoned-in question. Alas, C-SPAN is always giving voice to the public—to my irritation. The question was about the Fiscal Cliff. Rothkopf put it nicely into perspective as a short-term phenomenon and went on looking way ahead.

After it was over I noted that, ranging well out into this century and possibly beyond it, our author saw a relatively optimistic picture. The epic rivalry would be resolved—if not necessarily in our favor unless we, too, reformed our ways and found a way to strive for wide equity for the population—rather than vast profits for a tiny elite. And I sighed. Rothkopf had dealt with the Fiscal Cliff quite well, but at least in this interview, he didn’t mention the Other Cliff. It is the fact that—by about the end of this century—we will have used up our fossil fuels. And that will be a genuine game-changer. I have a very difficult time imagining world population remaining at 8, 9 billion after that happens—even during the run-up to that day. Capitalistic economies competing? In the short term, perhaps, yes. But what about the elephant in the room that we seem unable to see? Not to take anything away from Rothkopf’s excellent presentation, but his next book, I suggest, should be titled: Power, Inc. — Not.

Solomon Lynched!

The Fiscal Cliff the subject, Brigitte said to me. “I have a solution. Call it Solomonic. They want to cut Social Security. Right? Well, here is what I’d propose. I’d be willing for them to cut our Social Security income by 10 percent. We’d manage somehow. But only if the top earners would also agree to pay another 10 percent of all their earnings—not just salaries—to the government. So there you have it.”

My reaction? Well, if Solomon actually lived in our time and held that top job he held once in Israel, we could expect soon to see a headline such as the one I’m using as my title for this post.