About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Sunday, April 23, 2017

Birthday Sum Quiz

In deference to the good sports in the readership who enjoy participating in the quizzes I present from time to time, but don't like ones with much math, please consider the following Birthday Sum Quiz.
 
I found the quiz on
the National Museum Of Mathematics website (www.MoMath.org) after it appeared in the WSJ. 
 
Readers who prefer to use logic (with just a modicum of arithmetic) will find this one enjoyable.  Please let me know how you work the problem.  I will post all correct answers or alternatively will send the solution privately to anyone who requests it if no one figures it out.
 
Birthday Sum Quiz
 
If you add up the two-digit year that somebody was born, the number of the month of their birthday from 1 to 12, and the day of the month of their birthday, we'll call that their "birthday sum." For example, somebody born in 1968 on Feb. 18 would have a birthday sum of 68 + 2 + 18 = 88.
 
What is the largest possible difference between birthday sums of people born on consecutive days?
 

Sunday, April 16, 2017

Donald Trump's Income Taxes

"Among the many other questions raised by the nebulous concept of 'greed' is why it is a term applied almost exclusively to those who want to earn more money or to keep what they have already earned – never to those wanting to take other people's money in taxes or to those wishing to live on the largess dispensed from such taxation.  No amount of taxation is ever described by the anointed as 'greed' on the part of government or the clientele of government." – Thomas Sowell
 
click on graphic to enlarge
 
No violation of man's rights, short of murdering him, exceeds that of the imposition of an income tax system in which the government lays claim on an individual's property – to take whatever portion of what one produces in order to give it to others to dispose of.  This concept precisely fits the definition of a slave – a person who is strongly influenced & controlled by something, in this case the income tax code, which people are forced to obey, & one person's legal property becomes the property of another.  This is the type of greed – legalized theft by the government – that Dr. Sowell referred to above.
 
So with this backdrop there still seems to be thousands, out of 324 million Americans, that are interested enough to take to the streets to protest Trump not releasing his income tax returns.  NYC & LA each had about 5,000 such protesters on April 15 in what was organized as the "Tax March" in 150 to 200 cities around the world.  Trump's response was the following tweet:
 
click on tweet to enlarge
 
Carol told me it is such a waste to have people protest Trump's income tax returns when there are so many other things of importance & injustice around the world that this energy could go into.  We have to remember that Trump's election made Democrats realize they are fish on a hook fighting for their political lives & saving their progressive statist Democrat hides, @ the expense of everyone else, is the only cause they are willing to fight for.
 
Now in the case of Donald Trump's income taxes – Trump's detractors asserted that he pays little or no income tax & because Trump would not release his income tax returns during the presidential campaign they became certain of it.  How surprised everyone was, when two pages of Trump's 2005 income tax return was illegally leaked that showed Trump paid $38 million in income taxes on $153 million of income (after deductions including a $103 million write off of business losses).  Click here to see Trump's 2005 income tax return.
 
The above income tax return shows that Trump paid over $31 million in 2005 because of the alternative minimum tax (AMT) – see line 45 of the return. 
 
The AMT is a supplemental income tax imposed by the federal government that is required in addition to the baseline income tax (see line 44 of the return) for many individuals with complicated returns regarding exemptions or special circumstances – not necessarily seven or eight figure incomes.  The AMT requires a taxpayer to calculate their income tax liability twice, once under regular income tax rules & rates & a second time under AMT rules & rates.  The idea of the AMT is to allow far less deductions & a higher effective tax rate.
 
Since the AMT is part of the standard 1040 Instruction Book economist Steve Moore was correct over two decades ago when he said the AMT is not an alternative minimum tax but a mandatory maximum tax.
 
Who among the protesters earns $38 million per year let alone pays that amount in taxes – the answer George Soros.  Who among the protesters becomes a multi-billionaire & then patriotically gives up the free enterprise system to run for president to bring wealth creation to all the citizenry – the answer none of them.  That is what Trump did.
 
Trump stipulated during the campaign that he employed tax accountants & attorneys to minimize his tax burden – a universal goal whether people use high power tax accountants & attorneys or do their taxes themselves.  Of course all of Trump's employees paid income taxes from their wages after working on this unproductive exercise of filing income tax returns.  What a waste of brain power & talent having these educated people fill out 1040 forms every year.
 
In addition, Trump donated his first quarter salary of $78,333 (annual salary prorated from January 20 to March 31) to the National Park Service.  See copy of check below.
 
click on check to enlarge
 
For his donating trouble Trump received criticism from the usual bunch of enemies of America: CNBC said the donation was not nearly enough; the Sierra Club called the donation a publicity stunt; & a 2017 MBA candidate tweeted that the donation was tax deductible & that all Trump was doing was taking money from one part of government, moving it to another, & getting a tax deduction – this cheap misuse of economic principles totally ignores that the money was Trump's property originally, having earned it working virtually 24/7, & that an income tax deduction amounts to cents on a dollar.  This Ivy Leaguer is counting on people being easily fooled.
 
To put Trump's income taxes in perspective the non-partisan Tax Policy Center projected that the top-earning 1% of Americans paid 45.7% of the individual income taxes in 2014 while earning just 17% of the income – or 2.7 times taxes paid to income received; the bottom 80% of income earning Americans paid 15% of all federal income taxes in 2014 while the bottom 60% paid less than 2% of federal income taxes.
 
These type of statistics are the basis of nonsensical statements made by politicians like BO in the cartoon below – & even more pathetically Democrat followers who believe it.
 
 click on graphic to enlarge
 
Trump is catching on to the Democrats' time wasting tricks, is seeing them more & more as distractions, & has pretty much gotten matters like his personal income tax foolishness out of the way so that he can concentrate on turning the country around from the dangerous cliff BO was driving it to.
 
The American economy has been stuck in BO's deliberate harmful policies, that were documented on this blog for eight years, that resulted in a new normal of 2% annual growth from mid 2009 to the present – this compares with an average annual growth rate of GDP of over 4.5% from 1983 to 1988 & just under 4.0% growth from 1993 to 2000 – periods when most everyone prospered or @ least had a chance to succeed.
 
Trump has promised economic growth of over 3.0% for the next decade & even that scaled back forecast from his original could be in jeopardy – sales @ retail stores, restaurants, & online sellers decreased in March from a revised decrease in February from January; the consumer price index declined in March; spending on vehicles & parts has fallen for three straight months; bank loan growth has slowed; & the budget deficit increased to $651 billion from $461 the past twelve months – see graphic below for current national debt time bomb.
 
click on graphic to enlarge
 
Now all of the above is certainly not Trump's fault but if the economy does not pick up he & the Republicans will get the blame.  Losing the House &/or Senate majorities in 2018 will doom the remainder of Trump's presidency because the Democrats will just continue to oppose everything - but the difference from the present is that Trump will have no mechanism to move forward except by executive orders – we saw how that worked out the past two years.
 
Another potential firecracker is the looming partial government shut down on or about April 28 when the government runs out of money for the umpteenth time.  This time OMB Director Mick Mulvaney & Trump will need Democrat help to move funding bills out of the Senate – such bills to include a $30 billion increase in military spending, $2 billion to start the southern border wall project, & greater flexibility to deny funds to sanctuary cities – all points hated by Democrats.
 
After seemingly accepting the failed attempt to repeal & replace ObamaCare three weeks ago Trump said he was moving on to his next priority of tax reform only to say last week "I'm going to get healthcare done" thereby in effect putting tax reform on hold while spending valuable time on the no-win healthcare political issue.
 
In this regard Mulvaney told Laura Ingraham last Wednesday that a major repeal of ObamaCare – as opposed to the full repeal – would be completed in the House by April 29, the end date of Trump's first 100 days.  No word on when the Senate would take this up, if it does move through the House.
 
Mulvaney believes that getting rid of ObamaCare's most egregious parts will significantly improve the growth outlook – this is why they keep coming back to healthcare before tackling tax reform.
 
But Trump needs economic growth like in the 1980s & 1990s – see above - to get the country totally behind him.  Trump's refusal to release his income tax returns provides a Democrat excuse for not helping in tax reform or any other issue.  We all know that releasing his income tax returns will merely cause the Dems to find fault or move on to another fake issue – so Trump doesn't do it. 
 
Republican plans for economic growth, as a matter of course, are based on lower corporate & individual income tax rates from which the circle is completed by Democrats bringing up tax cuts (not tax rates) for the wealthy that will produce more millionaires & billionaires @ the expense of the poor who pay no income taxes & have no jobs.
 
It certainly is a tough row to hoe – but if anyone can pull a lot of it off it is Donald Trump - as he demonstrated last November.
 

Sunday, April 9, 2017

The Many Misconceptions About Social Security

"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents." - James Madison, Father of the Constitution, writing in 1794 regarding his intention that the federal government could only expend money for purposes specifically enumerated in the Constitution.
 
It is neither the purpose nor a right of Congress to "attend to what generosity & humanity require, but to what the Constitution & their duty require." – Virginia Congressman William Branch Giles condemning a spending measure in 1796.  Giles also served as VA governor & VA senator for 11 years.
 
"We have the right as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money." - Congressman Davy Crockett speaking on the house floor in 1827
 
"I cannot find any authority in the Constitution for public charity."  To approve the measure "would be contrary to the letter & the spirit of the Constitution & subversive to the whole theory upon which the Union of these States is founded." – President Franklin Pierce vetoing a popular measure in 1854.
 
"I can find no warrant for such an appropriation in the Constitution, & I do not believe that the power & duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit."  President Grover Cleveland vetoing a bill for relief charity – one of many vetoes during his two terms in office regarding bills that violated the Spending Claus of the Constitution in his opinion.
 
"If Congress can do whatever in their discretion can be done by money, & will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions." – James Madison
 
"Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated." - Thomas Jefferson's letter to Albert Gallatin, Secretary of the Treasury 1801 to 1814.
 
"The powers delegated by the proposed Constitution to the federal government are few & defined . . . to be exercised principally on external objects, as war, peace, negotiation, & foreign commerce."  The Federalist No. 45: Madison
 
"Ours is the job of interpreting the Constitution.  And that document isn't some inkblot on which litigants may project their hopes & dreams for a new & perfected tort law, but a carefully drafted text judges are charged with applying according to its original meaning.  If a party wishes to claim a constitutional right, it is incumbent on him to tell us where it lies, not assume or stipulate with the other side that it must be in there someplace."  Neil Gorsuch, newest Associate Justice of the Supreme Court (to be sworn in on Monday) writing in a concurring opinion in a 2016 case.
 
Today over half of the $4.147 trillion federal budget request for FY 2017 is spent on "objects of benevolence" – Social Security, Medicare, Medicaid, & over another 120 anti-poverty & welfare programs identified by the Cato Institute.  This post focuses on the many misconceptions about Social Security including its unconstitutional origin, growth, & funding – it will show how our country went from the mindset intended by our Founders (& also expressed by our newest Supreme Court Justice) as stated above to one of government dependence that is ruining our heritage of liberty & prosperity.
 
click on graphic to enlarge
 
The above poster was presented by the federal government in the 1930s to entice people who had been in & out of work for five years or longer (due to intervention & interference by the federal government with the free enterprise system) to sign up for Social Security benefits.
 
Everyone, whether employed or underemployed, who worked or had worked for salary or wages, except for agriculture, domestic service, or government work was eligible.  Applications for Social Security accounts were available from employers or from the post office making it about as easy as it is today to register to vote @ the DMV.  You could hand the completed application to your employer, labor union, or letter carrier – or deliver it to the local post office or mail it in a sealed envelop to the local Post Master with no postage required.
 
The Social Security Act was signed into law by FDR on August 14, 1935.  The Act followed the German old-age social insurance program designed in 1889 by German Chancellor Otto von Bismarck.
 
Seemed like quite a good deal, actually New Deal, to receive a monthly check for life starting @ age 65 -  except that life expectancy @ birth in 1930 was 58 for men & 62 for women so by this measure the program was a winner for government collecting taxes & not paying benefits.  Even by the more appropriate measure, that stripped out the high infant mortality rate of 1930, life expectancy after attainment of adulthood statistics showed that 54% of men survived from 21 to 65 & 61% of women survived from 21 to 65 so even this measure gave the government assurance that the program was viable.  They did not see what was coming.
 
You see in 1940 there were 222,488 Social Security beneficiaries; but in December 2015 Social Security beneficiaries totaled 40 million retired workers, 2.3 million spouses & children of retired workers, 6.1 million surviving children & spouses of deceased workers, & 10.8 million disabled workers & their eligible dependents.  Source – Center On Budget & Policy Priorities
 
The original Social Security Act not only paid retirement benefits to the primary worker but included the first national unemployment compensation program, aid to states for various health & welfare programs, & the Aid to Dependent Children Program.  By 1939 the law added Social Security survivor benefits & benefits for the retiree's spouse & children.  In 1956 disability benefits were added. 
 
Payroll taxes for Social Security began in January 1937.  From 1937 through 1939 lump sum payments were made to beneficiaries – the first such beneficiary was Ernest Ackerman who retired after paying one nickel into the system.  Mr. Ackerman received a lump sum payment of 17 cents.  Starting in January 1940 monthly payments began with Ida May Fuller being the first beneficiary.  Ida May had paid $24.75 into the system over the three year interim & received $22.54 in her first monthly check – her lifetime total benefit was nearly $23,000.
 
In 1940 there were 159.4 workers paying taxes into the Social Security system for every beneficiary collecting.  Since 2009 the ratio has been less than 3 to 1.
 
The Act lays two different types of taxes – an income tax on employees & an equal excise tax on employers, both measured by wages paid during the calendar year.  The proceeds of both taxes are paid into the general treasury & are not earmarked in any way so that the current Social Security Trust Fund is merely an accounting of money taken from over payments to the Social Security system over the years that has to be repaid one day.
 
With regard to the Social Security Trust Fund - the annual notice Social Security mails to people who have not set up a Social Security account warns prospective beneficiaries (from page two of sample statement on the Social Security website) – "Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2034, the payroll taxes collected will be enough to pay only about 79 percent of scheduled benefits."  I have never met one person @ my FairTax seminars or anyone who has participated in radio programs I have been on that was aware of this warning.
 
With regard to the excise tax that employers provide in matching the income taxes paid by employees (payroll taxes) concerning Social Security it is equally important to realize that this "matching share" is taken out of funds the employers dedicate to the total compensation of hiring the employee.  As such the employer pays nothing – the worker is the source of the funds of both taxes.  The employer's "matching share" is really part of the employee's total compensation that must be earned through the employee's productivity.  If the employer doesn't receive value commensurate with the total compensation of the employee the job will be eliminated.
 
I will always cherish the memory of the morning that Professor Williams returned my call to explain this point to me so that I would never forget it.
 
The above "matching share" point is illustrated in the Supreme Court case of 1937, Helvering v. Davis in which George P. Davis was not prepared to pay the employer's share of Social Security tax arguing that this tax robbed him of part of his equity in the Edison Electric Illuminating Company.  Davis lost the case & companies have paid the "matching share" out of employee's productivity since the start of the Social Security program – but the great majority of employees have always thought the employers paid this tax without ever wondering where the money came from.
 
Once someone qualifies for Social Security retirement benefits under current rules the formula for determining the amount of retirement benefits @ full retirement age is based on a percentage of one's averaged indexed monthly earnings - 90% of the first $885, plus 32% of amounts over $885 to $5,336, plus 15% of amounts over $5,336.
 
You can readily see that the benefit formula is designed to provide lower wage workers with a greater percentage of their past earnings than higher wage earners receive.  The formula is steeply graduated in favor of lower wage workers so that they receive 90% of their retirement income while Social Security benefits fall off fast from that level for higher paid workers.
 
At the beginning of 2016 the average monthly retirement benefit was $1,341 & the maximum retirement benefit was $2,639 for a worker who retired @ age 66 – both  amounts are determined by the above formula.  Do your own examples & arithmetic – for instance a worker who paid the maximum Social Security tax during his working life & retired @ age 66 in 2016 would have paid just under four times more into the system than a person who paid the average Social Security tax over his working life & also retired in 2016 @ age 66.  The higher wage worker would receive only twice the benefit of the average wage worker after paying almost four times as much tax.  The ratio is more pronounced when comparing the benefits & taxes paid of high earners to low earners.
 
A review of the above formula shows that the way the Social Security Administration determines retirement benefits makes Social Security an income redistribution & welfare transfer system instead of a system where you receive benefits that pay your contributions back commensurate with what you put in over the years.
 

To illustrate just how dependent many Americans are on Social Security please consider that two thirds of our seniors depend on Social Security as the main source of their income & for one in five it is the only source of income.  Without Social Security half of all seniors would be living in poverty so naturally seniors love Social Security – but they don't know or don't want to know that it is a welfare transfer system.  It is easier to falsely believe that they paid something in & are getting back what they deserve. 

 

So how is any of this constitutional?

 

In 1937 FDR had the Congress under his thumb but not so much the Supreme Court.  As such FDR threatened to have Congress enlarge the high court by six justices of which he would appoint liberal justices who would approve everything he proposed.  The Supremes got the message & starting in March of 1937 began to find FDR's New Deal programs constitutional – shamelessly reversing decisions they had found unconstitutional just a short time before.  So much for impartial court decisions & the rule of law.

 

In finding the Social Security Act constitutional in May of 1937 the Supreme Court relied on Congress's taxing power to provide for the general Welfare of the United States – they found that Congress could authorize taxes to pay for a retirement/insurance program that had already expanded into many other areas as described above. 

 

This type of decision makes liberal justices like Ruth Bader Ginsburg think that the country was founded in 1937 instead of 1776.

 

Founders such as Jefferson, Hamilton, Madison, & Monroe were specifically documented as regarding the words "general Welfare of the United States" as a limiting condition on government spending not one where anything goes to approve any government dependent welfare program.  For instance, during his two terms in office President James Monroe (my favorite president) regularly vetoed spending bills because they did not provide for the entire nation's welfare – like defense spending would. 

 

In this same regard the Tenth Amendment Center explains that the words "United States" did not refer to a geographic territory or a single nation in the founding documents – the words referred to a compact or union between the several states so that the "general Welfare of the United States" dealt with this compact.  Thus, the words "United States" specifically refers to the several states in their united or collective capacity (i.e., the States united). 

 

FDR, the Congress, & the Supreme Court all "used a provision of the Constitution that applied to the States, in their united capacity, & unconstitutionally applied it to the people"1 to tax & appropriate money for a welfare program that along with Medicare & Medicaid has become the cornerstone of the American welfare state – ObamaCare being the latest expansion thereof, derived into law by much the same type of terrible legal reasoning described hereinbefore.

_________________

 

1 The Tenth Amendment Center