How Much Are You Paying in Taxes?

Greg Cochran alerted me to an Op-Ed in the WSJ ("My Response To Buffett And Obama") by the former CEO of Amex, Harvey Golub, claiming "of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes." And Greg pointed out that with the maximum FIT rate at 35% and NY/NYC at ~12%, Medicare < 3% and FICA maxed out at 6k, and considering the deductibility of state and local taxes and other exemptions, he's unlikely to pay much more than 44%. We have give him the benefit of the doubt that his income is primarily subject to NY/NYC tax, otherwise it's beyond preposterous. (He's also ex-Chairman of the Board of AIG - which gives more weight to his being more mendacious than simply innumerate.)

But what truly amazes me about this is that in searching on this article in Google News, I couldn't find any article that directly questions this "80 to 90%" tax rate assertion. There's some push back in the comments section in this Accounting Today article, but no one seems to be able to actually sit down and work out the numbers. Innumeracy reins supreme! And then there's that bizarre mentions of "estate" taxes. So this blog post can be considered a public service - the only refutation of Mr. Golub's article in the webosphere that actually looks at numbers. As I write this it occurs to me he might also be paying some serious real-estate taxes - and perhaps he's counting that in his equation (and what he means by "estate" taxes?).

Apparently the way it works in NYC is that property taxes on single-family dwellings are 17% of 6% of assessed market value. It sounds like these valuations are rather dodgy in themselves, but let's assume he owns a $10 million dollar unit (I'm guessing he pays little property taxes on his "golf" homes in New Mexico and Florida). So that would work out to about $102k per year.

So, if that property tax explains the "80 to 90%" tax rate (let's call it 85%), then we have

.85Y = .44Y + 102

which equals Y = $248. So if his property is worth $10m, that means his income could only be $248k. Generally, his ~85% tax rate is possible if his NYC property is 40 times greater than his income. Maybe he should move.

Laying it out Squarely

The NY Times Editorial intones:

The rebels — a ragtag band that overcame incredible odds [yeah, who'd've ever thought you could win with with NATO bombing your enemy? - ziel], battlefield defeats and bitter internal divisions — have showed extraordinary commitment and resilience...They have promised to build a democratic Libya. They must keep that promise.

Yes, they must, the just must.

Is Krugman a Troll?

An internet troll, that is.

Krugman on CNN last weekend, talking about economic policy:

If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months, and then if we discovered, oops, we made a mistake, there aren't any aliens, we'd be better--

He was cut off there, but likely he'd have finished with "-off than we are now."

Greg Cochran, a few years back:

If the President had decided (because of a stroke with truly interesting side effects) that we could no longer stand idly by in the eternal conflict between penguins and skuas ( penguins = Good, skuas = Evil) and sent an expeditionary force to Antarctica, an expedition in which a thousand soldiers froze to death and ten thousand others lost limbs to frostbite - an expedition that cost one hundred billion dollars, a conflict in which the skuas and blizzards left the issue in doubt, one in which we discovered that penguins are thoroughly unlikable when you get to know them better - if he had done this instead of invading Iraq, the country would be substantially better off than it is today.

Not that Krugman couldn't have thought of that himself, but I find the two quotes eerily familiar in structure and tone. Krugman has shown other hints that he is sympathetic with some "paleo-conservative" thinking on other occassions. I wouldn't doubt that he reads Randall Parker's blog (as Tyler Cowen often links to him) and could well have encountered Greg's gem there.

As to his main point about the stimulus, he may be right that such huge stimulus spending - regardless of the value of what's produced - would be a positive for the economy, but I'm skeptical. But he's ignoring the fundamental basis of his parable - that full mobilization, all other concerns be damned, is what is needed.

But such stimulus is not remotely possible today. To do so, Obama would have to throw environmental concerns to the wind, tell Labor to shove their rules up their nether regions, and tell his Diversity cronies to take a hike. (A Republican would have his own cadre of leaches he'd have to dis). Never going to happen. The only solution is government paralysis leading to a cathartic depression, cleaning out the poison in the economy. It will be painful, but at least we know that works, as it's happened throughout history (the last time being 1982-83).