Charles Murray On The Evils of Tax Withholding

Charles Murray wrote a wonderful editorial in last Thursday's Wall Street Journal, entitled "Tax Withholding Is Bad for Democracy."

Murray provides a lot of interesting and compelling statistics. Among them,

"Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined.

My point is not that the rich are being bled dry. The taxes paid by families in the top 1% amounted to 22% of their adjusted gross income, not a confiscatory rate. The issue is that it is inherently problematic to have a democracy in which a third of filers pay no personal income tax at all (another datum from the IRS), and the entire bottom half of filers, meaning those with adjusted gross incomes below $33,000, have an average tax rate of just 3%.

This deforms the behavior of everyone—the voters who think they aren't paying for Congress's latest bright idea, the politicians who know that promising new programs will always be a winning political strategy with the majority of taxpayers who don't think they have to pay for them, and the wealthy who know that the only way to get politicians to refrain from that strategy is to buy them off."

Murray is correct, of course. It's not so much the tax rate on higher-earnings, as it is the existence of a large number (i.e., those that cause the so-called "tipping point" to be reached) of voters who don't think more government costs them anything.

Murray offers two simple ideas by way of solving this mess,

"For once, we face a problem with a solution that costs nothing. Most families who pay little or no personal income taxes are paying Social Security and Medicare taxes. All we need to do is make an accounting change, no longer pretending that payroll taxes are sequestered in trust funds.

Fold payroll taxes into the personal tax code, adjusting the rules so that everyone still pays the same total, but the tax bill shows up on the 1040. Doing so will tell everyone the truth: Their payroll taxes are being used to pay whatever bills the federal government brings upon itself, among which are the costs of Social Security and Medicare.

The finishing touch is to make sure that people understand how much they are paying, which is presently obscured by withholding at the workplace. End withholding, and require everybody to do what millions of Americans already do: write checks for estimated taxes four times a year."

Murray does something that I've seen nobody else do. He observes, and states, the truth- that Social Security is a shell game, in which taxes buy government IOUs, so that the net result is that the "program" doesn't really have any sequestered assets of its own. It's really just another tax program, the payments from which go into the general Treasury fund, though indirectly, through the purchase of that department's instruments.

Second, Murray touches on a point that only my late father, to my personal knowledge, understood. As a youth, I listened to him lecture my brother and I on how FDR had stripped from every citizen their right to not pay taxes. Further, he turned reality upside down by slowly, over decades, teaching people to want a big refund, rather than owe the government money. Since it's your money, overpaying all year is wrong and foolish. But Roosevelt conned Americans into thinking they are fortunate to get their own money back after April 15th.

Murray is spot on when he insists that only by making every taxpayer write four quarterly checks for their taxes, including FICA, will we ever bring home the true, large scale of governmental cost to each voter and taxpayer.

Clearly, this Congress and administration won't even consider these ideas. Maybe a new Republican President and Congress will.

Let's hope so, because I believe time is running out for America to recover its fiscal rectitude.

Louisiana Democrat William Jefferson Found Guilty

With all the excitement over Wonderboy's stimulus spending, healthcare and associated big government plans, Louisiana's 'ice box' Willy Jefferson's conviction seems to have slipped from the front pages of the nation's newspapers and other media.

As this webpage noted on August 5,

"Former Democratic Congressman William Jefferson was found guilty of 11 of 16 corruption charges today by a federal jury.

The jury of eight women and four men returned a guilty verdict following five days of deliberation.

In the 16-count indictment, Jefferson was charged with soliciting bribes and other crimes for a series of schemes in which he helped American businesses broker deals in West African in exchange for payments or financial considerations to companies controlled by members of his family, including his brother Mose, his wife, Andrea, their five daughters and a son-in-law.

Jefferson, 62, who represented the New Orleans-based 2nd Congressional District for nine terms, will now face sentencing by Judge T.S. Ellis III, who earlier meted out stiff sentences for lesser figures in the case. According to the U.S. attorney's office, Jefferson faced 235 years in prison if convicted on all counts, and will still face substantial prison time."

Nice to know justice triumphed. Too bad the same bullhorn that the nation's liberal-leaning media used to announce various Republican scandals hasn't informed voters about Jefferson's conviction.

Wonderboy's Healthcare Plan Begins To Fade

The verdict on Wonderboy's attempt to win over voters with his ambitious town hall meeting campaign.

He's failed.

The many video clips of his carefully staged meetings have convinced many of the obvious liberal plants in the front rows of his events. Then there are the softball questions and borderline-abusive use of children asking leading questions about signs saying 'mean things.'

True, over the weekend, the First Rookie's HHS secretary floated a trial balloon of a healthcare bill with no government option. But no less a respected conservative than former House Majority Leader Dick Armey warned that the public option is not off the table at all. Not by a long shot.

If anything, he cautioned, this is a feint by Wonderboy to get people relaxed and pacified, while his Congressional minions ram through the complex bill without any Republican votes.

It's been eye-opening for me to see a voter lift the entire, wrist-bending bill in his hand and demand from his Senator to know why the healthcare 'solution' must be so complicated, long and incomprehensible.

I think we are at the point that, if such a bill does pass, it will mark the imminent end of Democratic majorities in either Congressional chamber, more likely the House, first.

Of course, after that will probably come Wonderboy himself. He's really lost his cover on this, judging by the many, angry town hall meetings held by various Congressional Democrats.

Senate Majority Leader Harry Reid added fuel to the fire when he castigated those voters objecting to Wonderboy's plans as 'evil.'

Good job, Harry. Word has it your own approval rating is below 50%. Maybe you won't be getting another term, either. You can join Tom Daschle in that free limousine of Leo Hindry's.

This long, hot recessionary summer has galvanized opposition to the junior Senator-cum-naive president's omnibus health sector takeover, and it doesn't look like things will calm down any time soon.

Sure, hardcore liberals and Democrats will fawn over the damn thing. And Republicans continue their principled, expected opposition.

But the key is and will be how the independents who put Wonderboy and his party in power in Congress swing between those two positions. I'm betting they'll be for change on the scale Congress is trying to cram down the country's throat.

Then, perhaps, the media will actually report on the many sensible, free-market alternatives advanced by Congressional Republicans.

Salem's Shameful Treatment Of Its Victims

I had the occasion to visit Salem, Massachusetts, site of the historic witch trials, this weekend.


Though in the town to view an exhibition of Dutch sea painters and paintings, my friend and I spent some time poking around the town, too.

Salem's claim to fame, of course, is the witch trials. Back in the 1600s, some people consumed spoiled grain and, due to resulting hallucinations, began the process which ended with several dozen people being named witches.

Many were put to death, by hanging, pressing, or torturous drowning. None, of course, were real witches.

That's the first ironic thing about the town.

You cannot swing a dead cat without hitting a witch's shop offering fortune telling. Rather odd, actually, for a town which pointedly did not have any witches in its past.

Many wrongly-accused people believed to be witches, but no real witches.

The other curious thing about Salem is what is celebrated and promoted by the town.

The old part of town is down near the water, as you'd expect. There are a few old houses from the period, a village green, and various sites depicting the witch trials for which the town is known.

Those accused of witchcraft, convicted, and hung, met their end on Gallows Hill.

Gallows Hill would, one naturally thinks, be a well-cared for, celebrated place. After all, it's where quite a few convicted witches died at the hand of the state, in error.

No such luck.

My friend and I, on the morning of our departure from the town, decided to take a quick look at the park. It proved to be nearly impossible to find. Our map simply pointed in a general direction out of town to find the site.

Driving toward it, we were given misleading directions by one local shop worker. When we finally met a local resident who offered to point out the hill on her way by, it occurred to us that the hill was quite far from old Salem.

To reach it, the townspeople of the witch era had to leave town, cross a river, climb a fairly steep escarpment and, then, after that, a still higher hill. I'd guess Gallows Hill is a good 3-4 miles from the harbor.

When we arrived at Gallows Hill, we were greeted by a strange site. A children's park.

No plaques. No ceremonial structures or National Park buildings. No self-guided trail. No reconstructed gallows tree or marker on the spot where so many poor, wrongly-accused and -convicted souls met their end.

No, just a skateboard and baseball park. And a few narrow, paved trails leading up to a dilapidated pavilion with once-ornate Greek columns by a now-graffiti-covered municipal-looking building.

It's really quite a sad, telling treatment of what is arguably the only important site in Salem.

Salem is about wrongly-accused witches and municipal rule and hysteria gone fatally wrong. The crushing power of the town of Salem and the Massachusetts Bay Colony stamping out the lives of people, based upon hysterical, hallucinated evidence of some teenagers.

If anything is important, it would be the site where most of those people were executed. Not the commercialized harborside, or the tricked-up shops on Essex Street purporting to vend all manner of witchcraft supplies.

But when you find Gallows Hill Park- if you can find it- all you see is a playground, a large water tower decorated with a painted witch on a broom, and a lonely, overgrown, forlorn hillock.

Nothing marks the place of execution of so many citizens of Salem wrongly put to death by the town and state.

No list of their names. No record of the town's grotesque errors. No attempt to describe, recall or recreate the senseless acts of wrongful state execution.

Salem likes to spotlight its quaint green, pretty, modern museum, and old buildings. And a modern harborside development.

But hidden away, forgotten and purposely neglected, is the site that really put Salem on the map.

Gallows Hill, on Witch Hill Road.

It's a mute, solemn testament to both the immense power of the state to careen out of control and wrongly take lives, then cover that up and make it difficult to discover, no doubt abetted by a town deeply ashamed of the real source of its fame.

Sadly, even in America, the state has grown even more powerful, while becoming better at hiding the truths of its wrongdoing even more cleverly than it was 400 years ago.

The Healthcare Bill: Why So Complex?

I saw two interesting panel discussions about the omnibus House healthcare bill on CNBC yesterday morning.

On one, a former FDA official, a representative for the bio-pharma sector, and former HHS secretary Tommy Thompson discussed how European pharma companies stopped producing innovative medicines a few years after imposition of universal healthcare programs in various countries. Their point was that, with government-imposed cost controls, pharma companies had less profit with which to fund innovative drugs, and little prospect of recovering any such investments, at a profit, by selling such new products to the same cost-conscious European country healthcare systems.

On the other, several industry executives and, I believe, at least one Congressional member, discussed the inadvisability of attempting to force through, hurriedly, such a complicated, voluminous and incomprehensible bill.

One noted the sudden fears rising among already-insured Americans who suspect that this bill will change what they have, and not for the better. Another mentioned a now generally-agreed brief list of legislatable fixes which, if implemented, would likely resolve more than 75% of the coverage and cost-containment issues now being debated, without redesigning the entire US healthcare system.

In response, the Hispanic co-anchor Carlos Q objected that sometimes big, broad programs are necessary to accomplish big tasks, such as Social Security in the 1930s and Medicare in the 1960s.

Two panel members immediately criticized Carlos for misunderstanding the current situation and needlessly complex, lengthy bill.

I have an additional criticism of the rather unintelligent, clueless CNBC co-anchor. It's a really simple one, but, never the less, one that escaped him.

Social Security and Medicare are both programs which offered benefits to individuals which had not existed before. That is, public pensions and medical care were not changed due to those two programs, but were provided by government for the first time because of them.

Universal healthcare bills are essentially and radically different. They, for the most part, promise not new coverage or benefits, but simply changed benefits.

Sure, perhaps 8-10MM new, poor, currently-uninsured will be served. But for the 250MM+ Americans who already have health insurance and access to good medical care of their choosing, life will change.

If it didn't, why the complicated bill? It's easy enough to just legislate tax credits or vouchers for government-offered or private health insurance without touching the rest of the system.

No, people are appropriately wary that such a large, unreadable, lengthy bill must be full of changes and traps which, if seen clearly in a 10-page or less bill, would provoke a terrible firestorm of voter fury and rejection.

Several of the panel members noted that if Wonderboy made progress on only one or two aspects of healthcare in his first term, e.g., interstate insurance availability, removal of mandates in policies, tax credits and vouchers for health insurance or no tax preference for anyone on the matter, and tort reform, people would credit him with real progress and accomplishment.

But, as they noted, fear is what you get when you deliberately pass a bill so long and complex that the average American knows the resulting administration of said law will subject them to a new, horrible nightmare.

This time, it won't be about retirement benefits, or old-age healthcare. It's going to be about every aspect of their most private family choices involving health and medicine.

About Those Death Panels: Wonderboy As Lawyer

Have you seen the video of Wonderboy's town hall meeting on healthcare?

He does something that is just what you'd expect a lawyer to do. It involves the so-called 'death panels.'

You see, buried deep in the bowels of the House healthcare bill are provisions for federal regulators to allocate medical care. Now, I can't recall exactly what the name of the commission is, but I can guarantee you it is not "Death Panel."

So when a colleague asked me how our First Rookie can stand in a town hall meeting and state so unequivocally that there are,

'no death panel that is going to deny care to your grandmother,'

he is, narrowly technically, correct.

But only a lawyer would think like that. Everyone else knows what the questioner meant. And that it is true.

It takes a true sophist, devoid of any principles or commitment to the truth, to so beguilingly lie, while technically telling not lying.

And that sophist is our president. A liar and a dissembler.

My colleague has said for a week now that someone should be cataloguing all Wonderboy's lies. I assured him that somewhere, someone is doing just that.

No doubt such a volume will be making an appearance by the next Congressional election cycle, as a reminder to voters everywhere of how they've been lied to by Wonderboy.

FDR & Wonderboy: The Scary Parallels

I've been reading Amity Schlaes' excellent book, "The Forgotten Man, A New History of The Great Depression."

In it, Ms. Schlaes carefully documents many of FDR's motivations and confused approaches to areas such as monetary policy and the gold standard, the NRA, TVA and the power industry.

Two things struck me about FDR's activities which seem to be shared by our current First Rookie.

First, FDR often had no clear conviction for his actions. For example, on monetary policy, he first disavowed leaving the gold standard, then formally severed the link, and, then, when this made gold price setting unable to affect the dollar's value, he returned the dollar to gold convertibility, albeit at a much higher $35/ounce, rather than the $20/ounce or so it had once held.

Schlaes' description of FDR's willy-nilly changes of mind to his own representatives to a gold conference he convened in London would be funny, if it were not so sad.

The other aspect of Roosevelt's activities which I had not realized was that the entire NRA was accomplished by executive orders. Congress had no say whatsoever in the autocratic agency which attempted to organize and regulate the entire US economy. Schlaes notes that, as of the mid-1930s, the NRA's regulations ran to some 10,000 pages, more than the entire Federal Register from the Republic's founding, in 1789, to that time.

One gets the sense that Wonderboy is also devoid of any clear sense of economic direction in his own deliberations. He demands a nearly-$800B stimulus bill, all to be borrowed, then claims his healthcare bill will not increase the deficit.

Too, as FDR did with his executive orders, Wonderboy has appointed a huge array of 'czars,' and is running the auto sector and supporting banks without meaningful Congressional oversight.

It's scary how much of FDR's approaches and overall game plan of explicit socialization our current president seems to have borrowed.

But, in contrast, there's hope, as well. Schlaes details how the tide eventually turned against FDR, as I will relate in an upcoming post.