Skip to main content

This graph separates federal income tax dollars from the dedicated payroll taxes that go to Social Security and Medicare Part A. As you can see, in 2014 only 2.5% of Federal spending went to Education. Meanwhile, a staggering 27% goes to Military and another roughly 5% goes to interest on the military portion of the debt. There’s even more military-related spending tucked away in other buckets like Veterans Programs, FBI, Homeland Security, Dept of Energy, NASA and International Affairs.

We do spend another huge chunk on Health, with just under half going to Medicaid and Children’s Health Insurance Program (CHIP), and the other big portion going to Medicare doctor and prescription drug payments not covered by Medicare’s payroll tax or enrollee premiums. Most seniors don’t realize that the Medicare payroll tax and premiums cover only about half of Medicare’s actual costs.

Did you finish your taxes? If so, get a breakdown receipt for your own federal income taxes here:
Enter in your total tax: From form 1040, use line 63 (but subtract any self-employment tax on line 57, as that is payroll tax not income tax). From form 1040EZ, use line 12.

You can also get a receipt here:
Percentages vary a bit from the National Priorities’ receipt because of differences in how govt functions might be categorized.

Do the results surprise you? Do they reflect YOUR priorities?

Tax Cuts REALLY Benefit the Top 1%
Marginal tax rates — especially for the top — used to be much, much higher. Most Americans are shocked to discover that before 1982 when Reagan first implemented the fixation with tax cutting, income in the top bracket was taxed at 70%, and before that a whopping 91%!

In 1960, for example, any amount over $400,000, which equals $3.5 million in today’s dollars, was taxed at a 91% rate. So if you had the equivalent of $4.5 million in taxable income, you paid $910,000 in taxes on that last million and anywhere from 50% to 90% on the amounts over $276,000 in today’s dollars.

As we saw in my last diary, since the Tax Act of Dec 2012, any taxable income over $457,600 married or $406,750 single is taxed at only 39.6% (up from a decade at 35%). And if you get most of your money from capital gains and dividends like Mitt Romney, you pay only 20% — up from 15%.
Note: Thanks to the Affordable Care Act, high incomes also pay an additional 3.8% Medicare tax on net investment income over the $250,000 married/$200,000 single threshold.

As we see, the overwhelming majority of tax cuts have been skewed to the super-rich. Our measly tax cuts are just so we’ll carry the water and make the argument for the billionaire cuts.

Here’s a quick one-page history of the major changes to the tax tables from 1956 to 2013. Prepared to be shocked at how progressive our federal tax system used to be — even under Republicans like Eisenhower — before America’s ungrateful obsession with “tax relief” and not wanting to pay for the benefits of civilized society.

Tax Tables: Major Changes 1956 to 2013
For a printable PDF of this flyer, see page 2 at this link:
Americans scream and yell about tax rates, but most don’t have a clue how our “marginal” tax rates work, much less how to calculate their “effective” tax rate. So in honor of tax season, here’s a quick primer on our progressive federal income tax system.

The middle “yellow” section of this chart shows the ordinary income tax brackets passed under Bush in 2003 and extended until the end of 2012 by Obama. The bracket dollar amounts are adjusted for inflation each year so I show 2014 dollars here. In the right blue column, you’ll see the current Obama rates that began in 2013. Despite all the “socialist” rhetoric, Obama returned to the Clinton rates of 39.6% (on ordinary income) and 20% (on capital gains) ONLY for the top 1%. Ideally, we should have at least returned to the Clinton rates for the top 2% — with the 33% rate returning to the 36% rate.

The important thing to remember is that no matter how much total income a household has, the taxable income that falls in each bracket is taxed at the same rate for everyone. So, for example, even Oprah pays only 10% on her first $9,075 of taxable income, 15% on the amount between $9,076 and 36,900, and so forth. And if she married Stedman, they’d use the brackets on the left for married couples.

Let’s do an example. (Thank you to Brainwrap’s Daily Kos classic diary for inspiring this example: )  

Suppose Suzy, a single person, has $89,351 of taxable ordinary income (after all deductions), she would owe:

10% on the first $9,075 = $907.50 plus
15% on the $27,825 between $9,076 and $36,900 = $4,173.75 plus
25% on the $52,450 between $36,901 and $89,350 = $13,112.50 plus
28% on that last $1 between $89,351 and $186,350 = $0.28
= Grand total of $18,194.03

Notice that the last dollar does NOT push all Suzy’s income into the 28% bracket, which would mean her tax would be 28% of $89,351 = 25,018.28 — almost $7,000 more than her actual tax. This is a fundamental misunderstanding most folks have about our federal tax system. Even though they are not paying it, Americans mistakenly believe their tax rate is way higher than it actually is. Suzy’s blended rate is actually closer to 20%. And that’s not even counting all her deductions from total income, which we’ll address in another post.

Rest assured, even Turbo-tax will calculate it correctly for you with the press of a button. Here’s how TurboTax explains our example: For single income between $89,351 and $186,350, the tax is $18,193.75 plus 28% of the amount over $89,350.

In short, the progressively in the tax code — the seven marginal brackets — make the tax code a bit more fair, but hardly more complicated. No, what makes the tax code infinitely complicated are all those deductions… What counts as “taxable income”?

Continue Reading
Social Security, which celebrates its 79th birthday on August 14th, is one of our most successful federal government programs, paying out every benefit owed since 1935 and keeping many seniors and disabled out of poverty. And that’s why Republicans and their Wall Street overlords want to drown the beloved program in a bathtub.

The next time someone tries to convince you that the Social Security trust fund is empty, show them this accounting statement. Notice how in 2013, the trust fund earned $103 Billion by loaning the surplus back to other parts of the U.S. government. That's a 3.75% annual rate of return and makes more economic sense than stuffing the money under the mattress (or in a lock box) where it earns no interest and gets eaten up by inflation.

Also note that the outlays for Disability Insurance (DI) exceeded income by $32 Billion so that amount of treasuries had to be sold by the Disability trust fund. How could all this happen if the trust fund were empty? On the contrary, as I illustrated in an earlier diary, the Social Security Trust Fund is America’s largest creditor:

According to the recently released annual report of the Social Security & Medicare Boards of Trustees, the Old-Age & Survivors Insurance (OASI) program can pay out full benefits until 2034. After that, even if nothing is changed, it can still pay out 77% of benefits from its dedicated payroll tax.
A 23% cut to seniors is a terrible thing, but it’s hardly a 100% cut as if the Old-Age fund were completely empty. The Trustees specifically define “solvency” to mean the program can pay out full benefits for the next 75 years! That is a very high bar and not the common definition of “solvent.”

The Disability Insurance (DI) fund is a much more urgent matter. Its trust fund will be depleted late in 2016 — just two years from now! After that, if nothing is changed, it will only be able to pay out 81% of benefits owed. By law, the OASI and DI trust funds are two separate accounts and cannot pull from each other. In 1994, however, Congress temporarily reallocated the payroll tax to make up a shortfall in DI. Normally, OASI gets a payroll tax of 10.6% and DI gets 1.8%, with the employer and employee each paying half.

There is an easy, permanent fix to all this — just scrap the wage cap and collect payroll taxes on earnings over the arbitrary $117,000 (in 2014). Back in 1983, 90% of all income in the U.S. fell under the cap and was subject to the Social Security tax. With growing income inequality and more income going to the top, now only about 83% of all income falls under the Social Security cap. So we could either raise the cap to $180,000 to make sure the tax once again reaches 90% of total U.S. income, or even better, just scrap the unfair cap all together. The Medicare payroll tax (for Part A Hospital portion) has no such wage cap.

And let's not forget that getting unemployed and underemployed folks back to full employment, as well as raising the minimum wage, will bring in more payroll taxes and further improve Social Security projections.

I’ll take a look at the Medicare books in my next diary.

If you would like to compare the 2013 Social Security finances to the 2012 finances, follow me below the orange squiggle...

Continue Reading
Chart: Federal Revenue Sources 1940-2013
As we can see from the chart above, the red line shows that corporations used to pay a much larger portion of total revenues — back in the mid 1940s, it was 40% of total revenue. Today it’s only 10%, and was recently as low as 6%. Measured as a percent of the total economy, corporate taxes once added up to 7% of Gross Domestic Product (GDP). Today it’s a meager 1.6% of GDP or $274 Billion. Remember, GDP is currently about $17 Trillion, so each 1% equals $170 Billion. When corporations don’t pay their fair share, the rest of us ”little people” have to make up the difference or the deficit increases.
The declining revenue share paid by corporations is certainly not because they
haven’t been profitable. On the contrary, since 2010, we’ve seen all-time highs for
corporate profits. In 2013, corporations raked in 10% of GDP in after-tax profits,
which equals about $1.7 Trillion.

But corporations only paid an average effective tax rate of 20% of their profits — well below the statutory 35% federal corporate rate (39% including state and local taxes) and far below the four decade high of 50%.

Much of this lost revenue is due to clever tax avoidance schemes in which corporations exploit loopholes that they themselves have lobbied to insert and keep in the tax code. Spare me the “We’re just taking advantage of legal strategies available to us...” canard. You and your lobbyists wrote the dang tax code!

One tax evasion gimmick corporations use is to keep profits abroad because, unlike other countries, our tax code stupidly waits to tax profits when they are brought home. There is now an estimated $1.6 to $2 Trillion in profits being stashed overseas — costing Americans $560 to $700 Billion in lost revenue.

Then the tax deserters lobby for another “repatriation tax holiday” to bring the profits back at a meager 5% tax with the false promise of creating lots and lots of jobs. Instead, they boost executive pay and shareholder dividends and buy back their own stock to inflate the share price. We already fell for that ploy in 2004. Fool me once… Rather, we should change our tax code to tax any corporate profits as they are earned in the U.S., with penalties for shifting it abroad.

Most recently, Walgreens backed down under public pressure to abandon its “inversion” (perversion!) scheme in which it planned to buy up a small Swiss company and then change its address to Switzerland to avoid paying estimated U.S. taxes of $4 Billion over the next 5 years. Of course, Walgreens would still be on every other street corner in America, using our roads and legal system, depending on our workforce and customer base, and getting 25% of its revenue from taxpayer-funded programs like Medicare and Medicaid. It just wouldn’t be paying its fair share of taxes anymore. What an ungrateful, unpatriotic taker!

While Congress drags its feet on reining in these tax dodgers, you can demand that the President sign an executive order to prevent corporations from deserting America through the inversion perversion:

Hyprocrisy from the religious right hardly seems surprising anymore, but the recent Hobby Lobby decision and the Teapublican vitriol launched against the Central American refugee children set a new low even for this mean, illogical crowd.

First there’s Hobby Lobby, Inc. that wants to dictate which forms of birth control women should have access to under their healthcare plans, based on the erroneous belief that four methods cause abortions instead of simply preventing pregnancy. Curiously, the company covered three of these “troubling four” before 2012 when they decided to make this issue political. Nor are the religious sensitivities of Hobby Lobby’s owners bothered by their financial investments in those very same methods of birth control or the fact that most of the products in their craft store come from China, where the one-child-per-family rule not only encourages abortion but also infanticide. Holy Hypocrisy!

For those affected by the Hobby Lobby ruling, check out this hilarious video entitled “Hobby Lobby Crafts (Make Your Own IUD!)”

Next, we have the Corporatist Five male justices on the Supreme Court who seem to think they can actually draw the line of their newly invented corporate religious freedom at birth control and closely-held corporations. To quote from Justice Ginsburg’s blistering dissent,

"Would the exemption…extend to employers with religiously grounded objections to blood transfusions (Jehovah's Witnesses); antidepressants (Scientologists); medications derived from pigs, including anesthesia, intravenous fluids, and pills coated with gelatin (certain Muslims, Jews, and Hindus); and vaccinations[?]…Not much help there for the lower courts bound by today's decision... The court, I fear, has ventured into a minefield."
What’s the difference between birth control and blood transfusions or vaccinations or anesthesia, you might ask? Well, MEN might need a blood transfusion or a vaccination or anesthesia someday so we can’t have employers deny that kind of health coverage now can we? The reasoning (or lack thereof) of Justice Alito, writing for the majority, proves once again that this whole abortion (and now contraception) controversy is all about controlling women and returning to an even more patriarchal society of yesteryear.

So zygotes and corporations are full-fledged persons with Constitutional rights, but women not so much. This funny graphic sums up the SCOTUS reasoning in the Hobby Lobby case:

More Tea Party hypocrisy after the orange squiggle...

Continue Reading
Staggering U.S. Firearm Facts
It's a tragedy that every day in the U.S., an average of 87 people die from gun violence — 54 from suicide, 31 from intentional homicide, and 2 from accidents.

We have almost as many civilian firearms as people. Estimates range from 270 million to 320 million firearms. The U.S. comprises only 5% of the world’s population but owns 50% of the world’s civilian guns. And gun ownership is now concentrated in only 34% of U.S. households, down from 50% in the 1970s.

The fact that 65% of the guns are owned by only 20% of U.S. households shows that gun manufacturers are marketing and selling to an ever-shrinking base of repeat customers. Remember that when you hear that gun and ammunition sales are soaring. It’s not that a lot of new people are running out to get a gun for protection. Rather, it’s the same ol’ paranoid crowd stockpiling for “black helicopter” day.

Also shocking is the sheer number of bullets and amount of carnage that an AR-15 military-style weapon and/or an extended magazine or drum can accomplish. Like "miles per hour" speed limits for the road, we need a sensible "shots per minute" speed limit for guns and ammunition. Any gun, gadget or contraption that enables a shooter to exceed that limit should be illegal.

No one needs a military-style weapon or a high-capacity magazine to defend themselves (and you surely don’t need them to hunt). Even the NRA and other gun extremists — hard-pressed to find even one example where such firepower was used or needed — must resort to fanciful hypotheticals. While AR-15s and high-capacity magazines have little redeeming value, they do impose undue risk on the rest of society and are disproportionately the chosen weaponry by those who want to create the most carnage in the shortest amount of time.

Just as support of speed limits and drunk-driving laws does not make one "anti-car," support of limits on such excessive weaponry does not make one "anti-gun." Nor does it lead to a slippery slope. It that were true, we’d all be driving at 1 mile per hour or back in the saddle!

How does the U.S. compare to our peer countries when it comes to guns and homicides? Check out my recent diary:

Gun Ownership & Homicides By Country
Sadly, in light of the recent mass killing in Santa Barbara, it’s time to post this chart again.

Here we see gun homicides (red bar) and homicides by all other means (black bar) per 100,000 people (use scale on left). The red and black bars together show the total homicide rate. “Homicide” here is defined as ”unlawful death purposefully inflicted on a person by another person.” So that does not include justifiable self-defense or justifiable killing by a police officer.

The U.S. rate of gun homicides was 10 times the average rate of peer countries. And looking at total homicides, people in other advanced countries do not appear to be swinging nearly enough hammers or wielding enough knives to rival our total homicide rate either. The only countries that exceed our rate of homicides and gun homicides are less developed, drug cartel infested countries like Columbia and Mexico. Surely, we do not want to set our bar that low!

We also have by far the highest rate of civilian gun ownership (see yellow bars and use scale on right). Some countries like Switzerland do have high gun ownership rates without an accompanying spike in homicide rates. But the Swiss also require universal background checks, licensing and training and have been moving away from widespread guns in households and instead storing guns in depots. See more about Switzerland here:

Continue Reading
Who Holds The $16.7 Trillion U.S. Debt?
Most folks who scream about the debt don’t realize that we owe most ($9.1 Trillion) of our $16.7 Trillion debt to OURSELVES — not to China. And as this chart shows, we owe about the same amount to Japan as China, so why does the propaganda machine always fixate on “borrowing from China”? Perhaps because they are the “Big Commie” enemy?

Also notice that Social Security — far from adding to the deficit or debt — is America’s largest creditor. Failure to grasp this distinction is like not understanding the difference between your home loan and the bank to whom you owe the money.

For the last few decades, Social Security has generated a surplus every year (in anticipation of the Baby Boomers retiring), so the trustees invest the surplus in U.S. Treasuries that generate interest of about $100 Billion per year, which gets credited back to the Social Security Trust Fund. That makes more fiscal sense than sticking the surplus in the sock drawer (i.e. lock box) where it would earn nothing and get eaten up by inflation.

Deficit Since 1940: Deficit Fix Requires Less Spending AND More Revenue
A “deficit” is when the government spends more than it takes in in a given fiscal year (Oct 1st of year preceding to Sept 30th). A “surplus” is just the opposite. All the deficits added together is the long-term “debt.” Think of the debt as the country’s credit card balance.

Here we see federal spending (the red line) vs. revenue (the yellow line) as a percentage of Gross Domestic Product (value of all goods, services, exports created annually) going back to 1940. The more the red line is above the yellow line, the greater the deficit is for that year. When the yellow line is above the red line, that indicates a surplus for that year.

During WWII, we had huge deficit spending, but we got it under control because back then even Republicans like Eisenhower knew it was irresponsible to cut taxes until the budget was balanced and debt paid off.

Two Santas Theory: In the Mid 1970s GOP Abandoned “Balanced Budgets” for “Tax Cuts”
Then in the late 1970s, Republicans decided “tax cuts” were a sexier platform to run on than “balanced budgets.” I mean, who doesn’t like a fire-sale? Who doesn’t like Santa Claus?

The GOP obsession with tax cuts sprang from a now famous 1976 editorial by Jude Wanniski. He argued that if they ever wanted to win elections again, Republicans would need to adopt a more attractive marketing strategy to compete with all the popular Democratic programs like Social Security, Medicare, Medicaid, public schools and parks, investments in roads and bridges, etc.

So instead of being the “Scrooge of Balanced Budgets,” Republicans would brand themselves as the “Santa Claus of Tax Cuts”: Government is on sale! Vote for us and you don't have to pay for anything. Based on magical math, we can reduce everyone's tax rates and still bring more money into the U.S. Treasury. You can have your cake, eat it too, and not gain any weight.

Reagan was the first President to put this new marketing gimmick into action. Let’s zoom in on the deficit graph to see what happened since the 1980s and the newfound GOP obsession with the “tax cuts” marketing strategy (see you after the orange squiggle...)

Continue Reading
We Have A MILITARY Spending Problem: U.S. Military Spending 1947 to 2014
When it comes to spending, boy do we have a MILITARY spending problem. Even if we end the war operations in Afghanistan more quickly, we are still spending approx $150 billion more than the post-WWII average in inflation adjusted dollars.

In addition to the 4,000 military bases in the U.S., we have an estimated 1,000 military sites overseas — ranging from huge installations to small "lily pads." Why do we still need over 200 military sites in Germany? Why does the Pentagon maintain several resort hotels, ski resorts and more than 230 golf courses overseas?

Because the Dept of Defense is the only government budget that is not subject to a financial audit, it is difficult to pinpoint the exact cost of all these overseas military sites. Including the $115 billion spent in Afghanistan and Iraq last year, estimates range from $170 billion to $250 billion.

Hey, remember when Thomas Jefferson argued against even having a standing army in America? He’s probably turning over in his grave at the sight of USA’s growing military empire — domestic and abroad. How is it any different than that old-time British imperialism?

Surely we can trim some of the Pentagon pork and still maintain our security. Defense spending is not immune from waste, fraud and the law of diminishing returns. In addition to closing many of our overseas military sites, let's eliminate the weaponry that the Pentagon hasn't even asked for and doesn't even want. As retired Congressman Barney Frank quipped, “We have three ways to annihilate the former Soviet Union. Let’s pick two.”

Continue Reading
Sky-High U.S. Military Spending: What’s The Trade-Off?
How does our Military spending compare to other countries? We are off the charts. The U.S. alone spent 39% of the entire world’s military spending in 2013 — more than $600 Billion. That’s actually down from the 46% share the U.S. spent in 2011. The next biggest spender was China at only $112 Billion. And they have 4 times as many people as we do!

Now I think security is an important priority, but it is not the only priority at the expense of all else. Similarly, I have an alarm system on my house, but I don’t have round-the-clock security guards or an alligator-infested moat. Preemptive wars and nation-building are perhaps beyond the scope of reasonable security efforts. And certainly beyond our means.

What else could we have done with that money? What’s the trade off? What could we afford to do if we cut the military industrial complex by even 25%?

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.


Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site