Sunday, June 15, 2014

Fair Tax Formula


If congress truly wants to develop a fair tax code, then they would tie the rates to national median salary. I have devised a simple formula that illustrates how rates could be derived and a few illustrations on how it would be applied.

The formula is as follows:

Median Income of upper economic quartile.
 Median Income of Lower economic quartile.
Median Income of total economic population.
  Personal Tax Rate
  Income Tax Rate
   Personal Income 

In the first part of the formula, it can be easily seen that there are two ways to reduce your income tax rate. First, if the median income of the total economy increases, the denominator becomes larger and therefore the fraction, I call the Median Variable, becomes smaller and reduces the income tax rate. Likewise, if the spread between the upper and lower median quartiles decrease, then the Median Variable would similarly reduce the income tax rate. Therefore, in theory it would be in everyone’s best interest to increase the median salary and reduce the gap between poor and wealthy. In other words, develop the middle class.

This brings us to the second portion of the formula . Since  , ones salary relationship in respect to the total median income also plays an important role in determining their tax rate and what they are able to contribute toward the overall economy. If one’s income is well below the median, then their tax burden is reduced to allow them more upward mobility. If one’s income is well above the median, then they should be able to contribute somewhat more to allow others to share in their success.

The only caveat to the formula is when we get into incomes above $370,000 annually and the rate rises above 30%. Thus we should cap the upper tax rate at say 30% on any income made above the calculated rate, which if the Median Variable reduces, and particularly if it reduces due to an increase in the total median income, then the amount of income that is taxable below the 30% cap greatly increases.

Let me clarify the power of the above formula by offering a few examples. Let’s assume the lower quartile have a median income around the national poverty level for a family of four, or $22,000/year. Now let’s assume the median income of the upper quartile is the mysterious $250,000/year. Finally, let’s assume a figure I recently read was the national median income is accurate at $53,000/year.

Doing the arithmetic we have:

% or $392.85 for someone living at the federal poverty line. Although it seems low, you can’t say they are not paying something, and they will most likely place much of their income back into the economy.

Now let’s see what the formula does for someone making the median income:

or $2,280.00 for someone earning median salary. As you see his or her tax burden is more than twice someone in poverty.

Now let’s see what happens to someone earning the median salary in the upper quartile of the economy, or the mysterious $250,000 annual income per individual:

 % or $50,730.00 for someone that is considered wealthy. It might seem high by comparison, but let’s not forget they still have $199,270.00 of spending money as compared to $50,720 and $21,607.00 for the median and poverty earners respectively. Considering all three examples are individuals that benefit from the same public services from our government, security, infrastructure, and so forth, it might seem unfair. But is it?

Let us now look at what happens if you actually increase the median salary because the lower and middle-income brackets start spending more, because they have more, and start improving the economy. Let’s just say the lower median quartile income increases 10% to $24,200, and the national median income moves up to a similar percentage to $58,200 annually.

We now have:

% or $390.39

% or $2,257.99

% or $41,663.25

As you can see, a small 10% increase in the lower and middle median income levels translates to a significant savings for those in the upper income levels.

Obviously the economy expands and contracts so the actual figures will change over time, but the relationships will remain the same. Plus it would be difficult to predict what the next years income tax rates will be, until the data was available from the previous year. However, if everyone is required to file whether or not they have any income, then a reasonably accurate number could be calculated for the participating workforce. Further, some may argue that there would be insufficient revenue from the above examples to support the current social economic and government services budgeted. To that I simply say a minimum base tax could be added to assure it meets the basic necessities of government and current obligations. I shall address that argument by suggesting an 8% figure that could eventually be lowered as the margin between the lower median quartile and the upper median quartile narrows, meaning more people are paying a flatter tax.

Let’s now look at what effect the base 8% rate would have on the above examples.

For the figures in the first example, before an improvement in the lower and middle-income brackets is realized, we have the following tax rates:

Lower = 1.7857% + 8% = 9.7857%  
Providing $2,152.85 revenue and $19,847.15 disposable income

Middle = 4.3019% + 8% = 12.3019% 
Providing $6,520.00 revenue and $46,479.99 disposable income

Upper = 20.2920% + 8% = 28.2920%  
Providing $70,730.00 revenue and $179,270 disposable income

After increasing median salary and wages 10% for the lower and middle-income brackets we have:

Lower = 1.6132% + 8% = 9.6132%
Providing $2,114.90 revenue and $22,085.10 disposable income

Middle = 3.8797% + 8% = 11.8797%
Providing $6,913.99 revenue and $51,286.01 disposable income

Upper = 16.6653% + 8% = 24.6653%
Providing $61,663.25 revenue and $188,336.75 disposable income

We now have roughly a 10% increase in disposable income for both the lower and middle-income individuals, and at least 5% increase in disposable income in the upper income bracket, all by shifting the money from the revenue side. This model is significantly different from the current tax code, however, because the lowering of the revenue through tax decreases is tied directly to the median income levels as well as the persons individual income level, and it motivates the market to do so by increasing the median income and reducing the spread between the upper and lower quartiles, quite the opposite of our existing tax structure.

Our current tax structure is riddled with loopholes that are neither fair nor conducive to creating a wealthier nation. It is completely corruptible through special deductions for lobbyist and other self-interest, and is completely slanted toward corporate welfare.

If you want to treat corporations separately, then we need to either treat all individuals similarly, or eliminate those services provided to corporations that are meant for individual taxpayers, and vice versa. The tax code needs to be simplified. We can no longer afford to subsidize the wealthy on the backs of the poor and middle classes. Our current tax structure is completely upside down!

The tax formula I propose not only reverses that trend, it treats all participants equally based on a market relationship, that not only addresses the disparities in income and the services we all are entitled to, but it does so in a way that makes it in everyone’s best economic interest to raise the bar on salaries and wages to meet the demands of a growing economy. In addition to providing a way to incentivize the market to increase salaries and wages, it does not dissuade any entrepreneur from increasing their income. There is no barrier or keeping one form going beyond the 30%. Millionaires and Billionaires will still find it advantageous to build their empires. We will just be asking them to take a more responsible role in addressing social issues by figuring that the cost of business must include consideration not to place the burden of unemployment and poverty on the governments door step. That capitalism does not mean the highest profit at the expense of the lowest pay reduced benefits! The uncalculated human cost is much higher than the one reflected in the spreadsheet, as we witnessed in the fall of 2007 and the great recession.

Perhaps some may find some flaws in my logic, and there may be some better calculation out there somewhere, but I invite all to the premise that we need to tie the problem of poverty to the very institutions that are motivating it. To simply ignore that the wealthy have a different playing field than the average hard working citizen is to not even get the message.

I have always found it strange that so many people seem to blame unions, or drugs, or wars, or catastrophic events for the poor economic choices we are given. After 45 years of hard work, 5 lay offs, one brief period of homelessness, and a possible sequester that could wreck what little I have been able to build, I must at least speak to the insanity that both sides of the aisle call progress. We Americans cannot pray, or work, or protest, or even wave the flag out of the problems we face. We simply have to make the choice to change the status quo!

Do not question my faith, my patriotism, my loyalty or my work ethic until you have made every effort to help those less fortunate than yourselves. If you need to ask me of my character, then perhaps it is your Americanism that is in question?

Friday, September 17, 2010

Fools Paradise

Americans are blinded by their own foolishness. Many of us cast votes for public office based on issues that are close to our personal emotions or immediate needs, without consideration for objectivity or malice. We are blinded by our economic woes and spiritual passions. We foolishly accept the rhetoric of the extremist or alarmist and fail to take time to challenge their claims or investigate the sources. It is obvious in the current political climate, with the volatile rhetoric and dogma that is being spewed forth from most conservatives and certain Tea Party members, that much of the nations anger will decide the mid-term elections.

The consequences of venting their anger at the polls unfortunately will only produce the opposite of what they truly seek; jobs, stable economy, less government, and liberty.

Many American voters are blinded by their own patriotism which paralyzes their thought process and makes it numb to any idea beyond their perception of traditional American values. Many tout that the U.S. Constitution limits the scope of government, and they perceive that government can only interfere with the free markets. To be free to make a profit on the sweat of any sucker that is willing to pay any price for any product they may be able to produce, in any manner they see fit. Any regulation required for the safety and security of the consumer is a personal front to their right to be an entrepreneur. If people are willing to make uninformed, unwise, or risky decisions, then it is an American right to take advantage. Further, if regulation shall be required, then it must be so complicated and so ambiguous that it effectively confounds the consumer to a level that requires further legal counsel and intervention to detour any notion of recourse.

As one that has been politically and spiritually engaged in the American dream my whole life, I find it very interesting that these people that denounce our government are the same ones that take advantage of it when it is personally beneficial. They privately complain about people that file bankruptcy due to loss of employment, but publicly have no qualm about filing bankruptcy themselves to save their own corporation's or business from failing. They claim they support religious freedom on one hand, yet they also claim it is a Christian nation on the other. They scream that the government is too big and overreaching, yet they have no problem taking a government contract to make a large profit. They are so transparent that it make one wonder how they continue to grab power and stack the rules in their favor.

Wonder no more! We Americans are simply fools.

Only fools would watch George W. Bush sign into law the deregulation of the banking industry, change the bankruptcy rules, and propose that social security be allowed to invested into the stock market, then elect him in a second term. Only fools would watch the Republican Party borrow and spend more money in six years than all previous congresses combined, then blame the failure of the economy on the Democrats. Only fools would believe the conservative rhetoric that the President of the United States is not a U.S. citizen and is a Muslim. Only fools would believe that the Tea Party is a diverse group of American voters with the best interest of all Americans at heart, in the name of Liberty, Jobs, and Patriotism.

Yet I do not tarry or worry because I know most are fools, and it is easy to predict the inevitable outcome. Therefore I am no fool and can take advantage of our foolishness.

I predicted fairly accurately the failure of our economy and moved all my personal wealth out of the stock market on October 7th, 2007 after several years of warning the banks, coworkers, family and friends. I can also predict that the fools will vote out the Democrats who have averted a great depression which potentially could still be 100 times worse than the 1930's, because it is global via the Internet. I can predict that the fools will repeat everything they did in the 1930's and prolong the agony for many unnecessary years.

One may ask how I can predict such a doomsday scenario? Easy, we have learned nothing from the past. Why? Perhaps it has much to do with the true nature of Capitalism unchecked. The same environment that existed prior to 1929 (Free Markets) is the motivating force today. The same type of people that were living beyond their means in the roaring twenty's also exist today. The same critics of the status quo when it all came undone, also exist today. The same people that believed in survival of the fittest also exist today. Finally, the same fools that believed them and took the bait also exist today.

One thing is for certain. People are easily manipulated by their personal values. Religion, work ethics, morality, patriotism, greed and fear makes most voters vulnerable to those that want to fool them into a false sense of resolve.

The simple facts are that many conservatives have rationalized that it is best for all Americans to allow Capitalism not government to determine our destiny. That greed is good and government is bad. That money is not the root of all evil, but Liberal compassion somehow is.

I personally welcome the coming storm. Only then will God's wrath and subsequent grace be know. The only tragedy that shall be hard to bear is the children that shall suffer because of it.

May God be merciful to the children.

Sunday, March 21, 2010

The SushiDoctor

I have to repost this essay I came across while blogging on the healthcare bill. It was so beautifully written and addresses the claim that the healthcare bill is socialized medicine. Enjoy.

This morning I was awoken by my alarm clock powered by electricity generated by the public power monopoly regulated by the US Department of Energy. I then took a shower in the clean water provided by the municipal water utility. After that, I turned on the TV to one of the FCC regulated channels to see what the National Weather Service of the National Oceanographic and Atmospheric Administration determined the weather was going to be like using satellites designed, built, and launched by the National Aeronautics and Space Administration. I watched this while eating my breakfast of US Department of Agriculture inspected food and taking the drugs which have been determined as safe by the US Food and Drug Administration.

At the appropriate time as regulated by the US Congress and kept accurate by the National Institute of Standards and Technology and the US Naval Observatory, I get into my National Highway Traffic Safety Administration approved automobile and set out to work on the roads built by the local, state, and federal Departments of Transportation, possibly stopping to purchase additional fuel of a quality level determined by the Environmental Protection Agency, using legal tender issued by the Federal Reserve Bank. On the way out the door I deposit any mail I have to be sent out via the US Postal Service, and then drop the kids off at the public school.

After spending another day not being maimed or killed at work thanks to the workplace regulations imposed by the Department of Labor and the Occupational Safety and Health Administration, enjoying another two meals which again do not kill me because of the USDA, I drive my NHTSA car back home on the DOT roads, to my house which has not burned down in my absence because of the state and local building codes and fire marshal’s inspection, and which has not been plundered of all it’s valuables thanks to the local police department.

I then log on to the internet which was developed by the Defense Advanced Research Projects Administration and post on CNN about how SOCIALISM in medicine is BAD because the government can’t do anything right!

by The SushiDoctor on Healthcare Blog.

Why I am Liberal

"Give me your tired, your poor,Your huddled masses yearning to breathe free,The wretched refuse of your teeming shore.Send these, the homeless, tempest-tossed to me,I lift my lamp beside the golden door!"

When I think of the actions of the Democrats to muster the courage to vote yes on Healthcare Reform, I am reminded why I am a Liberal Democrat.

I am a Liberal because I stand with integrity to place the needs of my country before my selfish desire.

I humbly pick up the noble torch of truth to march for the cause of the unfortunate and exploited.

I respect the grace of labor by recognizing its significance in the development of a nation.

I am generous in spirit and noble in deed.

I am proud to be Liberal.

Friday, January 08, 2010

The Real Economics of Our Time

The Real Economics of Our Time

Profits do not create jobs. Wages create jobs. When people receive wages, they tend to spend them on things that fundamentally sustain an established standard of living. When people receive profits, it is considered above and beyond the income required to sustain an established standard of living. Therefore profits are excess capital in the economy for investment in research and development or entrepreneurships. The problem arises when the people with profits desire to sustain a certain standard of living based on profits rather than wages, and cut people or wages on those that generate their profits to sustain that standard of living. Because of this the basic economy shrinks and the unemployment rises.

I am of the school of thought that in order to increase the overall economy and generate more jobs. We must increase the base wage and reduce profits. It is much like growing plants. If you take a plant that has only the water and sunshine that nature provides it will generate a certain amount of sprouts. If one starts to prune all those sprouts and not provide additional water, light and nutrients, then it will die. Only when the plant receives more water (opportunity), light (education), and nutrients (higher wages), does the plant thrive and produce more sprouts (profits).

What we have done is reduce wages by moving overseas to reduce cost. This has therefore reduced wages and opportunity here. Yet we continue to flood light on the issue and convince ourselves that with education alone that we can still obtain profits. In actuality all we have done is dry up the opportunity and starve the local economy.

The reality is that the only way to turn this economy around is to take new seeds (taxes), present new opportunities (Water), and place them in a whole new light (education).

The problem is that those which have benefited from the profits (sprouts) do not want to provide any seeds (taxes) to plant.

Until people can completely understand this and stop supporting those that are selfishly hoarding all the seeds, and will only release enough seeds to those to keep the power to decide who or where the seeds are planted, then we remain at their mercy and self interest.

That is why I cannot be Republican. They seem to feel that government is the enemy because they want to safe guard the economy and look after the lower and middle class. Their policies support the corporation at the expense of the individual. It is a survival of the fittest mentality that has little sense of community. They only want to deal with social issues through the church without respect for people of different cultures. They cleverly disguise their greed and ambition through a moral facade that is socially compassionate on the surface, but in policy and practice keeps more people in poverty and powerless to be empowered into a higher class.

Perhaps people will begin to understand why Republicans’ so called moral majority wants to take education from the public and place it in private hands. Then their party can control the thinking of the masses and blame the liberals for all the social woes. It is a clever strategy, but one doomed to failure honestly. It has been done many times throughout history. Yet I am amazed at the number of people that are convinced that greed is good and compassion is immoral. The private education system is obviously working for now.

I am hopeful however, since I am a liberal Christian that has left the church because God knows I can remain a christian without following false prophets. Plus I am not so na├»ve to believe that I am the only one. It just surprises me how those people that call themselves Christian cannot see these false teachings, and apply different rational to social issues that are the premise of their argument and theology when it comes to their beliefs. Could not the failed economy or the division of their party not be God’s judgment of their twisted policies?

I will speculate on religion and politics in another essay. This is about economics. I just wanted to make the point that politics and religion are only a part of economics, albeit a significant part. It should be understood however that in a nation that prides itself on basic freedoms; freedom of religion, democracy, and education, that we need to connect the dots. We are free to connect them however we choose, but we cannot expect certain results when we connect them poorly. We cannot continue to grow and prosper if we fail to recognize the relationship between the fundamental institutions we support.

Personally, I believe in our nation, our constitution, our government, and our freedoms. I respect the beliefs of others, but resent the lack of respect for my beliefs. I shall always reserve the right to fight against oppression in any form or authority. As a citizen I must respect the law, but nothing precludes my right to challenge the law. I shall however discern in what is an appropriate platform to express those beliefs with consideration for others within the community. I only wish that others would reciprocate mutual considerations.

I do however understand those that have the right to survive physically, and that these rights sometimes preclude the luxury of debate. For example, ones lack of education or understanding and economic means may not allow them to communicate their needs effectively. It is up to those of us that do have the means to yield to their concerns as a matter of principle. I am not speaking of the abortion issue which is much more complicated, but the disenfranchised living.

Friday, September 11, 2009

On 9/11

As a former resident of NYC and one who worked daily in the WTC this day comes very close to my memories and heart. That day will be etched in my memory for eternity, yet I have no hatred, anger or malice toward those that commited such a horrific act. I only pray God has mercy on their twisted and misguided souls. I learned through that tragedy alot about stereo types, and how all New Yorkers and ethnic groups came together for the sake and compassion of their fellow humankind. We can only honor their sacrifice by building a more respectful and civil nation. A nation that resolves issues through honest debate and dialogue, rather than deception and malice. May God Bless America and all nations...People have seasons too.

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Tuesday, August 18, 2009

Democratic Healthcare

Enough is enough. I am sitting here with thousands of dollars to contribute to the DNC, DSCC and DCCC, yet all this in fighting over the healthcare reform is troubling me. I am outraged that there are Democrats that are against the public option. I always felt that Democrats worked for the little guy, regardless of special interest. As a life-long Democrat I have held what I call Democratic values. First and foremost is the value of integrity, being one’s word! When President Obama said he was for a public option to keep the Insurance Industry honest, I believed him. He simply placed three basic principles for the reform and allowed for honest solutions to obtain them. Now however, it appears that other Democrats are eroding those principles by caving into the Republican rhetoric and misinformation campaign.

I have news for those Democrats that do not get behind the President and majority of the Democratic Party. Be prepared to be voted out in November next term. I spent much time and money campaigning for Obama and other Democratic leaders in the last election. That will dry up if I feel they are going in the wrong direction. I have no self interest in the reform; in fact it could even hurt my wife, who is a medical transcriptionist, in the long run. It is simply a matter of doing what is right for the less fortunate in our nation. I have been homeless and laid off at least 5 times in my life. Although I am doing rather well now, I cannot forget the past or the stories of those I encountered along the way. I am a Democrat because I choose not to support the selfish and dysfunctional tactics of the Republican Party. Nor do I believe in the cynical and non-productive criticism of the Independents, who do not deliver a reasonable resolution.

By giving into the media blitz of the special interest lobbyist and compromising on campaign pledges, the Democrats only destroy all they built in the last election. I travel for my work and encounter many diverse groups. I do not know where you people get your information, but 8 out of 10 people I speak with are for healthcare reform with a public option. The elderly are scared because they are told lies pure and simple. The elderly and poor are relying on us Democrats to do the right thing regardless of the popularity of it. After all, slavery taught us that just because an idea is popular; it does not mean it is right!

I am going home this weekend to address this issue, and make out checks to the DNC, DSCC and DCCC, but I am only going to donate $100 each. If you can demonstrate some reasonable progress on passing a bill with the public option that satisfies President Obama’s initial principles and gets the so called Blue Dog Democrats back in line with the majority of the Democratic Party, then I will seriously consider contributing an additional $900 each. If not, then I will have to find those individuals that shall and step up their campaigns.


James Alan Cole