Uplifting Boogie Woogie Dance

And who says the Swiss are quiet, boring and bland? Not me! Silvan Zingg on piano with two energetic dancers... perfect stimulation for holiday travels. Happy trails...

Who pays how much tax anyway?

With the recent upheaval within the US Congress over the continuation of the Bush-era tax cuts, much of the debate has been over whether to increase rates for the "rich".  I was curious to discover how many tax payers there actually are and how collections are spread among the income groups.

As you note in the IRS chart below, there are only about 140,000 returns filed each year for just over $1 trillion collections.  As regards income, it seems that $33,000 is the break between the top 50% and lower 50%.  AGI means adjusted gross income.

Very interesting numbers!  For instance, the top 10% (with incomes above $114,000) have a total share of 45.7% of total income, but pay 69.9% of all taxes.  The top 1% of earners pay 38% of all monies collected by the IRS. They only earn about 20%.

The lower 50% (almost 70 million people), who are also in many cases receiving government benefits, pay only 2.7% of the entire monies collected. 

So, are the rich somehow escaping their fair share?  Do they have some sort of free ride?  Look at the data yourself and make your own decision.

There is an excellent commentary on this in a recent Reason Magazine piece.

2010 Year in Ideas - NY Times

The New York Times does a wonderful spread of top innovative ideas for 2010.  The interactive website gives short digests of each one.  An interesting selection and some noteworthy progress...

Growing Trend in Food Stamp Use

This holiday season is a tough one for many folks.  This graph illustrates a quite steep curve in United States food stamp usage in the past few years. It compares participation to the US U6 unemployment rate at 16%, which includes short-term discouraged workers who have stopped looking. 

One in eight people use food stamps.

For example, the number of Americans signing up for food stamps on the Supplementary Nutrition Assistance Program (SNAP) has increased at an even faster rate in 2010 than in 2009, according to new USDA figures.

The number of people receiving food stamps in September 2010 stood at 42.9m, the newly released figures show, up by six million compared to a year ago, when 36.9m people were enrolled with the program – and a rise of more than 50 percent on 2008 numbers.

Last year, Americans were joining the food stamp program at an average rate of 20,000 a day; in 2010 the rate accelerated to 22,000 a day.

In order to qualify for the program, household income must be at less than 130 percent of the poverty threshold, roughly equivalent to $29,000 a year for a family of four.

The program cost $64.7bn in 2010, up from $34.6bn two years ago.

Participation levels have set new records for 22 straight months. According to White House estimates more than an eighth of the population will get food stamps each month in the year beginning October 1.

Graph from Agora Financial

Is there really low inflation in the United States?

As usual, a chart depicts quickly the true sense of the situation. On the graph below, on the far right, is the "official" CPI figure publicized as the core inflation number - and more importantly used to calculate many cost-of-living increases for retirements and pensions.  Note the rather low 1.1% "official" increase year on year.

Then there are the actual prices of some illustrative commodities (those things that are the raw materials for food and transport).  It is obvious the major price increases during just the past year, especially with the grains. (thanks to the good folks at Casey Research for compiling the chart).

Of course, this type of chart does not include such rising costs as health care, entertainment or housing.  And it also does not include all the low cost plastic and tech stuff (imported from China) one can find at the big box stores.  And of course, in many parts of the country, housing has cratered severely.

However, I think all of us realize that in our day-to-day lives prices are certainly much higher than 1% more than last year this time.  It is not an illusion.  Economist John Williams notes that since WWII the ways that consumer inflation is calculated has been continually tinkered with.  Increasingly over the past 25 years  starting with Alan Greenspan's term at the Federal Reserve, the means of valuing the  "basket of goods" used to track inflation was continually adjusted by such games as geometric weighting, chaining, and the newer concept of core.  

Shown below is the actual consumer inflation using Williams' traditional calculation (SGS) used for decades through WWII before the political shenanigans (CPI-U) began as a regular pattern.  As you see below, reflecting some of the commodity prices increases above, inflation can be seen actually at about 8%.

For those who are really interested in the formulas and rationale behind this, you can visit the excellent Shadow Government Statistics site.  I've met John several times at conferences.  He is the real deal - not flashy, but providing a clear window into the world of often arcane government economic statistics.  An in-depth review of the various inflation manipulations (done under both Democrat and Republican administrations) is contained in this analysis from an early SGS newsletter.

What does this mean?? 

What is means is that if you are simply holding savings in US dollar cash or low interest certificates, you are losing about 5-7% a year in purchasing power.  To protect yourself and maintain wealth, you need to consider diversifying investments in "hard assets" for the next few years - land, metals, perhaps shares of companies profiting from commodity increases, or even foreign currencies from commodity rich countries (such as Canada or Australia).

Good News in Health and Prosperity

Famous statistician Hans Rosling creates a 4 minute tour de force with 200 years of human development statistics! Very good news against the backdrop of short-term economic crisis and disruption.

Thoughts About the Wikilinks Diplomatic Dump

As confidential U.S. diplomatic documents continue to enter the public domain, it is worth remembering that not everything that is written down in a government document, even (or especially) in a classified document, is necessarily true. "Truth telling" involves a bit more than trafficking in official records. Any historian or archival researcher knows that. So did the famous Soviet agent Kim Philby, who spied against Britain for decades until he escaped just in time to Moscow.  He addressed the issue in his 1968 book "My Silent War" (p. 255):

"It is difficult, though by no means impossible, for a journalist to obtain access to original documents. But these are often a snare and a delusion. Just because a document is a document, it has a glamor which tempts the reader to give it more weight than it deserves. This document from the United States Embassy in Amman, for example. Is it a first draft, a second draft or the finished memorandum? Was it written by an official of standing, or by some dogsbody with a bright idea? Was it written with serious intent or just to enhance the writer's reputation? Even if it is unmistakably a direct instruction to the United States Ambassador from the Secretary of State dated last Tuesday, is it still valid today? In short, documentary intelligence, to be really valuable, must come as a steady stream, embellished with an awful lot of explanatory annotation. An hour's serious discussion with a trustworthy informant is often more valuable than any number of original documents."

"Of course, it is best to have both," he added.